Home News NIRSAL Considers Yield-based Insurance for Agric Sector

NIRSAL Considers Yield-based Insurance for Agric Sector

by AgroNigeria

NIRSAL Plc has revealed a shift towards yield-based insurance in the agricultural sector to drive growth of the economy. 

This was disclosed by the Principal Manager, Agribusiness Finance and Investment, NIRSAL Plc, Akinola Baiyewu, at the 2025 Annual Outlook Conference organised by Meristem recently in Lagos.

The third quarter 2024 GDP report from the National Bureau of Statistics indicated that the agriculture sector recorded modest growth of 1.14 per cent in real terms, below the 1.30 per cent growth recorded in Q3 2023. Crop production remained the dominant contributor.

Speaking on the role of insurance in the sector, Baiyewu noted that there has been capacity development to find the right type of insurance for agriculture. 

He stated that the current insurance is indemnity-based, covering only the cost of input, and expressed the need for a more comprehensive insurance product, specifically yield-based insurance.

“At the end of the day, when you have to pay back a loan, it does not quite cut it. The kind of insurance that we are now looking at is yield-based insurance. It looks at your expected yields and insures for it.

“NIRSAL has worked on that with Polar Consulting, and we have been able to roll it out in five insurance companies. In that space as well, we are going to be looking at microinsurance to deal with the lower segment of the market.”

Baiyewu shared that more tailored products will be introduced into the agricultural insurance sector. 

These products would be designed to address specific challenges within the industry.

He stressed the need to rethink how insurance payments are structured, with the potential for farmers to make payments in smaller installments or through other innovative methods. 

This, he said, could also involve building credit around the way insurance is paid, which would make it more accessible for farmers. 

He also underscored the importance of redesigning insurance products to meet the needs of the agricultural sector.

“Product design is going to change. One of the major things that we are going to work on in the insurance space is trust; building trust.

Self-regulation has to be ramped up, particularly private sector-driven self-regulation,” he added.

Speaking on the uptake of agricultural insurance in Nigeria, he noted that the space is evolving, but there’s still more work to be done. Despite the progress, he described the uptake as “positive, but slow positive.”

Baiyewu emphasized the need for larger farms in Nigeria to boost food production and export. 

He pointed out that developed countries like those in Europe and America have large-scale farms that boost their agricultural sectors. 

“With the new land that will probably be opened up, and that will require significant private investments, there would be a plan for bigger farms. I don’t know many developed countries where it is smallholder farmers who are driving things. 

“If you look at the farms in Europe, you look at the farms in America; they are really large farms. We want to support these smallholder farmers. We want to help them, but it is time for us to look at larger farms that are able to scale, get quality inputs, negotiate, bring down prices, meet quality and improve yields,” he said.

In his remarks, Babatunde Oguntade, President and Chairman of the Nigerian Council of Registered Insurance Brokers, highlighted the role of brokers in deepening insurance in the agricultural sector. 

He acknowledged that agricultural insurance is a specialized area, but brokers have been involved in initiatives like the Anchor Borrowers Scheme and NIRSAL. 

However, Oguntade revealed that many brokers are reluctant to work with the Nigerian Agricultural Insurance Corporation due to subsidized premiums and reduced commission rates.

Despite these challenges, Oguntade emphasized that brokers still work with underwriters who offer agricultural insurance products. 

He noted that Nigeria’s agricultural sector is currently dominated by subsistence farming, with limited commercial agriculture. 

Speaking further, he noted that, there are opportunities for growth, particularly in the livestock sector in northern Nigeria. 

Oguntade concluded that improving agricultural insurance is crucial for the sector’s growth and development in Nigeria.

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