Agricultural practices remain the main source of livelihood for rural dwellers and relentless efforts by farmers have brought fortune to the nation. The Centre for Inclusive Agriculture has stated that agriculture employs almost two-thirds of Nigerian labour manpower, contributes significantly to the Gross Domestic Product (GDP) and provides a large proportion of non-oil earnings (CIA, 2012). All professionals or occupations, as the case may be, have their specific risks, limiting the profit to be generated, productivity level, efficiency and so on. Agriculture activities are not an exceptional when it comes to risk involvement during the production period. Both biotic and abiotic factors can become threats or risks that must not be left unattended to because they often come as emergencies that need quick and urgent attention.
Risks in agriculture mostly do not depend completely or partly on nature. Production risks include the vagaries of nature and inclement weather conditions such as drought, excessive rains, storms and hurricanes, pests and diseases along with flood and fire outbreaks and these cause heavy losses to farmers. Interestingly, higher profits are usually linked with higher risks. During agricultural production or cycle, the mind of the farmer is usually unsettled due to uncertainties and events that are risk-poised during agricultural enterprises, most especially livestock enterprises. Loss can be prevented by engaging in different security measures such as bio-security, agricultural insurance, good agricultural practices, and engaging the services of consultants, among others.
Loss in agricultural varies from the type of production that farmers are involved in. Agricultural losses have discouraged many youths and investors from engaging in agriculture due to high level of risk involvement. Mr. Abiola, poultry farmer in Ilorin, Kwara State narrates his ordeal during one of his production cycle; the situation was pathetic. One of the farm attendant partnered with the farm security personnel to loot the farm by selling eggs before the agreed farm transaction time. That is, they will schedule some customers to come and buy eggs by 8’o clock in the morning, whereas the farm usually starts transaction by 11’o clock in the morning, the money generated will be shared by them and the actual crate of eggs sold from the farm will not be accurately reported. This activity continued for months before they were caught. The farm owner keeps paying debt from the money generated from other businesses to make up for the losses incurred.
Similarly, Mr. Adeola from Ekiti State stopped his poultry business due to the outbreak of Avian Flu disease that he experienced some months prior to December sales, when sales are made and the profit generated are used for personal/family without paying back money borrowed from financial institutions. He added that the lost 500 hundred birds daily and this continued until about 95% of the total birds were wiped out. Recovering from the shock remains a mirage till date. Financial institutions embarrassed him by mortgaging some of his properties, and was forced to leave his apartment to a less comfortable enclosure and so on. He said he understood what it mean being miserable despite being hardworking. The term insurance can be defined as uncertainty or risk management procedures. Agricultural insurance shields against damages or loss of livestock or crops caused by either biotic or abiotic factors. It is expedient or necessary for farmers to protect their farms from natural and non-natural calamities, secure investment and ensure food security.
Ray (2001) posited that in developing countries, crop insurance can help ensure a considerable measure of security in farm income over the years and this contributes to the stability of agriculture and in turn the general economy, improves the level of farmers in relation to lending, reduces the shock of disastrous crop losses in a bad year, strengthens the position of agricultural cooperative societies as a result of the economic fortunes of farmers. Credit institutions can be more liberal in providing the much needed loans to farmers, taking crop insurance contracts for such collateral gives farmers more confidence in adopting new and improved farming practices and in putting more investment into farming for improved yields and increased agricultural productivity. Another point is the facilitation and replacement of sporadic grant and relax operations, which governments in developing countries are called upon to carry out through actuarial-calculated system of compensation and pre-planned awards in which the parties concerned such as government and farmers know in advance their respective liabilities and the farmers in particular would know the extent of guarding against unavoidable shortage of produce.
The National Agricultural Extension and Research Liaison Services (NAERLS) looked at the following as advantages of agricultural insurance to stakeholders: (a) ensures that farmers do not suffer from any insurable uncertainties in which compensation is liable. The farmer is able to maintain and continue activities and maintain stability of his/her income (b) helps the farming families to get loans for insurance guarantees protection over livestock and crop failures, as the already insured farmers have high zeal to obtain loans (c) promotes good project implementation and planning since there is a great degree of assurance for moving ahead in business (d) gives
In view of the risks and uncertainties of agricultural production in Nigeria and the dire need to manage risk in farming, the Nigerian government decided to bring fort, the National Agricultural Insurance Scheme (NAIS) in December 1987 as well as the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Plc in June 2011. After this, was the establishment of the Nigerian Agricultural Insurance Corporation (NAIC) scheme to allow farmers have access to main farm resources that encourage the utilisation of innovation with the belief that such practices will help increase the quantity and quality of farm production and food availability. Although, there are many bad cases about insurance activities in Nigeria that could be responsible for their folding-up such as non-payment of claims as at when due, poor documentation, insincerity of policy holder and so on. Despite all these shortcomings, agricultural insurance is largely a soft landing product for farmers against risks and sudden/unseen losses or damages. Therefore, farmers should never fail to insure their business.