Can medium scale farms contribute to smallholder commercialisation and welfare in Nigeria?

APRA researchers Lenis Saweda O. Liverpool-Tasie and Salim Nuhu explore the beneficial relationship between small-scale and medium-scale farms in Nigeria, where frequent interactions between the two are boosting the productivity and welfare of small scale farmers. They then look at policy implications, and how the government can help support this partnership.

This blog is based on APRA Working Paper 38. Access it, for free, here.

Written by Lenis Saweda O. Liverpool-Tasie and Salim Nuhu

The share of farmland under “medium-scale” farms (5-50 hectares) is on the rise in many countries in sub-Saharan Africa. These medium-scale farms (MSFs) co-exist with small-scale farmers (operating on less than 5 hectares), who still constitute the majority of households in rural areas of Africa. Compared to large-scale plantation farms (LSFs), MSFs tend to be more socio-culturally similar to small-scale farms (SSFs) in the communities where they are located (Wineman et al., 2020; Houssou et al. 2016). Due to their smaller size, MSFs are also more likely (than LSFs) to be interested in coordinating input purchase or output sales with SSFs. Despite the increasing recognition of these potentially stronger spillover effects of MSFs on SSFs, the majority of existing empirical literature has focused on spillover effects of LSFs (Ali et al., 2019, Burke et al., 2019, Xia and Deininger, 2019, Glover and Jones, 2019, Herrmann, 2017, Lay et al., 2018) and that evidence is mixed. Thus, the Nigeria work stream 1 team explored the extent to which SSFs interact with MSFs around them and whether those interactions affect their modern input use, productivity, commercialisation, and welfare. We empirically test for these effects with data from Kaduna and Ogun in Nigeria, Africa’s largest economy and most populous nation. 

Findings from study

First, we find that many small-scale farmers in Nigeria interact with the medium-scale farms (MSFs) around them. About 30% of SSFs either received training from, sold output to, or purchased inputs from an MSF around them.

Second, we find that receiving training and purchasing inputs from an MSF is associated with higher yields and improved welfare via increased incomes and lower poverty incidence and severity of poverty.  While receiving training increases the likelihood and intensity of improved seed use, it has no effect on the use of fertiliser or crop protectants (such as herbicides and pesticides). Surprisingly, purchasing inputs from an MSF has no positive impact on any modern input use. This implies that the increased productivity observed from farmers who purchased inputs from MSFs is likely driven by improved access to higher quality inputs; a big challenge in sub-Saharan Africa (Poku et al., 2018) or the provision of other complementary services alongside the sale of inputs such as training or credit or logistics services.  This is consistent with Liverpool-Tasie et al (2020) who find that value chain actors in the midstream and downstream of food value chains across Africa address idiosyncratic market failures of SSFs by providing them with complementary services such as credit, logistics, training and physical inputs that improve SSF productivity and welfare.

Cassava farmer in Nigeria. Credit: IFPRI

We find that the opportunity to sell through MSFs has strong welfare effects. It enables SSFs to receive a higher price; thereby boosting their crop production and total income. This reduces their probability of being in poverty as well as the extent and severity of poverty they experience. Higher yields associated with sales coordination could occur through investments made in agricultural production to take advantage of improved access to a more guaranteed market and/or training offered to support the coordination activities of medium-scale farms.[1] On exploring this further, we confirm that SSF productivity and welfare are significantly enhanced by more intense interactions with medium-scale farmers. This means that the provision of multiple complementary services and opportunities by MSFs is significantly driving improved SSF productivity and welfare.

Policy implications

We believe that our findings have important implications for policy makers and development practitioners across Africa. Currently, African governments are striving to improve SSF welfare while creating an environment for expanded food production to meet the demands of a rapidly growing populations and changing dietary patterns.

Our findings suggest gains from policies and programs that encourage the beneficial co-existence of medium and small-scale farms. MSFs in our study sample are supporting SSF productivity and welfare via improved management practices and the opportunity they provide for SSFs to sell their output at more competitive prices. Government and donor programs should support these interactions and ensure that they are inclusive of typically disadvantaged groups such as women, youth and marginalised SSFs.

We also find that multiple interactions, such as market access alongside training, are important for these positive productivity and welfare effects. Thus, in addition to supporting the beneficial co-existence of MSFs and SSFs, incentives/support to MSFs (and other market actors) to boost the provision of multiple and complementary services (access to input, training and output market) should be encouraged.

[1] Because our input use  and crop yield determination occurs before our sales outcome (though through the effect of the number of MS farms  in a farmers vicinity in the previous farming year) it is also possible that farmers who use higher inputs and have higher yields sold to MS farms we focus more on the welfare effects of  sales coordination.

Cover photo credit: Student Media Grant winner Immanuel Afolabi

Please note: During this time of uncertainty caused by the COVID19 pandemic, as for many at this time, some of our APRA work may well be affected but we aim to continue to post regular blogs and news updates on agricultural policy and research.