Changing farm structure and agricultural commercialisation in Nigeria

Evidence is mounting that the rise of medium-scale investor farms and associated changes in the distribution of farm sizes are occurring in many African countries.

These changes in the distribution of farm sizes are creating important and wide-ranging impacts at all stages of agricultural value chains.

However, these effects remain poorly understood and only examined in a small number of countries to date.

A better understanding of the effects of changing farm size distributions are urgently needed to guide policies aimed at achieving agricultural commercialisation and broader economic transformation objectives.

This paper provides improved evidence for policies designed to support equitable and poverty-reducing agricultural commercialisation in Nigeria. Here is the summary of the paper:

Recent evidence suggests that the changing structure of land ownership in sub-Saharan Africa (SSA) is
one of the major new trends affecting African agrifood systems.

Research in several other African countries shows the rapid rise of a medium‐scale farming sector.

For example, in Ghana, Kenya, and Zambia, medium‐scale farms (MSFs) already control more land than do large-scale farms, and in Zambia and possibly Ghana, MSFs now control more land than the small- and large-scale farms combined.

While national development policy strategies within the region (including most national Comprehensive
Africa Agriculture Development Programme (CAADP) strategies and investment plans) officially regard the
smallholder farming sector as an important (if not the main) vehicle for achieving agricultural growth, food
security, and poverty reduction objectives, the meteoric rise of emergent farmers warrants their inclusion in efforts to understand the changing nature of the farm structure and food value chains in Africa.

At the same time, land pressures are increasing in many parts of the continent and expansion potential
may be much more limited than previously assumed.

Moreover, the current land administration policies seem to be lagging behind to support more sustainable and inclusive land dynamics in particular, and agriculture and rural transformation in general.

Recent policies facilitating the transfer of land to medium/large holders are based on several premises.

The first is that medium/large holders are relatively more productive than smallholders. Medium/large-scale farm investment may inject important sources of capital and expertise into underperforming current farming systems.

Evidence in support of the inverse farm size/productivity relationship has generally been based on a range of farm scale which does not include medium/large-scale farms and there is reason to believe that such farms may in fact be more (land and labour) productive than smallholdings.

Consequently, improving medium-scale farms’ access to land can help the country increase its
domestic production of key staple crops.

Second, even if medium-scale farms may be less productive than smallholders in some contexts, there may nevertheless be significant positive spillover benefits from medium/large-scale cropping activities
to adjacent smallholder communities (assuming appropriate institutional arrangements exist or are
designed) that may therefore improve the access of these smallholder communities to agricultural technologies, credit, and extension and marketing services, and thus improve the food security and welfare of smallholders in those communities.

Thirdly, medium/large holders may provide a valuable source of off-farm agricultural wage employment (and thus additional income) for an adjacent smallholder community.

The main objectives of the work stream #1 (WS1) in Nigeria is to study the potential opportunities and
challenges associated with medium-scale (investor) farms as a pathway into agricultural commercialisation.

The study is intended to test the hypothesis that the growth of medium-scale farming promotes agricultural commercialisation in SSA.

Changes in farm size distributions have potentially diverse and complex impacts on rural livelihoods, and hence the need to explore how the rise of medium-scale farms affects a range of outcomes.

We are particularly interested in how investment by medium-scale farms influences the welfare of small-scale farms (SSFs) that still constitute the vast majority of farms in the region.

Anecdotal evidence of massive investment by medium-scale and large-scale farms in Nigeria raises fundamental questions about the trajectory of agricultural commercialisation under status quo policies,
the trade-offs and potential synergies involved with smallholder agriculture, and the appropriate policies
to promote equitable agricultural commercialisation, the empowerment of women and youth in agriculture, poverty reduction, and agricultural transformation objectives.

Evidence is mounting that the rise of medium-scale investor farms and associated changes in the distribution of farm sizes are occurring in many African countries. These changes in the distribution
of farm sizes are creating important and wide-ranging impacts at all stages of agricultural value chains.

However, these effects remain poorly understood and have only been examined in a small number of
countries to date.

A better understanding of the effects of changing farm size distributions is urgently needed to guide policies aimed at achieving agricultural commercialisation and broader economic transformation objectives.

Consequently, the WS1 study will provide an improved evidence base for policies designed to support equitable and povertyreducing agricultural commercialisation in Nigeria.

It will also have important applications for many other countries in the region that are experiencing rapid changes in farm structure. The study therefore sets out to provide answers to the following major research
questions. First, what are the characteristics of these emerging medium-scale farms? Second, what is the nature of the changing farm structure that produces them?

Third, how do these mediumscale farmers influence the behaviour and welfare of the millions
of small-scale farm households around them? Fourth, are there productivity differences between small- and medium-scale farms?

Fifth, on the policy front, should medium-scale investor farms be promoted as a policy tool to promote agricultural commercialisation and transformation?

The answers to these questions may differ importantly by age and gender and hence we aim to examine these issues in more depth in the 2019 WS1 work plan.

For the purpose of addressing these research questions, this study was designed to carry out two waves of data primary collection in 2018 and 2020 respectively. The first wave, a primary data collection exercise, was carried out in April/May 2018 in Nigeria.

The survey collected information from 1,000 medium-scale and 1,000 small-scale farmers from Kaduna and Ogun states, through a multi-stage sampling procedure that involved a combination of purposive, cluster, and proportionate random sampling techniques.

This working paper presents the preliminary results of the first round of analysis of the quantitative data collected through the survey.

The technique of analysis in this report is basically descriptive with extensive use of averages, percentages, and tables to organise the preliminary set of findings from this exercise.

Additional and more detailed analyses are expected to continue in the form of journal articles using the first wave of data until the second wave is collected in the first half of 2020.

The preliminary analysis based on descriptive statistics is as follows. Observed differences between MSFs and SSFs suggest that years of school, assets, and durables may be important in driving the process of agricultural commercialisation in the study area.

The youth have little participation in medium-scale farming, and farming in general, and have thus been generally excluded from the commercialisation process.

We document two pathways to agricultural commercialisation in Nigeria; namely, transition from
small- to medium-scale farms (stepping up) and the emergence of investor farmers that start off as medium-scale-level farmers (stepping in).

Only about 6 per cent of all those who started off as SSFs actually graduated to medium-scale over the past three decades. The implication of this is that there is still a lot of scope for policy to enhance this process of transition from small to medium scale.

Land availability and accessibility were the most important factors that enabled transition from small- to medium-scale farming.

Specifically, land inheritance and increased engagement in the land markets (through land purchase and rent) tend to be important modes of land acquisition for farmers transitioning from small-scale to medium-scale.

Unfortunately, security of tenure is very low among both MSFs and SSFs. This high level of tenure insecurity may decrease incentives for long-term investment in land development, which may in turn hinder the process of agricultural productivity growth and commercialisation.

Agricultural commercialisation seems to have positive impacts on a number of aspects. Labour productivity is substantially higher for SSFs compared to MSFs but the converse is true with land
productivity.

We find that some forms of interactions exist between MSFs and SSFs that could positively affect the welfare of the SSFs.

These include, in order of importance, the provision of an extension guide/services to smallholders, sales of farm inputs to smallholders, purchase of farm inputs together with smallholders, and rentals of tractors and farm machinery services to smallholders. The degree of interaction between MSFs and SSFs varies by state.

Poverty indicators provide suggestive evidence that some measure of poverty reduction is associated with ‘stepping up’ from small-scale to medium-scale farms among the study population.

However, agricultural commercialisation does not appear to benefit other outcomes. Specifically, there are only marginal differences in levels of commercialisation between medium-scale and small-scale farmers, both in the input and output market processes.

In addition, an increase in farm sizes has little impact on women’s empowerment and food security, and may lead to modest decreases in dietary diversity of women in households.

Finally, multidimensional poverty indicators show that small- and medium-scale farms are only marginally different once several poverty indicators are considered.

Consequently, MPI reduction may require substantial farm size changes and/or intervention from the government.

It is important to note that these bivariate relationships, while providing a fairly consistent picture, do not control for the effects of other variables that are likely to affect our outcome variables of interest.

However, these relationships do lead to an important hypothesis for more rigorous evaluation in the next round of analysis.

Written by, Milu Muyanga, Adebayo Aromolaran, Thomas Jayne, Saweda Liverpool-Tasie, Titus Awokuse andAdesoji Adelaja

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