Technical Efficiency of Cocoa Production in Southwest Nigeria

Abstract

In this study, we investigate the profitability of cocoa enterprise, the technical efficiency, and drivers of efficiency among cocoa farmers, in southwest Nigeria. Data were collected through the use of well structured questionnaires administered to farmers in selected cocoa producing states. For enterprise profitability, the gross margin analysis was used while the Data Envelopment Analysis (DEA), a non-parametric approach, was used to analyse technical efficiency and the OLS regression to profile socio-economic variables that affect technical efficiency. A majority of farmers were male with a mean age of 55.01±16.74 years, mean household size of about 7.28±3.79 members and about thirty-five percent without any formal education. Over eighty percent had more than 10 years of cocoa farming experience with the average age of cocoa trees being 30.38 ±17.92 years. Cocoa was found to be a profitable enterprise, although returns in Ekiti state were higher. The majority of cocoa farmers were relatively technically efficient in their use of resources, with a mean technical efficiency of 0.8126. Farmers in Ekiti state are most technically efficient with a mean of 0.8922 followed by Ondo state with a mean of 0.8132 while Osun state has the least mean of 0.7323. Education was positively and significantly associated with efficiency, while area of land and age of cocoa trees negatively affects technical efficiency. This indicates that public investments in education have complementary and synergistic effects on improved cocoa technical efficiency, and younger cocoa trees should be planted by farmers in southwest Nigeria. Key words: Cocoa production, Profitability, technical efficiency, DEA, Southwest