Climate risk adaptation through livestock insurance: evidence from a pilot programme in Nigeria

Abstract

This study investigates the option of choosing index-based livestock insurance (IBLI) to mitigate the adverse effects associated with climate change in Kwara State, Nigeria. Previous studies indicate that the failure to include farmers during the early stage of pilot programme design is a major factor in Africa’s poor participation rate in index insurance. We conducted a survey with 392 farming households across eight of the state's 16 Local Government Areas (LGAs). This survey employed a contingent valuation method (CVM) to assess the value respondents are willing to pay for such insurance and add to the growing literature on IBLI uptake. We discuss important issues ranging from the cost of the IBLI premium to the impact of social capital and access to alternative sources of income on adoption. Our findings show that farmers are willing to pay a 1.3% premium for IBLI, which is lower than the current premium charged for traditional agricultural insurance in Nigeria which typically ranges from 2% to 5%. The results also highlight the need to consider insurance uptake and access to credit as complementary measures, rather than substitute strategies for managing the risks posed by severe climate shocks and extremes.