Livestock Insurance Programme Design and Implementation for Nigerian Smallholder Farmers

This study examines livestock insurance programme design principles and implementation challenges for Nigerian smallholder farmers, with the aim of developing a practical insurance model suited to the Nigerian agricultural context. Livestock losses from disease, drought, and market collapse impose severe welfare shocks on smallholder farmers who have no financial safety net. Livestock insurance offers risk transfer mechanisms that can protect farmer investment and stabilise income, but product design, premium affordability, and claims assessment challenges have limited existing programme coverage. This study reviews international livestock insurance programme experiences, analyses actuarial data on livestock mortality risk from the Nigerian Agricultural Insurance Corporation database for the period 2018 to 2023, and conducts willingness-to-pay surveys with 240 livestock farmers across four states representing different agro-ecological zones. Index-based livestock insurance designs using satellite vegetation indices are evaluated against indemnity-based designs for the Nigerian smallholder context. Findings reveal that average willingness to pay for cattle mortality insurance is 3,800 naira per head per year, comparable to actuarially fair premium estimates for the North Central zone but below premiums required for the more drought-prone North West. Index-based designs using NDVI thresholds show lower basis risk than expected in pilot assessments due to correlation with reported mortality events. The study recommends a staged livestock insurance programme beginning with cattle in higher-potential zones and expanding to sheep, goats, and poultry using parametric index designs.

Keywords: livestock insurance, smallholder farmers, risk management, Nigeria, index-based insurance.