ABSTRACT

This study was designed to analyze the risk management practices among micro agribusiness enterprises in Abia State, Nigeria. This study was conceived as a result of the observation that there is dearth of information on the use of risk management practices by micro agribusiness enterprises in Abia State. A total of 120 micro agribusiness enterprises were purposively selected for the study. Data were analyzed using descriptive statistics, Likert-Type scale and Multiple Regression analysis. Results revealed that 49% of the enterprises have been in operation for not more than 10 years while 77.5% had between 1-4 employees. Majority (7 1.67%) spent between N1000-N100, 000 as production cost and generated between N1000-N150, 000 or about 61.67% as revenue. The extent of adoption of risk management practices was observed to vary greatly. About 36% of the micro business enterprises used diversification (16.6%) and cash at hand (19.4%) and less of the other strategies to reduce risk. The low or non use of cask management strategies was as a result of either unavailability or high prices. For instance, effective irrigation could not be practiced because of unavailability and high cost of fuel to operate irrigation pumps. Likert-Type of scale showed that about 57.5% of the decision makers agreed that using risk contingency plan is important but the major sources of risk affecting the micro agribusiness enterprises was lack of awareness of what risk management strategies is all about, changes in environmental conditions and lack of credit to fiancé the business enterprise. The results of the multiple regression analysis using the Cobb-Douglas model showed that the factors that affected output were age of the enterprise, total cost of production (inputs), and the number of risk management practices adopted. The study further revealed that contrary to expectations, the effect of number of employees on output was positive but not significant even at 10% level of probability. Based on these findings, the government needs to enact a favourable adopter incentive policy that will encourage enterprise owners to perceive the value of the strategies (such as forward contracting, hedging, and improved seeds/seedlings etc). There should be effective and efficient storage and processing technology to reduce/eliminate the factors responsible for risk. And there is need to encourage banks to extend credit with low interest rate to recognized micro agribusiness enterprises. This will assist them in acquiring resource inputs as at when due since most operations in the agribusiness enterprises are time bound.