In Nigeria, agriculture is the most important sector of the economy, employing nearly two-thirds of the population and providing about a quarter of GDP. However, farmers often face extreme weather events, pest attacks, and other risks that can wipe out their crops and income, keeping them in a cycle of poverty.

To address this issue, the government, in collaboration with insurance companies, has introduced an agricultural insurance policy that caters to the needs of farmers and protects them from financial loss. Today, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) has become one of the leading agencies responsible for promoting the policy and providing farmers with the needed access.

Farmers in Nigeria have embraced the policy, with 1.5 million participating in 2018 alone. The policy covers various facets of agriculture, including livestock, crops, equipment, and fish farming. Under the policy, farmers pay a premium based on their level of risk and the amount of coverage they need. If a natural disaster occurs, the farmer can claim compensation from the insurance company.

For example, in 2019, the Nigeria Agricultural Insurance Corporation (NAIC) paid out N2.5 billion in claims to farmers. This payout helped boost their confidence and allowed them to invest in their farms without fear of losing everything if the worst should happen. In line with this, the government continues to encourage farmers to take agricultural insurance as a priority in their agribusiness investment.

The policy has also encouraged commercial lenders to lend to farmers, as it reduces the risk of default. This has resulted in an increase in financial flows to the agricultural sector and has enabled farmers to access credit, finance, and other services to grow their businesses.

However, there are still many challenges that need resolving for the policy to have the desired impact. Limited access to information about the policy and its benefits has hindered participation among farmers, particularly those in remote areas. Additionally, the policies are often geared towards established farmers, excluding smallholder and subsistence farmers who form the bulk of the farming population.

Nevertheless, the agricultural insurance policy has gained traction amongst farmers in Nigeria, serving as a powerful tool to combat the risks inherent in the farming business. However, to ensure all farmers benefit from the policy, there’s a need for increased awareness and targeted support for smallholder farmers to access insurance coverage.