Dealing with risks and uncertainties in Agriculture: Implications for Central Bank of Nigeria Interventions

Abstract

With the majority of the population of the Nigeria living in rural areas, agriculture can be a key driver of economic and human development. However, agriculture is a risky business, especially where small and medium scale farmers often have to deal with a series of risks and uncertainties related to the weather, market, production, technology, political environment etc. The paper discusses key areas in dealing with risks in agriculture which involves much more than dealing with risky events after they occur but through a coordinated risk management processes like establishing the context, risk identification, risk analysis and other quantitative analytical tools. The key institutional risk sharing systems like credit guarantee and insurance schemes were presented with their merits and demerits. The CBN on its part has put in place some risk mitigating approaches through programmes and schemes like the Agricultural Credit Guarantee Scheme Fund (ACGSF), Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), The Anchor Borrowers' Programme (ABP) as well as establishing institutions (either solely or in conjunction with other stakeholders) like Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) and the National Agricultural Insurance Corporation (NAIC). However, for risk mitigation to be effective under CBN interventions, there is need for the Bank through her linkages with other institutions and agencies to make concerted and purposeful efforts towards ensuring that risk management and coping strategies are incorporated in all loan schemes, simplified and automated risk sharing products are readily available to farmers as well as complete deregulation of the agricultural insurance space among others.