Post-harvest Losses: Need for Agriculture Insurance

High yields and bumper harvests by pepper farmers this season have resulted in glut in pepper markets, forcing the farmers to incur huge losses. Ebere Nwoji reports that this reinforces the need for farmers to insure their produce and pass the losses to insurers.

Current significant glut in the supply of fresh pepper in Nigerian markets and the consequential losses recorded by farmers call for the need for agric insurance among farmers in the country.

In different parts of the country, farmers including pepper sellers witness harvest of losses as there is 80 to 90 per cent fall in the price of pepper. Indeed, the losses are so huge that farmers said proceeds from pepper sales could not cover cost of seedlings and fertilizers used in farming the pepper let alone the cost of labour and transportation from their point of production to market places.

Reports Across the country 

Across the country, there are media reports on farmers’ lamentation over financial and produce losses. Reports from Enugu said that pepper farmers have raised the alarm over the sharp fall in prices of the commodity, attributing the development to heavy supplies from the Middle-Belt region. According to the report, in Enugu, a measure of pepper previously sold for N5,000 now goes for N1,000.

The sellers lamented that before the present glut, pepper business used to be profitable as buyers from Port Harcourt, Owerri, and Umuahia patronised them heavily.

In Lagos, the story is the same. One of the pepper sellers in the popular Iyana-Iba market narrating her bad experience in the business this season, told THISDAY  that her pain was  not only that the price drastically fell,  but  sellers scarcely sell their stocks because  the supply was  much more than demand with the result that at various bus stops, there is common site of bags of wasted pepper heaped by the road sides being trampled upon by passers-by. 

Indeed, at various dust bin spots, there is common site of perished pepper bags thrown away by the sellers. The wastes are so much that sellers lamented that their business capital would not be recovered, let alone make profits. In Lagos, a bucket of pepper that before now sold for N5000, now sells for N2000 or even less.

Absence of insurance Cover

The situation has been worsened by lack of preservative facilities among farmers with the result that in time of glut, the farmers have no choice than to dispose what they have at any given price that the buyers are willing to pay and then retire to counting losses. Also in the mist of these losses, most farmers lacked adequate insurance cover against glut and other related risks. Agric experts said the worst situation in glut risks is that it is highly unforeseen and unpredictable and as such, farmers often fall victims.

For instance, the experts recalled that at this time last year (November, 2024), farmers were smiling to banks even up to march this year as pepper prices were very impressive to the farmers.

As a result of the high demands and high profits they recorded last year, farmers sunk much money into the business this year; little did they know that this high level of glut would hit the pepper market.

Due to the abundance of supply during this harvest season, the price of pepper has dropped sharply. A big bag of pepper in Lagos markets fell by over 48 percent to around N80,000 in September 2025 from N155,000 in August. Some reports from Benue State indicate an 80 percent price crash where farmers are forced to sell at “giveaway prices.” The glut is attributed to a bountiful harvest, especially from major producing regions in the Middle Belt and Northern Nigeria, such as Benue, Kano, Kaduna, and Plateau states.

A major challenge in pepper business is the perishable nature of the commodity and the severe lack of adequate storage and processing facilities. Farmers are often compelled to sell their produce immediately after harvest at low prices to avoid spoilage, which exacerbates the market glut and their financial losses.

Market Dynamics 

The surplus supply has led to a stagnant market in some areas, with fewer agents and buyers, further driving down prices. The price volatility in the pepper market is a recurring seasonal issue in Nigeria, often described by the “cobweb theory” of supply and demand cycles.

This current glut follows a period of acute scarcity and record-high prices earlier in 2025 (around March to July), which was caused by pest outbreaks, insecurity in farming areas, and high off-season production costs. Prices had more than doubled during that time, making the current price crash a significant market swing. 

Under this circumstance, insurance cover against losses from glut would have been their source of solace but many farmers don’t have insurance cover due to lack of awareness. Farmers don’t really see insurance as the right way to go.

Agric Insurance

Agricultural insurance is an insurance policy which involves the insured(farmer) paying a little sum called premium usually in percentage to an insurance company to guarantee against loss due to any of the perils (death, flood, drought, glut, crop diseases) covered for a particular period of time usually not more than one year.

Agric insurance experts said the role of insurance in enhancing agricultural productivity is that it protects farmers against financial disaster after suffering any of the insured risks for which indemnity (compensation) is paid. With the insurance coverage, the farmer is not only able to continue in business but also the stability of his income is enhanced. Aside this, agricultural insurance empowers the farmers to obtain farm credits.

An employee of Nigerian Agricultural Insurance corporation (NAIC) who spoke to THISDAY on anonymous grounds, said he pitied pepper farmers this year, seeing the quantity of pepper thrown away in Lagos. He said had these pepper farmers insured their business against the current huge losses from the glut witnessed this year, they would have felt better as insurance companies would pay them compensation from the little premium they paid.

He said NAIC in particular has been doing a lot to sensitise farmers on the relevance of insurance but some were sceptical of the workings of insurance. 

But as beneficial as agricultural insurance is, Nigerian farmers are yet to embrace it. The result of this is what the farmers are witnessing in pepper market today.

The situation is worsened by the fact that some of these farmers suffered huge losses from the tomato Ebola which hit farms last year, the same set of farmers who farmed pepper and tomatoes again currently cries against losses from glut in pepper market. This spells the need for farmers on yearly basis to make provisions for insurance expenses to provide for rainy days of farm losses.

Had the farmers secured adequate insurance coverage, what they would have done in the face of the current glut is to approach their insurance underwriter for indemnity and this would return each farmer who suffered the loss to his former financial position.

Agric Insurance in Nigeria 

The Nigerian Agricultural Insurance scheme (NAIS) was established in 1987 with the goals of encouraging financial institutions to offer rural credits lowering the need for government post- disaster assistance and encouraging investment in the agric sector.

At the beginning of agricultural insurance in Nigeria only the Nigerian Agricultural Insurance Corporation was licensed to offer agric insurance services to farmers at subsidised rate. Later the Agric line of business was liberalised during the era of Fola Daniel as the commissioner for insurance as he licensed more operating firms to underwrite agric insurance.

Some of the licensed underwriting firms are Leadway Assurance, Industrial and General Insurance Plc, NEM Insurance, Royal Exchange Assurance, Universal Insurance plc.

Since their entrance into agric insurance underwriting, they have been doing a lot to popularise agric insurance among Nigerian farmers; though, despite various risks farmers faced, many of them have remained adamant towards embracing Agric insurance.

Risks faced by farmers 

Generally, farmers face various risks such as adverse weather conditions, pests and diseases, market fluctuations, fire outbreak and other unpredictable events. Agricultural insurance serves as a crucial risk management tool, providing financial protection and stability to farmers and traders in the face of uncertainties.

Initially one of the challenges faced by insurance underwriters from farmers is ignorance resulting in situation in which  when a farmer takes one insurance cover without extension and faces a different risks that made him incur losses he will expect the insurer to compensate him for the losses whereas he did not secure cover for the particular risk that occurred and when the insurer refuses to pay on the ground that the particular risk that occurred was not insured against, the farmer will go about saying insurers don’t pay claims and other farmers hearing it will believe. But as years go by with awareness creation and sensitisation, the farmers are beginning to understand and some are keying into insurance coverage. What the agric insurance underwriters are now fighting for is to ensure mass patronage of insurance by farmers.

Agric Insurance Policies

Agric insurance experts said some of the agric insurance options available to Nigerian farmers are: Crop Insurance, designed to protect farmers against losses resulting from crop failures caused by adverse weather events, pests, diseases, or other perils. 

According to the experts, key crop insurance options in Nigeria include: Yield-Based Insurance, which covers farmers for losses in crop yield due to perils such as drought, flood, pests. Area-Based Insurance also known as index-based insurance, which the experts said compensates farmers based on predefined weather or yield indices that represent the overall agricultural performance of a specific area.

There is also the Multi-Peril Crop Insurance which provides coverage for a range of perils, including weather events, pests, diseases, and fire. It offers comprehensive protection against multiple risks that could affect crop production. This type of insurance provides farmers with more extensive coverage but may involve higher premiums.

There is livestock insurance, which is designed to protect farmers and livestock owners against losses resulting from disease outbreaks, accidents, or natural disasters. In Nigeria, livestock insurance options include: Mortality Insurance which covers the loss of livestock due to accidental death, disease, or theft.

Health Insurance for livestock which covers veterinary expenses incurred for the treatment of diseases and medical conditions. It ensures that farmers can afford necessary healthcare for their animals. Another is Feed Insurance which covers losses incurred due to the failure of purchased or produced feed. This type of insurance helps livestock farmers manage risks associated with feed shortages, poor quality feed, or feed-related health issues Agricultural asset insurance protects farmers and traders against losses or damage to their agricultural assets, including farm buildings, machinery, and equipment. Options in Nigeria include. Agricultural Value Chain Insurance covers risks associated with the entire agricultural value chain, including production, processing, storage, transportation, and marketing. This type of insurance protects farmers, traders, and other stakeholders against risks throughout the entire agricultural supply chain.  With glut faced by pepper farmers, this particular policy would have saved them.

Benefits of Agricultural Insurance 

According to insurance experts, Agricultural Insurance offers several benefits to farmers and traders in Nigeria in the area of Risk Management: Agricultural insurance provides a safety net against unpredictable events, helping farmers and traders manage risks associated with production losses, price volatility, and asset damages. It ensures financial stability and reduces the vulnerability of agricultural stakeholders.

Access to Credit: Agricultural insurance enhances farmers’ creditworthiness by providing collateral for loans. Lenders are more willing to provide credit to insured farmers, knowing that their investments are protected against risks. This promotes access to finance and enables farmers to invest in improved agricultural practices and technologies.

Improved Productivity: With the security provided by insurance coverage, farmers can adopt more efficient and advanced farming techniques, knowing they have a financial safety net in case of losses. This can lead to increased productivity, better resource management, and improved agricultural practices.

Challenges

Despite these benefits, agricultural insurance in Nigeria faces certain challenges which include limited awareness, as many farmers and traders in Nigeria are unaware of the existence and benefits of agricultural insurance. Raising awareness about the importance of insurance and its role in mitigating risks is crucial for increasing insurance penetration in the agricultural sector.

There is also the challenge of affordability because the affordability of insurance premiums is a significant challenge for small-scale farmers who often struggle with limited financial resources. Developing innovative and flexible insurance products that cater for the specific needs and financial capacities of small-scale farmers can help address this challenge.

There is also the need for reliable and accurate data on agricultural production, weather patterns, and market information is essential for effective insurance coverage. However, data collection and management systems in Nigeria are often inadequate, limiting the availability of data necessary for assessing risks and determining insurance premiums.

With the quantum of losses incurred by farmers as a result of glut in pepper business, there are fears that many may be discouraged from investing in pepper farming next year and scarcity will hit the market.

Given the aforementioned benefits, there is need for both government and insurers to join force in bringing farmers into the main stream of Agric insurance so that in case of acute shortage of farm produce as a result of any of the above risks, farmers will bounce back to business due to insurance claims received and gap in such food production will be easily covered.

Also with insurance coverage, farmers will be educated on how to guard against attack of their farms by disease outbreak and as such they will prevent any of such disease that cause food shortage from attacking their farms.