ABSTRACT
The study examined economic analysis of grasscutter farming in South East Nigeria. A multistage and purposive sampling procedure were employed to select 81 grasscutter enterprises in South East, Nigeria. Data analyses were carried out using descriptive analytical tools such as mean, frequencies, percentage, standard deviation as well as inferential statistics such as multiple regression analysis, stochastic frontier model, profitability indicators, investment function, sustainability index, Tobit regression and exploratory factor analysis. The result showed that the mean age was 48.4 years with majority (86.4%) of the enterprises in the study area operated by males. Mean household size was 7 persons. On average, the enterprises had spent about 7 years in business. Performance analysis showed that the average revenue realized per family per annnum was N325,200.00 and the net return per family per annum was
N138,041.09. Regression results for determinants of profit for the grasscutter enterprise in the study area showed the value of R2 as 0.7168 with age of business (1%), amount of credit used (1%), value of asset (1%), price of mature grasscutter (1%), number of competitors (5%) and other cost (1%) as the significant variable (p<0.01) influencing profit. The maximum likelihood estimates using stochastic frontier parameters for grasscutters enterprises showed the coefficient of feed and labour were statistically significant at 1% level and positively related to total output for production factors. Also the coefficient of medication was negative and significant at 1% level of probability. Furthermore, the result showed that there is a positive relationship between the inefficiency variables (number of employees, amount of credit, cooperative membership) included in the model. While a negative relationship existed between age of business and number of competitors. The estimated parameters for the stochastic frontier cost function for grasscutter farming business showed that cost of feed, labour and stocking density were the significant variables influencing the total cost of production of the grasscutter enterprise. The average technical, allocative and economic efficiency level of the grasscutter enterprise were 0.567, 0.513 and 0.501 respectively. The result of the Tobit regression on determinants of economic efficiency showed that the estimated coefficients were significant for age of business, amount of credit, stocking density, price of mature grasscutter, number of competitors, technology adoption and cooperative membership. The estimated determinants of farm investment of grasscutter enterprises showed the value of R2 as 0.8424, while the coefficient of profit (10%), sales from grasscutter business (5%), amount of money borrowed (5%), business location (5%) and working capital ratio (1%) were positive with level of investment. The average sustainable index was 0.748 and Tobit regression analysis on the factors associated with sustainability level showed that the estimated coefficients of age of business, firm’s operation risk, number of worker, productivity, high concentration of industrial activity, taxes and number of grasscutter stolen were the significant variables. Furthermore, it is observed that Instability in government policy, bush burning, barrier to adoption of techniques, lack of organized market, hunting, lack of good roads and social facilities and dwindling income were significant and responsible factors influencing grasscutter enterprise in the southEast Nigeria. The study therefore recommended that concerted efforts should be geared towards increased production of grasscutter in order to meet the demands of grasscutter for food security in both the study area and the country (Nigeria) in general.
TABLE OF CONTENTS
Title
Page i
Declaration
ii
Certification iii
Dedication
iv
Acknowledgements
v
Table
of contents vi
List
of Tables x
List
of Figures xi
Abstract
xii
CHAPTER 1: INTRODUCTION
1
1.1
Background Information 1
1.2
Problem Statement 6
1.3.
Objectives of the Study 8
1.4
Research Hypotheses 8
1.5.
Justification for the Study 9
CHAPTER 2: LITERATURE
REVIEW
2.1 Conceptual Literature Review: 8
2.1.1. Grasscutter production,
characteristics, habitat and behaviour 8
2.1.1.1:
Grasscutter production 8
2.1.1.2
Characteristics, habitat and behavior: 11
2.1.1.3 Distribution of the Grasscutter: 14
2.1.2
Domestication of the Grasscutter: 15
2.1.2.1
Reasons for domestication: 17
2.1.3
The potentialities of grasscutter husbandry in Nigeria: 18
2.1.4.
Farming wildlife versus domestic livestock:
24
2.1.5
The challenges of grasscutter husbandry in Nigeria: 24
2.1.6
Opportunities of grasscutter husbandry in Nigeria: 26
2.1.7
Implications for sustainable adoption and conservation 27
2.1.8 Economic efficiency (EE): 29
2.1.9
Small business sustainability
issues 30
2.1.10
The real options approach to investment 32
2.2
Theoretical Framework: 39
2.2.1
Theoretical framework on cost of production:
39
2.2.2
Farm Revenue: 39
2.2.3
Economics of profit maximization: 40
2.2.4.
Theory of production: 41
2.2.5
Theory of economic development: 42
2.2.6 Theory of
innovative enterprise: 47
2.2.7
Theory of Firm Growth: 50
2.3
Empirical literature review:
2.3.1 Efficiency levels of
grasscutter enterprises and its determinants; 53
2.3.3 Profitability
and investment of grasscutter production and its determinants; 54
2.3.3 Sustainability level and
determinants of grasscutter business 57
2.2.4 Challenges of domestic
grasscutter farming business. 58
2.4
Analytical Framework: 60
2.4.1
Descriptive Statistics: 60
2.4.2
Regression analysis: 61
2.4.3
Profitability ratio 63
2.4.4
Turnover ratio 63
2.4.5
Efficiency ratio 64
2.4.6
Solvency ratio 64
2.4.7
Financial feasibility analysis 64
2.4.8
Revenue Cost Ratio (RCR) 65
2.4.9
Internal rate of return 65
2.4.10
Payback period (PBP) 65
2.4.11
Profitability index (PI) 65
2.4.12
Sensitivity analysis 66
2.4.12.1
Break even analysis 66
2.4.13
Profitability analysis 66
2.4.14
Net farm income: 67
2.4.15
Tobit Regression Model 67
2.4.16
Exploratory factor analysis 68
2.4.17 Stochastic production frontier 70
2.4.18 Corporate sustainability index (CSI) 72
CHAPTER 3: METHODOLOGY
3.1
Study Area 77
3.2
Sampling Techniques 78
3.3
Data collection 79
3.4
Method of data analysis 80
3.5
Model specification 80
CHAPTER 4: RESULTS AND DISCUSSION 92
4.1 Socioeconomic, Enterprise and Production
Characteristics of Grasscutter Enterprises 92
4.2
Profitability of Grasscutter Production and its Determinants 99
4.3 Efficiency Levels of Grasscutter
Enterprises In The Study Area 105
4.4 Determinants of Investment in
Grasscutter Enterprise in the study area
113
4.5 Sustainability Level and Determinants of
Sustainability level of Grasscutter Enterprise 119
4.6 Challenges of Grasscutter Enterprise in
the South-East Nigeria 120
CHAPTER 5: SUMMARY, CONCLUSION AND
RECOMMENDATIONS 123
5.1 Summary
of Findings 123
5.2 Conclusion
125
5.3 Recommendations
126
5.4 References
128
LIST OF TABLES
2.1:
Proposed sustainability performance evaluation scale 75
3.1:
Sustainability index performance (SIP) evaluation scale 88
4.1: Distributions
of Respondents according to socioeconomic characteristics 93
4.2: Enterprise and
production characteristics of grasscutter enterprise. 96
4.3 Profitability analysis of
grasscutter enterprise in South East Nigeria per annum 100
4.4. Regression analysis on
determinants of performance of grasscutter enterprise 102
4.5: Maximum likelihood
estimate of stochastic production frontier function 105
4.6:
Allocative efficiency of grasscutter enterprises 107
4.7
Efficiency distribution of respondents 109
4.8 Tobit regression model
result on the determinants of Economic Efficiencies 111
4.9: OLS estimate on determinants of
investment in grasscutter enterprise 113
4.10:
Distribution of respondents based on sustainability level 115
4.11 Tobit regression model result on
the determinants of sustainability level 117
4.12 Principal component analysis on
challenges of grasscutter enterprise 119
4.13: Total variance
explained on challenges of grasscutter enterprise 121
4.14: Communalities
scores on challenges of grasscutter enterprise. 121
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND INFORMATION
Grasscutter farming business is
one of the fastest growing parts of the agribusiness sector of Nigeria as it is
driven by high income growth and supported by technological and structural
changes. Grasscutter farming is also crucial to the development of the national
economy in view of its contributions to the gross domestic product (Owen and
Dike, 2010).The growth and transformation of the sector offer opportunities for
agricultural development, poverty reduction and food security (Uddin and
Osasogie, 2016).
Grasscutters (Thryonomys swinderianus) or Cane rats are the biggest African
rodents after the crested porcupine (Hystrix
cristata). They weigh between 2kg to 6kg and measuring up to 60cm length.
The animal is a herbivore that feed on forages such as Guinea grass, Elephant
grass, Carpet grass, Aspillia Africana, Sugar cane, etc. and can adjust to
different diets; so feeding is comparably easy (Opara 2010). They have a
gestation period of 152 days (about 5 months); hence, can breed two times in a
year with an average of 4 litters (offsprings). They are the predominant specie
that is found in Nigeria.
However, other species which are
widely distributed in Central and some West African Countries are Thryonomys inderianus and Thryonomys
gregorianus. They live by reed beds, sugar cane plantations, river banks
and areas with dense grasses, especially reedy grass growing in damp or wet
places (Abioye et al , 2008). Its
distribution is determined by the availability of adequate or preferred grass
species for food (NRC, 1991).
The farming and utilization of
indigenous wild grasscutter (Thryonomys
swinderianus) plays a significant role in improving the living standards of
the rural, sub-urban and urban households in Nigeria (FAO, 2003; Adetunji and Adeyemi, 2012; FinIntell, 2013; Abiodun et al ; 2017).The value chain of producing, transporting, processing and
marketing of grasscutter give employment to many people (Abiodun et al ; 2017). As such, the prospect of grasscutter farming is very bright and
encouraging due to the increased profit and other economic benefits to the
farmers.
Grasscutter
provides protein to a large number of families because of its availability and
taste which is better than other wild animals in the country. The meat is the
most widely sold bush meat in Nigeria (Akintola, 2008; Annor and Kusi, 2008). Grasscutter meat is socially and
culturally acceptable with no religious taboos associated with its consumption
and is therefore a micro livestock in high demand. The meat is low in
cholesterol (48.5 – 53.4mg/100g), conferring health benefits to the consumers
(Fayenuwo et al; 2003) and highly
valued for its savory taste (Odebode et
al ; 2011). As a result of the above qualities, grasscutter meat is a
highly preferred choice of animal protein source than cow, goat, sheep and pigs
etc.
In Nigeria, a matured grasscutter
of 2kg to 6kg sells for between N4,000
and N6,000 or more depending on the
location of the farmer (Adedapo and Ogunjinmi, 2013). Economic viability of
grasscutter farms depend on the socio-economic context of the farm. If the farm
is situated near urban centres where there are higher demands and bush meat
prices are high, a middle-sized grasscutter farm can certainly be profitable
(Adedapo and Adekunle, 2013). Several authors in different African countries
seem to agree that a small-scale grasscutter farm of 40 reproductive does is
the most profitable scale of production if well managed and can also contribute
to local economies as well as generate enough profit to make a living (Tutu et al , 1996; Fantodji and Mensah, 2000; Dabogrogo, 2000; Sodjinou
and Mensah, 2005; Adedapo and Ogunjinmi, 2013).
Furthermore, it has also been
noted that grasscutter breeders generally earn two times more than what they
invested in the grasscutter husbandry (Sodjinou and Mensah, 2005). In many
instance, fire from bush burning for grasscutter has lead to destruction of
homes, farm assesr etc and even lives. Domestication of grasscutter therefore
serves to generate income and reduce hunting. It also ensures conservation and
sustainability of the grasscutter species as well as provides unique
opportunity to minimize environmental damage. Studies showed that grasscutter
farming possesses environmental related advantages such as reduction in
poaching and bush fires (Boateny, 2005; Bulletin BEDIM, 2005).
Due to increasing level of
urbanization in South East Nigeria, the ideal of hunting for wild grasscutter
is going into extinction. Furthermore, the accelerating growth in human
population will intensify the demand for protein sources (Ulrich et al ; 2012; Weidinger, 2014); hence,
the need for research to encourage domestic production of grasscutter to meet
the demand occasioned by growing population. The need to evaluate the economic
aspect of farming as abusines in the South East Nigeria as well as the
implications for sustainable production justifies the present study.
1.2 PROBLEM STATEMENT:
Grasscutter is among the number
one choice meat for many in the South East Nigeria (Obi et al , 2008). The demand for its consumption is ever increasing.
Over the years, this demand has been met through hunting from the wild through
the use of local guns, chase dogs, traps, bush burning and baiting with
chemicals with associated harmful
effects on consumers and other untargeted species (Yeboah and Adamu,
1995; Oduro and Kamkam, 2002). In many instances, fire from bush burning for
grasscutter and other rodents has led to destruction of homes, farm assets etc.
and even lives. Evidently, the future availability of grasscutter meat through
the wild system as well as it's sustainability is in question.
As a result of the high demand of
grasscutter in the South East Nigeria, the meat attracts higher price advantage
over other meat types (Adedapo and Adekunle, 2013). This serves as a great
incentive for people to go into it's rearing in the area.
However, studies on grasscutter
production in the South East Nigeria reported that, "There is a
significant decline in the domestic production of grasscutter in the area"
(Obi et al., 2008). The implications
of this findings is that not many people have embraced grasscutter farming in
the area despite the high demand and high economic gains.
Finally, most of the recent
studies on grass cutter production tend to focus primarily on addressing the
challenges of appropriate housing and feeding as well as the description of
production systems and traits (ILCA, 1979; Gatenby and Trial, 1982; Sumberg and
Cassaday, 1986; Obi et al 2008). Owen and Dike, 2012). Little seems to
have been done on the economic analysis of grasscutter farming in South East
Nigeria; hence, this study to fill the gap. Based on the aforementioned
problems, the study seeks to provide answers to the following research
questions:
i.
what is the business-related profile of the
grasscutter farming business in the study area?
ii.
what is the profitability level as well as its
determinants in grasscutter production in the South East Nigeria?
iii.
what is the efficiency levels of grasscutter
enterprises in the study area?
iv.
what are the determinants of investment in
grasscutter farming business in the study area?
v.
what is the sustainability level and
determinants of grasscutter business in the study area? and vi. what
are the challenges of grasscutter business in the South-East Nigeria?
1.3 OBJECTIVES
OF THE STUDY
The broad objective of this study
was to examine the economic analysis of grasscutter farming business in South
East Nigeria. The specific objectives were to:
i.
describe the socioeconomics, farming and
production characteristics of
grasscutter enterprises in the area;
ii.
examine the profitability of grasscutter
enterprises and its determinants in South
East
Nigeria;
iii. estimate the
efficiency levels of grasscutter enterprises in the study area;
iv. identify
the determinants of investment in grasscutter farming business in the study
area;
v. determine the sustainability
level and determinants of grasscutter business in the South East Nigeria; and vi. ascertain the challenges of grasscutter
farming business in the South-East
Nigeria.
1.4: HYPOTHESES:
In line with the specific objectives, the following
null hypotheses were tested;
H1: Grasscutter farming business in South
East Nigeria is not a profitable venture;
H2: Grasscutter businesses are not
allocatively and economically efficient;
H2: Investment in
grasscutter enterprise is positively influenced by business profit, volume of
sales, farm size, return on assets and working capital and negatively
influenced by debt and business location;
H4: Grasscutter farming business is not sustainable;
H5: Grasscutter farming is not
affected by social, technical, economic, marketing and political constrainst
1.5: JUSTIFICATION OF THE STUDY:
More recently, efforts are being
made towards intensive production of domestic grasscutters on a large scale in
order to provide a substantial source of protein to compliment the carbohydrate
meals of the country. This is achieved through the various intervention
programmes by the government vis-à-vis the World Bank assisted FADAMA 3 Project
of the Abia State Agricultural Development Programme which gives grants and
loans to co-operatives in order to encourage animal protein production. It is
hoped that commercial rearing of grasscutter will provide meat that will serve
as an alternative for the high consumption of red meat from cattle in the study
area.
This study will also help to
educate livestock farmers on the profitability of grasscutter farming business;
thereby encouraging them to engage in large scale (Commercial) domestic
grasscutter production. Moreover, the study will help to create the needed
awareness required by livestock farmers to engage in the large scale
(Commercial) grasscutter farming which has high potential for income generation
and wealth creation. This will ultimately solve the problem of high demand for
grasscutter meat in the area and even beyond.
Furthermore, this study is
intended to discourage the practice of hunting for wild grasscutters through
activities such as bush burning which destroys the natural vegetation and soil
nutrients resulting to various degrees of soil erosion and other unforeseen
consequences. This will help to solve the problem of over-hunting for wild
grasscutters and other animal species in the area in other to avoid total
depletion of the natural ecosystem.
The study will also help to expose
the health benefits inherent in the consumption of grasscutter meat as well as
encourage more people to consume grasscutter meat; especially diabetic patients
because of its low cholesterol and sweet tender taste.
To students, it will form a basis
for further research and reference material. It will be useful to policy makers
who need to know whether policy targets are being achieved and how grasscutter
farming business will change with a given percentage of output resulting to
economic policy implementation. Furthermore, information from this study will
help to contribute to a more rational and sustainable investment in grasscutter
production.
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