About two weeks ago, the Federal Government bungled another opportunity to sell insurance to Nigerian farmers with the president skipping that aspect while promising farmers compensation over floods that ravaged their investment.
Having been devastated as a result of flood that destroyed their farmland and produce, the affected farmers and fishermen were assured by the Federal Government of compensation.
Presidential gaffe
While compensating the farmers is not out of place, the scenario, however, provided another unique opportunity for the government to talk extensively on the importance of agric insurance, which had also been experiencing apathy among Nigerian farmers.
Recall that despite efforts by the National Insurance Commission (NAICOM) and the Nigerian Agriculture Insurance Corporation (NAIC) to promote agric insurance in the country, only a limited number of farmers have embraced it, thus exposing the farmers to effects of various inclement conditions.
In announcing the compensation as part of activities to mark this year’s Farmers’ Day, President Muhammadu Buhari said, the National Food Security Council met and approved a compensation package for all flood impacted farmers and fishermen.
“This government is with you in your time of need, he said. “As I speak to you now, the modalities for this compensation programme are being finalised and very soon, we shall start implementation.”
NAIC’s bait
While the president missed out in the message to farmers, who are yet to take insuring their investment seriously, the Managing Director/Chief Executive, Nigerian Agricultural Insurance Corporation (NAIC), Mrs. Folashade Joseph, emphasised that the financial institution would always pay appropriate compensation to insured farmers, whose agricultural farmlands were ravaged by the flood disaster across the country.
She urged insured farmers to make all efforts possible to avert and minimise the untoward effects of the torrential rains and floods on their farms by promptly informing the nearest NAIC office in their states of their travails so appropriate support will be extended to them in a timely manner with emphasis that the succour would be strictly for farmers insured under its policy.
In recent past, the insurance industry and the Central Bank of Nigeria (CBN) had initiated some policies not just to encourage agriculture but also to ensure products and farmers enjoy adequate insurance cover.
NCII initiative
For instance, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), a subsidiary of CBN, in conjunction with NAIC and NAICOM launched the NIRSAL Comprehensive Index Insurance (NCII) scheme, a new insurance cover for Nigerian farmers.
The new insurance policy is a combination of Yield Index, Price Index and Life Insurance, with implementation beginning immediately with CBN’s Anchor Borrowers Programme (ABP) as a pilot phase.
NCII was developed by the Corporation in conjunction with NAICOM, NAIC (lead of the consortium of insurance on NIRSAL Anchor Borrowers Programme). Members of the consortium include Axa Mansard, IGI, Leadway, and Royal Exchange with Pula Advisors as consultant to NIRSAL on Agricultural Insurance).
According to the details, NCII is designed to safeguard farmers against risks along the agricultural value chain, and an improvement over Area Yield Index Insurance (AYII) mechanism introduced last year.
The product is especially targeted at small-holder farmers – the most vulnerable segment in the agricultural sector and the Nigerian population as a whole.
Apart from being an innovative form of revenue insurance, it is also unique in Africa. It is also the first such product to be achieved without government subsidies on the premium.
Beyond its benefits to farmers, NCII’s comprehensive cover will also encourage financial institutions to lend more to primary production and ensure reduced premiums in comparison with the earlier version.
Regulatory incentive
In recent past, NAICOM had seen the need to invite more operators into agric insurance as a way of boosting farmers’ confidence and also enhancing self-sufficiency.
Unlike in the past when NAIC dominated the scene, a wider window of opportunity has been opened for all insurance operators to key into the programme.
IBAI
Early in the year, NAICOM disclosed that it had granted product approval to five insurance companies participating in the Index-Based Agricultural Insurance (IBAI) pilot scheme.
The Director, Inspectorate, NAICOM, Barineka Thompson, noted that the approvals were in line with the ongoing efforts by the current administration to diversify the Nigerian economy and create opportunities to promote agric business and employment, stressing that IBAI is a programme in support of the policy of government.
According to him, IBAI is a relatively new financial instrument for transferring agriculture risks from individuals or groups of farmers to (international) risk carriers (Insurers), adding that in an Index-Based System, when a claim is triggered for a specific area, all insured units (farmers) within a given geographical area and having similar characteristics, are compensated at the same payout rate, usually a percentage of the sum insured, on events specifically covered by the policy (usually those for which the proxy(ies) meet the specified triggers).
Collaboration
The project is also in collaboration with NIRSAL and the pilot scheme is running in 10 states namely – Adamawa, Bauchi, Benue, Kaduna, Kano, Kasina, Kebbi, Nasarawa, Taraba and Zamfara, with crops such as rice, maize, soya and sorghum.
“The 2017 planting (wet) season has gone with five insurance companies participating in the consortium mainly under the NIRSAL facility, we anticipate that more companies will join in the 2018 planting season as a result of greater awareness and the upcoming capacity building programme,” Thompson said.
Previous commitment
Prior to current development, about $5 million was approved by Federal Government to enhance the activities of NAIC for adequate crop and livestock insurance, a gesture that was meant to support NAIC’s institutional reforms, strengthen operations and roll out of agricultural insurance products.
The Federal Government said then that it understood the importance of risk management in agricultural investment and therefore decided to build its capacity and prepare it to effectively meet the insurance needs of the agricultural sector.
“As we continue to modernise the agricultural sector, we will ensure that farmers are protected from the effects of climate change. The devastating flood of 2012 was a wake-up call for the need to develop policies and risk transfer systems to protect the government and farmers from effects of climate change,” it said.
Although NAIC had been in existence for long, a number of Nigerian farmers have failed to take advantage of the benefits due mainly to ignorance.
Expert opinion
Commenting on the latest initiative, Managing Director, NIRSAL, Mr. Aliyu Abdulhameed, said the new insurance product was a testament to NIRSAL’s focus on expanding the frontiers of innovation in Nigerian agriculture for over all benefit of Nigeria’s farmers.
“At NIRSAL, our focus is on making positive impact at key points of the agricultural value chain that can translate to significantly higher and sustained productivity and food security for the country,” he said.
“In line with our mandate to de-risk Nigerian agriculture, this innovative insurance product will help to secure farmers against key risks in order to make agriculture more attractive and more profitable.”
On his part, a practicing farmer and the Public Relations Officer, National Cashew Association, Mr. Anga Tonya, had blamed the poor utilisation of agric insurance on ignorance on the part of farmers.
Tonya in a chat with New Telegraph, described agric insurance as the best form of support for farmers to recoup their investment in the case of losses.
He said: “Agric insurance is very good. Over the years, farmers have not utilised crop insurance adequately and as a result they suffered colossal losses. The reason actually is due to ignorance and that is still the same reason a lot of farmers are not involved in it.
“Another reason is the cost implication. Most of the farmers don’t know what it costs. They think it is very expensive whereas it is something they can afford if only they take time to find out.
“I believe the best thing to do, moving forward, is to sensitise farmers on the benefits. Basic knowledge and information would make a lot of difference. When they know it will protect their interest and crop, they will go for it.”
Last line
The desire by the Federal Government to diversify from oil into other areas to boost the economy with emphasis on agriculture has long been commended by observers and economic experts.
However, to fully achieve this, it is believed that everything that will make the sector realise its potential must be encouraged with insurance of crops and famers being the uppermost.
