Authors : G.A. Oyedele, J.O. Akintola, M.A.Y. Rahji and B.T. Omonona
Abstract: Credit is an important factor for improving the profitability of agricultural production activities of the resource poor smallholder farmers. This study was carried out in two Local Government Areas of Oyo and Ondo States of South-Western Nigeria, where the National Special Programme for Food Security (NSPFS) was implemented. The provision of credit to smallholder farmers was a major strategy employed by the programme to increase farmers’ productivity, income and standard of living. The study investigated the determinants of credit constrained conditions of farm households and analyzed the effect of credit on profitability of agricultural production enterprises between credit constrained and unconstrained beneficiaries of NSPFS credit in the study area. A multi-stage sampling technique was used to collect primary data from 320 beneficiaries of agricultural production credit under the NSPFS. Descriptive statistical tools and switching regression model were used for analysis of the primary data obtained from the survey conducted. The findings of the study showed that majority (76.9%) of the credit beneficiaries were credit constrained while, the remaining (23.1%) were credit unconstrained. The result of the probit analysis showed that farmers’ age, household size, gender, size of landholding, access to other credit, value of other assets, monthly household expenditure and choice of crop and livestock enterprises were the significant variables that determined the credit constrained condition of NSPFS credit beneficiaries in the study area. The switching regression model was used to determine the effect of credit constrained condition on farmers’ profit. The result showed household size, amount of NSPFS credit obtained, access to other credit and monthly household expenditure as the significant factors that determined the profitability of agricultural production enterprises of credit constrained beneficiaries under the programme. The result further revealed that age, years of formal education, access to other credits, size of landholding and value of other assets were the significant variables that determined the profit of credit unconstrained farmers in the study area. The significance of the estimated lambda parameter for both groups of credit beneficiaries implies that ordinary least square estimate of the data collected would have yielded a bias estimate and therefore, the use of the switching regression model has corrected for biasness in the data obtained. A test of hypotheses on difference in profitability of the two groups showed that profit of the credit unconstrained farmers is higher than that of credit constrained farmers.
G.A. Oyedele, J.O. Akintola, M.A.Y. Rahji and B.T. Omonona, 2009. Credit Constrained Condition of Farm Households and Profitability of Agricultural Production in Nigerian Agriculture. Agricultural Journal, 4: 192-201.