EFFECTS OF CREDIT UTILIZATIONAND RISK MANAGEMENT PRACTICES ON PRODUCTION EFFICIENCY OFCASSAVA — BASED FARMERS IN SOUTHWEST,NIGERIA

Abstract

ABSTRACT Credit use and effective risk management are important in improving the efficiency and livelihood offarmers. Thus, this study examined the effects ofcredit utilization and risk managementpracticesontheproductionefficiencyofcassava-basedfarmersinSouthwest, Nigeria. A multistage sampling procedure was used to select 378 respondents for the study. The firststageinvolvedthepurposivesamplingofOgunandOyoStates,whileinthelaststage, convenient sampling technique was used toselect 378 cassava-basedfarmers for thestudy. Kobo Toolbox powered questionnaire was used to obtain primary data on farmers' personal characteristics,inputsandoutputsquantities,pricesandriskmanagementpractices.Datawere analysedwithdescriptivestatistics,Translogstochasticoutputandinputdistancefunctions. Resultsshowthat67.0%oftherespondentsweremalewithanaverageage,farmsizeand farmingexperienceof51years,2.1haand12years,respectively.Majority(62.0%)ofthe respondentsrentedfarmlandatH20,000.00/ha/annumwith450kg/haofcassavastemsanda mean output of 12.5tons/ha. Furthermore,respondents expended an average of R6,500/workday, H4,500/ltrandH680/kg onlabour, herbicidesandfertilizers, respectively.Majority (65.6%)of therespondentswere co-operativememberswhile 69.9%obtainedcredits from formal sources and predominantlyused credit for land clearing (73.2%), planting (71.6%), weeding (70.4%) and harvesting (64.5%). The respondents indicate that the major risks facing cassava-based farming were lowcrop yield (87.6%), pest and diseases (73.5%) and inflation (63.1%).Risk management practices commonlyusedbythe respondentswere planting ofearly maturingvarieties (85.6%) anddiversificationoffarmactivities(72.7%) while farm insurance(15.5%) and contractwith off-takers (27.3%) were less commonly practiced. Translog production function showed that the meantechnical,allocativeandeconomicefficiencyoftherespondentswere91.7%,94.8%and 93.7%,respectively.Also,quantityofcassavastem(§=-0.468,p<0.01)positivelyinfluenced iVcassavaoutput,whilefarmingexperience(§=-0.117),creditutilizationratio(§=-0.179E-04), contractwithoff-takers(§=-0.552),diversificationoffarmactivities(§=-3.765)andinsurance offarm(§=-1.504)haveapositiveandsignificant(p<0.01)effectonthetechnicalefficiencyof thecassava-basedfarmers.Priceof land (§=0.080),labour wage (§=0.099),cassava stemprice (§=0.869),fertilizer price(§=0.743)andherbicide price(§=0.133)significantly (p<0.01) influencedthecostofcassavaproductionwhilecooperativemembership(§=0.005,p<0.01)and contract withoff-takers (a=0.006,p<0.01) hadapositiveandsignificant effectoncassava-based farmers' allocative efficiency. The study concluded that the farmers were efficient in cassava production. The study recommended easy access to credit, diversification of farm activitiesandriskmanagementtrainingstoimprovetheproductionefficienciesofthecassava-based farmers.