Assessment Of Effects Of Agricultural Insurance On Food Productivity In Nigeria

Project and Seminar Material for Insurance

Assessment Of Effects Of Agricultural Insurance On Food Productivity In Nigeria


Abstract


This research project assessed the effects of agricultural insurance on food productivity in Nigeria. The problem that prompted the research of this project is inability of farmers to effectively embrace Agricultural insurance primary data is used, and it were collected through the use of structured questionnaire. Table and like scaling were use in the analysis of data, while Z-test statistical model was used in testing the hypotheses.

The result of evidenced that there are a lot of problems pacing the Nigerian Agriculture in their effort to enhance efficient food productivity the result also revealed that Agricultural insurance contributes effectively to efficient food productivity. The researcher therefore, conclude that Agricultural insurance enhance effective and efficient food productivity and recommended that Nigerian farmers should embrace the important of Agricultural insurance services in order to enhance efficient food productivity.


Chapter One


Introduction

1.1 Background of the Study

Agriculture has been provider of food for teeming population and the largest employer of labor force in the country (Amaza, 2000). The Nigerian agriculture as in most developing countries of the world is anchored mainly onsubsistence farming methods. In this regards small scale farming operators producing about 80% of the total food production for the ever increasing population, operate on fragmented farm of between 0.5 – 2hectares (Salami, 1994). The federal office of statistics (2006) recorded that food production grew at a rate of 3.5% with an annual population growth rate of 2.83%.In a desperate bid to solve the country’s food and nutrition problems, various food related policies, programmes and projects were put in place. In spite of various programmes and projects, the food problems continued unabated and food importation had to step up. Aderinola et al (2007) gave the following reasons for the perpetual food deficits:

  1. Lack of dramatic breakthrough in agricultural research,
  2. High risks and uncertainties often associated with agricultural production,
  3. Unwillingness of the entrepreneurial class to devote organizational abilities to agricultural production,
  4. Inefficient marketing and distributional system,
  5. Low status accorded farmers in the society, and
  6. Rural-urban migration of the rural youth.

Furthermore, there is the institutional constraint especially the weak linkage between agricultural extension and research services that have widened communication gap between farmers and policy makers, and inadequate credit to agricultural sectors to finance modern farming technology (Soniran, 1991). Avery important problem faced by farmers and agricultural business enterprises is that it is characterized by considerable risk and uncertainties which stem from its predominant dependence on nature. This is because agriculture requires extensive direct and continuous contact with the forces of nature. These risks are unforeseen and they are beyond the control of the farmers. Farmers face considerable losses of investment and income due to the losses resulting from these risk and uncertainties. Because of this, Ajakaiye (2001) stated that small farmers in many developing countries of the world including Nigeria are trapped in the vicious cycle of poverty. This cycle is characterized by low productivity and low farm income which leave them with virtually no saving as capital required in the transformation of their production technology. Farming communities face a variety of risks. Although they have learned to live with these risks by employing various devices to prevent, avoid, mitigate or cope with them, there are still the problems of residual risks. These are the catastrophic types that human intervention can neither prevent nor mitigate. The damage they cause to lives and properties cannot be underestimated. In such situations, agricultural insurance may prove useful.

Because of risks inherent in agricultural production which lead to farm income uncertainty and low or no profit, many farmers express fears on their ability to meet overhead costs, family needs, and also repay any debt. On the other hand, formal lending institutions also express apprehension on farmers’ ability to repay loans. These lenders seek to reduce the possibility of poor loan recovery by reducing amount of loan to agriculture and in some cases seek collateral from the farmers before granting a loan. This has led governments all over the world to intervene with a range of risk management programmes for farmers thereby enhancing their credit worthiness before lending institutions (Hazell, 1992). Peasant farmers are naturally keen to avoid taking risks which might threaten their livelihood and is often reflected in their farming practices (Alli, 1980). Notionally, there is a trade-off between the levels of risk that farmers can withstand and the aggregate level of food production in the country (Ray, 1985).

Recognition of this trade-off by policy makers has led to the introduction of programmes that attempt to address peasant farmers’ aversion to risk (Alli, 1980). One such approach is to establish a scheme to offer insurance against agricultural risks. The introduction of agricultural insurance has therefore continued to generate a keen interest among academics and politicians because of the volume of investment involved (Olubiyo, 2009). Agricultural Insurance, in its widest sense may be defined as the stabilization of income, employment, price and supplies of agricultural products by means of regular and deliberate savings and accumulation of funds in small installments by many in favorableThe introduction and formal lunching of the Nigeria agricultural insurance scheme by the president and commander in chief of the armed forces of Nigeria, president Ibrahim Babangida Badamosi on 15th December, 1987 was designated to benefit the small, medium and large scale farmer from the effect of natured hazards in consideration of a determined price called premium.Agriculture has been provider of food for teeming population and the largest employer of labor force in the country (Amaza, 2000). The Nigerian agriculture as in most developing countries of the world is anchored mainly onsubsistence farming methods. In this regards small scale farming operators producing about 80% of the total food production for the ever increasing population, operate on fragmented farm of between 0.5 – 2hectares (Salami, 1994). The federal office of statistics (2006) recorded that food production grew at a rate of 3.5% with an annual population growth rate of 2.83%.In a desperate bid to solve the country’s food and nutrition problems, various food related policies, programmes and projects were put in place. In spite of various programmes and projects, the food problems continued unabated and food importation had to step up. Aderinola et al (2007) gave the following reasons for the perpetual food deficits: Agricultural insurance is a special line of property insurance applied to agricultural firms. In recognition of the specialized nature of this type of insurance, insurance companies operating in the market either have dedicated agribusiness units or outsource the underwriting to agencies that specialize in it. There are several features of this type of insurance that validate it being treated as a special line of business. Difficulties in achieving adequate diversification because of the nature of the risk, asymmetries of information in underwriting, the geographical dispersion of agricultural production and the complexity of the biological processes of production, which requires skilled and expert underwriting justify it being considered a special business line (Iturrioz, 2009).More so, Nigeria agricultural insurance scheme is to ensure the payment of appropriate compensation sufficient to keep the farmer in business after insuring any loss on their insured form.


1.2 Statement of Problem

In the result past, various governments in Nigeria have launched different agricultural policies in their relentless effort to enhancing agricultural productivity.

They also have committed a large sum of zealous desire to achieving an increased agricultural production but have continually and repeatedly failed. One of the reasons for this failure is that most farmers in Nigeria have never discovered the need to insure their farms and other agricultural of the federal government in establishing the Nigeria agricultural insurance scheme (NAIS).

Sourcing of fund has proved highly impossible because the lending institution also are supposed to fund agricultural development are quite doubtful of advancing loan to this sector because of the risks of uncertainty and insecurity.


1.3 Significance of the Study

Agricultural insurance unlike the conventional insurance is relatively new in Nigeria. consequently, there are many problems involved in collecting data and other materials for research in the field of insurance. this problem underscore the significance of this piece of work hence, the study will be helpful to students of insurance and other interested discipline who may wish to carry out further study on this new field.

The research will assist both the federal government and the Nigeria agricultural insurance corporation which are directly as the device better ways of improving their performance. this will also enlighten e various marketing intermediaries on the need to participate more effectively in the operation of the scheme to ensure it success.

Furthermore, since the scheme serve as a kind of production to the insuring public (ie the insured farmers) thereby enhancing greater confidence to all farmers) (whether insured or not) on adopting a new and improved farming practice and in making greater economy’s perhaps aids to increase the state agricultural production.


1.4 Objective of the Study

  1. To investigate the number of claims that was reported to NAIC yearly.
  2. To investigate the amount paid by the farmers as premium.
  3. To investigate the performance of the relevant financial institution and agricultural lending institution on the insurance policy.
  4. The research will also check the output achieved in farming activities under the agricultural insurance scheme.
  5. To investigate the claim settlement methods and procedures of the agricultural insurance scheme.

1.5 Research Hypotheses

  1. H0: farmers in Nigeria does not subscribed to insurance policy
    H1: farmers in Nigeria do subscribed to insurance policy
  2. H02: farmers who subscribe to insurance cover do not pay the required premium
    H2: farmers who subscribe to insurance cover do pay the required premium

1.6 Scope and Limitation of the Study

Nigeria Agricultural Insurance Corporation is the only corporation underwriting all agricultural policies in Nigeria with a network of branches made the study unique. The research work carried out tend to be in dynamic setting as the scope of the work extend from the head office of the Nigeria agricultural insurance corporation in Abuja to the nearby zonal office here in Enugu. The research work covered agricultural crop, insurance product. The volume of work local require in a research of this nature could not be carried out without some limitations. first, was inadequacy of finance, second was the death of book, journal magazine on agricultural insurance as secondary source of data collection thirdly, the illiteracy level of respondent farmers constituted serious handling and mount loss of vital information relevant to this piece of work.


1.7 Definitions of Terms

The following terms used in this study should taken to mean the following:

1. Agricultural Insurance:

Is insurance cover giver to farmers or stake holders in the agricultural sector.

2. Underwriting:

It means undertaking by signing an insurance policy0 to pay damage when ever losses occur. This is done by the insurance company or society which, therefore, is called the underwriter.

3. Policy Holder:

The individual or corporate body who purchase the insurance cover from the insurance company.


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. 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 investigate the role of agricultural insurance in enhancing agricultural productivity

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 agricultural insurance in Nigeria.


5.2 Summary

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 directlytransferring 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


5.3 Conclusion

Modern technology and agricultural insurance are not mutually exclusive. Rather, they should be seen as both complementary and mutually reinforcing. This is because uncertainties in Agriculture transcends the production stage, to include special processes such as harvesting, storage, good-in-transit, pilfering and 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 have been instituted have elicited some modest supply response. There has been growth in the agricultural sector. The growth has touched virtually all the sub-sectors of agriculture which has lead to an increase in hectarage cultivated. At the same vein there is need for government agencies to address in fractural challenges which constrain productivity


5.4 Recommendations

Haven successfully completed the study, the researcher therefore recommends that:
Institution lenders would be encouraged to lend more for agricultural production because of added security of insurance for the loans;

Farmers 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;

Bank loan repayment will improve because of added supervision of farmers activities by the insurance Agency and other institutions participating in the operation of the scheme;

Administration of the scheme will be made simple because:

  1. Services of existing financial institution will be utilized;
  2. Premium will be built in and deducted straight from the loan for payment to the Agency by the financial institution;
  3. Insurance contracts are made between the insurance Agency and the lending institutions rather than directly with the farmers;
  4. Indemnities are paid to the farmers through the credit institutions and
  5. Compulsion for insurance is easily enforced However farmers not taking institutional credit can avail themselves of the protection offered by the scheme.

Project Material Download

5,000 5000

The Complete Material Will Be Sent to You in Just 2 Steps

Quick & Simple…


Step One Purchase

Make Payment (Through Transfer) of ₦5,000 to Any of the Account Below

Access Bank PlcAcc No: 0811003731
Samphina Academy
Current Account
Zenith BankAcc No: 1225513212
Samphina Academy
Current Account

Or CLICK HERE To Pay With Debit Card


FOR STUDENTS OUTSIDE NIGERIA
CLICK HERE To Purchase Material ($15)
FOR GHANIAN STUDENTS
Make Payment of 120 GHS to 0553978005 | Douglas Cloud Osabutey | MTN MoMo

Step Two Purchase

Send the Following Details on WhatsApp ( 08143831497) After Payment

  1. Payment Details

  2. TOPIC: Assessment Of Effects Of Agricultural Insurance On Food Productivity In Nigeria

The Complete Material Will Be Sent To You On WhatsApp After Receiving Your Details
T & C Apply


  Contact Our Help Desk


Need a Different Topic? Perform a Quick Search



List of Related Works

Click on Any Topic to Preview the Content

samphina.academy

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.