Rice Farmers’ Willingness-to-Pay for Weather-Index Insurance in Kwali Area Council, Federal Capital Territory, Nigeria

Abstract

Objectives: This study examined rice farmers’ willingness to pay (WTP) for weather-indexed insurance in the Kwali Area Council, Federal Capital Territory, Nigeria. The research aimed to determine the drivers of insurance participation and the specific factors influencing the amount farmers are willing to invest to mitigate climate-related risks.

Method: A multistage sampling technique was employed to select 120 rice farmers from a population of 171 across five wards. Data were analysed using descriptive statistics and the Heckman Two-Stage Selection Model to correct for potential selection bias.

Result: Descriptive results indicated that a significant majority of respondents (70.8%) were willing to pay for weather-indexed insurance. The first stage of the Heckman model (participation) revealed that age (p ≤ 0.05), lack of extension contacts (p ≤ 0.10), farm income (p ≤ 0.01), artisan income (p ≤ 0.10), and non-rice farming (p ≤ 0.05) significantly influenced the decision to participate. The second stage (WTP amount) showed that land ownership (p ≤ 0.01), illiteracy (p ≤ 0.10), rice farm size (p ≤ 0.10), farm income (p ≤ 0.10), and cooperative membership (p ≤ 0.10) were the key determinants of WTP. Major barriers identified include limited awareness, inadequate government support, credit scarcity, and premium affordability.

Conclusion: Despite a high willingness to participate, adoption is hampered by significant institutional and knowledge-based constraints. The study recommends implementing targeted education programs to enhance financial literacy, alongside the provision of affordable credit and premium support mechanisms. Strengthening institutional and policy frameworks is essential to transition the high stated willingness into active participation in insurance schemes.