THE CONTRIBUTIONS OF AGRICULTURAL INSURANCE TO THE NIGERIAN ECONOMY
1.1 BACKGROUND OF THE STUDY
The principal feature, which distinguishes agricultural from other production sectors, is its great dependence on nature which itself is beyond man’s control. The agricultural sector, as importance as it is, is exposed to extremely high degree of risks arising out of natural factors like weather conditions. Uncertainties, regarding the quality and quantity of the crop/livestock output due to natural hazards, are one of the basic risks that are constantly faced by every farmer. But majority of farmers are subsistence in nature and are seldom able to bear such risks especially when large losses involved. The decline in the supply of products in turn creates a shortage of inputs in other sectors of the economy; thus the entire economy is open to the serious consequences of agricultural risks of which the farmers are most direct and primary victims. Most of these events that results in these losses are beyond the control or prevention by individual(s) or society as a whole.
It is therefore important that devices be employed for minimizing the adverse economic effect of these natural hazards in agriculture. Not only lives and well being of individuals are involved but also the economic viability of the entire nation may be at stake. Agricultural insurance is therefore the most important available device for minimizing the adverse effects of natural hazards. Agricultural insurance scheme is a collective system or scheme for reducing economic uncertainties through the basic technique of risk pooling. Where as the frequency of and severity of crop losses of individual farmers cannot be predicted the predictability and severity of losses frequency is substantially increased when similar exposures of large number of farmers and pooled.
However, there are measures established to increase agricultural production and farm income like the Agricultural Development Project (ADP) operation feed the Nation (OFN), the Green Revolution, the Nigeria Agricultural and Co-operative Bank.
Agricultural and Co-operative bank and various river basin authorities in different states. These measures have not been with success because of the huge losses of Agricultural products caused by natural disaster/hazards which has been the major constraints in increasing food production in Nigeria economy. Agricultural insurance therefore offers protection to farmers insured from the effect of these natural disaster and ensures payment of appropriate compensation sufficient to keep the farmer in the business after suffering a loss. It minimizes and eliminates the need for emergency assistance provided by government during the period of Agricultural disaster.
Agricultural insurance scheme is therefore aimed at encouraging banks to be more liberal in extending agricultural credits to formers for increased food production since their loans are under Agricultural insurance policy cover. Most importantly, the scheme includes research and development which generates innovations that reduce risks of diseases, pests and yield losses in Agricultural production and give protection to farmers. It provides financial support and increase the growth of Agricultural credit from lending institutions from farmers. Therefore, farmers are encouraged to ensure their farm projects with Nigerian Agricultural insurance corporation (NAIC), so as to have more confidence to embark on wider range of Agricultural production.
1.2 STATEMENT OF THE PROBLEM
The growth of agricultural production has declined substantially both in food production and exports crops resulting increased food import and diminished foreign exchange capacity. Measures by various government of the federation towards increasing food production has been in operation like Agricultural Development plan (ADP), the operation Feed the Nation (OFN), the Green Revolution of Rural Development bank (NACRAB) River Basin Development Authorities (RBDA) etc. were already, established to increase Agricultural production and farm income. All these efforts have not been with success. The observed poor performance of farmers in agricultural production is due to the nature of risks and uncertainties in agriculture. The physical environment is harsh, the weather is highly variable, the rainfall is often bodily distributed, high soil temperature, are frequent, pest and disease are diverse and in abundant.
As a result of this inherent factors militating against farmers success in agricultural production, farmers experienced huge losses of their crops and live stocks in any year such extent occurs and they are left bankrupt, financial institutions are reluctant to lend to agricultural sector, big investors are unwilling to enter into large scale production. As a result of all these factors and fear, a reliable insurance scheme to adequately provide covers for all these uncertainties become inevitable and a loud able scheme.
Therefore, certain key issues pertaining to Agricultural insurance contributions to the Nigerian economy will be discussed. The key questions will form the bases or main themes of this project work are:
- What contributions has Agricultural Insurance scheme towards the growth and development of Agriculture.
- Have financial institutions any role to play in the successful implementation and existence of Agricultural insurance scheme.
- What is the nature of premium income generation and indemnity payment to farmers by the corporation?
- Has there been a change in the level of performance of farmers before and after taking up the insurance policy?
- What are the problems and prospects of agricultural insurance scheme?
1.3 PURPOSE OF THE STUDY
The broad objective of this study is to examine the contributions of Agricultural insurance scheme to the growth and development of Agriculture in Nigeria but the specific objectives of this study are:
- To ascertain the contribution of Agricultural Insurance scheme towards improving food production in Nigeria.
- To ascertain the contribution of the financial to the successful implementation of Agricultural insurance scheme in Nigeria.
- To examine the premium income generation and indemnity paid on claims by the Nigerian Agricultural insurance corporation.
- To compare the performance of farmers before and after taking up the Agricultural insurance policy
- To ascertain the problems and prospects of Nigerian Agricultural insurance scheme in Nigeria.
1.4 SCOPE/LIMITATIONS OF THE STUDY
This work entails an accurate measurement of all studied variables. The scope of study was restricted due to constraints of time and money to go into the interior areas of Enugu state, the reluctant or outright refusal of some respondent to air their views or make certain information available, the possibility that some of the interviewers may not have been objective in their responses made the researches to limit the study to NAIC, Enugu state, farmers and financial institution in Enugu state. However, in spite of the above mentioned constraints, adequate and correct information are collected and analyzed appropriately.
1.5 RESEARCH QUESTION
To guide this study, the under listed research questions were formulated.
- To what extent has the contributions of Agricultural insurance scheme affect the growth and development of Agriculture in Enugu State.
- What role has financial institutions to play in the successful implementation and existence of Agricultural insurance scheme in Enugu state?
- To what extent has the premium income generation and indemnity payment of NAIC, Enugu state office effect the growth and development of Agriculture in Enugu
- Has there been a change in the financial level or performance of farmers before and after taking up the Agricultural insurance policy.
- To what extent has the problems and prospects of agricultural insurance scheme effect its operations in Enugu.
1.6 DEFINITION OF TERMS
PREMIUM: This refers to the amount paid by the insured to the insurer before taking up the insurance policy.
RISKS: This refers to all those hazards which effects insured properties, e.g pests, diseases, erosion, thunder, lightening etc.
INSURED: This refers to person who took insurance policy with the insurer.
INSURER: This refers to the insurance company or corporation that, underwrites insurance risks for people.
NAIC: Nigerian Agricultural Insurance Corporation.
NAIS: Nigerian Agricultural Insurance Scheme.
INDEMNITY: This refers to the amount paid by the insurer to the insured who sustain loss on the risks he insured against.
AGRICULTURAL INSURANCE: This is a collective system for reducing economic uncertainties through the basic techniques of risk pooling.
AGRICULTURE: This may be defined as the cultivation of land and the production of food, plants and animals for man’s use and survival.