To better safeguard farmers against risks along the agricultural value chain, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) has developed a new insurance product which improves on its pioneering Area Yield Index Insurance (AYII) mechanism introduced last year.
The product is especially targeted at small-holder farmers – the most vulnerable segment in the agricultural sector and the Nigerian population as a whole.
While the cover provided by the earlier product was limited to yield insurance, the new insurance product, NIRSAL Comprehensive Index Insurance(NCII) is a combination of Yield Index, Price Index and Life Insurance. It is designed to mitigate the impact and losses of both yield risk and market price risk – fundamental risks associated with possible production shortfalls and the uncertainties of the marketplace. The new insurance product, an innovative form of revenue insurance, is unique in Africa.
It is also the first such product to be achieved without government subsidies on the premium.
The deployment of the product begins immediately with a pilot phase as part of NIRSAL’s operations in the CBN’s Anchor Borrowers Programme.
Beyond the benefits to farmers, NCII’s comprehensive cover will also encourage financial institutions to lend more to primary production and ensure reduced premiums in comparison with the earlier version.
This will also lead to an additional benefit – the eradication of premium subsidy, to free up Government funds for intervention in other areas.
Leveraging on its $30m insurance facility, NIRSAL’s goal is to expand insurance products and coverage for agricultural lending across the entire value chain by growing coverage from about 0.5million to 3.8million primary producers.
Speaking on the development, the Managing Director of NIRSAL, Mr Aliyu Abdulhameed, stated that the new insurance product is a testament to NIRSAL’s focus on expanding the frontiers of innovation in Nigerian agriculture in pursuit of practical and effective benefits.
“At NIRSAL, our focus is on making positive impact at key points of the agricultural value chain that can translate to significantly higher and sustained productivity and food security for the country.
“In line with our mandate to de-risk Nigerian agriculture, this innovative insurance product will help to secure farmers against key risks in order to make agriculture more attractive and more profitable.”
Abdulhameed expressed his appreciation to NAICOM, NAIC and the insurance companies who collaborated with NIRSAL on the project.
NCII was developed by the Corporation in conjunction with key partners, including NAICOM (Regulator of the insurance industry), NAIC (lead of the consortium of insurance on NIRSAL Anchor Borrowers Program) and members of the consortium (Axa Mansard, IGI, Leadway, Royal Exchange) and Pula Advisors (Consultant to NIRSAL on Agricultural Insurance).
Specifically, NAICOM supported the licensing of key insurers to provide agricultural insurance services that will not only protect the farmers but also deepen the Buhari administration’s financial inclusion agenda.
It will be recalled that NAICOM recently licensed Royal Exchange Assurance PLC, AIICO and other insurance firms to offer innovative index insurance products in Nigeria.
Amaka E. Nliam