Determinants of Credit Constraint Conditions and Production Efficiency Among Farming Households in Southwestern Nigeria

Abstract

Sustaining and improving production efficiency of resource poor smallholder farmers under the existing credit constraint conditions require the improvement of access to credit facilities and other factors involved. The study examined the factors influencing credit constraint (CC) and production efficiency of farming households in Oyo State, Nigeria. Primary data was randomly collected using structured questionnaire from 120 mixed farmers in the study area. Data was analyzed using descriptive analysis, probit regression and stochastic frontier analysis. The results shows that 79.2 percent of the respondents were credit constrained and this has negative influence on their production efficiency as credit constrained farming households (CCFH) were found to be less efficient with mean efficiency of 0.721 than unconstrained farming households with 0.913. Age, gender, education, and dependency ratio of farmers are significant variables that influenced credit constraint conditions of the farmers while the maximum likelihood estimate of the production frontier revealed that farm size, labour and quantity of agro-chemical used are positively and significantly related to the production efficiency of farmers. Given the largest proportion of CCFHs among farming population in South-Western Nigerian, this gap implies considerable potential loss in output due to inefficient production. Improving credit access of farming households in general but more particularly the CCFHs is desirable for higher production efficiency.Credit constraint, Production efficiency, Farming households, stochastic frontier, Nigeria, Agricultural Finance,