Profitability and Econimic Efficientcy of Groundnut Production in Benue State, Nigeria

Abstract

There has been a remarkable reduction in the contribution of groundnut to Nigeria’s foreign exchange earnings since the discovery of petroleum resources. There is need to re-position this valuable crop to assume its rightfull position in the nation’s economy. Thus, this study assessed the profitability of groundnut production and level of technical and allocative efficiencies of the farmers using Benue State as a case study. Multi-stage sampling technique, which involves purposive selection of two Local Government Areas (Makurdi and Ogbadigbo) and subsequent random selection of groundnut farmers from the selected three communities was adopted in collecting cross-sectional data from 270 groundnut farmers using structured questionnaire and oral interview. Descriptive statistics, gross margin analysis and Stochastic Frontier Model were used to analyse the data. The study found that the mean gross margin per hectare of groundnut was N1,897.86 per month while the profitability test shows that it is profitable (t= 6.87; P ≤ 0.01). However, the key variables that influence profitability are hired labour, cost of seed, agrochemical and cost of fertilizer. Meanwhile, the mean technical efficiency estimate of groundnut farmers in the study area was found to be as low as 4%. This could be attributed to high demand for labour, land and agrochemicals which are the critical factors that play a significant role in groundnut production. The socio-economic factors that affect groundnut production in the study area include farmers’ age, household size and annual income. Similarly, an average farmer spent about 28% above the minimum frontier cost. Furthermore, the elasticity of cost of production with respect to cost of hired labour and cost of seed was found to be relatively high indicating their importance in groundnut production. More land should be put into groundnut production and farmers should be given essential agricultural inputs that will enhance the productivity of this cash crop. The study further recommends the development and dissemination of simple machines that can facilitate the stages involved in the production of groundnut.

Key words: Groundnut, Profitability, Frontier, Efficiency, Allocative