ABSTRACT

This study examined the effect of capitalization on productivity of rice processors in Ebonyi state, Nigeria. It established the level of productivity, allocative efficiency and capitalization of rice processors as well as their determinants. A total of 120 rice processors were selected for study and data collected using set of structured questionnaire distributed and collected at rice processing points. Simple descriptive statistics like tables, means and percentages as well as econometric tools such as Cobb-Douglas Production frontier, Ordinary Least Square (OLS) and Heckman selectivity (Hurdle) and correlation models were employed in the data analyses. Result of the analysis revealed that rice processing is dominated by females who are married and within the age bracket of 25 – 34 years. Most of them have attended one form of education or the other with moderate years of processing experience. A mean productivity value of 1.53 implies that an average rice processor made 53 kobo for every one naira invested. The result shows that age, education, firm size, farming experience, capital inputs, household size and gender influenced rice processors’ productivity. With a mean of 0.762, the processors were allocatively inefficient and disadvantaged to increase output. Age of processors, education, cooperative membership and energy type, gender, household size, credit, training, number of times of servicing mills and age of mill all predicted allocative efficiency of rice processors. A mean investment value of ₦220, 610 implied that the processors may be involved with local processing methods which could have been responsible for their poor and inefficient allocation of resources. The result shows that age, education, loan size, farming experience and nature of ownership were positively related to the amount of capital invested by rice processors and negatively related to interest rate. Findings further showed that productivity and capitalization were positively correlated at 5% level of significance implying that as capitalization (amount of capital invested) increases, productivity increases too. A number of challenges were identified to militate against rice processing which include high cost of paddy, inadequate equipment and high transportation costs. It is recommended that the Federal government, state or local governments and non-governmental agencies should organize training for rice processors on the management of additional income from off-firm work activities. Policies should be put in place by stakeholders in rural development to encourage rice processors in non-agricultural wage and self-employment categories to reinvest off-firm income into rice production and processing. Increase in formal education of these respondents should target managerial skills that would enhance diversification through factor mobility and efficient allocation of labour between firm and off-firm sub-sectors of rural economy; extension programmes should also focus attention on efficient labour allocation so that off-firm work does not adversely affect profit efficiency among processors who participate in off-firm.