ECONOMIC ANALYSIS OF COTTON MARKETING UNDER THE FREE-MARKET SYSTEM IN NIGERIA

ECONOMIC ANALYSIS OF COTTON MARKETING UNDER THE FREE-MARKET SYSTEM IN NIGERIA

Abstract:

SJNCE the introduction of the Structural Adjustment Programme in 1986, the Federal Government has been introducing a series of measures aimed at stimulating increased agricultural production. One of such measures was the abolition of the seven commodity marketing boards which from 1977-1986 were responsible for organising the marketing of Nigeria’s major agricultural produce Including cotton. This was informed by their identified Inefficiencies and inability to sustain expanded commodity production. Since L9.86 therefore, cotton marketing has been operating under the free-market system. The objective of this study was to determine whether the new marketing system has eliminated the inefficiencies associated with the commodity board marketing system. To achieve this, data were collected from a total of 75 cotton farmers, 15 cotton buying agents, 12 cotton merchants, and 3 cotton ginning companies in Bauchi, Katsina, Kaduna and Sokoto states during the 1991/92 cotton season. The data were analysed using descriptive statistics, gross and marketing margin analysis, marginal cost analysis, price index analysis, Efficiency Ratio and three measures of concentration namely: the Gini Coefficient, the Herfindahl Index and the Coefficient of Variability. The results showed that efficiency has been” increased under the free enterprise system. The study observed that farmers were getting higher prices relative to the ultimate consumers’ expenditure on thecommodity than tinder the previous system. Both average yield/ha for farmers and aggregate output of the commodity wore on the increase while the industry was expanding rapidly and was attracting investments in the areas of product ion, processing and merchanting. The study however found that grading of cotton was no longer practised as buyers usually go after the produce at farmers’ homes and farms. Farmers also faced shortage of capital and difficulties in acquisition of product ion input. Part of the recommendations of the study was that to sustiin the level’ of efficiency being achieved, government should intervene in the area of enforcing inspection and grading before sales and take decisive steps in ensuring that farmers got adequate inputs at reasonable prices as well as credit facilities in order to sustain attractive profit margin, thereby encouraging expanded production of the crop in the country.

ECONOMIC ANALYSIS OF COTTON MARKETING UNDER THE FREE-MARKET SYSTEM IN NIGERIA