By Chinyere Igwe PhD (NAIC)
The importance of food security is emphasized by the fact that most developed countries invest heavily in agriculture and provide subsidies to ensure food is both readily available and affordable for their citizens. Agriculture, therefore, can be viewed not only as an economic activity but also as a social service that benefits all.
In many developing countries, including Nigeria, the agricultural sector remains a critical driver of economic growth and a key pillar of national development. It provides livelihoods for the rural population and offers substantial investment opportunities for the private sector. Despite its significance, the sector is highly vulnerable to adverse natural events such as droughts, floods, windstorms, pests, and diseases. Moreover, the growing impact of climate change and extreme weather events continues to disrupt agricultural activities, weaken value chains, threaten macroeconomic stability, and endanger livelihoods.
Sustaining agricultural productivity is essential for achieving food security with insurance playing a critical role in reinforcing and enhancing this productivity. Agricultural insurance serves as an effective risk management tool that mitigates the impacts of natural disasters and climate-related hazards faced by farmers and other value chain actors. It strengthens farmers’ resilience to losses arising from insured perils and supports recovery and continuity in agricultural production.
Furthermore, since food security depends directly on agricultural output, integrating agricultural insurance services with input supply can help farmers and other value chain participants stabilize their incomes and encourage further investment. This integrated approach promotes the transition from subsistence farming to more sustainable, large-scale commercial agriculture.
Insurance also plays a vital role in fostering innovation and the adoption of new technologies. Many modern agricultural technologies come with inherent risks that discourage adoption. However, with appropriate insurance coverage, farmers and investors gain confidence that potential losses from adopting new technologies will be adequately compensated. This assurance facilitates experimentation and modernization, both of which are essential for sustainable productivity growth.
Recognizing the strategic importance of agricultural insurance, the Federal Government of Nigeria established the Nigerian Agricultural Insurance Scheme (NAIS), which is being implemented by the Nigerian Agricultural Insurance Corporation (NAIC). The scheme was designed to keep farmers in business after experiencing losses, promote agricultural production, and encourage financial institutions to extend credit to the agricultural sector.
NAIC operates a subsidized agricultural insurance scheme in which farmers pay only 50% of the required premium. The remaining 50% is jointly borne by the federal and state governments, with the federal government contributing 37.5% and the state government 12.5%. Through this collaborative framework, NAIC continues to fulfill its mandate of promoting agricultural sustainability and providing comprehensive insurance solutions to farmers, agribusinesses, value chain actors, private individuals, and lenders.
Other benefits of insurance cover to farmers especially with the increase in the incidence of climate change related events such as floods, droughts, dry spells etc. include;
Improved risk management/farm advisory services,
Customized climate insurance products,
Prompt response and claims settlement,
Sustainable agricultural production and farmers’ income stabilization.
Insurance cover can be obtained through Banks and other lending agencies/institutions by following procedure outlined below:
The farmer or client approaches the Bank or lending agency and applies for an agricultural loan;
The bank or agency processes the loan and approval given;
The Bank or agency decides on the applicable insurance needs of the loan applicant;
NAIC and the bank/lending institution enlighten the client/loan applicant on all the insurable risks involved in the class of agribusiness or projects the farmer is proposing to embark upon and also the importance and benefits of taking the insurance cover;
Proposal form is then issued to the client for completion from which NAIC obtains complete, accurate and adequate information about the applicant and the proposed project. For large scale projects, Bank offer letter and feasibility report of the projects are required;
On proper completion of the proposal form, premium is computed based on the prevailing and approved rate loan volume, sum insured or estimated production cost of the proposed project(s);
The client is advised on the premium payable to provide insurance cover to the project;
Premium deducted by the Bank or intermediary is sent to NAIC by cheque, or electronic transfer together with the Bank remittance list and cover commences immediately;
The Certificate of Provisional Insurance Cover (CPIC) and other documents are issued to the client/bank. This will confirm temporary cover;
A comprehensive inspection is conducted on the farm to ascertain the suitability of the farm;
Once the project has been found to be genuine and insurable based on the inspection report, cover will be fully granted on the project;
Original policy is issued to the client through the lending bank.
Insurance cover can be obtained by self-financed or individual farmer through the following procedure:
The Farmer collects proposal form from NAIC based on the interested project(s) to be insured;
He is then enlightened/educated on how to complete the form and also the terms and conditions of the policies;
NAIC examines the duly completed proposal form and compute the appropriate premium based on the estimated cost of production or sum insured of the project;
On payment of appropriate premium, a Certificate of Provisional Insurance Cover (CPIC) is issued as a temporary cover;
A policy document is then issued to the insured as evidence of the contract;
NAIC may undertake a monitoring visit to any of the insured projects as a way of verifying and assessing the projects.
Chinyere Igwe (PhD) is the
Deputy General Manager
Planning Research and Development(.NAIC).
