Like every other business, agriculture is risk-prone to climate change variability.
Climate change has been altering and disrupting the farming cycle in the country for over three years, leading to a surge in food prices and importation in Africa’s biggest economy.
From the devastating flood in Nigeria to the historic droughts in the horn of Africa in 2022, climate change’s impact on communities is increasing daily and 2023 would not be an exception.
Enoch Adeboye, a renowned clergyman and the general overseer of the Redeemed Christian Church of God (RCCG) said there will be more erratic weather conditions in 2023 in his prophecies for the year.
As the agricultural industry is one of the most risk-prone industries globally, farmers must introduce effective risk management to safeguard their business operations.
They must take up insurance as buffers against climate change shocks.
Sandstorms can destroy a farmer’s crop and leave them without a source of income. So, farmers must have expansive knowledge to anticipate these disasters and, most importantly, ensure they’re adequately insured.
“Climate change is here. It’s something the farmers cannot avoid. The impact will always come. So one of the ways they can protect their investments is the need to get insurance,” an official at the All Farmers Association of Nigeria (AFAN) said.
As a risk management tool, agriculture insurance provides financial protection against losses caused by natural perils such as drought, flood, hail, frost, excessive moisture, and pests.
Agriculture insurance is therefore a vital instrument for economic development and the modernization of the agricultural sector since the associated financial risks can be transferred to a third party.
However, some of the obstacles that impede the growth and development of agriculture insurance include a lack of insurance culture and limited understanding of insurance products by farmers, the possibility of catastrophic events which can threaten the financial stability of insurance companies, and land fragmentation characterized by numerous small-scale farmers.
It is administratively costly to provide insurance services to so many small farmers.
In a report on ‘Key constraints and mitigating strategies to improve stakeholder involvement in the agricultural insurance space’, Sahel Advisory Services observed that farmers and agribusinesses are unaware and have a limited understanding of the benefits of insurance in managing risks.
In addition, the report states that they do not believe they will receive compensation for losses incurred.
The report, however, suggests that to build trust among farmers and agri-businesses, insurance providers must develop products that are easy for the users to understand and will leave little room for misinterpretation.
In addition, insurance providers should organise extensive training sessions to educate users on the importance of using various insurance products for risk management, the experts stated.
The report also argues that infrastructure such as feeder roads and proper communication facilities are required to facilitate prompt claims reported by farmers.