[19 million farmers shut out of agric insurance]

More than 19 million commercial farmers in Nigeria, constituting 96.5 percent of the nation’s commercial farming community, are exposed to the hazards of bankruptcy should natural disasters strike, BusinessDay investigations have shown.

This is because of the estimated 20 million commercial farmers in the country, only 700,000 (about 3.5 percent) have accessed agricultural insurance in the last five years, leaving 19.3 million who do not have insurance cover. For these, should a natural disaster occur, the burden of relief would fall on government, family and friends, and where these fail, they would likely become indigent.

According to a recent report by Enhancing Financial Innovation and Access (EFInA) – ‘Access to Financial Services in Nigeria 2012 Survey’ – out of the 5.98 million rural adults that experienced agricultural risk that year, only 70,600 used insurance. As a result, federal and state governments concerned spent hundreds of millions of naira to mitigate the effect, while the businesses of uninsured farmers who did not get compensation crashed and they had to sell assets or borrow money from family and friends to start all over again.

The objective of the agricultural insurance scheme, which has been run in Nigeria since 1987 when the National Agricultural Insurance Corporation (NAIC) was established, is to provide financial support to all categories of farmers who take up insurance policies in the event of losses arising from natural disasters. It also increases the flow of agricultural credit from lending institutions to the farmers when farming businesses are insured as well as minimises or eliminates the need for emergency assistance provided by government following agricultural disasters.

However, research surveys indicate that there is very low awareness of the scheme by farmers and many enlightened farmers are very wary of taking agricultural insurance policies.

But Bitrus Pembi, head, corporate communications, NAIC, says the new management of NAIC, which came on board a few weeks ago, has designed a very strategic plan to increase awareness among farmers and the uptake of agricultural insurance by tapping into the Agricultural Transformation Agenda (ATA) of the current government.

“Apart from English, we have translated our leaflets and jingles into the three major Nigerian languages – Hausa, Igbo and Yoruba – and would be[19 million farmers shut out of agric insurance] (Continued)

Industry sources, however, believe there should be more companies to service the agricultural industry apart from NAIC, which started in 1987, and Industrial and General Insurance Company (IGI) which was given the go-ahead just last year by the National Insurance Commission (NAICOM).

They also insist that the agricultural insurance market is still not competitive to insurance companies because the 50 percent subsidy provided by the Federal Government, in addition to the 25 percent subsidy provided by the state, are still given only through NAIC.

Therefore, farmers pay only 25 percent of their insurance premiums if they take up agric insurance with NAIC. But with IGI and any other entrant into the agric insurance industry, the farmers or agribusiness operators are expected to pay 100 percent.

These industry watchers, therefore, urge the removal of subsidies to liberalise the market. But the removal of subsidies is not a welcome development to many farmers.

“I rear broilers (chicken for meat) and so I have to buy a new stock of chicks every six weeks and I am expected to pay premium every time I procure a new stock. This is a heavy cost on my business due to the regularity of paying premiums. But NAIC pays when there are disasters,” says Olaseni Salako, a Lagos-based poultry farmer.

There are, however, so many complaints of non-payment of claims. Gani Abdulghaniyy Alabi-Ojolowo, a farmer says he and a group of farmers took insurance for the cultivation of cowpeas (beans) and it did not rain at the time expected due to climate change and they lost most of the crops as a result.

“But our application for claims was rejected by NAIC because they said we ought to have known that such a problem would arise and guard against it. I have never taken another agric insurance since then,” Alabi-Ojolowo says.

Pembi, however, says there are issues associated with agricultural insurance