‘Between farmers and agricultural insurance’

By Godwin Anyebe

Agricultural businesses are among the most risky economic ventures one can embark upon.

The reason is that the investment depends absolutely on unpredictable weather conditions.

A storm, flood, drought and other natural hazards make a return on investment from crop and other agricultural products like livestock poultry and dairies to be very unstable.

To nip this problem in the bud, policy makers in their wisdom established agricultural Insurance policies to serve as securities for banks as indemnification for financial losses suffered by farmers and those in the agricultural value chain resulting from damages to their products, and also provides funds for servicing such loans.

For instance, earlier in the year, about N6.5 billion worth of insurance coverage has been provided for farmers across the country, courtesy of the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL).

NIRSAL has developed and launched the Area Yield Index Insurance product. which protected up to N6.5 billion revenues of over 37,399 farmers, with over N121 million paid out as compensation.

The Area Yield Index Insurance, according to the agency covers the expected yield of smallholder farmers as it protects their revenues from losses due to pests, diseases, adverse weather conditions, and other disasters.

Analysts believe that agricultural insurance assists farmers in regulating cash flows and provides a financial buffer with which to rehabilitate damaged enterprises with its multiplier effect on the increased and stable income.

For these analysts, agricultural insurance stabilizes the income of the farmers.

Hence, farmers feel relaxed that he will be covered should in case a disaster erupts. However, checks by The Daily Times shows that agricultural Insurance in Nigeria is facing lots of challenges, as most Nigerian farmers are not aware of the existence of agricultural Insurance.

Some farmers are not certain that they will get compensation from insurance companies in times of disaster.

Meanwhile, the Nigerian Agricultural Insurance Corporation (NAIC) in the first quarter of 2019 said it paid claims of N464 million to insured farmers across the country.

The Managing Director/CEO of NAIC, Mrs. Folashade Joseph had disclosed that prompt payment of claims has always been the cardinal principle of NAIC.

Nigerian Agricultural Insurance Corporation was established by the Federal Government to shield farmers from the adverse effects of natural disasters.

Commenting on this issue, a Development Consultant, Adebiyi Adesuyi told our correspondent that, “the gap between Farmers and Agricultural Insurance in Nigeria is a threat to food security.

Most people don’t want to go into the farming business in Nigeria because of fear of the unknown.”

According to him, “while conventional insurance companies provide policies for individuals and other businesses, their impact on the agricultural sector is insignificant.

However, the government in its wisdom through the instrumentality of the central bank had established National Agricultural Insurance Corporation to insure agricultural activities against unforeseen disaster.

But I can tell you that most farmers are not even aware of the existence of this service. And because Because they are not aware, the suffer the most whenever there is a disaster.

And because they suffer loss, they will be discouraged going into farming, thus posing a threat to national food security.

For example, he continued, “agricultural insurance policies would have played a major role as mitigant against damages in the recent happening in Kebbi state where crops worth billions of naira were destroyed by the flood if the owners of the farms had insured their farms.

But when you investigate further, you will realise that those farms were not insured because they belong to smallholders farmers.

And the only thing that will happen is for state and federal government begin to look for a way to give a little financial support which shouldn’t be.”

While proffering solutions, he said, “I don’t know the capital base of the National Agric Insurance Scheme, but whatever it is, I believe it is inadequate to cover agricultural activities in Nigeria.

Government through the central bank has to increase the capital base of the National Agric Insurance Corporation to ensure that adequate insurance policies are provided for farmers.”

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“Most farmers are not aware of the existence of the National Agricultural Insurance Corporation, therefore, the the onus is on the management of the corporation to embark on a media campaign that will enlighten both small and big farmers of the importance of their services and the benefits of keying into such services.

So that whenever there is a disaster which will always happen just like the recent one that happened in Kebbi state, they will not suffer a total loss.

At least the compensation will be able to cover about 75 per cent of their losses”, he added.

Also speaking on this issue, an Expert in Insurance, Henry Jikazo said; “agricultural insurance protects against loss of or damage to crops or livestock.

It has great potential to provide value to low-income farmers and their communities, both by protecting farmers when shocks occur and by encouraging greater investment in crops.

However, in practice, its effectiveness has often been constrained by the difficulty of designing good products and by demand constraints.”