Economic Analysis Of Swamp Rice Production

Project and Seminar Material for Agricultural Economics and Extension

Abstract

Rice is the most important cereal in the world after wheat and more than half of the human race needs rice as a source of calories (wakatsuki et al, 2004). It is the leading cereal crop of the south East Asia which constitutes a thick population region of the world (Mani et al, 2007). Africa accounts for only about 2% of worlds output of rice. Rice is produced in the middle belt, south East and some far Northern states (Audi, 2008). The importance of rice in Nigeria is no longer the question but rather, how can we meet the growing demand, reduce import and be self sufficient. The green revolution in the 1960‘s laid the foundation for rapidly growing economies of Asia today. (Hirose and Wakatsuki 2000). Unfortunately, African is yet to attain its green revolution.

Rice production in Nigeria between 2001 and 2003 was estimated at 2.03 million mega grams, while consumption was 3.96 million mega grams. The balance of 1.90 million mega grams was obtained by importation (FAO, 2004). Total consumption stands at 29kg and has contributed to income and growth in Nigeria rice sector (USAD, 2008). Nigeria is the largest producer of rice in West Africa producing over 40% of the regions total production (Singhet al, 1997 and FAOSTAT, 2007). In the last 30 years, production has increased 6 folds with Nigeria producing 3.3 and 3.6 million tons of paddy rice in 2000 and 2005 respectively (FAOSTAT, 2004 and 2007).

Nigeria is equally the largest importer of rice and its importation figure stood at 11.61 million metric tons since 2000, which is one third of the sub regions total. It has a land area potential for rice estimated at 5 million hectares of which 65% are low lands. In 1999 area harvested from rice was 2.2 million ha consumption per capita jumped from 2.9kg in the period 1970-74 to 24.1kg between 1995-1999 (Hirose and Wakatsuki, 2002). Rice has emerged as one of the fastest growing agricultural sub-sector and has moved from ceremonial to a staple food in many Nigerian homes within the last two decades (Ume et al, 2007).

Chapter One

Introduction

1.1 Background to the Study

Agricultural sector played a significant role in Nigerian’s economic development before the oil boom of the early 1970s by providing food, employment, foreign exchange earnings and alleviating poverty. It was one of the most important sectors of the Nigerian economy. However, in recent years, there has been a marked decline in the performance of Nigerian agricultural sector. The contribution of agriculture to Gross Domestic Product (GDP) which stood at an average of 56 percent in 1960-1964, declined to 47 percent in 1965-1969, further declined to 35 percent in 2002-2004 and there is recent increase to about 40 percent in 2009 (Amaza and Maurice, 2005, FAO, 2010).

According to FAO (2010), the Nigerian rice sub-sector witnessed a remarkable increase in output from 2.5 million metric tonnes in 1990 to about 4.2 million metric tonnes in 2008. This increase in output of rice over the years was as a result of increase in hectarage cultivated. However, there has been falling yield of rice in Nigeria from 2069.54kg per hectare in 1990 to 1754.40kg per hectare in 2008 (FAO, 2010). This falling yield of rice led to supply deficit situation in the country.

In response to the prevailing rice supply deficit situation in the country, successive Nigerian governments have intervened in the rice sub-sector by increasing tariff on rice importation so that local production could be encouraged. This was expected to widen the home market for the nation local rice (Bamidele et al., 2010). The Federal Government of Nigeria has also established research institutions and programmes which

were geared toward increasing rice production and other crops. These are; Federal Rice Research Station (FRRS) in 1970, National Cereal Research Institute (NCRI) in1974, National Seed Service (NSS) in 1975, and Operation Feed the Nation (OFN) in1976. Other programmes were the River Basin Development Authority (RBDA) in 1977,Agricultural Development Project(ADP) in 1975, Structural Adjustment Programme (SAP) in 1986 and the presidential initiatives on increased rice production, processing and export in 2002 (Bamidele et al., 2010). These agricultural programmes have common objectives of increasing production and productivity in the rice sub-sector thereby achieving food self sufficiency. It is important to state that most of these programmes were terminated without achieving the set objectives. The result of this failure is the persistent demand-supply gap for rice

Rice is a staple food for about 2.6 billion people in the world (CTA, 2005).The global output shows that the Asian continent account for about 92 percent, while America and the Caribbean account for 5 percent and 3 percent for Africa (CTA, 2005). Rice as a cereal grain is the most important staple food for large part of the world human population. It is also the second highest worldwide production after maize (FAO, 2010). Since a large portion of maize crops are grown for purposes other than human consumption, rice is the most important grain with regard to human nutrition and calorie intake. Rice provides more than one fifth of the calorie consumed worldwide by human beings (Smith, 1998).

Swamp rice is produced in water logged and seasonal flooded low land area. The traditional method for cultivating swamp rice is by flooding the field and planting young seedlings. Swamp rice cultivation is well suited to countries and regions with low labour cost and high rainfall, as it is labour intensive to cultivate and require ample water (NRC, 1996).

The Nigerian food sub-sector parades a range of crops, but of all these, rice gained prominence (Akande, 2001). Nigeria plays a vital role in rice production in the West African sub-region with increasing production over the years. The production of rice rose from 2.5 million tonnes in 1990 to about 4.2 million tonnes in 2008, representing about 37 percent rise in domestic production (FAO, 2010). However, despite the numerous government policies and programmes on rice and rise in domestic production, the demand/consumption exceeds the local production resulting in rice importation.

It is on record that, Nigeria has become one of the largest importers of rice, second to Indonesia. Its importation bill of rice has increased from one million United States Dollar in 1970s to as high as 800million United States Dollar in 2005 (WARDA, 2007). The short fall in supply of rice in Nigeria has been attributed to continuous rise in per capita consumption brought about by increased population and rapid urbanization (Akande, 2001., Fabusoro and Agbonlahor, 2002).

1.2 Problem Statement

Rice is a staple food in many African countries and constitutes the major part of diet in many homes. Over the years, the crop has witnessed a steady increase in demand and this gave rise to its importance in the strategic food security planning of many countries. The Nigeria rice sub-sector has witnessed some remarkable improvement in output thereby attaining a position of prominence (Akande, 2001). Since the mid 1970s, the rice consumption in Nigeria has risen tremendously at about 10 percent per annum due

to changing in consumer preferences. However, production has never been able to meet demand, leading to considerable imports which today stand at about one million metric tonnes yearly. The imports are procured in the world market with Nigeria spending about 356 billion naira in 2010 on rice import alone (IITA, 2011).

In an attempt to address the nation rice demand-supply gap, the Nigerian government has intervened in the rice sub-sector over the past few decades. However, the public policy has neither been consistent nor appropriate and domestic production has continued to lag behind demand (Akande, 2001). For instance, from 1986 to mid 1990s import was illegal, in 1995 import was allowed at 100 percent tariff and in 1996 the tariff was reduced to 50 percent but it was later increased to 85 percent in 2001 (Akpokodje et al., 2001). Even during the rice ban period, Nigeria was still importing several hundred thousand of tonnes of rice annually through illegal trade. Notwithstanding the various policy measures, the domestic rice production has not increased sufficiently to meet the increased demand (Akpokodje et al., 2001).

The inability of Nigeria rice sub-sector to meet the domestic demand could be attributed to low productivity, inefficiency in the use of resources, disincentives from macro- economic environment and production being in the hands of small scale farmers who use traditional technologies (Federal Ministry of Agriculture, 1995). Nigeria has experienced falling yield of rice from 2069.54kg per hectare in 1990 to 1754.40kg in 2008 FAO (2010). For the swamp rice production to bridge the demand-supply gap, efficiency in production must be increased. Although various studies (e.g. Amaza and Maurice, 2005; Idiong et al., 2007) that have been carried out on rice production in Nigeria, (dwelling mostly on either technical efficiency, or determinant of technical efficiency, or profitability of swamp rice production). Few studies have been carried out in Niger State to determine technical efficiency and profitability of swamp rice production. To bridge this gap in knowledge, this study seeks to answer the following research questions:

What are the socio-economic characteristics of swamp rice farmers?
What are the levels of inputs and output in swamp rice production?
What is the relationship between inputs and output in swamp rice production?
What are the levels of technical efficiency of swamp rice farmers?
What are the determinants of technical efficiency in swamp rice production?
Is swamp rice production profitable?

1.3 Objectives of the Study

The broad objective of this study is to examine the economics of swamp rice production in Niger State, Nigeria.
The specific objectives are to:

Describe the socio-economic characteristics of swamp rice farmers in Niger State, Nigeria.
Determine the inputs and output levels in swamp rice production
Estimate the relationship between inputs and output in swamp rice production.
Estimate technical efficiency in the swamp rice production.
Identify the determinants of technical efficiency in swamp rice production.
Determine the profitability in swamp rice production.

1.4 Justification of the Study

Rice is cultivated in virtually all the agro-ecological zone in Nigeria, despite this; the area under cultivation to rice is still small. Consequently, Nigeria is not among lead world rice producers (NGADP, 2003) In 2009, out of about 30.7million hectares of land cultivated to various crops, only about 7.82 percent was cultivated to rice ( FAO, 2010). Niger State is one of the leading rice producers in Nigeria and the study area has a favourable climatic condition for rice production

There is need to investigate efficiency status of rice farming for purpose of expanding its production. The efficiency study is very important for provision of information on how to improve swamp rice output and enhance productivity of resources on farms. In the economy, where resources are scarce and opportunities are lacking, the efficiency study can show whether it is possible to raise the productivity without increasing the resource base of the farmers in the study area. The findings of this study would provide additional empirical evidence on technical efficiency in rice production in the study area. The information from this study would also contribute to knowledge relevant to policy formulation that would create enabling environment for sustainable rice production in Nigeria.

1.5 Research Hypotheses

The hypotheses tested include:

There is no significant relationship between the input and output in swamp rice production.
Socio-economic variables have no significant effect on the technical efficiency of swamp rice farmers.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary

A multi-stage sampling technique was used to select 159 respondents for this study. The data were collected from the respondents using structured questionnaire. The data were analyzed using descriptive statistics, gross margin analysis and stochastic frontier model.

The study revealed that less than 30% of farmers belong to cooperative societies. Majority (74%) were found to be under active age group of 31-50 years. The study also revealed that more than 50% had no access to credit. Gross margin analysis showed that swamp rice production earned N56740.60 gross margins per hectare. The gross margin
per naira invested was also found to be N0.97. However, labour alone accounted for more than 50% of the total variable cost of production.

The Cobb-Douglas stochastic frontier production function was used to estimate individual technical efficiency of the farmers. The result showed that the individual technical efficiency ranged between 34 and 98 percent with mean technical efficiency of 86%. The maximum likelihood estimate of Cob-Douglass stochastic frontier production function for swamp rice in the study area showed that the estimated coefficients of the production function were all positive except for herbicide (β4) which was negative. All the positive parameters were statistically significant at 1 or 5 percent. The elasticity of individual parameters was less than one and the return to scale was between zero and one (0.98) indicating a positive decreasing return to scale within stage II of the production process. Analysis of inefficiency model showed that age, family size, extension contact and membership of cooperatives were the significant determinants of technical efficiency among the swamp rice farmers in the study area.

5.2 Conclusion

The result of the study revealed that labour was the most limited and costly resource for swamp rice production in the study area. It accounted for more than 50% of the total variable cost of production. The major socio-economic determinants for swamp rice production were extension contact, age, membership of cooperatives and family size.

The result of the study revealed that the swamp rice farmers in the study area did not produce at the frontier level. This was evident by the presence of technical inefficiency among the farmers.

5.3 Recommendations

Effort should be made by extension agents to encourage swamp rice farmers to form themselves into cooperative groups. This could give them access to formal credit and enable them to benefit from the economy of bulk purchase of input to reduce cost of production.
The mean technical efficiency of 86% is an indication that there is chance for swamp rice farmers to improve production so as to reach the frontier level by involving themselves into cooperative and improve access to extension contact.
Swamp rice farmers in the study area should be enlightened by the extension agents on the use of recommended farm practices so as to improve farmers’ technical efficiency.
The fact that labour has been identified as the most costly input in swamp rice production in the study area. Therefore, policy should be directed toward providing labour saving technologies.

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