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Keywords: Insurance, Agriculture, Scheme, Prospect, Achievement, Nigeria.
INTRODUCTION
Agriculture has been provider of nutrient for teeming population as well as the largest employer of labor strength inwards the Earth (Amaza, 2000). The Nigerian agriculture equally inwards most
developing countries of the world is anchored mainly on
subsistence farming methods. In this regards little scale farming operators producing close 80% of the total nutrient production for the e'er increasing population, operate on fragmented farm of betwixt 0.5 – 2hectares (Salami, 1994). The federal business office of statistics (2006) recorded that nutrient production grew at a charge per unit of measurement of 3.5% alongside an annual population growth charge per unit of measurement of 2.83%.
In a desperate bid to solve the country’s nutrient as well as nutrition problems, diverse nutrient related policies, programmes as well as projects were set inwards place. In spite of diverse programmes as well as projects, the nutrient problems continued unabated as well as nutrient importation had to pace up. Aderinola et al (2007) gave the next reasons for the perpetual nutrient deficits:
• Lack of dramatic breakthrough inwards agricultural research,
• High risks as well as uncertainties often associated alongside agricultural production,
• Unwillingness of the entrepreneurial cast to
devote organizational abilities to agricultural production,
• Inefficient marketing as well as distributional system, • Low status accorded farmers inwards the society, and
• Rural-urban migration of the rural youth.
Furthermore, at that topographic point is the institutional constraint especially the weak linkage betwixt agricultural extension as well as enquiry services that receive got widened communication gap betwixt farmers as well as policy makers, as well as inadequate credit to agricultural sectors to finance modern farming engineering scientific discipline (Soniran, 1991).
Avery of import job faced yesteryear farmers as well as agricultural trace of piece of work organisation enterprises is that it is characterized yesteryear considerable gamble as well as uncertainties which stalk from its predominant dependence on nature. This is because agriculture requires extensive direct as well as continuous contact alongside the forces of nature. These risks are unforeseen as well as they are beyond the command of the farmers. Farmers appear upwardly considerable losses of investment as well as income due to the losses resulting from these gamble as well as uncertainties. Because of this, Ajakaiye (2001) stated that little farmers inwards many developing countries of the world including Nigeria are trapped inwards the barbarous bicycle of poverty. This bicycle is characterized yesteryear depression productivity as well as depression farm income which exit them alongside virtually no saving equally upper-case missive of the alphabet required inwards the transformation of their production technology.
However, alongside Agricultural Insurance, farmers tin travel saved from these losses or harm to crops as well as livestock or the outcome of which tin travel minimized. According to Ray (2001), crop insurance inwards developing countries can:
a. cushion the stupor of disastrous crop losses inwards bad year,
b. assist to ensure a considerable mensurate of safety inwards farm income over the years as well as this contribute to the stability of the agriculture as well as inwards plow the full general economy,
c. ameliorate the seat of farmers inwards relation to
agricultural credit,
d. strengthen the seat of the agricultural cooperative societies equally a outcome of the strengthening of the economical seat of the farmers, the credit establishment tin thus travel to a greater extent than liberal inwards providing the much needed credit to the farmers, accepting crop insurance contracts equally collateral,
e. laissez passer on the farmers greater confidence inwards adopting novel as well as improved farming practices as well as inwards making greater investment inwards agriculture for improving crop yields as well as increasing agricultural production, and
f. assist to supplant sporadic as well as haphazard grant as well as relief operations which regime inwards developing countries are oftentimes called upon to undertake inwards emergencies yesteryear a pre-planned as well as actuarially calculated scheme of compensation awards nether which the parties concernedgovernment as well as farmers to a greater extent than often than non know inwards advance their respective liabilities as well as the farmers inwards item know the extent of protection available inwards example of unavoidable losses of their crops.
Ray (2001) concluded that no sustained as well as steady evolution of the developing countries is possible without or so cast of crop-agricultural insurance to underwrite risks of crop-agricultural failure.
Agricultural Insurance thence is a necessary component of the institutional infrastructure essential for the evolution of agriculture which is basically a high gamble enterprise. Based on the inwards a higher house roles of agricultural insurance equally panacea to alleviate or so of the job militating against agricultural insurance inwards Nigeria, the Nigerian agricultural insurance scheme (NAIS) was formed inwards 1987 yesteryear the federal government. The scheme has been inwards functioning since then.
Agricultural Insurance: Risk as well as Uncertainty
Agricultural insurance is defined inwards the Nigerian Agricultural Insurance scheme (NAIS) functioning guideline (1989) equally the stabilization of income, employment, prices as well as supplies of agricultural products yesteryear agency of regular as well as deliberate savings as well as accumulation of funds inwards little installment yesteryear many farmers inwards favorable fourth dimension periods, to defend or so or a few of the participants inwards bad fourth dimension periods.
Mabawonku (1998) defines insurance equally the elimination of the uncertain gamble of loss for the private through the combination of a large number of similarly exposed private who tin contribute to a mutual fund, premium payment sufficient to brand expert the loss caused yesteryear whatever 1 individual. These definitions are consistent alongside Hansel (1998) which defines insurance equally a social device providing fiscal compensation for the effects of misfortune, the payment existence made from the accumulated contributions of all parties peculiarly inwards the scheme.
Thus, it may travel seen equally a form of fund, into which all those insured volition pay an assessed contribution (called premium), inwards return, those insured volition receive got correct to telephone phone on the fund for whatever appropriate payment should the insured trial occur.
The needs for agricultural insurance arose because the sector is exposed to varieties of gamble as well as uncertainties. Risk as well as uncertainties often used interchangeably, receive got dissimilar connotations. Mabawonku (1998) defines gamble equally variability’s inwards outcome which are measurable inwards an empirical or quantitative manner. Such outcome or situations are to a greater extent than often than non characterized yesteryear measurable probability. Mabawonku, however, viewed uncertainty equally province of affairs or outcomes alongside quantitative valuations measured alongside whatever flat of accuracy.
Farmers receive got dissimilar mental attitude towards risk. Some farmers are gamble a versed, or so are gamble neutral piece other are gamble preferrers:
Risk Aversion:- Is the style to avoid higher gamble equally much equally possible, non having a expert disposition to taking a higher risks. Influenza A virus subtype H5N1 risks averter farmer may convey gamble solely if the higher gamble is accompanied yesteryear a to a greater extent than than proportionally higher expected profit.
Risk Preference:- Is the style to bask taking higher risks; to this conclusion maker, there is a utility attached to the human activity of taking gamble which is distinct from the utility of expected reward. The gamble preferrer thence volition receive got a higher gamble for less than proportionate increment inwards the expected profit.
Risk Neutral:- Is the style non to bask or loathes taking higher risks. It agency that the gamble neutral an increment inwards gamble must travel accompanied yesteryear a proportionate increment inwards the expected profit.
Colman as well as Young (1998) reported that farmers inwards developing countries are gamble a versed. This implies that he is willing to forgo or so income inwards monastic tell to avoid risk. It is imperative at this dot to add together that non all gamble is insurable. The atmospheric condition of agricultural gamble to travel insurable inwards Nigeria are equally given yesteryear Mabawonku (1998). He states that insurable risk:
• Must travel of fortuitous character,
• It should travel measurable inwards large number,
• The cost of insurance or premium should travel inside the agency of the average farmer.
In trace alongside status for insurability of gamble given yesteryear Mabawonku, (1998), Adegeye as well as Akinwumi (1988) reported that the probability of occurrence of death, burn downwardly losses, accident are measurable as well as hence insurable solely because the number of observation is sufficiently large as well as is independently randomly distributed. Furthermore, gamble as well as uncertainty that resulted from natural peril outcome inwards losses of non solely on the plain but also, during storage, packaging as well as marketing of agricultural commodities. Pests, diseases as well as parasitic attacks receive got been found to travel the peril that occurs most oftentimes on the farm annually as well as they crusade a real high per centum of both plain as well as send service harvest losses of agricultural commodities.
Adegeye as well as Okunmodewa (1998) observed that most analyst telephone phone pilfering a social risk, but inwards their (Adegeye as well as Okunmodewa) view, the extent to which they deport on the
total yield of crops as well as livestock is at growing stage, substantial as well as non detected) larn inwards a major farm peril to reckon with.
Historical Background of Agricultural Insurance inwards Nigeria
Agricultural insurance equally an alternative for gamble management genuinely started equally crop hail insurance inwards Europe to a greater extent than than 100years agone as well as spread to the United State at the outset of the century. It has since been embraced yesteryear a lot of develop as well as developing countries of the World viz: USA, Canada, Japan, Mexico, Brazil, Bolivia, Coast Rica, Panama, Mauritius, India, Australia, I ran, Sri Lanka, Zambia, Philippine, Israel, Chile, Jamaica, Egypt, Cyprus, Sweden, People's Republic of Bangladesh as well as Venezuela – alongside varying degrees of successes as well as failures.
In Nigeria, commercial agricultural insurance scheme was pioneered yesteryear Niger insurance inwards May, 1987. National Insurance Corporation of Nigeria (NICON) fully owned yesteryear the Federal Government as well as the National Cooperative Insurance Society of Nigeria (NCISN) were also known to receive got operated insurance schemes alongside agricultural implication on a express commercial scale. Similarly, or so banks such equally the United Bank for Africa (UBA) as well as Union Bank of Nigeria which were actively involved inwards giving credit facilities to the agricultural sector had to lift the amount assured of life assurance of loan applicants to qualify equally suitable collateral for providing loan.
Agricultural insurance scheme (NAIS), which was formerly launched on the 15th of December, 1987, was later on followed yesteryear the incorporation of the Nigeria Agricultural Insurance Company (NAIC) inwards 1988 to implement the scheme.
Objectives of Nigeria Agricultural Insurance Scheme
The broad objective of the Nigeria Agricultural Insurance Scheme (NAIS) is to offering protection to the farmer from the effects of natural disasters as well as to ensure payment of appropriate compensation sufficient to maintain the farmer inwards trace of piece of work organisation after suffering a loss.
The scheme is designed specifically to:
(a) Promote farm production since it would heighten greater confidence inwards adopting novel as well as improved farm practices as well as inwards making greater investments inwards the agricultural sector of the Nigeria economy, thereby increasing the total production;
(b) Provide fiscal back upwardly to farmers inwards the trial of losses arising from natural disasters;
(c) Increase the current of agricultural credit from lending institutions to the farmers;
(d) Minimize or eliminate the demand for emergency assistance provided yesteryear Government during current of agricultural disasters.
Perils Under Cover
The perils covered nether the crop sub-sector are fire, lightning, windstorm, flood, drought, pests as well as diseases. For livestock, the perils covered are expiry as well as injury due to accident, disease, fire, lightning, tempest as well as flood. Losses caused yesteryear negligence or yesteryear willful harm are non covered. Similarly, political risks as well as losses resulting from social risks, e.g. riot, mutiny, revolution, etc. are non covered.
The insured nether the scheme is required to encounter the atmospheric condition for expert crop as well as livestock husbandry equally set downwardly inwards the guidelines/policies provided yesteryear NAIC.
Risk Management
As stated before gamble is an inherent element of life as well as thence cannot travel eliminated. The powerfulness to deal as well as command a gamble is the best way to tackle the number of risk. According to official newsletter of Farm Management Association of Nigeria (FAMAN), 2000, fiscal success inwards farming is heavily subject upon the powerfulness of the farmers to trim down gamble as well as uncertainty or to ameliorate his gamble bearing ability. The powerfulness to command or trim down gamble is referred to equally gamble management. Sonka as well as Patrick (2000) define gamble management equally the alternative of alternative course.
Oyekole (2002) as well as Otegbolade (2002) laissez passer on the working Definition of gamble management equally the identification, evaluation as well as economical command of gamble that threaten the assets as well as earnings of a trace of piece of work organisation or other enterprises. The objective of gamble managements Oyekole (2002) as well as Otegbolade (2002) went farther to brand the most efficient pre-loss organisation for post-loss residual betwixt resources needed as well as resources available to preserve the effective functioning of the business.
The next methods tin travel used yesteryear farmers to grip agricultural risks. These are measures that tin guarantee them or so minimum income or wealth inwards the appear upwardly of either natural or manmade hazards, equally summarized yesteryear Wallace (1988), Otegbolade (2002), Irukwu (2001) as well as Osoka (2002). These include the following:
(i) Risk avoidance,
(ii) Risk assumption,
(iii) Risk reduction,
(iv) Risk transfer,
(v) Risk sharing as well as (vi) Self insurance.
Before the commencement of functioning of Nigerian Agricultural Insurance Scheme (NAIS) inwards 1988, Nigerian farmers receive got been using or so gamble management
techniques to deal alongside agricultural risk. Mabawonku (1998) states that Nigerian farmers receive got been coping alongside agricultural gamble before he establishments of NAIS through diversification , that is, the growing of to a greater extent than than 1 crop on a plot of land, each alongside dissimilar wet requirement as well as dissimilar gestation current as well as management requirements. Sorrenson (1984) had before agreed that diversification guaranteed farmers or so minimum income or wealth inwards the appear upwardly of either natural or manmade hazards.
Additionally, Dittoh (1988) study that gamble management techniques inwards tree crops production differ significantly from that of animate existence as well as crops because of inflexibility inwards the tree crop production. He states informal gamble management techniques inwards tree crop production before the commencement of NAIS are:
(i) Conservation,
(ii) Engage inwards non-farm income generating ventures,
(iii) Mixed cropping as well as mixed farming,
(iv) Hedging and
(v) Agriculture cost back upwardly or guaranteed minimum pricing.
Prospect of Nigeria Agricultural Insurance Scheme
Agricultural sector is exposed to all normal trace of piece of work organisation risks as well as uncertainties equally good equally other natural calamities which are non solely unpredicted but autumn exterior the command of private farmer. This province of affairs leads to depression production inwards Agriculture. As a outcome of this, a serial of scheme were introduced to alleviate these problems. Mabogunje (2000) outline or so of these schemes, they include:
(i) Plantation Agriculture Development Scheme betwixt 1950’s as well as 1960’s
(ii) Farm village schemes, since the belatedly 1950’s (iii) Government owned nutrient companies or corporation inwards the 1970’s
(iv) The National accelerated nutrient production programme inwards the 1970’s (v) 0peration feed the Nation in1978
(vi) World Bank Assisted Agricultural Development
Projects, 1974
(vii) River Basin Development Authority (viii) The Nigeria Green Revolution.
Other regime programmes include Directorate of
Food, Road as well as Rural Infrastructure (DFRI) as well as straight off Nigeria Agricultural Insurance Company alongside the master copy objective of protecting the farmers from devastating effects of natural disasters as well as to ensure payment of appropriate compensation sufficient to maintain the farmer inwards trace of piece of work organisation after suffering a loss as well as consequently ameliorate Agricultural production level. Adegeye as well as Akinwumi (1988) are of the thought that apart from protecting farmers against losses, an insurance scheme would heighten farmer’s powerfulness to obtain loan from fiscal institutions thereby increment their total production. Adeyemi (2000) confirms that crop insurance policy is a feasible tool for increasing crop production and promoting exports thus promoting agricultural sectors equally whole. In the same vein, Ejemai (2002) highlight the benefits of agricultural insurance to include expanded agricultural output. This is possible because the policy holders are assured of a for sure income inwards a example of crop as well as livestock failure. This may include them to convey to a greater extent than gamble inwards an endeavor to increment production.
Jafiya as well as Toro (1998) province the NAIS is linked to Agricultural Credit Guarantee Fund Scheme (ACGFS) operated yesteryear the CBN, as well as to the agricultural loan scheme from the populace sources, The linkage makes it mandatory to farmers obtaining such loans to insure their farms nether the NAIS. The NAIS as well as ACGFS are issue or mutually reinforcing each other. The ACGFS guarantees depository fiscal establishment against loan defaulters as well as non farmers where equally nether the NAIC scheme; farmers are protected against losses resulting from natural hazards. NAIC does non laissez passer on banks guarantee of loan payment inwards the trial of defaults unrelated to natural peril which the ACGFS does.
Achievement of Nigeria Agricultural Insurance Scheme
With regards to achievements, the NAIC premium income for 1989–1993 was ₦50,121,115. This figure increased inwards 1994–1998 as well as 1995–1999 to ₦76,959,078 as well as ₦114,049,706 respectively (WAICA, 2000). The figure increased inwards 2000–2004 as well as 2005–2009. The claim for the twelvemonth 1989-1993, 1994-1998 as well as 1995-1999 were ₦2,410,000, ₦15,662,236 as well as ₦35,197,000 respectively. These stand upwardly for a loss ratio of 4.0 (WAICA Journal, 2001). From the figures given above, it tin travel seen that an endeavor has been made to salve farmers of the pains of losses suffered from natural disaster. On the whole Irukwu (2001) noted that the claim fifty-fifty experienced nether the scheme has been relatively expert after making allowance for or so fraudulent as well as grossly exaggerated claims.
As before indicated, the scheme was established to provide safety for all categories of farmers, namely: small, medium as well as large-scale holders, either inwards groups or equally individual. The insurance covert is compulsory for farmers that do goodness from whatever cast of agricultural credit scheme operated yesteryear approved lending institutions or agencies for the agricultural items covered nether the scheme alongside since 1st January, 1989. Most transaction was made yesteryear or through the lending institution. The scheme also provides covert for self financed farmers, Government sponsored or assisted projects, etc. inwards which institutional credit facilities may non travel involved. In this case, payments of premium as well as asking for whatever compensation were made direct to the companionship yesteryear the private farm or group.
Problems of Nigeria Agricultural Insurance Scheme
The efficiency of agricultural insurance inwards reducing farmer’s losses has non been inwards dubiety but the constraints to its polish functioning receive got been envisaged yesteryear many authorities. Jafaya as well as Toro (1998) envisaged that the next job powerfulness hinder the polish functioning of the agricultural insurance scheme inwards Nigeria:
(i) Inadequate infrastructure as well as administrative facilities
(ii) Shortage of trained manpower
(iii) Ignorance of farmers on the functions as well as merit of the scheme
(iv) Non-availability as well as unreliability of information useful for insurance purpose and
(v) Inadequate as well as untimely funding
These problems receive got been confirmed yesteryear Jafaya (2002) to travel amidst the problems militating against the effective as well as efficient functioning of the Nigerian Agricultural Insurance Scheme (NAIS). It is necessary to brand a brief analysis of these problems;
(i) Inadequate Infrastructure as well as Support services
Inadequacy of infrastructural facilities such equally expert roads as well as other efficient agency of transportation, expert communication facilities, uninterrupted powerfulness supply, could hamper the successful functioning of the scheme. These facilities are needed inwards monastic tell to facilitate prompt as well as speedy intimation of losses yesteryear the farmers for assessment of losses as well as payment of indemnities.
(ii) Inadequate funding
Adequate as well as timely funding of the scheme volition travel essential for its success. Agricultural insurance is a real costly venture as well as equally such, organisation for adequate funding should travel made. Delay inwards blessing as well as releasing funds as well as especially undue political interference inwards funding as well as management of the scheme volition deport on its success.
(iii) Lack of Trained Personnel
The scheme requires the availability of personnel trained inwards agriculture as well as insurance at the national, province as well as local regime levels equally evaluator, supervisors, loss adjusters, salesmen as well as extension staff. The Earth is brusk of this cadre of personnel.
(iv) Ignorance as well as Lack of Awareness of the Scheme yesteryear Farmers
The ignorance as well as lack of awareness yesteryear the bulk of farmers of the need, exercise as well as lack of awareness yesteryear the bulk of farmers of the need, exercise as well as values of agricultural insurance, constitute job to the scheme.
(v) Lack of Data
Influenza A virus subtype H5N1 major job affecting the scheme is the dearth of information on farm operations, peculiarly on crop yields as well as losses arising from natural hazards. These information are necessary for the computation of premiums as well as indemnities.
CONCLUSIONS AND RECOMMENDATIONS
Modern engineering scientific discipline as well as agricultural insurance are non mutually exclusive. Rather, they should travel seen equally both complementary as well as mutually reinforcing. This is because uncertainties inwards Agriculture transcends the production stage, to include special processes such equally harvesting, storage, good-in-transit, pilfering as well as marketing (prices) because of the perishability nature of agricultural products. Nigeria has made a decent start to tackling its agricultural albeit rural problems. The macroeconomic reforms that receive got been instituted receive got elicited or so small-scale provide response. There has been growth inwards the agricultural sector. The growth has touched virtually all the sub-sectors of agriculture which has Pb to an increment inwards hectarage cultivated. At the same vein at that topographic point is demand for regime agencies to address inwards fractural challenges which constrain productivity.
The scheme should travel made compulsory for farmers obtaining institutional credit for the next reasons:
(a) Institution lenders would travel encouraged to lend to a greater extent than for farm production because of added safety of insurance for the loans;
(b) Farmers volition travel encouraged to convey to a greater extent than credit for increased farm production when provided alongside insurance covert against natural hazards i.e. drought, floods pests, diseases etc;
(c) Bank loan repayment volition ameliorate because of added supervision of farmers activities yesteryear the insurance Agency as well as other institutions participating inwards the functioning of the scheme;
(d) Administration of the scheme volition travel made unproblematic because:
(i) Services of existing fiscal establishment volition travel utilized;
(ii) Premium volition travel built inwards as well as deducted straight from the loan for payment to the Agency yesteryear the financial
institution;
(iii) Insurance contracts are made betwixt the insurance Agency as well as the lending institutions rather than direct alongside the farmers;
(iv) Indemnities are paid to the farmers through the credit institutions and
(v) Compulsion for insurance is easily enforced
However farmers non taking institutional credit tin avail themselves of the protection offered yesteryear the scheme.
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