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AGRICULTURAL INSURANCE IN NIGERIA AND THE ECONOMIC IMPACT
Abstract
Agricultural production faces myriad of risks. Nevertheless, two major risks are of concern to the agricultural sector- price risk caused by potential volatility in prices and production risk resulting from uncertainty about the levels of production that primary producers can achieve from their current activities. It is likely that these major risks will increase in the future – price risk due to liberalization of trade and production risk caused by the effect s of climate change. Agricultural risks not only affect farmers, they also affect the whole agribusiness value chain. Each of the participants along the supply chain, from the Government, Financial Institutions, suppliers of inputs, the distributor, the trader, the processor and the end consumers, are subject to these risks.
Agricultural investments unfortunately are among the most risky economic ventures one can embark upon, the absolute dependence on unpredictable weather conditions, like storm, flood, drought and other natural hazards make income from crop products and agricultural products like livestock poultry and dairies to be very unstable.
Agricultural Insurance policies serve as securities for banks as indemnification for financial losses suffered by farmers and those in the agricultural value chain resulting from damages to their products, and also provides funds for servicing such loans. This paper is concerned exclusively with the role of agricultural insurance in the agribusiness and in the development of the economy. It gives an introduction and a review of the agricultural sector that led to the agricultural insurance decree in 1993. The paper describes the various products available under the agricultural insurance while a section was devoted to analyzing the economic impact of agriculture Insurance on the economy, then conclusion and recommendations.
Key Words Agriculture, Insurance, credit scheme, value chain