Climate change: Insurance, vital for farmers

Recent changes and development in weather have made it vital for cash crop farmers and other investors in agriculture to take insurance more seriously. Sunday Ojeme reports

For sometime now, the effect of widespread global warming is having its toll on every sphere of human endearvour. In the developed world where experts easily predict the weather with precision, the change in the ozone layer, according to experts, has continued to impute some level of doubts into their precision.

In the last one week or so, the level of snowfall in some parts of Europe and the Americas has disrupted socio-economic activities as individuals are locked up in their homes, thereby giving room to closure of schools, businesses and other outdoor activities.

Back home in Nigeria where weather and nature have been fair to the environment, the situation has changed a bit with early rains casting doubts on farmers’ calculation to resume planting for the year.

For some days now, the rains, which ordinarily begin properly around April, has been falling like it is already in the heart of raining season. As baffling as the development is, it should be of greater concern to professional and cash crop farmers, whose projections are likely to be disrupted as they prepare for the planting season.

With such change in weather staring everyone in the face and practically defying predictions and projections, getting an insurance cover for the planting season remains the best options to guard against any form of loss.

Although there have been unreported incidents of losses incurred by farmers, the widespread tomatoe fatality of three years ago still remains fresh for the farmers, especially for the fact that most of them did not insure their crops.

Recall that in November last year, President Muhammadu Buhari also promised compensation for farmers who lost their investment to flooding in some parts of the Niger Delta.

The President made the promise in a message as part of Farmers’ Day 2018 celebration held on in Yenagoa, capital of Bayelsa State.

Buhari said: “Two weeks ago, the National Food Security Council met and we approved a compensation package for all flood impacted farmers and fishermen. I want to assure all flood affected farmers and fishermen that you will be helped. This government is with you in your time of need. As I speak to you now, the modalities for this compensation programme are being finalized and very soon, we shall start implementation.”

In a country where the insurance industry has transformed over the years, it becomes an aberration for the government to keep indulging investors that are supposed to get their businesses insured by compensating them each time there is disaster.

Why it may not be completely wrong to help investors back to life in the event of losses, the need to embrace insurance should, however, be the uppermost message in this regard.

Save for the annual budget disruption, beginning of the year, traditionally, provides the opening for embracing policies for new entrants and renewals for policyholders.

As the Federal Government makes access to insurance for farmers easier by initiating various policies and also expanding the scope by allowing more underwriting firms to participate, there is no better time to remind farmers and insurers themselves of the need to take advantage of the opportunity than now, especially in the face of changing weather.

 Compelled by the need to ensure food security and to also record some success in its diversification bid through agriculture, the Federal Government moved  some steps further to ensure collaboration among relevant agencies with agric insurance also given prominence.

Apart from the National Insurance Commission (NAICOM)  issuing licences to more underwriters to give covers to farmers and their crop/livestocks, some other initiatives have also been put in place to enable more farmers take advantage of insurance benefits.

As part of the consolidation, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), an agency under the watch of Central Bank of Nigeria (CBN), in conjunction with Nigerian Agriculture Insurance Corporation (NAIC) and NAICOM came up with the NIRSAL Comprehensive Index Insurance (NCII), an insurance policy with a combination of Yield Index, Price Index and Life Insurance, with implementation beginning immediately with CBN’s Anchor Borrowers Programme (ABP).

Members of the consortium include Axa Mansard, Industrial and General Insurance, Leadway, and Royal Exchange with Pula Advisors as consultant to NIRSAL on agricultural Insurance.

As part of reminder in the process, 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. It is particularly 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 has 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.


In one of its outings in this regard, NAICOM disclosed that it had granted product approval to five insurance companies participating in the Index-Based Agricultural Insurance (IBAI) pilot scheme.

The approvals are in line with the ongoing efforts by the current administration to diversify the Nigerian economy and create opportunities to promote agric business and employment as IBAI is a programme in support of the policy of government.

According to the Director, Inspectorate, NAICOM, Barineka Thompson, 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).

He said IBAI paid out benefits on the basis of a predetermined index (e.g. rainfall level, crop yield) for loss of assets and investments, primarily working capital, resulting from weather and catastrophic events, without requiring the traditional insurance services and that the purpose is to compensate farmers in the event of a loss resulting from shared risks (rather than individual risk) associated with weather fluctuations, disease outbreaks or poor yield.

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, therefore decided to build its capacity and prepare it to effectively meet the insurance needs of the agricultural sector.

“As we continue to ubsidize 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.


As part of a recent reassurance and also to boost farmers’ confidence in insurance, the Managing Director/Chief Executive, NAIC, Mrs. Folashade Joseph, assured victims of last year flooding that NAIC would pay appropriate compensation to insured farmers whose agricultural farmlands were ravaged across the country.

She said that the corporationwas mindful of its corporate responsibility to provide relief and plough farmers back to prosperity through the prompt payment of appropriate compensations.

She urged insured farmers to make all efforts possible to avert and ubsidiz the untoward effects of 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.

While encouraging farmers without any form of insurance for their farmlands to do so for future benefits, she said apart from insuring the risk of loss of crops from flood, NAIC also provides insurance against crop losses arising from fire, lightening, drought and pests,  adding that the risks of death of, or injury to livestock caused by accident, disease, fire, lightening, storm or flood are insured by the corporation.

“And the beauty is that the assessed premium payable to NAIC is ubsidized. The subsidy is 50 percent reimbursable to the corporation by the federal and state governments. All these are efforts to provide a secure future to farmers and eliminate the need for unpredictable ad-hoc assistance when insurable losses occur.

“To other farmers who might have suffered from losses arising from the floods but did not have NAIC cover, the corporation wishes to equally sympathise and encourage them to in future, take advantage of the agricultural insurance solutions of the corporation, in accordance with the policies of the government of His Excellency, President Muhammadu Buhari to offer protection to farmers who have answered the patriotic call to go back to agriculture,” she added.

Last line

Now that the weather is becoming highly unpredictable, farmers across the country have no option than to embrace every inch of opportunity provided by the insurance industry to guard against any form of disaster as the planting season approaches.

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