Post by Trade Coach on Dec 29, 2017 13:18:01 GMT 1
Agricultural is a risk embedded business. It is known for its susceptibility to massive losses in crisis ridden periods. During these periods, pest and disease outbreaks, unfavourable weather conditions, climatic variation, crop failure, soil depletion and drought are prevalent. These problems are peculiar to agricultural operations. However, these crises can be averted when proper agricultural management techniques are put in place before, during and after production periods.
For instance, in a poultry farm, shelter, water and hygines are important to its successful operations, depletion or reduction of value of any of the three can result in about 80 – 90 per cent loss on the farm. This makes agriculture a risky enterprise. As risky as agriculture might be painted, it is also a very profitable venture if properly managed. There are two major risks in agricultural sector; price risk caused by potential volatility in price 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 liberatlisation of trade and production risk caused by the effects 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 traders, the processors and the end consumers, are subject to these risks.
The lack of access to information in Nigeria by farmers is largely responsible for the low turn around in the agricultural sector; most farmers are rural dweller where there is poor information and communication network. Information such as available credit facilities, grants, high yielding crop varieties, change in government policies, improved fish and animal seeds and access to latest cutting edge technologies are not properly circulated to farmers who are major stakeholders in the agricultural sector.
In Nigeria, most farmers do not take into consideration the sine qua non of farming operations and they are often caught unaware by avoidable losses in their farms. 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.
Therefore, there is the need for financial cover for losses in agriculture. Unfortunately, most farmers do not know about insurance provision for agricultural operations in the country. Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
The Nigeria Agricultural insurance corporation regulates the insurance cover of different areas of agricultural operations. Agricultural insurance cover is activated in crop production if damages or losses caused by fire, or lightning, windstorm, flood, draught, pests and invasion of farm by wild animal occur and in livestock production, if death or injury caused by accident, disease, fire, lightning, storm and flood occur. There are lots of insurance firms who have varying insurance policy plans for farmers but the problem has always been if the farmers can fulfill the terms of the insurance covers. For instance, in Nigeria, the Agricultural Credit Guarantee Scheme Fund, which has been planned by the government to boost agricultural production, is constrained by the inability of the average farmer to provide the necessary security for loans to be granted under the scheme, likewise for insurance covers. It should also be noted that most farmers in the country are small holder farmers, so they might not see the need to have their farms insured.
It is evident that agricultural insurance policies and plans are existent in Nigeria; however, proper orientation should be administered by the relevant agencies to the average farmers in the rural areas who are major stakeholders in the agricultural sector to enlighten them on the benefit inherent in having insurance cover for their agribusiness.
For instance, in a poultry farm, shelter, water and hygines are important to its successful operations, depletion or reduction of value of any of the three can result in about 80 – 90 per cent loss on the farm. This makes agriculture a risky enterprise. As risky as agriculture might be painted, it is also a very profitable venture if properly managed. There are two major risks in agricultural sector; price risk caused by potential volatility in price 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 liberatlisation of trade and production risk caused by the effects 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 traders, the processors and the end consumers, are subject to these risks.
The lack of access to information in Nigeria by farmers is largely responsible for the low turn around in the agricultural sector; most farmers are rural dweller where there is poor information and communication network. Information such as available credit facilities, grants, high yielding crop varieties, change in government policies, improved fish and animal seeds and access to latest cutting edge technologies are not properly circulated to farmers who are major stakeholders in the agricultural sector.
In Nigeria, most farmers do not take into consideration the sine qua non of farming operations and they are often caught unaware by avoidable losses in their farms. 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.
Therefore, there is the need for financial cover for losses in agriculture. Unfortunately, most farmers do not know about insurance provision for agricultural operations in the country. Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
The Nigeria Agricultural insurance corporation regulates the insurance cover of different areas of agricultural operations. Agricultural insurance cover is activated in crop production if damages or losses caused by fire, or lightning, windstorm, flood, draught, pests and invasion of farm by wild animal occur and in livestock production, if death or injury caused by accident, disease, fire, lightning, storm and flood occur. There are lots of insurance firms who have varying insurance policy plans for farmers but the problem has always been if the farmers can fulfill the terms of the insurance covers. For instance, in Nigeria, the Agricultural Credit Guarantee Scheme Fund, which has been planned by the government to boost agricultural production, is constrained by the inability of the average farmer to provide the necessary security for loans to be granted under the scheme, likewise for insurance covers. It should also be noted that most farmers in the country are small holder farmers, so they might not see the need to have their farms insured.
It is evident that agricultural insurance policies and plans are existent in Nigeria; however, proper orientation should be administered by the relevant agencies to the average farmers in the rural areas who are major stakeholders in the agricultural sector to enlighten them on the benefit inherent in having insurance cover for their agribusiness.