AN APPRAISAL OF AGRICULTURAL INSURANCE IN A DEVELOPING NATION LIKE NIGERIA BETWEEN 1990-2006
1.1 BACKGROUND OF THE STUDY
Agricultural insurance as an alternative for risk management started as a crop hail insurance in Europe more than one hundred years ago and then, spread to the United States of America at the beginning of the century. It has since then been embraced by a lot of the developed and developing countries of the world like USA, Canada, Zimbabwe and Nigeria with varying degrees of success and failures.
In Nigeria, there has been growing need since 1976 to evolve a worthwhile and more permanent national approach to risk management in agriculture and this has continued to attract the attention of the various governments. To this effect, the Nigerian Agricultural Insurance Corporation was established by the federal government of Nigeria and funded largely by her with the participation of state governments and the organised private sector, Nigeria Agricultural Insurance Corporation started as a company but became a corporation in 1998 by the virtue of Decree 37 of 1993.
The formal launching of the Nigerian Agricultural Insurance Scheme, (NAIS) was done by the President and Commander in Chief of the armed forces of Nigeria, President Ibrahim B. Babangida on the 15th December 1987. The scheme is relatively new in Nigeria and has been some degrees of success.
This agricultural scheme was designed to benefit the small, medium and large scale farmers, either in groups or as individual farmers.
Further, the broad objectives of the NAIS which is to offer production or cover to the farmers from the effects of natural hazards in consideration of a determined known price called premium.
Furthermore, it is to ensure the payment of appropriate compensation, sufficient to keep the farmers in business after incurring any loss on their insured farmers.
1.2 STATEMENT OF THE PROBLEMS
The relentless effort and huge financial investments been made by various governments in Nigeria towards achieving the desired result of increased agricultural production but this has not yielded the expected positive results.
- Majority of the Nigerian farmers do not see the bosom need to insure their farms and farm investment in line with the good objectives of the federal government of Nigeria in establishing the NAIS.
- The landing institutions who are supposed to fund agricultural development are quite reluctant in lending to this sector. Consequently, the Nigerian Agricultural Insurance Corporation was set up to provide collateral security to the lending institution in the form of agricultural insurance policies for the agricultural investments. The Nigerian Agricultural Insurance Corporation is presently faced with very many problems that have affected their smooth operations. These problems includes: lack of trained personnels, lack of data and so forth.
1.3 OBJECTIVE OF THE STUDY
- The research is to inquire into the causes of the apparent lack of interest of the Nigerian farmers in agricultural insurance products and other related assistance/services aimed at achieving greater patronage. It is poised to achieve the following stated objectives: The study will provide an insight into the performance of the banks and other agricultural lending institutions on the mandatory agricultural insurance cover, for selected crops and livestock critical evaluation of the performance of the various intermediaries involved in the marketing of agricultural insurance products shall also e undertaken with a view to improving performance where it falls below standard.
- Furthermore, the study is also aimed at assessing NAIC’s efforts as the farmers shield in assisting the farmers cushion the effects of losses, arising from fortuitous events in relation to agricultural enterprises.
- The research will in addition examine the effectiveness or otherwise of the various methods employed by the Nigerian Agricultural Insurance Corporation in the marketing of their products.
- The research will look into the underwriting and claims settlement work done by the underwriting and claims department, in Nigeria Agricultural Insurance Corporation (NAIC) and seek to find their attribution to the promotion of the scheme.
1.4 SIGNIFICANCE OF THE STUDY
- Agricultural insurance unlike the conventional insurance is relatively new in Nigeria. Consequently, there are many problems involved in collecting data and other materials for research on this field of insurance. These problems underscore the significance of this piece of work hence, the research work will be helpful to students of insurance and other interested disciplines who may wish to carry out further research on this new field.
- The research will assist both the federal government and the Nigerian Agricultural Insurance Corporation which are directly involved in the implementation of the scheme as they devise better ways of improving their performance. It will also enlighten the various marketing intermediaries on the need to participate more effectively in the operations of the scheme to ensure its success.
- Since the scheme serves as a kind of protection to the insuring public thereby enhancing greater confidence to all farmers in adopting new and improved farming practices and in making greater investments in the agricultural sector of the Nigerian economy perhaps and to increase the nation’s total productions.
1.5 SCOPE AND LIMITATION OF THE STUDY
Nigerian Agricultural Insurance Corporation as the only corporation underwriting all agricultural insurance policies in Nigeria with network branches made the study unique. The research work carried out tend to be in a dynamic setting as the scope of the work, external from head of office of the Nigerian Agricultural Corporation in Abuja to the nearby zonal office.
The research work covered crop and livestock insurance products.
The volume of work load required in a research of this nature could not be carried out without some limitations. First, was inadequacy of finance.
Second was the death of books, journals and magazines on agricultural insurance as a secondary source of data collection.
Thirdly, the illiteracy of respondent farmers constituted serious handicap and meant loss of vital information relevant to the research. Many of them did not grant the researcher audience during oral interview.
In addition, the absence of facilities such as computer in the operations of the Nigeria Agricultural Insurance Corporation hindered the availability of some required information or data while in certain cases, scanty statistics were available.
1.6 DEFINITION OF TERMS
In this research work, certain abbreviations were used by the researcher to save words and reduce the volume of the work. The under listed are some of the abbreviations and meanings:
- NAIS: Nigerian Agricultural Insurance Scheme
- NAIC: Nigerian Agricultural Insurance Corporation
- Insured: The person/organisation covered by the insurance company
- insurer: This is another word for the insurance company
- NACBL: Nigerian Agricultural and Co-operative Bank Limited
- Agric Ins: Agricultural Insurance
- Premium: This is the consideration paid for the insurance coverage that is price of the insurance service paid
- agent: This is an intermediary who handles the sales of insurance policies between the insurer and insured on commission deductible from premium paid by policy holders
- Broker: This is an intermediary who act as a co between for the sale of insurance policy. In one who introduces the business to the insurer and are paid brokerage on premium collected from the policy.
- Life Assurance: It is a contract of insurance on the life of a person. It is a contract whereby one party called the insurer agrees that subject to some terms exceptions and conditions that he would pay some money on the death of life assured on the precious maturity of the policy.