With only about five per cent of agricultural crops in Nigeria insured, operators see this as a threat to food security, OKECHUKWU NNODIM writes
The insurance of crops in Nigeria’s agricultural sector is low as most farmers across the country shy away from insuring their crops and produce.
Agro-insurers, government officials as well as farmers believe that it is vital to insure crops, particularly to forestall the devastating impact of adverse weather on crop production.
Operators in the sector see the about five per cent level of agriculture insurance in Nigeria as another potential threat to food security nationwide.
Although many farmers agreed to the fact that it was vital to insure their crops, the concern of trust in insurance companies and the non-payment of claims by these firms had been sources of discouragement.
Some of them also claimed that insurance companies were selective of the type of agricultural insurance offers to make available to farmers.
However, insurance firms insisted that they had been engaging in series of enlightenment campaigns across Nigerian states to make farmers appreciate why they should insure their produce.
The Head, Agric and Micro-insurance Division, Leadway Assurance Company, Fatono Ayoola, said operators in the agro-insurance sector had been working hard on how to use insurance to guarantee food security for Nigeria.
Ayoola, who spoke in Abuja, observed that agriculture was a very risky venture in Nigeria, especially when in the production value chain.
He said, “This is the chain where you go to the field to cultivate a particular crop or to raise animals in poultry or others. You are faced with a lot of risks as an investor in that particular sector.
“In these days of climate change, you often have erratic weather patterns that can consistently impact negatively on your investments in the field. As you may have observed in this country, for the past three or four years there have been consistent flooding and rainfall.
“Now, assuming you are a farmer who cultivates crops in the region of consistent flooding, you may stop the investment if you do not have anything to fall back on after flood disaster hits your investment.
“That is why insurance has become a very good tool in securing your investment when the unexpected happens. This is because weather events are purely beyond man’s control.”
Ayoola said insurers had to organise workshops to look at insurance products that could be used to mitigate these climate risks, especially for farmers in the production value chain.
He said the capacity of insurers and service providers were being enhanced in order to know how best to make subsistence farmers understand ways to mitigate their risks through insurance.
On whether cost was a factor hindering the penetration of agro-insurance, Ayoola said, “For the Nigerian market, from my experience of close to three decades in this business of under-writing agricultural risks, the cost of agric insurance here is actually the cheapest anywhere in Africa.
“In fact, it is the cheapest anywhere in the world, as is applicable to the Nigerian farmers. So I believe the cost element is actually affordable.”
He said the cost of agro-insurance had to be reduced in Nigeria because most small scale farmers considered this as an additional cost that they did without.
The Leadway Assurance official, however, noted that insurance was necessary because of the erratic climate in Nigeria, as he explained that in 2020 there were unusual dry spells and many farmers lost their crops.
Ayoola said, “Dry spells that we call August break which should not last more than 14 days but ended up lasting for about 52 days.
“So if you are taking a look at the risks and uncertainties that the insurance company is insuring, vis-a-vis the price that the farmer is paying for the cost of insurance, it is certainly and very cheap.”
Insurers collaborate with farmers
The Head, Agric Insurance, AIICO Insurance Plc, Leonard Okereafor, stated that insurers had started collaborating with farmers based on the need to secure the country’s food production through insurance.
He said, “Our mandate is to reach smallholder farmers in Nigeria with respect to the insurance of their investments. But one thing you need to understand is the fact that it is easier to reach them through their cooperatives, aggregators and anchors.
“It is more cost effective both for the insurance company and for the famers. That is not to say that if we have the opportunity to deal with them individually we wouldn’t do that, but at the end of the day we look at the outcome.”
Okereafor stated that it had not been always easy for farmers to cope in terms of the payment of premium, apart from when they get assistance.
He noted that the collaboration between farmers and insurance firms was also geared towards addressing issues of mistrust which farmers had for insurance.
He said, “The issue of mistrust affects the whole insurance industry and we can’t say because of that we will not do what is needful. What we do is to try to empower, educate, carry them along and let them know the importance of insurance.
“Now, the process of educating them is not a straightforward one. You will have to organise a lot of events and it is something that is ongoing and can’t be achieved in a haste. No one company can do it all.
“And if you don’t achieve this mandate, there is no how we will be able to make agriculture to develop in this country. But one key challenge is that the knowledge base is still low, especially on the part of the farmers.”
Okereafor stated that funding was also a factor limiting the ability of farmers to insure their produce, adding that there poor access to loans had been a challenge as well.
He said: “It is important to note that about 98 per cent of the food we eat are produced by smallholder farmers in the crop value chain. And unfortunately, over 40 per cent of the rice we eat are imported.”
Asked to state the percentage of smallholder farmers who have access to insurance for their produce, Okereafor replied, “We have less than five per cent.
“The target to increase this percentage is an ongoing thing and we are looking at getting about 10 million farmers within the next five years.
“If we do that and we are able to build on it and other collaborators are equally involved in it, I think we can get there and food security will not be a far fetched expectation.
Herdsmen attacks not covered by insurance, say farmers
Speaking on why many farmers were not insuring their commodities, the National President, Nigeria Cassava Growers Association, Segun Adewumi, said cassava farmers were not insuring their crops due to herdsmen menace on cassava.
He said insurance firms had also told cassava farmers that destruction caused by herdsmen could not be insured.
Adewumi said, “There was this time when we insured our cassava and the herdsmen came and destroyed our crops. And when we reported they told us that what we experienced was malicious damage and that they don’t insure malicious damage.
“So we lost all to the herdsmen then. The greatest challenge we have in cassava cultivation is the activities of herdsmen. During the dry season, cassava is the only crop that stays wet and remains green.
“This makes cassava a target of herdsmen and whenever they invade your farm you cannot have any claim from the insurance companies.”
The cassava growers president, however, agreed that it was important for farmers to insure their produce, regardless of the challenge faced by those who cultivate cassava.
“However, beyond the challenge of cassava farmers with herdsmen, I think there is a need to insure our farm produce,” he said.
Adewumi added: “Also the insurance companies must be faithful, so that if there is any disaster they will take it up.”
He further pleaded on insurance companies to consider insuring cassava crops whether those destroyed by weather conditions of herdsmen.
Adewumi said, “During the period that I earlier talked about, when herdsmen destroyed our cassava, we took the pictures and videos, invited the police, went to the Local Government chairman, got affidavits, among others.
“To show enough evidence that herdsmen actually destroyed our cassava farms, but yet the insurance firms did not pay anything.
“However, we are being encouraged to insure our produce because of the loans from the Central Bank of Nigeria and other uses.”
Also, the Ekiti State Chairman of the All Farmers’ Association of Nigeria, Adebola Alagbada, explained that insurance only covered flood, fire and a few others but exclude cattle menace.
He lamented the destruction of farms by herdsmen’s cattle among other security challenges.
Alagbada said: “Going to farm is a serious problem. You face the challenge of being kidnapped by the bandits. Again, the challenges of herdsmen to farmers are enormous.”
He noted that a major obstacle was the limited coverage of available insurance.
“We want insurance to cover cattle menace. As it obtains now, it is not packaged into the insurance scheme. The insurance covers just flood and fire. It does not cover herders’ attack which is the problem that we have in the farms,” he said.
Alagbada’s position was corroborated by the state Chairman of the Maize Growers Processing Marketer Association of Nigeria, John Omoyajowo, who said the lack of insurance for cattle menace was also affecting farmers.
He said, “There is nothing we can do about it. It is unfortunate the insurance we have does not cover cattle menace. When our farms were destroyed, they were referring us to insurance when they knew that cattle menace is not insured in Nigeria.”
‘We’re speaking with insurance firms’
On why only about five per cent of Nigerian farmers had their crops and agro-produce insured, the President, All Farmers Association of Nigeria, Kabir Ibrahim, described it as a cultural thing.
He, however, stated that many farmers had run out of business due to the failure of having their produce and crops insured, adding that AFAN had been speaking with insurance companies on how to address this concern.
Ibrahim said, “It is the culture in the country but if you ask the insurance firms today they know that we are in discussions with them because it is now important for us to insure our crops against the vagaries of whether and climate.
“Recently we had flooding. We cannot wait for government intervention in the form of compensation because it will not really cover much of what we lose.But if you insure you get a percentage payment of what was lost.
“So we are talking with the insurance companies. And it is a very important thing that we are working on for we definitely have to insure our commodities. So many farmers have gone out of business because of flooding and things like that.”
He said the association had been informed of the possibility of flooding in 2021 as predicted by Federal Government agencies.
Ibrahim said: “We are aware of the predictions on flooding and we know such predictions are being helpful to farmers because it enables us to plan very well and to avoid planting on flood prone plains.
“This again speaks to why insurance is very important because even when you don’t have flooding, some other things such insecurity, loss of goods in transit, etc, could lead to the loss of produce. However, we appreciate the flood predictions.”
In March, the Nigeria Hydrological Services Agency advised the three tiers of government and citizens across the country to prepare against the impending devastating floods in 2021.
Director-General, NIHSA, Clement Nze, who gave the advice in Abuja, said this was because Nigeria was at the receiving end of disastrous floods among the nine countries of the River Niger Basin.
He said, “There is still time for states/LGAs (Local Government Areas) and individuals to take necessary steps to avert or minimise the disastrous effects of flood in the year 2021.
“As the country gradually steps into the 2021/2022 Hydrological Year in the River Niger Basin which covers nine countries of Benin, Burkina Faso, Cameroun, Chad, Cote D’Ivoire, Guinea, Mall, Niger and Nigeria, it means that Nigeria is gradually inching towards the peak rainy season with its attendant flood incidents.
“Nigeria’s geographical location downstream of all the countries in this Basin places it at the receiving end of disastrous floods and pollution from all the countries upstream.”
Nze had also explained that the persistent flooding and flood disasters had become an annual event in Nigeria since 2012 when the country experienced its worst flood disaster in recent history.
Officials of the CBN and the Federal Ministry of Agriculture and Rural Development confirmed that the government had continued to encourage farmers to insure their crops and produce.
Govt bringing insurers, farmers together
The Director, Policy and Regulation, National Insurance Commission, Leo Akah, said the Federal Government through NAIC had been working hard to ensure that more subsistence farmers insure their crops.
He stated that a few years ago, most insurance companies in Nigeria were not aware that they could offer insurance cover, apart from NAIC, which was the statutory institution put in place by the government to offer agric insurance.
“So NAICOM (National Insurance Commission) in its wisdom realised that other operators can still offer one service or the other.
“And that is why you have insurance companies marketing products now to farmers to boost the productivity of these farmers and ensure food security for Nigeria.”
On why many insurance firms were not fully into agric insurance, Akah explained that index insurance, which was obtainable in agric insurance, was slightly different from the conventional insurance policies.
He said, “Conventional insurance policies talk about indemnity. Now what is indemnity? It simply means that you’ve suffered a loss and the insurer is to bring you back to that position you were before the loss happened.
“But in this type of insurance, the effect of the adverse weather on your produce should warrant a compensation to the farmer. Now the compensation will still come whether you actually suffered loss or not. That is the striking difference here.
“Also, the conventional insurance does not cover adverse weather conditions such as floods, hurricanes, etc.
“Mind you, not everybody may have suffered losses from that excess rainfall, for instance, but you will still get some compensation.”
He noted that with this kind of insurance in place, the farmers would have access to funds.
The NAIC official observed that most times, many smallholder farmers lacked collateral and access to funds.
“But with this, they have some forms of backing in terms of credit, should anything happen to the farmer. Farmers don’t have the required capital but with insurance behind them they can use it to access capital,” Akah stated.
He further noted that the government could support could support farmers in accessing insurance through the provision of funds.
Also, the Chief Executive Officer, Nigerian Council of Registered Insurance Brokers, Adaramola Tope, admonished farmers to approach the right players in the insurance sector, stressing that there was nothing that could not be insured.
He explained that the greater the risk, the higher the premium and urged farmers not to be deterred, as insurance firms would be willing to partner those who were ready to meet the requirements.
Tope said: “There is nothing that insurance firms cannot insure. The only thing is the apathy in that sector. The farmers themselves, the question we should ask them is what efforts have they made?
“This is because we have insurance companies that are specialists in agric insurance, such as the Nigerian Agricultural Insurance Corporation, which is one of the companies licensed solely for agric insurance.
He explained that insurance involved risk taking, adding that the higher the risk, the greater the premium charged and encouraged farmers to be willing to make the required commitments.
“And to some of these farmers, the premium may be scary to them. And this is coming against the backdrop of concerns that what if we insure and the risk or danger that made us take insurance didn’t happen?” Tope stated.
He added, “So a lot of people are deluded by that to stay off insurance, not knowing that insurance sells peace of mind. So even if that peril did not happen, but then when you know that you have insurance in place it sort of helps you to be at peace.
“Therefore I don’t believe that insurance firms do not want to insure farmers. Also, what is the nature of risk that they want to insure? These are some of the issues.”
The council CEO further advised farmers to go through registered insurance brokers, adding that the broker would educate the farmers on how best to go about insuring that assets.