Every attempt by the authorities to find a way to use agricultural insurance to support agricultural production, protect investments in agriculture, and ensure the country’s food security has been met with resistance from experts.
These experts are not laughing with the authorities while sending them to the cleaners, despite the fact that the authorities have asked farmers and investors in agro-allied industries to insure their investments and farms against unforeseen disasters in order to maintain their productivity and sustainability.
For instance, flooding caused the loss of over 2 million metric tons of rice, or a quarter of the country’s anticipated harvest, by farmers in northern Nigeria in September 2020. Additionally, Kebbi, the country’s largest rice-producing state, experienced heavier-than-anticipated rainfall, displacing over 1 million metric tons of rice from smallholder farms.
It was gathered that the state had previously projected 2.5 million metric tons of rice in 2020. Agribusiness financial experts have also emphasized the importance of insurance as a tried-and-true method for strengthening farmers’ resilience to a variety of production risks. Despite that, the inherent risks and loopholes of the agricultural sector were lamented by Mr. Manzo Maigari, Director-General of the Nigerian Agri-Business Group.
Maigari stated that Nigeria’s agricultural insurance needed to be altered because it was paralyzing. The expert went on to say that the government doesn’t even have the money to help agriculture. He provided examples, one of which was the fact that Nigeria has the lowest mechanization rate in the world.
The specialist in a public presentation on Tuesday, January 31, 2023, said the country would also need approximately 10,000 tractors to meet the standard for agricultural mechanization. He asked a question that could not be answered about the cost of 10,000 tractors.
He believed that no tractor in the modern era could be purchased for less than $20 million. He grinned because the state and federal budgets of Nigeria would not be able to purchase those tractors for five years, as according to him.
“We have the Nigerian Agricultural Insurance Corporation (NAIC),” Maigari said, expressing dissatisfaction with the severe paralysis of Nigeria’s agricultural insurance. In Nigeria, he said, the NAIC regulates agricultural insurance in addition to providing retail insurance services.
“Consequently, you cannot simultaneously act as a player and a referee.” Because agriculture is such a serious industry, we keep saying that NAIC ought to be a department of the National Insurance Commission (NAICOM) that develops a wide range of novel concepts to meet our particular requirements,” he went on to say.
It was discovered that farmers could insure against fire, lightning, windstorm, flood, drought, pests and diseases, and invasion of the farm by wild animals through the NAIC as part of a crop insurance policy. This finding posits the experts’ part of the truth by delegating the efforts of the Federal Government.
However, negligence-related losses and intentional damage are not covered. In a similar vein, the scheme does not cover losses and political risks caused by social risks like riots, mutinies, and revolutions.
Maigari added, “They are, on the other hand, both a player and a regulator, so that simply isn’t possible. Second, in all of its interventions, including the Anchor Borrower Program and others, the government prohibits any other insurance company from providing farmers with insurance coverage; that insurance can only be provided by NAIC, and I predict that no one will ever receive compensation.
“So, the issues are as follows: In Benue, I have 500 hectares of rice that have been completely submerged for more than three weeks as I speak with you. This amounts to a loss on an investment of more than N100 million. How do you intend to handle this? As a result, these are actual issues.”
The anomalies that characterize agricultural insurance are not unique to Maigari. Juxtaposing to that, insurers of agricultural commodities and their regulators, including Leadway, Veritas Kapital, IGI, AXA, Sterling, JAIZ, Royal Exchange, NEM, AIICO, and NAICOM, among others, stated that the percentage of smallholders who have access to agriculture insurance in Nigeria was less than 5% at a workshop that was held in Abuja about two years ago for insurers who underwrite agriculture insurance in Nigeria.
They also stated that these farmers produce more than 98% of the food consumed throughout the nation, highlighting the fact that the most recent mandate of the majority of insurance companies is to now insure agro-commodities to prevent food shortages.
Leonard Okereafor, chief executive officer of Agric Insurance, AIICO Insurance Plc, stated that smallholders’ lack of access to insurance posed a threat to Nigeria’s food security.
“It is important to note that approximately 98% of the food we eat is produced by smallholders in the crop value chain,” he asserts. In addition, less than 5% of smallholder farmers in Nigeria have access to agricultural insurance. And why agricultural insurance, which helps farmers better plan for the next season and protects crops and livestock from damage and loss, indemnifies policyholders for losses, and has a lot of potential to benefit low-income farmers and their communities, is in such a decline is beyond comprehension.
However, Mrs. Folashade Joseph, Managing Director of the NAIC, informed the media that under the NAIC Act, Cap. Under the Laws of the Federation of Nigeria (N89), NAIC is given the authority to underwrite agricultural risks and reduce the premiums on certain crops and livestock by up to 50%.
Checks revealed that increasing insurance coverage among Nigerian farmers is a monumental task that necessitates partnership with various farmers’ associations, groups, and media sector operators, as well as awareness, funding, and persuasion. Mr. Ayo Fatona, a specialist in agro-allied insurance, explained the reasons why most farmers do not take advantage of agricultural insurance.
He explained, “The majority of farmers view agriculture not as a business but rather as a way of life and a means of enduring poverty due to financial constraints. As a result, the majority of small-scale farmers recycle poor planting materials and do not utilize fertilizer, agrochemicals, mechanization, or improved varieties of seeds and planting materials that could boost productivity. Having said that, insurance policies are not even given much thought.”
In support of insurance in agriculture, Abdulrasheed Magaji, Chairman of the Kano State chapter of the All Farmers Association of Nigeria (AFAN), urged farmers to be aware of climate change and to follow the advice of experts regarding planting in light of forecasted rainfall; choice of seeds to plant (where appropriate, early maturation); avoiding riverine areas to avoid flooding, and, most importantly, cultivating farms that are as big as their pockets despite the government’s ambiguous support in the form of loans or subsidies for inputs.
Given the above, experts assert that insurance reduces risks because agriculture is risky because of its importance. Insecurity raises Nigeria’s agricultural risk factors in addition to natural, biological, and environmental disasters. Another one is climate change.
Insurance is generally opposed, despite the difficulties, particularly among Nigerians with limited resources, most of whom are subsistence farmers. In addition, Ibrahim Kabir, the National President of AFAN, exhorted farmers to utilize insurance products to mitigate unforeseen disasters in order to make Nigeria food self-sufficient and prevent hunger.
Chukwu writes from Port Harcourt.
