ANALYSIS OF SUPPLY RESPONSE AND TREND OF GINGER PRODUCTION IN BENUE AND KADUNA STATES, NIGERIA

ABSTRACT

This study analysed supply response and trend of ginger production in Benue and Kaduna States Nigeria. A multistage sampling technique was employed. Cross sectional data from 359 respondents were collected through structured questionnaire and time series data from 1979 to 2018 were also used for the study. Simple descriptive statistics, Autoregressive Distribution Lag Model (ARDL) and the grafted polynomial model were employed for the study. Male (80.5%) dominated ginger farming. (83.3%) were married with an average household size of 8 persons. (62.4%) attained the level of secondary education at an average age of 31 years. Ginger farmers were well experienced in their farm practices with an average farm size of 1.0 ha. The result of the ARDL model revealed that ginger output responded positively to land area and price change at 1% significant level in the long run with a coefficient of 0.316 and 1.452. Ginger productivity dprod(-1) and dprod(-2) were significant at 1% and positively influenced the productivity of ginger in the short run. The coefficients of the current (0.381), first (0.2598) and second (1.0256) lag of land area positively affect ginger production at 1% significant level in the short run. The short run coefficients for the current price (1.8518) and first lag of price (1.2059) positively influenced ginger production at 1% significant level. However, ginger production was negatively influenced by price in the second previous years at 10% significant level. The estimate of the error correction term (ECT) has a coefficient of -0.884, -0.929 and -0.124 in Benue, Kaduna and the pooled sample respectively. This implies that nearly 88%, 92% and 12% of any disequilibrium level of ginger production during the previous years will be corrected in the subsequent years in Benue,  Kaduna  and  the  States  combined  respectively.  The  observed  trend  in  ginger production indicated that ginger output stood between the ranges of 180,000 to 200,000 metric tonnes from 1980 to 1984 and maintains a slow rise from 1985 to 1990. However, between 1999 and 2000 there was a structurer break and a sharp drop in ginger production. Ginger production increases from 455,660.55 to 503,001.12 metric tonnes between 2009 and 2010 and reaches a peak of 594,502.52 metric tonnes in 2015. However ginger production fell sharply from 56,000 to 27,000 metric tonnes between 2017 and 2018. These changes occurred either as a result of price variation or government agricultural policies.  The result of the ex-ante and ex-post forecast of the Quadratic-Quadratic-Linear function for the pooled sample predicted a fall in ginger output in the future with a root mean square error(RMSE), mean  absolute  error(MAE)  and  mean  absolute  percentage  error(MAPE)  of  65658.12,49729.86 and 16.386 respectively. Inadequate rainfall, high, weed infestation, disease incidence, high cost of seedlings, inadequate improved seed variety, inadequate loan and credit, inadequate market extension service are serious constraint militating against ginger production  in  the  study  area.  Since  the  Quadratic-quadratic-linear  function  predicted  a possible fall in ginger production in the near future, it is recommended that credit facilities and  farm  inputs  should  be  made  available  in  the  study  area,  ginger  farmers  should  be sensitized through adequate extension services on modern production techniques and adaptation strategies to climate change constraints. Government should regulate the price of ginger as a potential export commodity. The land tenure act should be more flexible to give more access to land for ginger production.

CHAPTER ONE

1.0        INTRODUCTION

1.1        Background to the Study

Nigeria has in recent years, been involved in executing painful economic recovery programmes arising from recession in international oil market and changes in the macroeconomic direction of the world. This is the consequence of dependence on a monolitic (crude oil) economy at the expense of other untapped economic resources of the nation (Nigerian Association of Agricultural Economists, 2015).

A strong and efficient agriculture sector would enable a country to feed its growing population, generate employment and foreign exchange and provide raw materials for industries. The agricultural sector has a multiplier effect on any nation’s socio- economic and industrial fabric because of its multifunctional nature (Mbam, 2012). The crises in Nigeria economy lies in the neglect of the agriculture sector and the increase dependence on a mono-culture economy, mostly based on oil (National Directory of Employment, 2006). The neglect of the agriculture sector has post so many  challenges  in  the  development  of  agriculture  in  Nigeria.  Aside  this,  most farmers are unaware of several factors to be considered during their farming practice. One  among  the  major  challenges  is  the  fluctuation  in  price  of  agricultural commodities which is also common to ginger production (Titilayo et al., 2016).

Ginger (Zingiber officinale) as a crop is an herbaceous perennial plant belonging to the order, Scitamineae and the family Zingiberaceae. It is referred to as root crop and a typical herb extensively grown across the world with its pungent aromatic under- ground stem or rhizome which makes it an important export commodity in world trade (Ajibade and Dauda,  2005). Ginger is a rhizomatous spice of culinary  and medicinal importance (Amadi, 2012).

Nigeria was among the countries that the global production of ginger in 2008 was over 1.4 million metric tons (MT) and the major exporting country to US in 2007 (Folorunso and Adenuga, 2013). Out of over 1.4 million metric tons (MT) of ginger produced annually, Nigeria produces an average of 50,000 metric tonnes of fresh weight ginger per annum. About 10% of the produce is consumed locally as fresh ginger while the remaining 90% is dried for both local consumption and export. 20% of the dried ginger is consumed locally for various uses and 80% is exported (Ezeagu, 2006; Folorunso and Adenuga, 2013).  The global demand for ginger was necessitated by the various uses of ginger crop. it is used domestically for spicing food and also for local medicinal purposes. It is also used by pharmaceutical, beverage and cosmetics companies, for the production of drugs, beverages and cosmetics respectively. According  to  Mallam  (2015)  ginger  is  not  only  an  income earner  for  individual farmers, it is as well a foreign exchange earner for the country, and the dried products are the major forms of which ginger is traded internationally. It also has various uses, which ranges from been used as spices in soups, confectionaries, zingiberone (anti- helmintic)  from  Zingiberofficinale,  oloresine  are  among  the  extracts  used  for medicinal purposes (Mallam, 2015). Fresh ginger is consumed as vegetable. Ginger powder is used in making ginger beer, wine, and baked  foods. The essential oil obtained from ginger is used in the food and perfume industries. Oleoresin is the total extract, which contains both volatile oil and pungent extractions. It is used in many types  of  baked  foods,  sauces,  and  alcohol  beverages.  Ginger  is  widely  used  for flavouring a great variety of foods. In western countries, ginger is used for culinary purposes. In Saudi Arabia, ginger is used mainly in the preparation of ginger coffee. In United States of America (USA), United Kingdom (UK) and Canada, ginger is widely used in meat processing industries. Ginger is extensively used in winter for curing minor ailments like cough and cold. It is also prescribed as an adjunct of many tonic and  stimulating  remedies.  Other  uses  include;  culinary  uses  such  as  stews, pepper soups, etc; and Medicinal/Therapeutic uses such as ginger/lime/honey anti- malarial and anti-typhoid fever portion, ginger/garlic anti-hypertension tea (Mefoh, 2006). Ginger is used in the control of atherosclerosis in rabbits and nausea and vomiting and has confectionary and beverages uses as well used as ginger ale, ginger beer, meat flavouring and tendering, diary product and livestock feeds. Despite the increased demand and uses of ginger in both local and global market, its production is perceived to fall short of the demand for the crop, thus creating a wide gap between the demand and supply of ginger in the market place.

Despite the huge potentials of ginger in stimulating agricultural growth in Nigeria, it is surprising and unfortunate to note that the trend of ginger production and trading in Nigeria is not on a steady accent (Daniel, 2009). Over the years, in Nigeria, there have been occasional food supply shortfalls and high food prices in all or some parts of the country, it can be noted that changes in ginger production output was glaring over the years (2001 to 2016) from as low as 200,000.00 tons in 2001 to as high as 556,901.00 tons in 2016 (Kaduna State Agricultural Project, 2017). Though there may be fluctuation within the year interval, this report indicates the growing importance of ginger as an essential cash crop (Food Price Watch, 2017).  Notwithstanding, ginger production has not been an exception to the declining performance of agricultural production in Nigeria, hence it has not been able to realize its full potential as an export crop and a major foreign exchange earner (Sunday et al., 2014).

The price of nearly every agricultural commodity increased sharply by 55 percent between  2007  and  2008  (UN  Department  of  Public  Information,  2008).  This fluctuation in the price of agricultural product (i.e tubers and cereals crop) produces a supply shock leading to a yearly seasonal change in agricultural output. A look at these seasonal changes in ginger production provides the required information on their causes and trend which further guides ginger farmers in their production pattern. Recently between 2015 and 2016 the price of agricultural commodities including ginger increased sharply with some commodities experiencing an increase of between 50% and 80% in Nigeria. However, despite frantic efforts by the Central Bank of Nigeria (CBN) to put stringent monetary policies in place, the prices of goods and services are steadily rising throughout the country (Food Price Watch, 2017).

Agricultural commercialization policies and price mechanism targeted towards increasing output in supply response play an important role in increasing farm production   (Nerlove and Bachman, 1960).   Measurement of supply trend and responsiveness                of                ginger                farmers                is                a veritable    means    of    assessing    the    impact    of    economic    reforms. Policies which provide appropriate incentive such as price or non-price incentives are likely to bring about high supply responsiveness, while those that act as disincentives are less likely to do so. Interestingly, if agricultural supply is highly responsive to changes, it is likely farmers’ behavior to produce more can effectively induced changes in ginger production.

For information  to be  meaningful and useful to ginger farmers there is the need for analysis to refine and summarise the information, hence, the estimations of output supply response and forecasting models to forecast the probable future values of an economic time series which is one of the econometric methods of information management (Nigerian Association of Agricultural Economists, 2015). The use of supply and trend models for estimation could improve ginger farmers level of productivity and the power of prediction provided by the use of time series data which subsequently guides against unforeseen circumstances in the near future (Commission for Sustainable Development, 2008).

1.2       Statement of the Research Problem

The population growth rate in Nigeria is higher compared to its food production (National Planning Commission, 2015). The population of Nigeria as at 2019 stood at 202,937,844 with a high dependency ratio of 78.8% (World Population Prospects 2019 Revision). The Nigeria Food Consumption and Nutrition Status Survey (NFCNS) showed  that  nationally,  42  percent  of  children  were  stunted  with  an  estimated 2 million children in Nigeria suffering from severe acute malnutrition, 25 percent underweight and 9 percent wasted (USAID, 2017). This will convert sub-Saharan Africa to being the region with the highest number of inhabitants who are chronically malnourished.

Producers of ginger in Nigeria face the world market directly. They reap profits when prices are good but absorb shocks and suffer losses when prices fall. Consequently, the producer’s price of ginger has become unstable creating dis-incentive for production thus making output and exports to suffer (Mesike et al., 2010). This could have negative implications for the agricultural industry and for the national income. Consequently, the prices at which ginger and other cash crops farmers in Nigeria are able to sell their produce to a large extent now depend on how they respond to both local and global demand.

Ginger production has not been an exception to the declining performance of agricultural production in Nigeria, given that it has not been able to realize its full potential as an export crop and a major foreign exchange earner. As observed by Sunday et al. (2014), the absence of scientific research on the supply system to back up the efforts of the farmers was among the factors limiting increased production. The trend and output supply response to price and other variables could have a negative effect on ginger production in Nigeria. According to Emmanuel (2008) in response to the dwindling fortune of ginger production in Nigeria, governments have over times initiated numerous policies, programmes and projects aimed at reviving ginger production. No study has been undertaken in Nigeria in recent years to analyse the supply response and trend in ginger production. It is assumed that if appropriate measures are not undertaken to address the problems and pattern of seasonal food production and price fluctuation, the future growth of agriculture in Nigeria would be jeopardized. It is in view of this that this study aims at answering the following research questions.

i           What are the socio-economic characteristics of ginger farmers?

ii         What is the output supply response of ginger farmers?

iii        What is the observed trend of ginger production in the study area?

iv        What is the ex-post forecast for ginger production in the study area?

v          What are the constraints faced by ginger farmers in ginger production?

1.3       Aim and Objectives of the Study

The aim of this research work is to examine the supply response and trend of ginger production in Benue and Kaduna States, Nigeria. The specific objectives of the study are to:

i.         describe the socio – economic characteristics of ginger farmers;

ii.        determine the output supply response of ginger farmers;

iii        examine the observed trend of ginger production in the study area;

v          estimate and predict the trend of ginger output in the study area;

vi         examine the constraints faced by ginger farmers in ginger production.

1.4       Research Hypotheses

H01        There is no significant relationship between supply and prices of ginger. H02        The size of land area cultivated does not have significant effect on ginger output

H03        There is no fall in ginger production in the near future

1.5       Justification for the Study

Uncertainty in crop prices makes it difficult for farmers in Nigeria to be confident that they will obtain a sufficient return from the sale of the additional harvest in their production practices. This is alleviated by fluctuations in output and market information services that assist producers in organizing supply and enabling farmers to re-route goods to other markets which suffer from a shortage of supply or high-demand (Mani, 2018). There is therefore a need to understand the pattern of output variations and the causes of these variations in ginger production in other to establish policies that will help stabilize deviations in ginger production.

The focus on ginger supply apart from its importance is also derives from the fact that ginger is a valuable export commodity with the capacity of generating high foreign exchange as a means of government revenue and also a source of income to small scale rural farmers. In addition to this, ginger is a multipurpose crop; all parts of the plant have economic value. Emmanuel ( 2008) asserted that most of the previous researches focused on the profitability and efficiency of ginger production with little emphasis on the supply analysis and the supply trend.

Various factors affecting the supply of ginger in Nigeria could have a negative effect on the productivity level of ginger farmers and consequently, their level of incomes. It therefore  becomes  imperative  to  determine  these  factors  and  the  trend  of  ginger output in order to provide credible information on redressing the situation. In addition, a supply output response analysis will enable this research to estimate the various trends associated with ginger production in the study area.

In developing countries like Nigeria, inadequate information on the determinants of an economic time series and the absence of capable statistical routines, have often limited the choice of predictive models. These conditions have necessitated the forecasting of key economic time series (supply, demand, prices, etc) on trend, using variants of the linear model which is not in good means as compared with the grafted model. It is therefore with the hope of using the right model in detecting relevant factors that could serve as incentive for agricultural households to increase the present level  of ginger  supply  in  an  effort  to  bridge  the gaps  between  food  supply  and consumption and  to  provide  a better  understanding  of  supply  response  in  ginger production that this study will be carried out.   Thus, the study is therefore another avenue towards increasing the production and supply of ginger by determining the structure of supply system.

Tight market conditions for essential agricultural commodities pose policy challenges for national governments, as well as for international organizations (Mani, 2018). In order to take the right policy decisions, there is the need to understand what causes the supply shock, what the implications may be for prices and price volatility in ginger production, and how ginger farmers may be affected. Prices vary almost throughout the year and understanding the trend of such variations will therefore be essential for good planning by ginger farmers, consumers and policy makers. This research aims to improve the knowledge of ginger farmers on how to predict and respond to price change in the future.

This       study       attempted       using       model       which       incorporates       more general    dynamic    structure than the restrictive popular Nerlovian    models often used   in   agricultural   supply   response function.  Hence,  unlike  Nerlovian  model, the     co-integration          approach          is          useful          in          overcoming

the  potential  problem  of  spurious  regression  in  supply  response  function. The research   provide the basis for further research work most especially in respect to supply response and trend in ginger production. In addition to this, is to provide government with the understanding with the view to contributing to sound policy formulation for ginger production in Nigeria.

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