Metafrontier Analysis of Access to Credit and Technical Efficiency among Smallholder Cocoa Farmers in Southwest Nigeria

Abstract

It has been identified that limited access to timely credit has been a major constraint militating against increased agricultural productivity by farmers. Studies have shown that a large percentage of farmers faced with credit constraints have low production efficiencies. This study empirically investigated access to credit and technical efficiency (TE) of cocoa farmers in southwest Nigeria. The Study was conducted in Ogun State, southwest Nigeria. Primary data used for the study were collected in 2012 through a multi-stage sampling technique to select 240 cocoa farmers in the four (4) divisions of Ogun State. Data collected were analyzed using descriptive statistics, and Stochastic Metaproduction Frontier analyses. Tobit Regression Model was used to analyze the relationship between access to credit and technical efficiency among cocoa farmers in the study area. The study revealed that majority of the cocoa farmers did not have access to credit from formal institution implying negative consequences for agricultural productivity and household income generation. Most of the farmers borrowed relatively small size of loans for short duration. Estimates of the stochastic frontier models showed that cocoa farms in Ogun State had mean technical efficiency scores of 0.41, 0.94, 0.32 and 0.71 for farms in Yewa, Ijebu, Remo and Egba respectively. The results for the inefficiency model showed that age, education, experience, membership association, marital status, occupation, livelihood income, household size, and labour cost had significant effect on cocoa farmers in at least one division. The values of the Technology Gap Ration (TGR), together with the technical efficiencies obtained from the divisional stochastic frontiers (TE) and the metafrontier (TE*) were computed for all farmers in Ogun State. These results implied that the mean producer in Ijebu and Egba, if he or she were technically efficient, could still increase output by 6% and 29%, if he or she were to adopt the most efficient meta-technology for the division. Finally, there was a significant relationship between access to credit and technical efficiency of cocoa farmers. Evidence from the study revealed that majority of the poor cocoa farmers do not have access to credit from formal institution. Evidence from the metaproduction frontier showed that the mean productivity potential and technical efficiency ratios give additional explanation compared to the analysis based only on individual stochastic production frontiers. The productivity potential ratio plays an important part in explaining the ability of cocoa farmers in one division to compete with other farmers from different division at the state level. Based on the results, policy environment whereby individual cocoa farmers may have access to formal credit from banks and other agency, by forming groups, by means of using land use right certificates and also guarantor as a collateral would be a right direction in boosting cocoa production in the sub-region.

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