Evaluating The Role Of Government Policies In Promoting Agricultural Insurance In Nigeria
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Evaluating The Role Of Government Policies In Promoting Agricultural Insurance In Nigeria
Chapter One: Introduction 1.1 Background of the Study
Beginning in 2010-2011, the Nigerian government began to reform the agricultural sector after years of neglect. To focus the sector, the government implemented a new strategy known as “The Agricultural Transformation Agenda ATA.”
This policy aims to help Nigeria refocus attention on agriculture. Growth and development in any economy, particularly in the agricultural sector, are activities that cannot be carried out efficiently without the use of insurance. As a result, insurance plays an important role in the development of Nigeria’s agricultural industry.
Agricultural insurance is often provided as a market-based activity by commercial or state-owned insurance organisations, generally with government assistance.The Nigerian government has been actively promoting agriculture insurance through various policies and interventions.
This is supported by the fact that agriculture has long been a significant occupation that has contributed to economic development, accounting for approximately 40-50% of GDP.
Agricultural insurance plays an important role, which cannot be overstated.One cannot discuss agricultural insurance without first defining what insurance is.
According to Udensi (2002), insurance is a system in which one party transfers the duty of paying for losses to another. According to traditional definition, insurance is the equitable transfer of a loss from one entity to another in exchange for a premium for a guaranteed and quantifiable little loss to avert a large and potentially devastating loss.
One of the cardinal programs of the Obasanjo-led administration when it came on board in 1999 was the radical development of agriculture in all its ratification, not only as a veritable way of bringing about the all-round development of the Nigeria state, but also as a propitious channel of systematically diversifying the mono-cultural tendencies of the Nigerian economy, and this was achieved through the establishment of Nigeria agricultural insurance cooperation (NAIC).
Section 3 of the order established the Nigeria Agricultural Scheme, which is being carried out by the Agricultural Insurance Cooperative. The scheme’s categorical imperatives are to give financial assistance to farmers in the event of crop and animal losses due to natural disasters, as well as to involve the granting of credit by financial institutions, since insurance coverage is added collateral. Again, it promotes agricultural production by instilling confidence in farmers to accept both new and modern ideas and inputs.
The system initially covered only two crops, two livestock products (cattle and poultry), and some commercial businesses such as farm building, machinery, and equipment. The coverage has since been expanded to include 21 crop items, 9 livestock items, and 12 categories of commercial businesses.
It also creates customised covers to meet the individual needs of each customer. For example, it has created and executed a unique sort of insurance for farm or produce marketing loans, as well as fire and special hazards coverage for property used as collateral security for marketing loans. The system operates a mandated cover for the following:
All agricultural loans acquired from banks for all products insured by NAIC
All agricultural and agro-related projects aided, supported, or entirely funded with public funding.
All direct and on-lending loans made by all levels of government for distribution to farmers and agricultural projects for implementation.
All types of loans for agricultural marketing purposes from all banks and non-bank lending agencies
All direct lending and investment loans made by the Nigerian Agricultural Cooperation and Rural Development Bank (NACRDB).
The value of the risk assumed by NAIC from its creation as of the end of 2003 was 80 billion, which was properly covered by local and international reinsurance treaties.
The vast scope of the cover, the massive volume of risk taken on by NAIC, and the Nigerian government’s 50% subsidy make the Nigerian agricultural scheme recognised by many countries and the Food and Agriculture Organisation (FAO) of the United Nations as a major contribution to self-sufficiency in food production and a scheme to be implemented in other parts of the world.
1.2 Statement of the Problem
The effectiveness of agricultural insurance in decreasing farmer losses is undeniable, and it remains a steady source of growth. The agricultural sector is an essential part of the economy since it provides food security for local consumption. During the course of this investigation, the following issues were identified.
One of the major issues in Nigerian agriculture is the wide range of agricultural practices. At times, the national agricultural insurance cooperation does not provide coverage for some of these practices, resulting in insufficient government funding of the agricultural sector. As a result of a lack of proper funding, many farmers are unable to enter commercial agriculture and thus cannot reach their full potential in agriculture.
However, there is a loss of properly skilled workforce in the agriculture insurance market who specialise in qualifying and underwriting agricultural risk.
The government frequently imports a significant number of tractors without a single service centre for repairs and replacement of worn-out parts, resulting in unserviceable machinery and farmers returning to traditional methods of farming.
Farmers are often uninformed of the functions and benefits of participating in an agricultural insurance system, which leads to ignorance on their part.
1.3 GOALS OF THE STUDY
This study aims to assess the role of government policies in increasing agriculture insurance in Nigeria. Other particular objectives include:
Analysis of agricultural policy options for promoting agricultural insurance in Nigeria.
To investigate the impact of poor statistical data on the effective appraisal of agricultural risk in Nigeria.
To investigate some of the problems confronting Nigerian insurance agricultural cooperation.
To investigate the influence of government policies on agriculture in Nigeria.
1.4 RESEARCH QUESTIONS
To what extent have government initiatives supported agriculture insurance in Nigeria?
Are agricultural policies available to promote agricultural insurance in Nigeria?
Do government policies have a good impact on the development of agriculture insurance in Nigeria?
How has agricultural insurance cooperation aided the growth of agricultural insurance in Nigeria?
1.5 Hypothesis formulation
The researcher’s premise concerning the effect of government policy on increasing agricultural insurance will be examined, allowing the researcher to draw possible conclusions.This study will be tested utilising the null hypothesis (Ho) and alternative hypothesis (H1).
Hyothesis I
Ho: There is no major link between government policies and agriculture insurance policies.
H1: There is a considerable link between government policies and farm insurance policies.
HYOTHESIS II.
Ho: There are no agricultural policies in Nigeria that promote agricultural insurance.
H1: There are agricultural policies in place to promote agricultural insurance in Nigeria.
HYOTHESIS III.
Ho: Government policies have not contributed positively to the promotion of agriculture insurance in Nigeria.
H1: Government measures have had a favourable impact on the promotion of agriculture insurance in Nigeria.
1.6 SCOPE OF THE STUDY
Agricultural insurance is intended to cover financial losses suffered as a result of reduced projected output.This research is intended to examine the government’s contribution to the promotion of agriculture insurance practice in Nigeria.
During the course of this study, several connected works were reviewed, including publications, annual reports, magazines, and textbooks. This study goes on to investigate the various agricultural policies available to farmers.
1.7 SIGNIFICANCE OF THE STUDY
This study will seek to evaluate the role of government policies in promoting agriculture insurance in Nigeria. The purpose of this research is to emphasise the efficacy of government policies in the functioning of agricultural insurance in Nigeria.
This study is significant because it would boost government policies that benefit agriculture by encouraging the development of agricultural insurance practice in Nigeria.
This research will help intending researchers update existing research and serve as a reference for future research.
Defining some terminology in the study report was necessary to provide clarity.
Agriculture is the study or practice of farming, which includes soil cultivation, crop production, and animal husbandry for food.
Agricultural insurance is a financial strategy for transferring production risk associated with farming to a third party through the payment of premiums that reflect the true long-term cost to the insurer taking on such risks.
Government: A group of individuals who rule a community or unit by establishing and enforcing public policy and exercising executive, political, and sovereign power through state norms, institutions, and laws.
Insurance can be defined as a systematic method to safeguard against financial losses.
Insurer: An insurance business or other organisation that offers insurance.
Premium: A payment, or one of multiple payments, required to start and maintain a life insurance policy in full force.
Promotion: The part of marketing concerned with determining the best method for selling a product to a consumer.
Policy: is evidence of a contract (section 15 subsection (1) of the Insurance Act of 2004).
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