Financial institution, NIRSAL Plc, has revealed a shift towards yield-based insurance in the agricultural sector to drive growth of the economy.
This was disclosed by the Principal Manager, Agribusiness Finance and Investment, NIRSAL Plc, Akinola Baiyewu, at the 2025 Annual Outlook Conference organised by Meristem recently in Lagos.
The third quarter 2024 GDP report from the National Bureau of Statistics indicated that the agriculture sector recorded modest growth of 1.14 per cent in real terms, below the 1.30 per cent growth recorded in Q3 2023. Crop production remained the dominant contributor, underscoring its critical role in food security and rural employment.
Speaking on the role of insurance in the sector, Baiyewu said, “There has been a lot of capacity development around that space in recent times to be able to find the right type of insurance for agriculture. The kind of insurance that we have now is just indemnity-based insurance, which is just the cost of input. At the end of the day, when you have to pay back a loan, it does not quite cut it. The kind of insurance that we are now looking at is yield-based insurance. It looks at your expected yields and insures for it. NIRSAL has worked on that with Polar Consulting, and we have been able to roll it out in five insurance companies. In that space as well, we are going to be looking at microinsurance to deal with the lower segment of the market.
We are going to see more products in the insurance space to address specific issues and to redesign the way insurance is paid.
If they can pay in bits and pieces and other innovative ways, build some credit around how their insurance is paid. So, product design is going to change. One of the major things that we are going to work on in the insurance space is trust; building trust. Self-regulation has to be ramped up, particularly private sector-driven self-regulation.”
In terms of uptake, he said, “I think that space is evolving. There is still a bit more work to be done in that space. I will say it is positive, but it is slow positive.”
During the panel discussion, Baiyewu called for larger farmers in Nigeria to boost food production and export.
He said, “So, with the new land that will probably be opened up, and that will require significant private investments, there would be a plan for bigger farms. I don’t know many developed countries where it is smallholder farmers who are driving things. I don’t know many. So, if you look at the farms in Europe, you look at the farms in America; they are really large farms. So, it is time for us.
Yes, we want to support these smallholder farmers. We want to help them, but it is time for us to look at larger farms that are able to scale, get quality inputs, negotiate, bring down prices, meet quality, improve yields, and all of that. So those are some of the ways I think we can deal with it.”
Speaking about the role of brokers in deepening insurance in the agriculture sector, the President and Chairman, Governing Board of the Nigerian Council of Registered Insurance Brokers, Bàbàtunde Oguntade, said, “Brokers play in every sector of the economy, but you know agricultural insurance is not something that is very common. It is kind of specialised, but we have been involved severally. Some of us worked with the government on the Anchor Borrowers Scheme, on NIRSAL, among others.”
However, he revealed that most brokers don’t like going to the Nigerian Agricultural Insurance Corporation because of the subsidised premium and reduced commission rate.
“But a lot of us still patronise underwriters who do that. As you know, what you have right now is subsistence farming; you don’t have commercial agriculture in the real sense. It is only in the north that you have that kind of high volume of farming, and it is mostly in the areas of livestock,” he said.
He added that the flood that affected Agribusiness a couple of years back led to claims that were paid.
“Agric insurance is an area where we need to improve once there is increased activity in agriculture in Nigeria,” he concluded.
