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

a subsidiary of FBNInsurance Limited a subsidiary of FBNInsurance Limited CHALLENGES AND RISK MANAGEMENT IN AGRICULTURAL PRODUTION BY BODE OPADOKUN MD/CEO, FBN GENERAL INSURANCE LTD DECEMBER 2018

Content a subsidiary of FBNInsurance Limited Background 3 - 5 6 - 7 Agriculture Value-chain Risk Management – Agriculture Insurance 8 - 13 Benefits of Agriculture Insurance 14 - 15 Conclusion 16

a subsidiary of FBNInsurance Limited OVERVIEW

Background a subsidiary of FBNInsurance Limited Export % Contribution % GDP Food Earnings to GDP Growth Rate Import Bill US$ US$ 25.08% 3.45% 1.4bn 5.3bn • Employs about two-third of Nigeria’s total labor force • Provides 70% of non-oil revenue Population (2017) earnings 198m • Small scale farmers with less than two (hectares) of cultivated Arable Land Total Land mass land account for more than 60% of the agricultural outputs 82.0m Hectares 92.4m Hectares

Background – (cont’d) a subsidiary of FBNInsurance Limited Private Sector Driven Transformation Agenda of the Government has emphasized the need to look at Agriculture as a BUSINESS RESULTS CHALLENGES  Job Creation  Environment Challenges – Climate change, Inclement and unpredictable weather Financial Returns: Impressive ROI  Pest Infestation  Increased Interest from Local Investors  Slow Technology & Mechanization adaptation   Increased Interest from Foreign Investors  Inadequate access to funds for small holder  International Donors farmers  Developmental Partners Desirous to partner  Market inaccessibility & Transportation Clear & Stable Framework for funding   Unfavourable Secondary Government Policies agriculture (CBN, Commercial Banks and other Financial Lending Institutions) Modernized Storage Facilities 

a subsidiary of FBNInsurance Limited AGRICULTURE VALUE CHAIN

Agriculture Value Chain a subsidiary of FBNInsurance Limited Input Storage Packaging & Retail Consumers Farmers Processing Providers Services Distribution Industries • Logistic • Primary • Logistic • Hyper • Seed • Crops • Urban Companies Companies Processors Market • Fertilizer • Meat • Warehousing • Warehousing • Rural • Secondary • Super Facilities Facilities • Crop • Dairy Processors Market • International Protection • Export • Cold • Cold • Corner Processing • Animal Storage Storage Shops Zones Health • Export • Export • Informal • Machine Processing Processing • Crop Markets Zones Zones Suppliers Insurance • Transport • Transport Hubs Hubs 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

a subsidiary of FBNInsurance Limited RISK MANAGEMENT – AGRICULTURE INSURANCE

Risk Management – Agriculture Insurance a subsidiary of FBNInsurance Limited Government Intervention Levels of Risk Management to Managing Risk Risk management • Crop rehabilitation or replanting, as in most o Micro Level : Individual Farms, Firms, is the process of tree/cash crops Enterprise Strategies • Introduction of high yielding crop varieties choosing o Medium Level : Joint Action with and improved strains of live-stock other farmers & firms, Arrangements appropriate • Establishment of emergency relief agencies with other value and supply chain methods to participants like the Ecology Fund Commission (EFC) and the National Emergency Management Agency respond to o Macro Level : Outside players (NEMA) both of which assist to provide absorbing risk through financial identified risks, support and reasonable compensation to instruments, stocks and other means victims of natural disasters which can include mitigation, Strategies for Managing Risks transfer, and   Avoidance Transfer coping…   Mitigation Coping

Risk Management – Agriculture Insurance (Cont’d) a subsidiary of FBNInsurance Limited 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

Risk Management – Agriculture Insurance ( Cont’d) a subsidiary of FBNInsurance Limited CROP PRODUCTION INSURANCE 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 of the expected yield. Credit Policy • Covers the amount of loan given to the farmer.

Risk Management – Agriculture Insurance (Cont’d) a subsidiary of FBNInsurance Limited 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 on their market value. – Coverage includes mortality, disability, infertility, medical treatment and surgery. – Covers mainly dogs and horses.

Risk Management – Agriculture Insurance (Cont’d) a subsidiary of FBNInsurance Limited 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 GREENHOUSE INSURANCE aggregate limit • Typically coverage is comprehensive for material damage to structures, glass, equipment, stock and other 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.

a subsidiary of FBNInsurance Limited BENEFITS OF AGRICULTURE INSURANCE

Benefits of Agricultural Insurance a subsidiary of FBNInsurance Limited • 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

Conclusion a subsidiary of FBNInsurance Limited 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

a subsidiary of FBNInsurance Limited Thank You 17