Econometric analysis of the impact of agricultural insurance of farming systems in the middle belt, Nigeria.

Abstract

Agriculture continues to dominate economic development policy in many developing countries. This is hardly surprising given the high proportion of the population of such countries that derive their livelihood from agriculture and related activities. What is surprising in many of the countries is the failure of the policy to deliver the sustained supplies of food and industrial raw materials as intended. In part this may have occurred because they failed to address the inability of the peasant farmers to withstand the increased risks associated with the adoption of commercial farming practices. Agricultural insurance is seen as one of the best strategies to address farm risks and encourage farmers to embrace modern production practices with greater potential for better and quality yields. In Nigeria, the Government introduced agricultural insurance programme with the tripartite aim of broadening farmers’ access to farm resources, positively changing farmers’ attitude to risk in their choice of resource use and to achieve increased food supplies in the market. Different factors can be identified that influence farmers’ behaviour especially making decisions that
relate to farm production, vis-à-vis choice of enterprise, its combination, the type and level of resources used in a given farming season. This study was carried out to examine whether agricultural insurance exerted any significant influence on the farming practices in the country. This study tests the broad hypothesis that farmers who purchase insurance increase their exposure to risk by adopting modern farming practices and achieved increase in resource productivity. The study found that the sampled farmers differ in their use of farm resources and the level of output produced. A higher proportion of insured farmers applied improved farming practices and were more commercially oriented. The insured farmers ventured into more risky enterprises and released a greater proportion of their output to the market for sale. However, contrary to expectations, uninsured farmers were found to be more productive and efficient in their resource use than the insured farmers.