ABSTRACT
The study examined the effect of commercialization on productivity and welfare of small holder cassava farmers in Anambra State, Nigeria. A multi-stage sampling procedure was employed to select the 120 responded needed for the study. Data analyses were carried out using descriptive analytical tools such as mean, frequencies, percentage and standard deviation, net return analysis, Total factor productivity formula, multiple regression analysis, chow test and factor analysis. The result shows that the mean ages was 40.87 years; and about 51.7% of the respondent were females. Majority (87.5%) of the respondents were married with about 54.2% of them attaining secondary. The mean household was 7 persons while mean farm size was 1.4 hectares. On average the farmers had spent about 11 years in farming. A dominant number of the farmers indicated access to credit (94.2%) while about 86.7% of the cassava farmers in the area belong to farming cooperative. Profit of N96,933.00 for an average cassava farmer in the area was realized per farming season with mean productivity of 1.77 kg/ N. The mean expenditure was N282,005.13. Ordinary Least Square (OLS) result on factors that influenced the level of commercialization of cassava farmers shows that the coefficient age, credit, household size, farming experience, labour input and distance were the significant factors that influenced level commercialization of the cassava farmers in the area. OLS result on determinants of productivity of the cassava farmers in Anambra State shows that farm size, labour, cost of cuttings, extension visit and household size were significant and positively related to productivity while capital and credit were significant and negatively related to productivity. Furthermore, multiple Regression on determinants of welfare of the farmers shows that the coefficients of education, farm size, coefficient of membership of association and farm production cost significantly influenced welfare of the farmers in the study area. The result of the chow test (F=8.023***) on the effect of commercialization on productivity of cassava in the area shows that commercialization had significant effect on productivity of cassava producers. Also the result shows significant effect of commercialization on welfare of cassava producers in the area. Therefore, the study recommend that government should ensure that farm inputs such as improved cassava cutting, fertilizers, tractors and agro-chemicals are made available to farmers at a highly subsidized rate since cassava production was very profitable as shown in the result. Commercialization should be encouraged as it can enhance productivity and welfare of the farmers thereby reducing and improving the economy.
TABLE
OF CONTENTS
Title Page i
Declaration iii
Certification iv
Dedication v
Acknowledgements vi
Table of contents vii
List of Tables x
List of figures xi
Abstract xii
CHAPTER 1:
INTRODUCTION 1
1.1 Background Information 1
1.2 Problem Statement 4
1.3. Objectives of the Study 7
1.4 Research Hypotheses 7
1.5. Justification for the Study 8
CHAPTER 2: REVIEW
OF RELATED LITERATURE 10
2.1 Conceptual Literature 11
2.1.1 Concept
of smallholder farmers 11
2.1.2 The
concept of participation 12
2.1.3 The
concept of market participation 13
2.1.4 Concept of productivity 16
2.1.5 Strategies
for improving market participation among small-holder farmers 17
2.1.6 Importance
of farmer participation in markets 18
2.1.7 Factors
influencing the choice of marketing outlets 19
2.1.8 Challenges
of market participation of smallholder farmers 20
2.1.9 History
of Growth Enhancement Support Scheme (GES) 21
2.1.10 Impact
of intervention on participants 25
2.1.11 Factors
influencing the participation of farmers in GES Intervention 26
2.1.12 Some
constraints encountered by farmers during gess implementation 27
2.1.13 General
information on cassava (Manihot Escalenta
Crantz) 28
2.1.14 Agricultural
policies and cassava programmes in Nigeria 29
2.2 Theoretical
Literature 30
2.2.1 Theories
of trade and utility maximization 30
2.2.2 Random
utility theory 33
2.2.3 Social
change theory 34
2.3 Empirical
review 36
2.4 Analytical
techniques 51
2.3.1 The Heckman Sample Selection Model 51
2.3.2 Regression
analysis 53
2.3.3 Multinomial logit model 54
CHAPTER 3:
RESEARCH METHODOLOGY 57
3.1 Study area 57
3.2: Sampling technique 57
3.4 Method of data analysis 58
CHAPTER FOUR: RESULTS AND DISCUSSION 68
4.1 Socio-economic characteristics of
respondents 68
4.2 Cost and returns associated with
cassava production and determinants of profit 73
4.3 Level of market
participation of the respondent 78
4.4 Factors affecting market participation and the intensity of
participation 79
4.5 Cassava marketing outlets and determinants of choice of the
identified marketing
outlets. 86
4.6 Total factor productivity and factors affecting total factor
productivity of the cassava
farmers 91
4.7 Impact of participation in GES on the
farmers’ productivity 96
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATION 102
5.1 Summary of Findings 102
5.2 Conclusion 105
5.3
Recommendations 106
REFERENCE 108
LIST OF
TABLES
Table
1: Distributions of Respondents according to socioeconomic characteristics 67
Table
4.2: Cost and Return Analysis for cassava farmers Per Month 72
Table
4.3. Regression analysis on factors affecting performance of producers 74
Table
4.4. Regression analysis on determinants of profit
for non-GES-Beneficiaries 76
Table 4.5. Level of market
participation for the farmers in the study area 78
Table
4.6 Parameter Estimates of the Heckman Double Hurdle Model for factors
affecting market participation and
the intensity of participation by GES beneficiaries 79
Table
4.7 Parameter Estimates of the Heckman Double Hurdle Model for factors
affecting market participation and
the intensity of participation by non-GES beneficiaries 83
Table 4.8:
Distributions of Respondents according to socioeconomic characteristics 86
Table 4.9: Results of the MNL model on
factors influencing choice of marketing outlet of the GES Beneficiaries. 87
Table 4.10: Results of the MNL model on factors
influencing choice of marketing outlet of the Non-GES-Beneficiaries. 90
Table
4.11: Distribution of respondents according to their productivity levels 92
Table
4.12 Multiple Regression Result on Determinants of Productivity of GES beneficiaries 93
Table
4.13. Multiple Regression Result on Determinants of Productivity of Non-GES Beneficiaries 95
Table 4.14: Determinants of productivity of among GES beneficiaries
and non- GES beneficiaries (pooled without dummy) 97
Table 4.15: Determinants of productivity of among GES beneficiaries
and non- GES beneficiaries (pooled with dummy) 99
Table
4.15 Test for difference in productivity among GES beneficiaries and
non-GES Beneficiaries 101
CHAPTER
1
INTRODUCTION
1.1
BACKGROUND
INFORMATION
Agriculture
continues to be a strategic sector in the development of most low-income
nations (Abu, 2014) and employs about 40% of the active labour force globally.
In sub-Saharan Africa, Asia and the Pacific, the agriculture-dependent
population is over 60%, while in Latin America and high income economies the
proportions are estimated at 18% and 4% respectively (World Bank, 2006).
The
sector constitutes 70% of the principal livelihood of the world‘s poor and it
is the main source of food security in most developing countries (Onwuemele,
2013; Siewe, 2015). Nigeria is generously endowed with many natural resources
and human capital. Its economy, although quite diversified, relies more heavily
on the petroleum and agricultural sectors. In Africa, it is the most populous
country with an estimated population of 170 million followed by Ethiopia and
Egypt. The agricultural sector‘s share of GDP was 37% between 1960 and 2008 and
rose to 40.87% in 2010. This makes agriculture the most dominant sector in
Nigeria in the period under study.
Agriculture is however dominated by smallholder farmers who are
predominantly rural dwellers, with about 90% of farm holdings less than 2
hectares in size (Ministry of Food and Agriculture, 2011). The
implication of this dominance of smallholders is that no meaningful policy to
enhance the development of the agricultural sector can overlook these farmers.
As a result, many authors such as Siziba et al., (2011), Denise, (2008), Chamberlin et al., (2007), policy
documents (such as GPRS II, FASDEP II, CAADP and institutions such as MoFA, (2007)
and the World Bank, (2007) have emphasized the reorientation of policies
towards access to markets by smallholder farmers as a means of improving their
livelihoods and development. Markets and improved market access are critical and important to
rural poor households as a pre-requisite for enhancing agriculturally based
economic growth by improving the competitiveness of farming enterprise and
improving rural incomes (Ohen et al., 2013).
Commercial transformation of subsistence agriculture, according to
literature, depends heavily on the triplet, market orientation, market access
and market participation. Market orientation is the degree of allocation of
resources (land, labor and capital) to the production of agricultural produce
that are meant for exchange or sale (Hinderink and Sterkenburg, 1987; Immink
and Aarcon, 1993). Market access is a combination of three factors namely
physical access to markets (distance to markets), market structure (usually
oligopoly) and finally organization of market (Marketing association) and
market information (Understanding of markets). Market participation on the
order hand is defined as produce offered for sale and use of purchased inputs
(Berhanu and Moti, 2010).
The trade theory posits that if households participate in markets by
selling surplus of what they produce on a comparative advantage basis, they are
set to benefit not only from the direct welfare gains but also from
opportunities that emerge from economies of large-scale production (Siziba et
al., 2011; Barrett, 2008). Market participation of smallholder agriculture
leads to gradual decline in real food prices due to increased competition and
lower costs in food marketing and processing. These changes improve the welfare
of smallholder farmers in two ways: low food prices increase the purchasing
power for food of consumers while, to producers, a decline in food prices
enables reallocation of limited household incomes to high value non-food
agribusiness sectors and off-farm enterprises. Despite the stream of benefits
that are inherent in market participation, studies show that participation in
market by smallholder farmers in developing countries is very low and has
slowed down agriculture driven economic growth and exacerbated poverty level
(Barret, 2008). Consequently, subsistent farmers cannot benefit from the
welfare gains and income growth associated with market participation.
As part of its efforts to increase food production, the Federal
Government Growth Enhancement Support Scheme (GES) was conceived and
implemented in 2012. The Growth Enhancement Support Scheme (GSS) was designed
as a component of the Agricultural Transformation Agenda of the Federal
Government (ATA). The ATA is the Government’s response to the crisis that has
riddled the agricultural sector in the past and seeks to put agricultural
growth at the center of the Government’s development objective given its
critical role for food security and economic diversification. The broad
objective of the GSS was to achieve food security for the nation at the macro
level, and increase household income for the farmers at the micro level. The
scheme was designed to encourage the stakeholders in the fertilizer value chain
to work together to improve productivity, household food security and raise the
income of farmers by providing direct subsidy through the supply of discounted
fertilizers and seeds. GES was developed as a poverty reduction strategy
designed to sustainably increase the incomes of the participant through
subsidizing the cost of major agricultural inputs like fertilizers and
seedlings (FEPSAN, 2014).
This study focuses on cassava market participation. Cassava is a
tropical root crop - originally from Amazonia - that provides the staple food
of an estimated 800 million people worldwide (FAO, 2013). It is one of the most
important crops for Nigerians. It is important, not just as a food crop but
even more so as a major source of cash income for producing households. As a
cash crop, it generates cash income for the largest number of households, in
comparison with other staples, contributing positively to poverty alleviation.
The New Partnership for African Development (NEPAD) has also identified cassava
as a crop that can be used to reduce poverty in Africa and has recommended more
intensity in its production.
The poorest people in the world are farmers with low market
participation and low agricultural productivity (Rios et al., 2008).
Increasing either one could help to improve the other, and both could boost
living standards: higher market participation could drive productivity by
providing incentives, information and cash flow for working capital, while
higher productivity could drive market participation since households with
higher productivity are more likely to have crop surpluses above their
immediate consumption needs. Examining these concepts along the GES
participation is the core thrust of this research.
1.2 PROBLEM STATEMENT
Since 2000, the world‘s annual cassava production has increased by
an estimated 100 million tonnes, driven in Asia by demand for dried cassava and
starch for use in livestock feed and industrial applications, and in Africa by
expanding urban markets for cassava food products (FAO, 2014). Booming demand
offers millions of cassava growers in tropical countries the opportunity to
intensify production, earn higher incomes and boost the food supply where it is
most needed. Despite this apparently expanding market for cassava due to its
high economic potentials, high productivity has eluded the sector owing to a
number of reasons – use of crude tools, use of low-yielding disease
non-resistant varieties etc.
However over the years, remarkable progress in Nigeria have been
made by agricultural research and development organizations on increasing
agricultural productivity and promoting intensification of major food crops for
small scale farmers. This progress have not significantly impacted on the
cassava actors although an average growth of about 4.92% growth rate in cassava
yield is observed between 2000 and 2012 (FAO, 2014). In other words, there has
been an improvement in cassava productivity across the country over the period
under consideration with little reflection on the living standard of the
people. As a result, poor performance and inefficiency abound.
It is well-known that the backbone of any agricultural revolution is
access of farmers to modern agricultural inputs. These agricultural inputs
range from improved seeds, fertilizers and crop protection chemicals to
machinery, irrigation and knowledge. Seeds are critical to successful crop
production and inevitably, farm productivity and profitability. Fertilizer
supplies nutrients to the soil that are essential for growth. Increased use of
fertilizer and improved seeds are partially credited with the large increases
in agricultural productivity growth in Asia during the Green Revolution in the
1960s. Irrigation is also essential for growth as it enables off-season
farming, provides the potential for multiple harvests per year, and brings
additional land under cultivation. Crop protection chemicals (pesticides, herbicides,
insecticides and fungicides) control weed species, harmful insects and plant
diseases that afflict crops. Nigeria as the world’s largest producer of cassava
is faced with high production costs as a result of the scarcity of these
agricultural inputs. Production is seriously hampered and market participation
is discouraged. However, majority of
Nigerian farmers still utilize traditional farming implements; do not have
access to improved seeds and seedlings, fertilizers and crop protection
chemicals. There are no irrigation facilities and most of the farmers lack
formal training whereas those who have training prefer to work in other places
rather than in farms.
There
is also a growing emphasis on the importance of graduating from a
subsistence-based smallholder system to a sector characterized by a stronger
market-based orientation based on a combination of productive smallholders.
Consistent with this, Siziba et al. (2011) observed that markets are the
pivotal point in the agricultural transformation process. Despite this growing
emphasis, agricultural commercialization is low (IFAD-IFPRI, 2011). They
indicated that the national average of marketed surplus ratio which defines the
level of commercialization is 33%, which is observed as low. This problem is
highlighted by the Swedish International Development Association (SIDA) cited
in Siziba et al., (2011), that only 10% of Sub-Saharan African
smallholders produce enough marketable surpluses. The low level of
commercialization is partly explained by small farm sizes, crop-mix, low
productivity per hectare and high household size (IFAD-IFPRI, 2011). Chamberlin
et al. (2007) noted poorer access to input and output markets as well as
credit and advisory services as responsible for the low commercialization. The
agricultural sector has remained largely untapped leading to dwindling
performance of the agricultural sector both domestically and internationally.
Many studies have addressed the impact of either market
participation or productivity on farmers’ income, and some studies related them
to each other. There is however, surprisingly little research on the extent to
which these factors influence each other, and almost none that does so at the
whole-farm level across. This study will be built
upon relevant theories, literatures and econometric applications in analyzing
the direction of causality between market participation and productivity, that
is, to address whether higher sales of farm produce have led to higher
agricultural productivity, or whether higher agricultural productivity has led
to a higher volume of sales. This study targets important questions in
developing the specific objectives. They include: what is the profitability of
cassava production and what factors affect the profit level? What is the level
of cassava farmers’ participation in the market and what factors affect market
participation and its intensity? What are the various
cassava marketing outlets farmers utilize and what informs the choice of the
marketing outlets? What is the productivity of cassava farmers and what factors
affect productivity? What are the levels of statistical differences between GES
beneficiaries and non-beneficiaries’ profits, market participation and
productivity respectively?
1.3 OBJECTIVES OF THE STUDY
The broad objective of the study is to examine the effect of
Growth Enhancement Support Scheme (GES) on the productivity and market
participation of smallholder cassava based farmers in Anambra State while the
specific objectives were to:
i.
describe the socio-economic
characteristics of the respondents;
ii.
estimate the
cost and returns associated with cassava production and analyze the
determinants of profit;
iii.
determine the
level of market participation of smallholder cassava based farmers
iv.
estimate
factors affecting market participation and the intensity of participation;
v.
identify the
various cassava marketing outlets and analyze the determinants of choice of the
identified marketing outlets;
vi.
determine the
total factor productivity and estimate factors affecting total factor
productivity of the cassava farmers;
vii.
examine the impact
of participation in GES on the farmers’ productivity.
1.4 HYOTHESES
The following hypotheses are formulated in line with the
objectives of the study.
H1:
there is no significant difference
in the profits of GES and Non-GES cassava farmers;
H2:
Net returns of cassava farmers
is positively influenced by farmers’ age, level of education, farming
experience, selling price and quantity of products sold and negatively
influenced by depreciation and purchase price.
H3: the decision to and extent of cassava farmers’ market
participation of cassava farmers is positively influenced by farmers’ age,
level of education, farm size, farming experience, number of extension
contacts, off-farm income, household income, cassava output, volume of credit,
market information, cooperative membership and selling price of cassava and
negatively influenced by household size and distance to market;
H4:
the choice of marketing
outlets is positively influenced by farmers’ age, level of education, cassava
output, vehicle ownership, market group membership,
price information and marketing
experience (Years).
H5:
Total factor productivity is
positively influenced by age
of the farmers, farmers’ education, number of extension contacts, farm size, farmers’
experience and negatively influenced by household size of the farmer, labour
cost and capital inputs of the farmers.
1.5 JUSTIFICATION FOR THE STUDY
This study would be useful to various commitments by the various
actors by providing empirical evidence on the factors that influence market
participation and intensity of participation by smallholder farmers which is
vital in informing priority setting in policies geared towards transforming smallholder farmers especially in
the area of responding to market incentives for improved farm incomes and
subsequent reduction in poverty and enhanced food security.
To the field of academics, the empirical evidence from this study
would serve to add to the scanty literature on market access of agricultural
commodities while also providing a blueprint to guide further research.
To
farmers, this study would provide evidence on farmer specific characteristics
that affect market participation and intensity of participation that would be
useful to farm households for their decision making. For example, membership in
farmer based organization is a choice that farmers make. Evidence from this
study about the effect of membership on marketing behaviour is useful to farm
households to make decision.
The
outcomes of this study will generate information for policy makers,
governmental and nongovernmental organization and all those interested in
cassava production and commercialization in Anambra state to design and develop
effective framework for sustainable livelihood strategies and policies among
small scale cassava farmers. Specifically, findings of this research will
provide empirical evidence of the quantitative impact of GES on farm
productivity and cassava market participation for poverty alleviation and
economic efficiency of small scale farmers in the study area. The motive behind
the idea of GSS implementation is to mainly achieve food security for the
nation at the macro level, and increase household income for the farmers at the
micro level. This aim justifies this study.
The findings from the study will help in evaluating factors
affecting participation of farmers in Growth Enhancement Support Scheme
programme for livelihood in Anambra State. It is also hoped that the research
will provide relevant information to policy makers which will enhance
formulation of agricultural policies aimed at improving agricultural
productivity, income of farming households and reduce poverty level among
farmers.
It
is also hoped that the findings of the study will be of immense benefits to the
government as it will help in identifying areas of constraints during the
implementation process in order to make adequate effort that will enhance its
effective implementation and to the farmers, as such will create in them
confidence that GES scheme, if properly implemented will lead to higher
agricultural production in the country.
Finally,
the findings and recommendations of this research work will be of benefit to
the government in policy formulation and a source of information to future
researchers as this will enable them assess the effectiveness of similar
projects in any part of the country. In the same vein, the findings could as
well be published in journals and in that way help future researchers.
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