Investment in cocoa production in Nigeria: A cost and return analysis of three cocoa production management systems in the Cross River State cocoa belt

Abstract

The study examined costs and returns in cocoa production in Cross River State by
comparing three identified management systems of cocoa production in the area. A
two-stage sampling procedure was used to select a hundred and fifty cocoa farmers
for the study. Data used in the study were collected using structured questionnaires
which were administered by the Agricultural Development Programme (ADP)
extension agents using the participatory approach while the data were analysed using
descriptive statistics such as mean, median, standard deviation, etc. and an investment
decision model comprising the net present value (NPV) and benefit-cost ratio (BCR)
analysis. Results show that the respondents were predominantly small scale farmers
with farm sizes ranging from one to five hectares. The age distribution of the farmers
showed that 61.3% of them were among the active farming population falling within
the age range of 21 to 40 years, and 16.67% of the respondents had no formal
education. More than 50% of the total respondents sourced funds from their personal
savings in all the management systems considered. Importantly, the study found that
cocoa production is a profitable business irrespective of management system, since all
of the management systems had positive net present values (NPV) at 10% discount
rate. The NPV for lease-managed farms is highest. The benefit-cost ratio (BCR) at
10% discount rate was greater than one for all the three management systems, which
indicates that the returns from cocoa production are high. Owner-managed farms had
the highest BCR followed by lease-managed farms and sharecropped farms in that
order. Lease-managed farms were more viable compared with other management
systems in terms of their high NPVs. The study recommends that given the high
benefits relative to costs involved in cocoa production irrespective of management
system, investments in cocoa production can be increased by providing expanded
access to cheap and flexible credit and land, which have presented as limiting factors
in cocoa production based on the descriptive statistical analysis in the study.

Keywords: Cocoa, benefit, cost, investment, management

African Journal of Food, Agriculture, Nutrition and Development Vol. 9 (2) 2009: pp. 713-727