EFFECTS OF AGRICULTURAL INSURANCE ON SURVIVAL OF SMALL FARM HOLDERS IN NIGERIA

EFFECTS OF AGRICULTURAL INSURANCE ON SURVIVAL OF SMALL FARM HOLDERS IN NIGERIA

Background of the Study

In view of persistent and wide forms of risks facing their means of living farming households pursue several traditional means of overcoming these risks. For example, to reduce exposure to potential losses, farmers often spread their bets by growing a mix of crops and crop varieties, stagger crop planting dates, and spread crops amongst fields that have different risk exposures in the landscape. These techniques can help reduce the chance of a major crop loss in any one season. Many farm households also engage in off-farm employment, or have a non-farm business of their own, and these help to reduce their dependence on farm income. To cope with the losses that do occur, farmers carry stocks of food, livestock, savings and other assets that can be consumed or sold in times of need. They may also take credit and engage in temporary offfarm employment. Communities provide another layer of protection against risk (Bhattamishra and Barrett, 2010). Religious funds, credit groups, and kin support networks provide reciprocal means through which individuals can help each other in times of need. Sharecropping contracts also emerged in many societies as a way of sharing risks between landlords and tenants (Kuhn, 2016). In pastoral areas, reciprocal arrangements between spatially dispersed communities enable mobile or nomadic grazing practices that reduce the risk of livestock having insufficient forage in any one location (McCarthy, Swallow, Kirk and Hazell, 1999). Repeated income shocks and asset losses can conspire to keep poor households trapped in poverty (Kuhn, 2016). Considering the above, seeking insurance becomes imperative. Ogwo, Eche, Ibeabuchi, Nwite and Enwereuzo (2000) assert that any device aimed at reducing the chance of a risk occurring or when it happen reduces the extent of its damage and providing the affected person with compensation is a form of insurance. It has great potential to provide value to low-income farmers and their communities, both by protecting farmers when shocks occur and by encouraging greater investment in crops. Eze (2019) noted that the development of agriculture requires financial services that can support larger agriculture investments and agriculture-related infrastructure that require long-term funding (given that currently transportation and logistics costs are too high, especially for landlocked countries), a greater inclusion of youth and women in the sector, and advancements in technology (both in terms of mechanising the agricultural processes and leveraging mobile phones and electronic payment platforms to enhance access and reduce transaction costs).It further stated that agriculture finance and agricultural insurance are strategically important for eradicating extreme poverty and boosting shared prosperity.

1.2 Statement of the Problem

In many countries, insurance sector contributes to economic growth both sectorally and geographically. Since insurance sector has links to other economic sectors such as industrial, transportation, agriculture, trade and others, both locally and internationally, its relevance to general human activities has continued to grow for all ages as all categories of risks increase (Zyka and Tomori, 2014). However, the ability of the insurance industry to contribute to the growth of an economy is dependent on its capacity. This is usually indicated by the level of development the industry has. Agriculture insurance in Nigeria has not received much patronage. It is growing at slower rate than provision of credit to the agriculture sector. This suggests that lending to the agriculture community in Nigeria does not build on the stability that available agriculture insurance in the economy provides. There are a number of factors necessitating this poor situation. Yet the situation can be seen differently. The non reliance on insurance paints a picture of many prospects of untapped market for agriculture insurance in Nigeria. Despite the existence of insurance services from Nigeria Agricultural Insurance Corporation and other private firms in Nigeria, there has been low level of participation in insurance activities by farmers. In view of this, there is need to determine feasibility of deepening the agriculture insurance market in Nigeria.

1.3 Objectives of the Study

The primary objective of this study is to investigate the effects of agricultural insurance on survival of small farm holders in Nigeria using Plateau State as a case study. Other specific objectives are:

1. To examine the extent to which agriculture insurance claims paid significantly affected credit to foodstock sector in Plateau State.
2. To assess the level to which agriculture insurance reserves significantly affected credit to foodstock sector in Plateau State.
3. To evaluate the degree to which agriculture insurance claims significantly affected credit to livestock sector in Plateau State.
4. To ascertain the measure to which agriculture insurance reserves significantly affected credit to livestock sector in Plateau State.

1.4 Research Questions

The following questions guide this study:

1. To what extent does agriculture insurance claims paid significantly affect credit to foodstock sector in Plateau State?
2. What is the level to which agriculture insurance reserves significantly affect credit to foodstock sector in Plateau State?
3. What is the degree to which agriculture insurance claims significantly affect credit to livestock sector in Plateau State?
4. What are the measures to which agriculture insurance reserves significantly affect credit to livestock sector in Plateau State?

1.5 Research Hypotheses

The following null hypotheses are tested in this study:

H01: Agriculture insurance claims paid have no significantly effect on volume of credit to foodstock sector in Plateau State.

H02: Agriculture insurance reserves have no significantly effect on the volume of credit to foodstock sector in Plateau State.

H03: Agriculture insurance claims paid have no significantly effect on the volume of credit to livestock sector in Plateau State.

H04: Agriculture insurance reserves have no significantly effect on the volume of credit to livestock sector in Plateau State.

1.6 Significance of the Study

This study will be beneficial to the entire public and farmers because it will expose to them the effects of agricultural insurance on survival of small farm holders as well necessitate policies that will enhance this insurance. Also, this study will serve as a reference material to students, researchers and scholars who may wish to carryout further research on this study or related areas in the future.

1.7 Scope of the Study

This study focuses on investigating the effects of agricultural insurance on survival of small farm holders in Plateau State. This study is delimited to Jos North, South and East Local Government Areas in Plateau State.

1.8 Limitation of the Study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing to the nature of the discourse thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. Additionally, the researcher will simultaneously engage in this study with other academic work. More so, the choice of the sample size was limited  as few respondent were selected to answer the research instrument hence cannot be generalize to other states in Nigeria. However, despite the constraint  encountered during the  research, all factors were downplayed in other to give the best and make the research successful.

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