ABSTRACT
The study analysed
off-farm income and farm capital accumulation among small-scale farmers at farm
level in North Central Nigeria. Multistage sampling technique was used to
select 360 respondents, comprising participants and non-participants in
off-farm work. The participants were disaggregated into three main typology
namely, agricultural wage, non-agricultural wage, and self-employments. Data
for the study were obtained from primary source with the aid of standard
questionnaire and analysed using descriptive and inferential statistics.
Self-employment was the dominant (42.78%) off-farm work. Full-time participants
were mainly (38.50%) in non-agricultural wage employment. Participants with
off-farm work experience of 14–19 years were mostly (55.20%) in
self-employment, while 61.50% of the farmers with off-farm work experience of
26–33 years were in agricultural wage employment. Off-farm income constituted
50.28% of total household income. The strongest and weakest predictors of
enterprise diversification were funds for farm investment (0.65) and crop
failure (0.36), respectively. The mean entropy of diversification was 0.67.
Farm income (p < 0.01, t = –10.237) and off-farm income (p < 0.01, t =
2.536) significantly affected market labour supply. Self-employed participants
had the highest average off-farm income (N266,680.78). Farm capital
differed significantly (p < 0.05) among off-farm work typology. Farm capital
was unequally distributed among the respondents (G = 0.56). Causality ran from
farm capital to off-farm income. Participants had significantly (p < 0.01)
less total farm liabilities, debt-asset-ratio, and loan for farm production
than non-participants. Participants significantly (p < 0.01) incurred more
yam production costs and total variable costs than non-participants.
Participants had significantly (p < 0.01) higher average technical
efficiency estimates in yam and cowpea enterprises but less average profit
efficiency estimates than non-participants. It was concluded that small-scale
farmers had average reliance on off-farm income for the purposes of generating
funds for farm investment and increasing farm capital. Although,
self-employment generated higher off-farm income, farm capital was highest
among farmers in agricultural wage employment. Thus, off-farm income was
diverted to non-farm enterprises, signaling a gradual drift from core farm
production. It was recommended that small-scale farm households should increase
off-farm income’s share invested in farming so as to raise production level,
farm capital and obtain higher returns so that they could take full part in
agribusiness; that IFAD and other stakeholders in rural development should
encourage farmers in non-agricultural and self-employments to re-invest
off-farm income in farming; and the Federal Government and IFAD should train
farmers on the management of additional income from off-farm work. These
measures would facilitate the development of the agribusiness sector and
forestall dual farm structure from adversely affecting food production by
small-scale farmers.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
In
sub-Saharan Africa, agriculture occupied a prominent position in national
economies as the sector served as a key driver of growth, employment
generation, wealth creation, food production, raw material supply, and poverty
reduction (Ekpo & Olaniyi, 1995; Diaz-Bonilla &
Gulati,
2003; Lawanson, 2005; Wankoye, 2008). Ajakaiye (1993), National Bureau of
Statistics (2007), and Matthew (2008) attested to the potentials and
indispensable roles of agriculture in Nigeria’s economy. The recognition of the
role of agriculture in Nigeria’s economy informed the decisions of the Federal
Government and donor and foreign agencies to marshal numerous interventions to
the sector (Oyeyinka, Arowolo & Ayinde, 2012).
Some
of the interventions, which aimed at mitigating financial constraints faced by
farmers, included Family Economic Advancement Programme, Nigerian Agricultural
Credit, Rural and Development Bank now called Bank of Agriculture, Agricultural
Credit Guarantee Scheme Fund, Community Banks, Microfinance institutions,
National Special Programme for Food Security and Fadama Development Programmes
(Nweze, 1995; Ogbanje, Okwu & Saror, 2010). These efforts are justifiable
given the importance of agriculture to both developed and developing countries
of the world. For instance, it has been observed that the rapid growth of the
newly industrialised economies of the Asian continent was directly associated
with substantial growth of the agricultural sector (Kay, 2001). Wankoye (2008)
was of the view that commercial agriculture is the most effective and
sustainable catalyst that would lead to sustainable industrialisation. It
follows that the need to increase farm income and agricultural productivity among
small-scale farmers is sine qua non, if the farmers must maintain their
national, though inadequately recognised role of feeding the nation.
In
Nigeria’s move towards agricultural renaissance, it is important to note that
commercial farms are profitable only if they generate sufficient income (on and
off-farm) and accumulate adequate capital for possible re-investment. In this
direction, it is imperative for small-scale farmers to embrace farm
diversification strategies as measures to curb declining farm and household
incomes and to insure against agricultural production and marketing risks
(Reardon, 1997; Amit & Livnat, 1988; Kijima, Matsumoto & Yamano, 2006;
Matsumoto et al., 2006; Hazell, Syed, Zupi & Miyazako, 2011).
Off-farm
income is that portion of household income which is obtained off the farm. It
includes non-farm wages and salaries, pensions, trading and interest on income
earned by farm families (Matthews, 2004). Off-farm income doubles as risk
minimisation and household income stabilisation strategies. In the United
States, for instance, off-farm income accounted for over 90 percent of farm
operators’ household income (Sommer et al., 1997; Babcock, Hart, Adams
& Westhoff, 2000; Briggeman, 2011). Ahearn and Lee (1991), Perry and Hoppe
(1993), Blank, Erickson, Nehring & Hallahan (2009) and Briggeman (2011)
asserted that several farms in the United States of America could not boast of
favourable leverage ratio without off-farm income. In a developing country like
Nigeria where agriculture has been relegated, and further worsened by flagrant
diversion of agricultural intervention funds to unintended beneficiaries
(Idachaba, 1993), off-farm activities deserve no less attention. Besides,
Babatunde (2008) has shown that off-farm income supplements and boosts farm and
total household incomes.
Off-farm work refers to
activities from which farmers earn income apart from their own farm. In Mexico,
De Janvry and Sadoulet (2001) clearly separated farmers into those who
participated in off-farm work and those who did not. According to Babatunde,
Olagunju, Fakayode and Adejobi (2010), the scenario, however, is different in
rural Nigeria, where farmers engaged in several activities at the same time in
a way that decisions to participate are
not mutually exclusive. Off-farm engagement is generally disaggregated into
three components. These are agricultural wage employment (AWE) involving labour
supply to other farms, non-agricultural wage employment (NAWE) including both
formal and informal non-farm activities, and self-employment (SE) such as own
businesses. This typology has been used by Babatunde et al. (2010) and
Ibekwe et al. (2010).
Myyra,
Pietola and Heikkila (2011) affirmed that besides generating annual income, a
farm family might have a goal to accumulate wealth through capital gains from
off-farm activities. This is especially relevant for the about 900 million
extremely poor people who lived in rural areas of developing countries. But,
with little income or collateral, poor farmers were hardly able to obtain loans
from banks and other formal financial institutions (Ochi & Nnanna, 2007;
Asogwa, Umeh & Ater, 2007). Access to rural financial services is worse
among women (Audu, Otitolaiye & Edoka, 2009) even though, women often had
the best credit ratings and were more actively involved in agricultural
production (International Fund for Agricultural Development (IFAD), 2000, 2003,
2004; Adepoju, Umar & Agun, 2006; Audu et al., 2009). The most
effective way out of this contraption, according to IFAD (2004), is that
the small-scale farmers need to be able to borrow, invest and save, and to
protect their families against risk. According to Mellor (1962), Kibara (2007)
and Petrick and Kloss (2012, rural financial capital improved agricultural
productivity, food security and poverty profile. Osaka (2006) and Ogbanje
(2010) noted that capital, including cash and other man-made farm assets that
are required to carry out production, is usually accumulated through savings
and investment.
Since
formal credit facilities were unreliable, farmers have resorted to alternative
measures to raise capital for farm investment. The two major alternative
sources of farm capital for small-scale farmers were the numerous local
savings’ schemes and involvement in off-farm activities (Adam & Agba, 2006;
Alade, 2006; Ibekwe et al., 2010). In some contexts, rural...
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