ABSTRACT

 In Nigeria, strong demand and the fact that most of the nation's 140 million people are in the hands of smallholders provides a tremendous opportunity for cassava farmers to participate in the cassava market and increase rural incomes. Unfortunately, recent output has not kept pace with increasing demand, suggesting that barriers prevent rural farmers from participatjng in the market. Increased transaction costs deter entry of small farmers into the market. This study looks at required interventions aimed at reducing transaction costs to encourage increased farmer participation in competitive markets. Using data from 360 smallholder cassava farmers in South-Eastern Nigeria, this study determined the factors enabling smallholder participation in cassava market and used the findings to identify strategies to promote successful smaliholder commercialization. The study estimated a model of ordered response when transactions costs create a situation where some producers buy, others sell, and others do not pailicipate in markets and presented two rationales for why producers may, have different relationships to the market: propprtional and fixed transactions costs. The probit model was also used to account ibr the effects of variable transaction costs on selling decisions (Off-farm/On-farm) and stimulus level deduced from the coefficients. A selectivity model was also used to account for the effects of variable transaction costs. The study showed that 166 farmers were off-farm sellers, 50 on-farm sellers,' 37 off-farm buyers, 1 2 on-farm buyers and o)5 autarkic (neither selling nor buying) households. Paiticipation decision revealed that membership of cooperatives or social organizations, farming experience and marketing experience in years had a positive relationship with decision to be autarkic other than buyer and seller other than autarkic and significant at I .0°/s level of probability. ] he coefficients for frequency of extension contacts, age, native of community, road conditions to the nearest town and yield were also positive and significantly related to decision to be autarkic other than buyer and seller other than autarkic at 5% level of probability. The coefficient for access to cOmmunication facilities was positive and significantly related to decision to remain autarkic othem than buyer and seller other than autarkic. The coefficients for education, distance to the nearest town, distance from the farm to the market and crop transportation costs were negative and significantly related with the decision to remain autarkic other than a seller and buyer other than autarkic at 1% level of probability. The coefficient for sex was positive and significantly related to decision by female farmers to be autarkic other than buyer and seller other than aOtarkic. These decisions to participate as a buyer, seller or remain autarkic were as a result of' FTCs and PTCs associated with participating in the market. The seller type decision revealed that coefficients for personal means of transport, road conditions to the nearcst town and marketing experience were positive and significantly related to increase in oftfarm cassava sellers at 5% level of probability. The coefficient for distance from the house to the farm was negatively and significantly related to increase in farmers selling off-farm at 1% level of probability. The coefficients for crop transportation cosLs. distance to the nearest town, distance from the house to the farm and yield were negative and significant at 5% level of probability. These decisions to participate as an off-farm or on-farm seller were as a result of PTCs associated with participating in the market. 'ftc stimulus levels were used to ascertain selected factors which are important for seller decisions (off-farm/on-farm) and effect of different policy alternatives. A 10% increase in personal means of transport, road conditions to the nearest town and marketuig experience led to a 0.28%, 0.64% and 0.01% increase in sales off-farm respectively xi 1 4 C e 'a 10.18% and 0.0001% increase in on-farm sales respectively. The coefficients for personal means of transport, marketing experience arid road conditions to the nearest town WCIC positive and significantly related to level of off-farm sales at 10%, 5% and 1% level of' probability respectively. The coefficients for distance from the farm to the market, distance from the house to the farm and crop transportation costs were negative and significantly related to the level of off-farm sales at 5% level of probability. The coefficient for distance to the nearest town was negative at 10% level of probability. Significant factors influencing level of on-farm sales positively at 5% level of probability were distance to the nearest town, distance from the house to the farm and yield. The coefficient for road condition to the nearest town was negative and significantly related to level of on-farm sales at 1% level of probability. The coefficients for distance to the nearest town, distance from the farm to the market and distance from the house to the farm were positive and signthcantly related to PTCs at 1% level of probability. The coefficients for marketing experience and non-farm income were negative and significantly related to PTCs at 5% level of probability. The coefficient for road conditions to the nearest town was negative and significantly related to PTCs at 1% level of probability. The test of structural differences between the selling FTCs and PTCs indicate that there was a structural difference between them therefore including them in market participation equations was important. The results of policy simulations show that if provision of good roads were made to the nearest towns, from the house to the farm and from the house to the market, about 72.40%, 68.81% and 54.62% of the respondents would sell cassava off-farm respectively. The results also indicate that with provision of vehicle loans and dissemination of improved varieties, about 69.90% and 34.72% of the respondents would sell in the market. The study raises policy issues which, when attended to, might reduce these fixed and proportional transaction costs, particularly by enhancing access to information and communication facilities, providing market outlets and bulking centers for farming households. Some constraints require. direct policy measures, such as policies dealing with, extension services, education, and then there are those that require stable policy environment for small-scale traders to promote significant farmer response. The conceptual and empirical evidence suggests that interventions aimed at facilitating rural smallholder cooperatives, by reducing transaction costs are central to stimulating market participation