Risk Management in Agricultural Business: Insurance as a Viable Option in Nigeria

Abstract

Agriculture contributes to the economy, provides employment, export revenue earnings and poverty eradication.  Although huge capital investment is usually involved, however, a crisis in the sector is capable of crippling the nation. Agriculture depends heavily on nature and because of the unpredictability of nature, a lot of natural disasters capable of taking investors out of the business are associated with farming. Agricultural risks are usually multi-perils, and characterized by high severity and frequency. The need to identify, analyze and consider economic and effective control of the risks can not be overemphasized. Hence, different control measures such as avoidance of risk, loss reduction, loss prevention, retention and risk transfer options were discussed in the paper. Insurance, a risk management strategy that involves the transfer of the associated uncertainties of an event or activity to a professional risk carrier was identified as a viable option that could effectively mitigate the inherent natural disasters threatening national food security. Stakeholders, especially extension personnel and those saddled with the operation of the Agricultural Insurance Scheme are admonished to create awareness and educate agro-prenuers on the scheme.