Agricultural mechanization in Nigeria: Demand characteristics and nature of tractor service...

Agricultural mechanization in Nigeria: Demand characteristics and nature of tractor service provisions

Hiroyuki Takeshima (IFPRI)

NSD-IFPRI Workshop

June 18, 2014

Beijing, China

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

Nigeria at a glance

Indicator ValueNumber of State 37Number of Local Government Area (LGA) 775GDP per capita (Real 2005 USD PPP) 2689GDP per capita growth rate (%) 7.4Agricultural value added to GDP (%) 22Contribution to employment (%) 68Poverty rate (% living on $1.25/day) 70% of cultivated area irrigated 2% of rice area irrigated 4Average farm size (ha) 1.8Median farm size (ha) 0.5Farm wages (Nominal, USD / day) – North 4Farm wages (Nominal, USD / day) – South 6Tractor hp per cultivated area (hp / ha) 0.03 ~ 0.04

Sources: LSMS (2010/2012); NBS Rebasing Report 2014; Presents based on various others.


Farming system in Nigeria

Agro-pastoral – millet / sorghum

Cereal – root crop mixed

Root crop

Tree crop

Coastal artisanal

Pastoral

Source: Dixon et al. (2001)

State boundary


Tractor policies in Nigeria Past

• Government tractor-hiring service (THS)• Expanded in 1970s• 3000 4W tractors in 250 Units across the country in 1983 (Akinola 1987)• Often less efficient than private sector THS (Kolawole 1972; Akinola 1987)

• Subsidized distribution of tractors – federal / state• Federal Government tractorization program (Jabbar 1995) - substantial though

still small compared to fertilizer subsidy• 1970-74: 85 million / 5 year (converted to 2010 USD)• 1975-79: 310 million / 5 year• 1980-85: 775 million / 5 year

• 1986 ~: SAP started• Currency devaluation => 8-fold increase in imported tractor prices• Reduced tractor subsidy

• 2000s: • Obasanjo administration – 1000 tractors and implements 25% subsidy

(Federal Government)(Ladeinde et al. 2009) in 2003, 2005• State governments’ subsidized distribution


Annual tractors imports in Nigeria (period average)

61-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85-8

9

90-9

4

95-9

9

00-0

4

05-0

7

08-1

10500

100015002000250030003500

Source: FAOSTAT for 1961–2007. Figures for 2008–2011 are authors estimation based on information from National Bureau of Statistics.Notes: The National Bureau of Statistics reported “net weight” of “agricultural tractors” and “tractors other fully built agric.” Assuming that each tractor weighs 5 tons, the approximate number of imported tractors is derived. Some of the earlier figures are consistent with other studies. For example, figures for 1973–1976 are generally consistent with IBRD (1978), as cited in Bates (1981). Figures for 2005–2007 are excluded due to unusually large importation recorded in 2006.

NA

Mostly 4 wheel tractor

Power tiller = only 100 / year (2010-13)

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE 6

State tractor distribution programs: Example: Kaduna state

• At least 10 ~ 20% of state agricultural

spending (Takeshima et al. 2014)• Tractor brand recommended by

Engineering Department in the

State Ministry of Agriculture• Competitive bidding (due process)

to select contractors for tractor procurement• Package - tractor, plough, harrow + ridger

– beneficiary must buy all of them• Subsidy - 60% total = 25% by the Federal + 35% by the State• In 2012 – 186 tractors distributed

• 129 units of 50 HP (Individuals - 50, Cooperatives - 79)• 57 units of 75 HP (Individuals)


Tractor policies in NigeriaNew focus of Federal Government

• Promotion of private sector tractor hiring services • Mechanization Implementation Program (MIP)

• Establish Agricultural Equipment Hiring Enterprise (AEHE) - private-sector managed tractor hiring enterprises

• 80 AEHEs within key industrial clusters, each with 5 tractors + implements, 5 two-wheel tractors, and a few other harvesters / threshers, operated by private sectors including farmers, cooperatives or investors

• Subsidized tractor hiring services for small-scale farmers (0.5 ~ 4ha) • Part of the E-wallet based subsidies (for seed, fertilizer)

• Agriculture Machinery Data Tracking Center (Agro-Mach DTC) - electronically monitor various information of tractors (tracking the locations, uses, storing of records)

Source: FMARD (2014)

• State governments may continue tractor distribution programs


Private sector tractor supply network –emerging as well

• Several large importers / retailers• serve institutional clients (states, sugarcane estates, large scale

foreign farmers in certain states)(Ajibola & Zalla 2007, Author’s fieldwork in 2014).

• Small / medium retailers• Medium – sell 100 tractors / year• Small – 10 ~ 30 tractors / year (new, refurbished)

• Refurbishing is the main, retail is side business, individual farmers

• Several of these types in major cities within each state• Major sources of used tractors for individual buyers


Areas (%) plowed by tractors and draft animal (2010 Jan – Aug)

Source: Author’s calculations based on LSMS-ISA. The denominator is all the households that report at least one plot. The percentages are calculated using the sample-weights. Animal tractors owned or rented are based on those who reported the actual number of days using animal traction.

9

1

12

20

0

5

1

46

11

59

0

0

0

Tractor Animal

National = 8% National = 30%


Tractorization in Nigeria is mostly for rice

Veg

Yam

Cassava

G nuts

Cowpea

Millet

Sorghum

Maize

Rice

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

Million ha

Total areaTractorized area

Source: LSMS-ISA Data 2010/12Area (total, tractorized) by crops for 2010/12 January - August

10


Tractor services mostly provided by private tractor owners

11

Majority are by tractor service providers, instead of own tractor

0.8 0.5

Area (million ha) cultivated by own and rented tractors

service providers own tractors

Sources of tractor services in 2010 rainy seasons (%)Source: Author’s calculations based on LSMS-ISA. The denominator is all the households that report at least one plot. The percentages are calculated using the sample-weights. Animal tractors owned or rented are based on those who reported the actual number of days using animal traction.

%

Private markets 42

Government 28

Friends/neighbors 14

Relatives 10

Other 7


Farm household types and mechanization

Takeshima et al. (2013)• Living Standard Measurement Survey (LSMS) 2010• Modified cluster analysis• Household simulation

Key findings:• Northern Nigeria

• A fraction of tractor users in many farm household types• Animal traction + irrigation seems substituting tractors• Tractor use in the North => less defining of farm household types

• Southern Nigeria• Mostly used by medium scale rice farmers with distinctive characteristics

(input intensive, asset wealthy)

• Household model simulation • Given the labor requirement, price and wage levels, demand for mechanized

plowing is potentially large among small-holder staple crop farmers in Nigeria

12


IFPRI/Ahmadu-Bello University surveyTractor owners / operators (2013)

• Small survey on tractor ownersSept ~ Oct 2013 (Takeshima et al. 2014)

• 111 respondents – 64 (Kaduna), 47 (Nasarawa)• Initial sampling frame – list of recipients in 2009, 2010,

2011• Purposively selected, snowballing

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EEKaduna

Nasarawa

Abuja


Two types of tractor owners identified based on the sources of tractors

Government-sourced (GS) owners

Obtained tractors only through government

scheme

Market-sourced (MS) owners

Obtained tractors through privat emarket,

private individuals

Tend to be more efficient

H0: MS owners = GS ownersNon-parametrically test differences in average / median


MS owners use tractors more than GS owners

Source: Presenter’s calculation based on survey.

MS owners operate longer hours, serve more areas than GS owners

Mean Median

692499

977*

691

Hours operated, per trac-tor, year

GS MS GS (mean) MS (mean) GS (median) MS (median)

74128

3088

103

169

70

133*

Areas served (ha), per tractor per year

Hired out farming Own farming


MS owners earn more revenues than GS owners

Source: Presenters.

GS MS

Median Mean Median Mean

Total gross revenues per year 5 8 11* 13*

Monetary values of own-farm use 1 2 3 4

Gross earnings from hiring out 4 6 6 9

Payment for operators and fuels 1 3 3 5

Operators 0 1 1 2

Fuels 1 2 2 3

Repairing 1 1 1 1

• MS owners earn significantly more than GS owners• Revenues are much greater while operators / fuels costs are similar

Benefits from tractor use in the last 12 months (current USD 1,000)


MS owners spend less on operators / fuels

Charges Payment for operator

Payment for fuel

GS MS GS MS GS MSFarming (USD / ha) Harrowing 58 61 14 *10 25 *17 Plowing / tilling 68 73 15 13 28 *21 Ridge making 50 49 10 8 18 *12

Non-farming (USD / day) Transporting farm products 101 86 14 13 26 *21Transporting non-farm goods

128 100 17 14 34 *22

Firewood transport 74 48 17 *8 21 21

Charges for service, payments for operators / fuels (USD / ha - farming, USD / day - non-farm service)

Fuel Driver Total GS MS GS MS

Mean 9.5 4.5 3.1* 14 12Median 6.3 4.2 2.6* 11 9*

Cost of bringing tractors (USD per hour of move)

Source: Presenters.

Source: Presenters.


Tractor use highly seasonal but MS owners are more active all-year around

1 3 5 7 9 11

343933

6575

111

80

43

24242734

63*5559*

104*

119*

147*

126*

65

44*57*

66*72*

GSMS

43403744

61

85

73

52

423633

42

63*58*59*

78*

89*9284

67

4956*

67*68*

38

90

56

20

34*

12*23*

82*

103*

128120*

54

516*

44*51**

Hours of operation per tractorMean Median

% operating by month

Month

Substantial seasonality But MS owners – mitigate seasonality; still find some work in off-season

* = statistically significant difference between MS and GS


Tractor services limited to local area – similar to Asia in the past

1 2 3 4 5 6 7 8 9 101112

6 5 9 1223262319

11 8 9 7

Month

4 4 5 9

212825

209 5 6 7

20*15*

45*39*

45

2320 2423*32*

39*

10

Travel alone (N = 79)Travel in group (N = 11)

6 51012

21232216

11 8 7 7

151110

25

73*

95

62*

84*

1010

53*

15

Travel on tractor (N = 83)

Group traveler – - travel further away in off-season

Truck traveller (10% of sample)- travel further away in peak-season

- Travel is generally confined within 25 km radius (Euclidean distance)

Average distance away from home district in each month (Euclidean distance from home district)


MS owners may have knowledge of soil types and appropriate horsepower

Figure 4. Bulk density of soils in Kaduna and Nasarawa (darker = heavier soils)Source: ISRIC (International Soil Reference and Information Centre) (2013).

Kaduna Nasarawa Both N of

obsCorr.

Coefficient

N of obs

Corr. Coeffic

ient

N of obs

Corr. Coeffic

ientCould select from a range of horsepower

138 .196*

26 .577**

164 .241**

All 238 .011 71 .180 309 -.027

Source: Presenters.

Correlation between the tractor horsepower and bulk density of soil – MS owners (conditional on operating outside the home LGA)

MS owners who could select from a range of horsepower Þ travel more to heavy soil area if they have higher

horsepower tractorÞ Some indication: MS owners can use tractor

efficiently based on soil type(no such patterns among GS owners)


Other key findings

• High horsepower tractors (50 hp or more) – common• Most repair is done within the village • 50% of spare parts are still obtained outside LGA• Age of tractors at purchase

• New – 15 ~ 20 years, Used – 10 ~ 30 years• Slightly but not much older than in the US - 14 years in Iowa in 1998 (Freeman

1999)• MS owners – old, used attachments

Mostly purchased within the state • Travelling in group – earn more revenue • Tractor purchase financed through own savings of several years• Speed of operation• Most operate less than maximum desired # of days


Summary – policy / research issues in Nigeria

• Seemingly rising farm wage, growing rice consumption => mechanization as important aspects of Nigerian agricultural transformation

• Lack of data – particularly since the beginning of SAP in 1986 • Tractor census• Data for assessing mechanization demand

• Seeming preference for large, high hp tractors (60 ~ 70hp)• Demand factors

• Economies of scale?• Lack of high-yielding varieties?

• Supply factors• Biased support for large tractors?

• Market-sourced tractor owners – more efficient service providers than government-sourced (subsidized) tractor owners

• But supply may be still constrained across space and time Þ market failure in mechanization serviceÞ Further research needed on government’s roles


References

Akinola A. (1987). Government Tractor Hire Service Scheme as a Tractorization Policy in Africa: The Nigerian Experience. Agricultural Administration & Extension 25, 63-71.

Bates R. (1981). Markets and states in tropical Africa: The political basis of agricultural policies. Berkeley, CA: University of California Press.

Dixon, J., A. Gulliver, and D. Gibbon. 2001. Farming systems and poverty. Improving farmers livelihoods in a changing world. Rome and Washington D.C.: FAO and The World Bank.

Federal Ministry of Agriculture & Rural Development (FMARD) (2014). Private sector driven agricultural mechanization framework (PSDAMF) and GES application strategy for ATA. Computer Disk.

Freeman SA. (1999). Potential Impact of a ROPS Retrofit Policy in Central Iowa. Journal of Agricultural Safety and Health 5(1), 11-18.

IBRD (International Bank for Reconstruction and Development). 1978. Nigeria: An Informal Survey. Lagos: IBRD (Typescript, 1978. Table 16).

Jabbar MA. (1995). Energy and the evolution of farming systems: The potential for mixed farming in the moist Savannas. In Moist Savannas of Africa: Potentials and Constraints for Crop Production : Proceedings of an IITA/FAO Workshop Held from 19-23 September 1994, Cotonou, Republic of Benin. IITA.


References

Kolawole MI. (1972). Economic aspects of tractor contracting operations in Western Nigeria. J. Agric. Engng Res. 17, 289-294.

Ladeinde MA, EO Atanda, AJ Ageh, SO Idowu & SO Olayemi. (2009). Agricultural machinery operators and mechanics training in Nigeria: An overview of contributions. Journal of Agricultural Engineering and Technology 17(2), 11-18.

Okolie AC. (1995). Oil rents, international loans and agrarian policies in Nigeria, 1970-1992. Review of African Political Economy 22(64), 199-212.

PrOpCom. (2011). Making tractor markets work for the poor in Nigeria: A PrOpCom case study. PrOpCom, Nigeria.

Takeshima H, A Nin Pratt & X Diao. (2013). Mechanization and agricultural technology evolution, agricultural intensification in sub-Saharan Africa: typology of agricultural mechanization in Nigeria. American Journal of Agricultural Economics 95(5, ASSA Proceeding Issue), 1230–1236.

Takeshima H, E Edeh, A Lawal & M Ishiaka. (2014). Tractor owner operators in Nigeria: Insights from a small survey in Kaduna and Nasarawa states. Forthcoming in IFPRI Discussion Paper.

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