Boosting Food Output through Agric  Insurance Premium Financing 

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Agricultural Insurance premium financing  is one important but neglected area government ought to pay attention to in its efforts to boost  food production in the country,  writes Ebere Nwoji

The federal government, under the regime of former President Goodluck Jonathan, demonstrated its determination to boost food production in the country through its agricultural transformation agenda (ATA).

 To accommodate as many farmers as possible in the scheme, the government registered about 10million farmers under its Growth Enhancement Scheme, an aspect of the ATA and pledged to ensure that all farmers in the country were captured in the scheme.

At a regional mechanisation stakeholders’ sensitisation workshop in Kaduna, the government had said its intention was to use the Agricultural Transformation Agenda to move  agriculture from a development project to a profitable business venture.

Along this line, it put up various intervention programmes; the most prominent being   a bush clearing intervention programme for farmers  with about 6,000 hectares of farm land earmarked to be cleared across the country as a way of assisting farmers who had difficulties in that area.
These efforts were geared towards boosting agric production in the country.

Unfortunately, in all these, the Goodluck Jonathan regime did not  mention any  effort towards boosting agricultural insurance, to secure agricultural  produce from the above efforts.

The then minister of Agriculture and Rural Development, Dr. Akinwunmi   Adeshina, in spite of his achievements in enhancing agricultural activities in the country, did not give much attention to agricultural insurance.

Indeed, Agric insurance, among Nigerian farmers, has remained very unpopular despite the menace of climatic change in Nigeria in recent times.

 In the year 2012, the experience of many Nigerians on the menace of flood had left indelible mark on many families as houses and farmlands were washed away by floods. The effect on food production and food pricing in the country had left many families under the threat of hunger and starvation up till date, as prices of foodstuff especially staple foods like garri, yam and beans have hit the roof top.

This was because farmers suffered great losses without any form of compensation because many of them did not insure their farms.

At one of the National   Economic summits held in Abuja, Economists had expressed the views that the promotion of agricultural insurance among farmers was a major factor that would enhance large scale food production worldwide as well as reduce prices of food.

Agricultural insurance all over the world has become as prominent in public discourse as conventional insurance. This is due to the adverse effects of global climatic change on food production in different countries, which is costing the world several billions of dollars annually excluding loss of lives .The development is also fast retrogressing progress in the global struggle for food security and individual country’s sufficiency in food production including Nigeria.

At micro level, periodic losses by farmers on account of natural disaster like flood, has left them at various stages of poverty that some lacked the least capital to continue farming even at domestic scale after each year’s natural disaster.

This situation was worsened by lack of insurance cover by the farmers, which would have helped to cushion the effects of such losses on the farmers and reposition them to remain in business.
As at present, many farmers in Nigeria are still far from understanding and making use of insurance services in their business. This is mainly attributed to the lack of funds to carry out their business and at the same time pay for insurance services.

Closely connected to this is the fact that many farmers have failed to see their farming activity as a profession or a business. They still see it as leisure or hobby; they therefore find it difficult accepting innovations that would improve on what they already know.
These reasons and more, explain why despite campaigns in different parts of the country on agric insurance, some farmers are still not responding to it.

In different parts of Nigeria, farmers see losses from natural disaster like flood or influenza like bird flu as a seasonal occurrence that must come at its due time. They also believe that such losses are unpreventable natural phenomenon, therefore they do not need preventive measures, but must take their natural course.

Bearing this in mind, efforts to make them see the need for agric insurance have not yielded the desired results. This was despite  mass sensitisation programmes by  the National Insurance Commission (NAICOM), which through its micro insurance programmes has been doing a lot to familiarise Nigerian farmers with agric insurance. NAICOM has also collaborated with foreign agencies in doing this as part of effort to ensure insurance penetration in the rural parts of the country.

Although the government had in the years past contributed  its quota in this regard by bearing part of farmers’ insurance cost  through subsidised agric insurance scheme, which was provided by the Nigerian Agricultural Insurance Corporation (NAIC), insurance experts and economists said  there is need for government to take further steps in subsidising agric insurance premium for covers provided by commercial insurers.

In the past four years, NAICOM had expanded the scope of agric insurance in the country by liberalising the subsector and encouraging the private sector insurers to participate in non-subsidised agric insurance underwriting. This is due to increasing need for agric insurance occasioned by adverse effect of climatic change in the country.

But the insurers had argued that agric insurance is such a high-risk business that many insurers will not want to venture into it without government support.

Against this backdrop, many insurers are hesitant to venture into agric insurance except companies like Industrial and General Insurance(IGI) and few others which have recently ventured into it .
Their experience so far shows that many Nigerian farmers have not seen the need for insurance services and this has continued to expose them to various forms of risks.

The all-important nature of agric insurance has in recent times continued to attract public attention and solution as economists believe that lack of agric insurance has impaired large scale production among Nigerian farmers.

At one of the education conferences of the Chartered Insurance Institute of Nigeria (CIIN) held in Lagos, a past President of the institute, Dr. Wole Adetimehin, had challenged the insurers to   expand their coast in insurance services provisions by including agric insurance in their products planning.

Also economic players at the 19th Economic Summit, held in Abuja, after a brainstorming session arrived at the conclusion that Nigeria  can only achieve true transformation in its agricultural subsector, when farmers move from being mere agents of food production condemned to a life of poverty and underdevelopment, to being businessmen who enjoy the fruits of their labour.
They reasoned that farmers in the country need reorientation and rehabilitation in their modus operandi to make them be in tune with global standard in food production and migrate from domestic to commercial farming scale.

They also posited that to achieve this, farmers need to block leakages in their system especially in the area of annual loss of farm produce to natural disasters like flood and influenza among livestock farmers.
According to them, where it occurs, farmers need some cushioning effects to make them  enjoy some level of financial stability and remain in business.
The economists recommended that agricultural insurance and other related services will go a long way to cushion the effects of any form of loss by the farmers.

They identified risks associated with agriculture as floods as witnessed in different parts of the country now on yearly basis, vagaries in weather conditions, fire disasters, communal clashes, market failure, price changes, unsteady rainfall pattern, policy changes, land losses as well as pest and disease attacks.

As this year’s rainy season is around the corner again and farmers have started planting, there is the big question on what the Muhammadu Buhari’s regime through the ministry of agriculture would do to avert wastage of farmers’ effort during the rainy season and its associated damages through flood.
There is also the question on the effort of the present regime towards agric insurance premium subsidy both on covers provided  by NAIC and those provided by commercial insurers.

The extension of agric premium subsidy to covers provided by commercial insurers will no doubt popularise  agric insurance among Nigerian farmers as the underwriting firms, in their bid to sell their products would through the use of their agents most of who are closer to the farmers in the  city and those in the rural areas push the products closer to the farmers and educate them more on the importance of insurance in their business.

A Lagos-based farmer and president Satin Farms and Agricultural Services, Mr. Kola Oyedeji, said common risks which poultry farmers in the country are  often prone to in addition to the risk of influenza is glut especially in egg and birds supply in certain periods of the year.
According to him, the losses incurred by farmers from this are often as high as that caused by natural disaster risk.

He said when there is glut in egg supply any year due to market lull, farmers could sell their eggs and birds at give-away price even below their cost price to avoid damage since there is no preservative method for eggs.

He  suggested that government can afford to mop up the supply in time of glut and give to school children in fulfillment of its campaign promises  because they need it most and from there help to minimise losses among farmers.

On the experience in Agric branches, he said  through improved technology, he as an educated farmer, has learnt to prevent risk of influenza among his birds and has reduced his loss ratio to zero level to the extent that for some years now, he has stopped taking insurance cover for his farm.

But agricultural risk analysts have questioned whether vaccination and other forms of disease preventive measures can act as substitute to insurance and the answer is no. This is because death by epidemic is not the only risk livestocks are prone to. Apart from this, they can be prone to fire outbreak and other forms of misfortune which vaccination cannot provide solution to.

Apparently, the use of mere vaccination to replace insurance, by the Ojo based poultry farmer, goes to show the level of ignorance of farmers and Nigerians at large to insurance even the educated ones.
This is because the farmer in question is a BSc degree holder in Biochemistry, but he still assumes that vaccinating his birds against livestock diseases is enough substitute to insurance cover.

Although the farmer in an interview told THISDAY that he decided to stop paying insurance premium because of lack of  funds to do his business, this no doubt spells the need for sensitisation programmes among farmers as well as financial assistance to them especially in the area of premium financing.
This has become   important as recent development has shown that Nigeria has now been included in the list of natural disaster-prone countries.

Climatically, Nigerian farmers are prone to risks from natural disaster such as flood, draught as well as different crop and livestock diseases. They are so prone to these diseases that on yearly basis, the farmers especially those in the rural areas are exposed to huge losses emanating from farm crops and livestock epidemics. Farmers in the city are not immune from the problem too.
This being the case, insurance managers should find ways of sweeping farmers under insurance cover through the ongoing micro insurance scheme being campaigned by NAICOM.

They should through the agency system discover various farm settlements in the country, find out risks different farmers are prone to and design products that will address such needs.
They should also study other problems facing the farmers and design investment-related products that will solve those problems and attract them to test what insurance cover looks like and the benefits they stand to gain from there.

Obviously, one of the common problems of farmers in the country is lack of finance and inability to secure credits from finance institutions to rent farm lands, buy fertilisers, seedlings and hire labourers.
One of the farmers in the Ojo Farm Settlement said despite the noise banks are making concerning agric credit scheme, none is real as he and his colleagues in the farm settlement had made efforts to benefit from the credit scheme of the banks but none worked.

He said if government really wants to help farmers, it should no longer channel it through the banks so that the credit will be equitably distributed to farmers who need it.
But in the midst of their plight, the Central Bank of Nigeria (CBN) few years back ignited light of hope for farmers in the country.

The Apex bank has in recent times shown  positive response to the farmers’ insurance needs.
Recently, the apex bank said it had perfected plans to invest USD 30 million on insurance in a way to mitigate losses among farmers through a programme tagged CBN initiative of the Nigerian Incentive Based Risk Management System for Agricultural Lending (NIRSAL).

According to the apex bank, the initiative  will provide opportunities for the insurance companies.
NIRSAL, according to the former CBN deputy governor Mr Tunde Lemo  is a dynamic, holistic approach that tackles both agricultural value chain and the agricultural financing of value chain and is built on five pillars namely: risk sharing facilities, insurance facilities, technical facilities, holistic bank rating merchants and bank incentives mechanism.

 He said the primary goal of the initiative’s insurance facilities is to expand insurance product for agricultural lending from the current coverage to new products such as weather index insurance, new variants of pest and diseases insurance.
At one of the insurance meetings held to close the year, insurance experts had urged federal government to develop agric sector through the extension of its Agric insurance subsidy project to private sector own insurance firms.

Currently only agric insurance provided by the Nigerian Agricultural Insurance corporation (NAIC) is being subsidised by the government.
But insurance experts said government should expand its agric insurance subsidy programme to enable other insurance firms participate in agric insurance in the country and to encourage farmers buy insurance.
According to the experts, government should borrow a leaf from agric insurance expansion programmes adopted by Nigerian neighbours and save farmers from losses while expanding farm production output.
Recently in China, farmers made positive confession on the impact of agric insurance claims payment in their activities.

Nigerian insurers are yet to experience this, raising the question on when Nigerian farmers will be fully brought under insurance  cover against natural disaster risks like  flood which is fast becoming annual occurrence in the country.