The Contribution Of Agricultural Insurance To The Nigerian Economy (A Study Of NAIC Nigeria Agricultural Insurance Corporation Enugu State)

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The Contribution Of Agricultural Insurance To The Nigerian Economy (A Study Of NAIC Nigeria Agricultural Insurance Corporation Enugu State)


Abstract


The agricultural sector, as importance as it is exposed to extremely high degree of disk arising out of natural factors like weather conditions. Uncertainties, regarding the quality and quality 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 natures and are seldom able to bear such risk especially when large loss involved. The information for the study was collected using primary and secondary methods of data collection. For the primary data collection, questionnaires, personal observations and oral interviews were used while existing literature relevant to the topic was consulted for the secondary data.

The researcher used chi-square statistical model to analyze the data. At the end of the research work the researcher find out the following: that Agricultural insurance scheme has helped the farmers to get agricultural loans easily from the farmers to get agricultural loans easily from the financial institution by the use of her policy document, which banks accept as enough collateral security from farmers. Based on the findings the researcher made the following recommendations: Government provision of befitting accommodation for the NAIC that pilot the scheme.

Since the scheme to established and 100% owned by the federal government, the government should assist in providing, benefiting accommodation for the office because of its importance to the Nigeria farmers, Government should assist the Nigeria Agricultural Insurance Corporation in the publicity of the scheme especially at the grassroots. This will encourage the farmers to go and take loan and invest it in agriculture without fear of uncertainlees, Before a farmer is qualified for a loan in agricultural bank/Commercial Banks, there is a minimum saving required by the bank to qualify you certain amount of loan. Guideline: Bank should be well acquainted with the modalities of the scheme so to educate their loaners in their local branches on the operations of the scheme.


Table Of Contents


Preliminary Page(s)

  • Title
  • Declaration
  • Approval
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Content

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of problem
  • 1.3 Objective of the study
  • 1.4 Research Hypotheses
  • 1.5 Significance of the study
  • 1.6 Scope and limitation of the study
  • 1.7 Definition of terms
  • 1.8 Organization of the study

Chapter Two

Review Of Related Literature

  • 2.1 An overview
  • 2.2 The meaning and concept of agricultural insurance
  • 2.3 Historical background of agricultural insurance in other countries
  • 2.4 Evolution of Nigerian agricultural insurance scheme
  • 2.5 Reasons for low productivity and the effects of natural hazards in Nigeria agriculture
  • 2.6 Risk in agricultural classification of these risks
  • 2.7 funding and administration of agricultural insurance scheme in Nigeria
  • 2.8 Basic agricultural insurance policies available in the scheme
  • 2.9 Beneficiaries and advantages of agricultural insurance scheme in Nigeria
  • 2.10 Procedure for insurance

Chapter Three

Research Methodology And Design

  • 3.1 An overview
  • 3.2 Sources of data
  • 3.2.1 Primary data
  • 3.2.2 Secondary data
  • 3.3 Population of the study
  • 3.4 Sample size of study and sampling techniques
  • 3.5 Instrument in determining sample size
  • 3.6 Validity of the instrument
  • 3.7 Method of data presentation analysis

Chapter Four

Data Presentation And Analysis

  • 4.1 An overview
  • 4.2 Data presentation
  • 4.3 Data analysis
  • 4.4 Testing of Hypothesis
  • 4.5 Discussion of findings

Chapter Five

Summary Of Findings, Conclusion And Recommendation

  • 5.1 Summary findings
  • 5.2 Conclusion
  • 5.3 Recommendations
  • 5.4 Suggestion for further studies 8
  • Bibliography
  • Appendix
  • Questionnaire

Chapter One


Introduction

1.1 Background Of The Study

The principle feature, which distinguishes agriculture 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 exposed to extremely high degree of disk arising out of natural factors like weather conditions. Uncertainties, regarding the quality and quality 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 natures and are seldom able to bear such risk especially when large loss 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 result in these losses are beyond the control or prevention by individuals 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 but also the economic viability of the entire nation may be at state.

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 techniques of risk pooling whereas the frequency of the severity of crop losses of individual farmers cannot be predicted, the predictability and severity of losses frequency is substantially increased when similar exposure of large number of farmers are pooled.

However, there are measures established to increase agricultural production and from income like the Agricultural Development Project (ADP), operation feed the Nation (OFN), the Green Revolution, the Nigeria Agricultural and Co-operative Bank and various River Basin Authorities in deferred states. These measures have not been with success because of the huge losses of agricultural production caused by natural disaster/hazards which has been the major constrains in increasing food production in Nigeria economy. Agricultural insurance therefore offers production to farmers (Insured) from the effect of these natural disaster and ensure payment of appropriate compensation sufficient to keep the formers 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 farmers 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, pets and yield losses in agricultural production and give protection to farmers. It provides financial support and increases the growth of agricultural credit from lending institutions and farmers. Therefore, farmers are encouraged to ensure their farm projects with Nigerian Agricultural Insurance Corporation (NAIC), so as to have more coincidence to embark on wider ranger of Agricultural productions.


1.2 Statement Of The Problem

There has been so many problems associated with Nigeria Agricultural insurance cooperation in agricultural development in Nigeria. Some of such problem includes:

  1. Nigeria Agricultural insurance cooperation are not adequately covering Agricultural risk.
  2. Nigeria Government is not adequately funding Nigeria Agricultural insurance cooperation.
  3. Famers in the rural Areas don’t even know the existence of Nigeria Agricultural insurance cooperation.

1.3 Objective Of The Study

The aim of this research work is to examine the role of Nigeria Agricultural insurance cooperation in the development of Nigerian agricultural industry, the specific objective of the study include the following:

  1. To examine why Nigeria Agricultural insurance cooperation are not adequately covering agricultural risk.
  2. To examine why Nigerian government is not adequately funding Nigeria Agricultural insurance cooperation and its economic implication.
  3. To know why famers in the rural area do not know about the existence of Nigeria Agricultural insurance cooperation.

1.3 Objective Of The Study

The aim of this research work is to examine the role of Nigeria Agricultural insurance cooperation in the development of Nigerian agricultural industry, the specific objective of the study include the following:

  1. To examine why Nigeria Agricultural insurance cooperation are not adequately covering agricultural risk.
  2. To examine why Nigerian government is not adequately funding Nigeria Agricultural insurance cooperation and its economic implication.
  3. To know why famers in the rural area do not know about the existence of Nigeria Agricultural insurance cooperation.

1.4 Research Hypothesis

The following research hypotheses were formulated by the researcher:

  1. Ho: Poor covering of agricultural risk by Nigeria Agricultural insurance cooperation do not affect the development of Agricultural industry.
    H1: Poor covering of agricultural risk by Nigeria Agricultural insurance cooperation affects the development of Agricultural industry.
  2. Ho: The poor funding of Agricultural insurance cooperation has no effect on Agricultural development in Nigeria.
    H1: The poor funding of Agricultural insurance cooperation has a significant effect on Agricultural development in Nigeria.

1.5 Significance Of The Study

This research work will be of immense help to:

The student:

It will help the researcher to know more on the role of Nigeria Agricultural insurance cooperation in the development of Nigerian agricultural industry.

The Stake holders:

This study will be of great importance to stake holders as it will enrich their knowledge on the various roles of NAIC to the rural dwellers.

Insurance company:

This will equally be of help to the insurance companies in Nigeria because when the exact role of NAIC is identified and they carry out their work


1.6 Scope And Limitation Of The Study

The scope of the study covers the contribution of agricultural insurance to the Nigeria economy.
The researcher encounters some constrain which limited the scope of the study;

a) Availability Of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities


1.7 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.


1.8 Organization Of The Study

This research work is organized in five chapters, for easy understanding, as follows

  1. Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  2. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  3. Chapter three deals on the research design and methodology adopted in the study.
  4. Chapter four concentrate on the data collection and analysis and presentation of finding.
  5. Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five


Summary, Conclusion And Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the contribution of agricultural insurance to the Nigeria economy. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the contribution of agricultural insurance to the Nigeria economy


5.2 Summary

This study was on the contribution of agricultural insurance to the Nigeria economy. Three objectives were raised which included: To examine why Nigeria Agricultural insurance cooperation are not adequately covering agricultural risk, to examine why Nigerian government is not adequately funding Nigeria Agricultural insurance cooperation and its economic implication, to know why famers in the rural area do not know about the existence of Nigeria Agricultural insurance cooperation. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of some selected insurance companies in Abuja. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made operations managers, managers, marketers and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


5.3 Conclusion

Insurance and other risk transfer solutions can be part of a systematic adaptation approach and can enable vulnerable countries to better manage the new climate risks. Insurance can provide financial security against the economic impacts of extreme climate events and may for some climate change perils, be more cost effective than certain prevention measures. The combination of risk transfer and prevention adaptation measures is a subjective change that depends on policy preferences, investment choices and opportunity costs. There are three mechanisms by which insurance can be an important component of adaption. The first is by directly transferring the risks away from the vulnerable allowing people to use insurance payouts to recover from shocks and maintain their livelihoods. The second by allowing them to take productive risks (e.g. to take or make a loan, to invest in their own productive capacity and to develop economically). The poor are almost always the most exposed to climate impacts. They are more likely to escape poverty if they are able to better protect themselves. The third mechanism is through the signals provided by insurance pricing insurance sets a price tag on risks. If certain activities become riskier under a changing climate the insurance price will rise to reflect this risk. The place increase can incentivize change to less risks activities and to roe comprehensive risk management strategies.


5.4 Recommendation

Institution lenders would be encouraged to lend more for agricultural production because of added security of insurance for the loans

  1. Farmers should will be encouraged to take more credit for increased agricultural production when provided with insurance cover against natural hazards i.e. drought, floods pests, diseases etc
  2. Bank loan repayment will improve because of added supervision of farmer’s activities by the insurance Agency and other institutions participating in the operation of the scheme

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