Please, don't take any offense by this, but I am amazed at the pomp and circumstance reserved for preschool graduations, kindergarten graduations, 1st grade graduations, 2nd grade, 3rd grade, etc.
Maybe I'm "old school", but graduations are usually reserved for 8th grade, high school, and college or university.
I suppose there is nothing wrong with a little ceremony of sorts, but you'd be surprised how many people I work with that put in time-off requests because their child is graduating from kindergarten or first grade. Sure, it's a milestone, but I think that it takes away from the important stuff.
For instance, my son is graduating from high school with honors. His yearbook, his cap and gown, his senior portraits, graduation announcements, the award ceremony two days before. It's very expensive.
I have two kids and I always thought the graduations for younger kids were a bit much. That is just my opinion.
If your daughter is really shy and reserved and nervous, I wouldn't force her to say anything. Some kids are very vocal and not worried at all about public speaking. Her teacher may feel confident she can pull it off and be encouraging her, but if it's fairly known that your daughter could freeze, I wouldn't put the pressure on her.
The only thing you can do is tell your daughter that you have every faith in her, but if she truly feels she can't do it, she needs to speak up.
On one hand, it might not be as bad as she thinks. She's just talking to parents and other family members. No one is going to make fun of her. She is, after all, only 5. No one is going to say she did a horrible job, even if she flubs a bit. If she forgets what she's supposed to say, she can always wing it and no one will know the difference.
Only you and your daughter know her comfort level.
I wish there wasn't so much pressure put on kids at such and early age for something like this.
Again, just my opinion.
I hope it all works out.