Plans are in top gear by the African Reinsurance Corporation (Africa Re), the International Finance Corporation (IFC) and other key stakeholders in both the agriculture and insurance sectors to improve food production in Nigeria and put an end to a whopping $10 billion which the country spends on food import substitution.
At the 3rd Africa Re Agriculture Insurance workshop in Lagos on Wednesday, the deputy managing director /chief operating officer , African Reinsurance Corporation (Africa Re), Mr. Ken Aghoghovbia, noted that the agriculture sector in any country is an important pillar in achieving food security.
Driving his points with data, Aghoghovbia, recalled that, in the second quarter of 2023, agriculture accounted for about 21 per cent to Nigeria’s Gross Domestic Product (GDP) and the sector employs more than 36 per cent of the country’s labour force, with over 70 per cent of this proportion being small holder farmers.
In spite of this level of contribution to the GDP, Aghoghovbia observed that the agricultural sector has been hurt by several shocks such as flooding, desertification of crop and grazing land, conflicts between herdsmen and local farmers, inadequate access to financing and low use of modern technology.
These challenges, he said, have stifled the sector’s productivity, and created a huge gap between local food supply and demand leading to increased food imports, adding that, the International Trade Administration estimates that Nigeria relies on about $10 billion of imports to meet its food and agricultural production shortfalls.
Agriculture Insurance, he continued, holds great promise in turning around the fortunes of Nigeria’s agriculture sector.
“In the last five years, Agriculture insurance has received considerable attention from the insurance market players in Nigeria who have been attracted by the opportunities that stem from the need to commercialise and modernise Agriculture production and the quest of successive governments to diversify the economy. With approximately 70 million hectares of agricultural land and diversity of Agriculture enterprises, Nigeria’s Agriculture Insurance market has the potential to generate a premium of over USD 600 million.” Aghoghovbia, projected.
However, he stated that, the current market reality paints a different picture,,as he adds, “While gross market agriculture insurance premium grew to a peak of $15 million in 2021, this figure has declined significantly. This dismal performance is attributed to several factors that include, non-renewal of the Government supported Anchor Borrowers Program, the misalignment of business goals between various industry players and the lack of investment needed to help industry players design and develop agriculture insurance products that respond to the needs of farmers and realities of Nigeria’s Agriculture landscape.”
On the part of Africa Re, Aghoghovbia said, the firm is committed to taking the leadership role in developing agriculture insurance in Nigeria.
“However, we also acknowledge that, on our own, we may not be able to sustain this noble objective. It is in this spirit, that we once again have seen it necessary to engage valued and likeminded partners seated here today; the International Finance Corporation- IFC, various insurance companies, finance institution and banks, insurance technology providers, key government agencies, farmer representatives and our esteemed service providers,” he added.
In his remarks, IFC’s Country Officer for Nigeria, Mohammad Aliyu, said, agriculture is becoming increasingly critical to the Nigerian economy, contributing a substantial 20 per cent of the GDP.
Aliyu, however, noted that the challenges of climate change and other associated risks pose a significant threat to Nigeria’s pursuit of self-sufficiency, import substitution, and the development of a competitive agriculture sector. Climate change can jeopardise our quest for food security.
He said, the IFC’s Nigeria Inclusive Insurance Project is a significant component of the IFC Africa Inclusive Insurance Program launched in May 2022, stressing that this initiative is a part of IFC ‘s comprehensive suite of solutions designed to support Nigeria’s agricultural sector.
According to him, the central objective of the Nigeria project is to enhance the resilience of at least 300,000 smallholder farmers through expanded access to climate and agriculture-focused inclusive insurance products.
This endeavour, he noted, is achieved by providing support to insurers in the development of innovative products and establishing distribution partnerships, through IFC’s engagement with Africa Re.
Till date, he said, the project has engaged with at least four insurers to deliver customised agricultural insurance support, adding that, “Additionally, a feasibility study for a revolutionary insurance solution for farmers and herders in the conflict affected regions of Northern Nigeria has been completed successfully.
He also disclosed that the IFC has an ongoing partnership with NAICOM to develop the market’s capacity for effective agricultural insurance management.
Agriculture insurance plays a crucial role in bolstering food security by enhancing the resilience of agricultural Small and Medium Enterprises(SMEs).
Integrating insurance into Agri finance channels,he pointed out, also facilitates farmers’ access to the necessary financing needed to expand their production, and enables banks to manage the inherent risks in agricultural lending.
The two-day event, organised under the IFC Technical assistance provides mandate for the Nigeria Climate insurance project, aims to bring together key stakeholders from the Agriculture insurance industry in Nigeria.
The primary objective of the workshop is to facilitate a collaborative platform for key industry players, including insurers, government agencies, farmers’ representatives, the insurance regulator, finance institutions, input dealers, and commercial farms.
The gathering will foster the exchange of knowledge and experiences critical for propelling the agriculture insurance sector forward.
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