Insurance key to sustaining agri-business expansion, say stakeholders

… seek  level playing ground

For the revolution going on in the nation’s agri-business industry to succeed, there must be a strong agricultural insurance sector to support its operations and assist in risk mitigation.

Insurance is needed to protect investment in agriculture, facilitate access to loans, protect farm lands against natural disasters, as well as support transportation of food and livestock across the country.

Analysts who spoke on recent developments in the agri-business environment said there have been increased investments and interest by the younger generation of Nigerians.

According to them, the bottlenecks bedeviling the agric sector are huge but would be largely addressed if there is adequate insurance that would enable quick decisions on financing and investments.

“Financing and issues around lending are  major challenges for most farmers, particularly smallholder farmers who do not have collateral to put forward for the loans. There are funds for agric business, but they can only be accessed by the big farmers, so small holder farmers are squeezed out”, one of the analysts said.

They also think that because of the huge investment going into the agricultural sector at the moment, there will be need for more insurance companies to come into the sector, so that capacity for risk mitigation will be enhanced.
Currently, agric insurance in Nigeria is driven by the Nigerian Agricultural Insurance Corporation (NAIC); Leadway Assurance Company Limited and Industrial and General Assurance Company Limited (IGI) among others.

Bashir Binji, acting managing director/CEO, Nigerian Agricultural Insurance Corporation (NAIC) said experience across the world has shown that to ensure that farmers widely participate in agricultural insurance; it must be made compulsory in some certain aspects and also government supported.

This support, Binji said, can be in form of  premium subsidy, public sector reinsurance , admin and operational subsidies, insurance legislation, loss assessment and other support in R&D/ training.

“In the conceptualisation of agricultural insurance in Nigeria, the Federal Government also took this into consideration by enacting a statue which made agricultural insurance compulsory for loans and credit farmers.”
According to him, many insurance companies have been licensed by NAICOM to carry out the business of agricultural insurance.
“Underwriters that have the skill and capacity to underwrite agricultural risks are free to apply for license. However, the insurance of agricultural projects financed by government and other financial institutions have remained the exclusivity of NAIC.”
Binji pointed out that NAIC annually insures an average of 500,000 Nigerian farmers across the agricultural value chain.
This is likely to double in the coming years, as NAIC continues to be the risk management service provider for  government interventions in agriculture, like the CACS and the Anchor Borrowers Programmes and other related programmes, Binji noted.
However, some others think that efforts to transform agriculture from a traditional (subsistent) activity to a full fledged commercial activity have been limited, owing to the inability to secure insurance in a competitive manner, as many investors remain sceptical to put their funds in a market where risk cannot be adequately mitigated.
“In fixing the financial value chain (for agriculture), the weakest link and the excuse of the banks (against) lending to agriculture is because only NAIC was underwriting agriculture risks,” said Ajibola Samson, head, Agricultural & Micro Insurance, Leadway Assurance.
Samson added, “The banks were not comfortable with the monopoly, so the insurance industry was called to come and partake in the underwriting of agriculture risks. The criteria for underwriting were set by the insurance regulator NAICOM but only a few companies showed interest. The few were given product approvals, based on the number of products each presented before the regulator.
“Though there is a dearth of capacity in this specialty area, the major reason why many private underwriters never showed interest was because of the unlevel playing ground created by the Act that established NAIC,” said Samson.
Adeola Elliot, chairman, Agric Group, Lagos Chamber of Commerce and Industry (LCCI) said “NAIC insurance is epileptic like other government institutions. The fact is that government should continue to pay compensation for natural disasters such as in poultry. However, insurance (for agriculture) should be (fully) commercialised. Agriculture like any other private investment is a business.”
Eleojo Peters, MD/CEO, Eleojo Foods NIG Ltd said “NAIC over the years and even now, still provides insurance services to the  agric sector and this they do professionally.
“They provide soft landing for farmers and also serve as backup to the sector as a whole and this has helped increase  activity in the value chain,” according to Peters.
Emmanuel Ijewere, a farmer, expressed the view that “NAIC’s monopoly has been removed technically and we have had a few insurance companies coming in. They have to face something, and it is the fact that insurance has not become a habit in the agricultural industry.”
Ijewere added “NAIC being a government agency, was somehow subsidised but the commercial companies now coming in don’t have that privilege and have to charge commercial rates.”
According to Ijewere, “NAIC has become a lot more proactive (since other insurance companies started showing interest) and it has started behaving with some private sector mentality, which is good. There is now competition but it is an unfair one because NAIC is still subsidised by government.
“Most farmers don’t have information and enlightenment about insurance policy for their farms. Those that are aware do not take insurance policy for lack of trust,” said Abiodun Olorundenro, chief executive officer, Green Vine Farms, in a response to  questions fromBusinessDay.
“Farmers need to be educated on the importance of insurance for their farms. There should also be more private sector involvement in agric insurance because government cannot do it alone,” said Olorundenro.
“Farmers have never been properly compensated whenever there are adverse conditions and this is why farmers don’t take insurance policy,” said Ibrahim Kabiru, national president, All Farmers Association of Nigeria (AFAN).
“Most farmers that take up insurance cover do so to secure loans from money deposit banks because it is one of the required documents to secure a loan,” Kabiru said.