The Contribution of Agricultural Insurance to the Nigerian Economy

Introduction

1.1 Background Of The Study

The principle feature, which distinguishes agriculture from other production sectors, is its great dependence on nature which itself is beyond man’s control. The agricultural sector, as importance as it is exposed to extremely high degree of disk arising out of natural factors like weather conditions. Uncertainties, regarding the quality and quality of the crop/livestock output due to natural hazards, are one of the basic risks that are constantly faced by every farmer. But majority of farmers are subsistence in natures and are seldom able to bear such risk especially when large loss involved. The decline in the supply of products in turn creates a shortage of inputs in other sectors of the economy; thus the entire economy is open to the serious consequences of agricultural risks of which the farmers, are most direct and primary victims. Most of these events that result in these losses are beyond the control or prevention by individuals or society as a whole.

It is therefore, important that devices be employed for minimizing the adverse economic effect of these natural hazards in agriculture. Not only lives and well being of individuals but also the economic viability of the entire nation may be at state.

Agricultural insurance is therefore the most important available device for minimizing the adverse effects of natural hazards. Agricultural Insurance Scheme is a collective system or scheme for reducing economic uncertainties through the basic techniques of risk pooling whereas the frequency of the severity of crop losses of individual farmers cannot be predicted, the predictability and severity of losses frequency is substantially increased when similar exposure of large number of farmers are pooled.

However, there are measures established to increase agricultural production and from income like the Agricultural Development Project (ADP), operation feed the Nation (OFN), the Green Revolution, the Nigeria Agricultural and Co-operative Bank and various River Basin Authorities in deferred states. These measures have not been with success because of the huge losses of agricultural production caused by natural disaster/hazards which has been the major constrains in increasing food production in Nigeria economy. Agricultural insurance therefore offers production to farmers (Insured) from the effect of these natural disaster and ensure payment of appropriate compensation sufficient to keep the formers in the business after suffering a loss. It minimizes and eliminates the need for emergency assistance provided by government during the period of agricultural disaster.

Agricultural Insurance Scheme is therefore; aimed at encouraging banks to be more liberal in extending agricultural credits to farmers for increased food production since their loans are under agricultural insurance policy cover. Most importantly, the scheme includes research and development which generates innovations that reduce risks of diseases, pets and yield losses in agricultural production and give protection to farmers. It provides financial support and increases the growth of agricultural credit from lending institutions and farmers. Therefore, farmers are encouraged to ensure their farm projects with Nigerian Agricultural Insurance Corporation (NAIC), so as to have more coincidence to embark on wider ranger of Agricultural productions.

1.2 Statement Of The Problem

There has been so many problems associated with Nigeria Agricultural insurance cooperation in agricultural development in Nigeria. Some of such problem includes:

1. Nigeria Agricultural insurance cooperation are not adequately covering Agricultural risk.
2. Nigeria Government is not adequately funding Nigeria Agricultural insurance cooperation.
3. Famers in the rural Areas don’t even know the existence of Nigeria Agricultural insurance cooperation.

1.3 Objective Of The Study

The aim of this research work is to examine the role of Nigeria Agricultural insurance cooperation in the development of Nigerian agricultural industry, the specific objective of the study include the following:

1. To examine why Nigeria Agricultural insurance cooperation are not adequately covering agricultural risk.
2. To examine why Nigerian government is not adequately funding Nigeria Agricultural insurance cooperation and its economic implication.
3. To know why famers in the rural area do not know about the existence of Nigeria Agricultural insurance cooperation.

1.3 Objective Of The Study

The aim of this research work is to examine the role of Nigeria Agricultural insurance cooperation in the development of Nigerian agricultural industry, the specific objective of the study include the following:

1. To examine why Nigeria Agricultural insurance cooperation are not adequately covering agricultural risk.
2. To examine why Nigerian government is not adequately funding Nigeria Agricultural insurance cooperation and its economic implication.
3. To know why famers in the rural area do not know about the existence of Nigeria Agricultural insurance cooperation.

1.4 Research Hypothesis

The following research hypotheses were formulated by the researcher:

1. Ho: Poor covering of agricultural risk by Nigeria Agricultural insurance cooperation do not affect the development of Agricultural industry.
   H1: Poor covering of agricultural risk by Nigeria Agricultural insurance cooperation affects the development of Agricultural industry.
2. Ho: The poor funding of Agricultural insurance cooperation has no effect on Agricultural development in Nigeria.
   H1: The poor funding of Agricultural insurance cooperation has a significant effect on Agricultural development in Nigeria.

1.5 Significance Of The Study

This research work will be of immense help to:

The student:

It will help the researcher to know more on the role of Nigeria Agricultural insurance cooperation in the development of Nigerian agricultural industry.

The Stake holders:

This study will be of great importance to stake holders as it will enrich their knowledge on the various roles of NAIC to the rural dwellers.

Insurance company:

This will equally be of help to the insurance companies in Nigeria because when the exact role of NAIC is identified and they carry out their work

1.6 Scope And Limitation Of The Study

The scope of the study covers the contribution of agricultural insurance to the Nigeria economy.
The researcher encounters some constrain which limited the scope of the study;

a) Availability Of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities

1.7 Definition Of Terms

Premium:

This refers to the amount paid by the insured to the insurer before taking up the insurance policy.

Risks:

This refers to all those hazards which effects insured properties, e.g pests, diseases, erosion, thunder, lightening etc.

Insured:

This refers to person who took insurance policy with the insurer.

Insurer:

This refers to the insurance company or corporation that, underwrites insurance risks for people.

NAIC:

Nigerian Agricultural Insurance Corporation.

NAIS:

Nigerian Agricultural Insurance Scheme.

Indemnity:

This refers to the amount paid by the insurer to the insured who sustain loss on the risks he insured against.

Agricultural Insurance:

This is a collective system for reducing economic uncertainties through the basic techniques of risk pooling.

Agriculture:

This may be defined as the cultivation of land and the production of food, plants and animals for man’s use and survival.

1.8 Organization Of The Study

This research work is organized in five chapters, for easy understanding, as follows

1. Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
2. Chapter two highlights theoretical framework on which the study is based, thus the review of related literature.
3. Chapter three deals on the research design and methodology adopted in the study.
4. Chapter four concentrate on the data collection and analysis and presentation of finding.
5. Chapter five gives summary, conclusion, and recommendations made of the study