CHALLENGES AND RISK MANAGEMENT IN AGRICULTURAL PRODUTION BY BODE - - PowerPoint PPT Presentation

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CHALLENGES AND RISK MANAGEMENT IN AGRICULTURAL PRODUTION

BY

BODE OPADOKUN MD/CEO, FBN GENERAL INSURANCE LTD

DECEMBER 2018

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Content

Agriculture Value-chain Background Risk Management – Agriculture Insurance 3 - 5 6 - 7

8 - 13

Benefits of Agriculture Insurance

14 - 15

Conclusion

16

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OVERVIEW

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% Contribution to GDP % GDP Growth Rate Export Earnings Food Import Bill

25.08% 3.45% US$ 1.4bn US$ 5.3bn

• Employs

about two-third

• f

Nigeria’s total labor force

• Provides 70% of non-oil revenue

earnings

• Small scale farmers with less

than two (hectares) of cultivated land account for more than 60%

• f the agricultural outputs

Background

92.4m Hectares

Total Land mass

Population (2017)

198m

82.0m Hectares

Arable Land

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RESULTS

• Job Creation
• Financial Returns: Impressive ROI
• Increased Interest from Local Investors
• Increased Interest from Foreign Investors
• International Donors
• Developmental Partners Desirous to partner
• Clear & Stable Framework for funding

agriculture (CBN, Commercial Banks and

• ther Financial Lending Institutions)

CHALLENGES

• Environment Challenges – Climate change,

Inclement and unpredictable weather

• Pest Infestation
• Slow Technology & Mechanization adaptation
• Inadequate access to funds for small holder

farmers

• Market inaccessibility & Transportation
• Unfavourable Secondary Government Policies
• Modernized Storage Facilities

Private Sector Driven Transformation Agenda of the Government has emphasized the need to look at Agriculture as a BUSINESS

Background – (cont’d)

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AGRICULTURE VALUE CHAIN

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Agriculture Value Chain

Input Providers Farmers Storage Services Processing Packaging & Distribution Retail Industries Consumers

• Seed
• Fertilizer
• Crop

Protection

• Animal

Health

• Crop

Insurance

• Crops
• Meat
• Dairy
• Logistic

Companies

• Warehousing

Facilities

• Cold

Storage

• Export

Processing Zones

• Transport

Hubs

• Primary

Processors

• Secondary

Processors

• Export

Processing Zones

• Machine

Suppliers

• Logistic

Companies

• Warehousing

Facilities

• Cold

Storage

• Export

Processing Zones

• Transport

Hubs

• Hyper

Market

• Super

Market

• Corner

Shops

• Informal

Markets

• Urban
• Rural
• International

Increased Investments in the sector has opened up the complexity of the Agri-Business Value Chain to the increasing attendant and pervasive risks of the business to the STAKEHOLDERS

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RISK MANAGEMENT – AGRICULTURE INSURANCE

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Risk management is the process of choosing appropriate methods to respond to identified risks, which can include mitigation, transfer, and coping…

• Micro Level: Individual Farms, Firms,

Enterprise Strategies

• Medium

Level: Joint Action with

• ther farmers & firms, Arrangements

with

• ther

value and supply chain participants

• Macro

Level: Outside players absorbing risk through financial instruments, stocks and other means

Levels of Risk Management

• Crop rehabilitation or replanting, as in most

tree/cash crops

• Introduction of high yielding crop varieties

and improved strains of live-stock

• Establishment of emergency relief agencies

like the Ecology Fund Commission (EFC) and the National Emergency Management Agency (NEMA) both of which assist to provide support and reasonable compensation to victims of natural disasters

Government Intervention to Managing Risk

Strategies for Managing Risks

• Avoidance
• Mitigation
• Transfer
• Coping

Risk Management – Agriculture Insurance

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Risk Management – Agriculture Insurance (Cont’d)

Agricultural Insurance provides cover against losses caused by natural and uncontrollable factors/events which adversely affects agricultural production, while providing risk-aversion or risk- minimization measures

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Risk Management – Agriculture Insurance (Cont’d)

All-Risk Insurance Policy

• Covers all risks of physical loss or damage

to the crop caused by the insured perils Harvest or Crop Yield Policy

• Cover loss up to the value of the expected
• harvest. Usually the unit price of the crop

is specified as a percentage

• f

the expected yield. Credit Policy

• Covers the amount of loan given to the

farmer. CROP PRODUCTION INSURANCE

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Risk Management – Agriculture Insurance (Cont’d)

LIVESTOCK INSURANCE – Provides cover for animals based on their market value and sometimes age. – Cover against non-epidemic disease, forced slaughter, transport mishap, death, accident, fire, national causes, lightening et al. – Covers livestock like chickens, goats, swine, cattle et.c. BLOODSTOCK INSURANCE – Provides cover for high-value animals based

• n their market value.

– Coverage includes mortality, disability, infertility, medical treatment and surgery. – Covers mainly dogs and horses.

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AQUACULTURE INSURANCE

• Covers complexities of the production process of fish &

fish farming

• Offered on name peril or all-risk basis

FORESTRY INSURANCE

• Provides protection for standing timber and stocks
• Covers

against fire, lightening, aircraft damage, explosion, windstorms, flood, hail and snow

• Coverage determined on a tired basis with an annual

aggregate limit

GREENHOUSE INSURANCE

• Typically coverage is comprehensive for material

damage to structures, glass, equipment, stock and

• ther contents (sometimes business interruption,

machine breakdown, and electronic equipment.

• Covers damage from storm (including hail storm),

water, fire, smoke, lightening, explosion, malicious acts, aircraft impact and earthquake.

Risk Management – Agriculture Insurance (Cont’d)

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BENEFITS OF AGRICULTURE INSURANCE

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Benefits of Agricultural Insurance

• Agricultural Insurance is the primary risk

management tool that agriculture investors use to financially recover from natural disasters and volatile market fluctuations

• Preserves the production capacity of farmers
• Provides

producers the financial freedom to innovate and build capacity thereby increasing food output and supply

• Prevents catastrophic production losses that could

affect the rural economies of the country, - Reduction in food production; farm failures and consolidation, job losses, farm-related small business failures, financial stress and reduced investment in agricultural production

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Conclusion

The ability of agricultural producers to purchase agricultural insurance for their investments is the country’s protection against any disruption in production and financial instability in the sector The Nigerian Insurance Industry has been repositioned and is poised to continue to provide relevant risk management solutions for the agriculture

• sector. This is aimed at achieving sustainability of the sector as well as

ensuring increased contribution to the growth of the Nigerian economy

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17

Thank You