TABLE OF CONTENTS
Certification i
Dedication ii
Acknowledgement iii
TABLE OF CONTENTS
List of Figures vii
List of Tables viii
Abstract ix
Chapter one: Introduction 1
1.1 Background of the Study 1
1.2 Problem Statement 4
1.3 Objectives of the Study 6
1.4 Research Hypotheses 7
1.5 Justification 7
1.6 Limitation of the Study 7
Chapter Two: Literature Review 9
2.1 Concept of Fish Farming 9
2.2 Prospect of Fish Farming 10
2.3 Relevance of Fish Farming 10
2.4 Value Chain in Pisciculture Enterprise 11
2.5 The Value Chain Concept Applied To Aquaculture /Fish Farming Enterprise 14
2.6 Value Chain Map of Inputs (Factors) 15
2.6.1 Inputs 15
2.6.2 Feed Manufacturing 16
2.6.3 Hatcheries 17
2.6 Value Chain versus Supply Chain 18
2.7 Production (Out-Grower Fish Farmers) 18
2.7.1 Production Methods 20
2.8 Value Chain Map for outputs (Products) 22
2.9 Value Chain versus Supply Chain 23
2.10 Constraints facing Fish Farming 23
2.11 Theoretical Framework 24
2.12 Analytical Framework 27
2.12.1 Stochastic Frontier Production Model 27
2.12.2 Technical Efficiency (TE) 29
2.12.3 Budgetary Technique 32
2.12.4 Value Chain Analysis 33
Chapter Three: Research Methodology
3.1 Study Area 34
3.3 Sample Techniques 35
3.2 Data collection 36
3.4 Data Analysis 36
3.4.1 Stochastic Frontier Model 37
3.4.2 Budgetary Analysis 39
3.4.3 Value Chain Analysis 39
Chapter Four: Results and Discussions 41
4.1 Socio-economic Characteristics of Respondents 41
4.1.1 Age Distribution of Respondents 41
4.1.2 Sex Distribution of Fish Farmers 42
4.1.3 Marital Status of Respondents 43
4.1.4 Educational Status of Respondents 44
4.1.5 Farming Experience of Respondents 45
4.1.6 Farm Size 46
4.1.7 Household Size of Respondents 47
4.1.8 Distance of Farm to the Market (km) 48
4.2 Steps in Pisciculture Enterprise 49
4.2.1 Value Chain in Pisciculture Enterprise 51
4.2.2 Production Value Chain in Pisciculture Enterprise 52
4.2.3 Marketing value chain in Pisciculture Enterprise 54
4.3 Factor-Product Relationship in Value Chain Pisciculture 56
4.4 Cost and Returns Associated With Pisciculture Enterprise 60
4.4.1 Return on Investment (ROI) 62
4.5 Value Chain Analysis 62
4.6 Constraints 63
4.6.1 Constraints Facing Pisciculture Enterprise 63
4.6.2 Constraints facing Value Chain Pisciculture 65
4.7 Recommendations according to Respondents 66
Chapter Five: Summary, Conclusion and Recommendation 67
5.1 Summary 67
5.2 Conclusion 68
5.3 Recommendation 69
References
Appendices
List of tables
Table 2.1: Output Based on Water Area and System Used 19
Table 3.1: Showing the Administrative Divisions and Local Government Areas of Lagos State 35
Table 4.1: Distribution of Respondents by Age 42
Table 4.2 Sex Distribution of Respondents 42
Table 4.3 Distribution of Respondents by Marital Status 43
Table 4.4 Educational status of respondents 44
Table 4.5: Farming Experience of Respondents 45
Table 4.6 Farm Size of Respondents 46
Table 4.7 Distribution of Household Size of Respondents 47
Table 4.8: Frequency Distribution of Respondents According to Farm Distance 48
Table 4.9: Steps of respondents in Pisciculture Enterprise 49
Table 4.10: Distribution of respondents based on value chain 51
Table 4.11: Type of Production value added by respondents in Pisciculture Enterprise 52
Table 4.12: Type of market value added by respondents in Pisciculture Enterprise 54
Table 4.13: Summary statistics of Output and Explanatory variable 56
Table 4.14: Maximum Likelihood estimation of the Cobb-Stochastic Production function 58
Table 4.15: Frequency Distribution of Technical Efficiency of fish farmers 60
Table 4.16: Cost and Returns associated with Pisciculture Enterprise 60
Table 4.17: Value Chain Analysis of pisciculture enterprise 62
Table 4.18: Constraints Facing Pisciculture Enterprise 63
Table 4.19: Constraints facing Value Chain Pisciculture 65
Table 4.20: Recommendation of Respondents 66
List of figures
Figure 2.1: An Operational Value Chain chart 12
Figure. 2.2: The Extended Value Chain 13
Figure 2.3: Fish Chain in West Africa 14
Figure 4.1: Depicts Respondent Age Distribution 42
Figure 4.2: Depicts Sex Distribution of Respondents 43
Figure 4.3: Depicts Marital Distribution of Respondents 43
Figure 4.4: Depicts the Educational Status of Respondents 44
Figure4.5: Depicts Farming Experience of Respondents 45
Figure 4.6: Depicts farm size of respondents 47
Figure4.7: Depicts Household Size of Respondents 48
Figure4.8: Depicts respondents’ farm distance to market (km) 49
Figure4.9: Depicts Steps in Pisciculture Enterprises 51
Figure 4.10: Depicts respondents’ status on value chain 52
Figure 4.11: Depicts type of Production Value Chain Respondents
Adopts in their Enterprise 54
Figure4.12: Depicts type of Marketing Value Chain Respondents adopts
in their Enterprise 56
ABSTRACT
The broad objective of the study was to analyze factor-product relationship in pisciculture value chain in Lagos state, Nigeria. The specific objectives were to: (i) determine the socio-economic characteristics of the pisciculture farmers and examine influence on their output, (ii) identify the value chain steps in pisciculture enterprise, (iii) determine the factor-product relationship and estimate the technical efficiency in the value chain, (iv) estimate the costs and returns of pisciculture value chain and (v) identify the various constraints facing the pisciculture value chain. The study adopted the survey design. It utilized mainly primary data. A structured close-ended questionnaire was used to collect information from the 120 fish farmers in the area. Data generated were analyzed using the stochastic frontier analysis (SFA), budgetary analysis, rate of return; test of difference in mean and value chain analysis. Average output of fish per production cycle was 14,000kg, while an average farm size (land) was 1.97ha per farmer. Average scores for farming experience, household size and years of schooling were 11.7years, five persons and 14.4 years respectively. The farmers were young as indicated by mean age of 43years. The result showed that all farmers (100%) culture fingerlings, juveniles and market size fishes while only few carryout hatching of eggs (40%) and culture fries (50%) in pisciculture enterprise in the state. Mean scores for pond size ( =2.22m2) and feed ( =3.12N/ha) were also recorded. Six factors namely, farm size, labour, feed, fertilizer, stocking capacity and depreciation value with coefficients of 0.02, 0.28, 0.03, 0.04, 0.40 and 0.20 respectively exerted significant (p<0.05) effects on the output of fish. All the production variables analyzed were positive except farm size and feed. The major determinants of efficiency were identified to be farm size and stocking capacity. The farmers are fairly efficient technically, with a mean efficiency estimate of 0.88 ( =88%). An average profit of N5,371,497.753 was recorded per farmer per farming cycle with a 2.2 return on investment (ROI) for farmers without value chain; while an average profit of N6,734,290.39 and a 2.0 return on investment was indicated on the other hand for farmers with value chain; indicating an average difference in margin of N1,362,792.64 between these farmers per production cycle. Also, the study revealed that hatching of eggs which only takes place in one week generates an average profit of N71,457.18 to the farmers while culturing of fries only generates on the average after two weeks a net profit of N16,928.36, while on the other hand, culturing of fingerlings which take up to four weeks generates an average profit of N467,856.72. Post-fingerlings culturing rakes in an average profit of N187,856.72 after four weeks while juvenile culture gives an average profit of N2,987,856.72 after four weeks while raising fish to market size which takes another four weeks produces on the average a profit of N1,542,223.29. It was therefore deduced that the highest profit in the chain of pisciculture enterprise remains culturing of juvenile and raising to market size respectively. Constraints to pisciculture enterprise in the state were high feed cost ( >3.8), lack of credit ( >3.6), high cost of inputs ( >3.4) and poor technical know-how ( >3.4). Value chain exerted no significant effect on
Chapter one
Introduction
1.1 Background of the Study
Food and Agricultural Organization (FAO, 2002) reported that an estimated 840 millionpeople lack adequate access to food; and about 25% ofthese are in sub-Saharan Africa (Illoni, 2007). As the population grows and puts morepressure on natural resources, more people willprobably become food insecure, lacking access tosufficient amount of safe and nutritious food for normalgrowth, development and an active/healthy life(Illoni, 2007). A number of countries in sub-SaharanAfrica are characterized by low agricultural production,widespread economic stagnation, persistent politicalinstability, increasing environmental damage, and severe poverty. Given these situations, it is thereforepertinent to provide the poor and hungry with a low costand readily available strategy to increase foodproduction using less land per caput, and less waterwithout further damage to the environment (Pretty et al.,2003).
Aquaculture is the farming of aquatic organisms,including fish, molluses, crustaceans and aquatic plants,is often cited as one of the means of efficiently increasing food production in food-deficit countries (Inoni, 2007). According to Zohar, Dayan, Galili and Spanier (2001), pisciculture (also called fish farming) is the principal form of aquaculture, while other methods may fall under mariculture. Fish farming is an aspect of aquaculture which involves the cultivation of fishes in ponds, tanks or other chambers from which they cannot escape. A wide range of fish farming does exist including growing of fish in earthen ponds, concrete tanks, cages, pens, run-ways, glass tanks, acrylic tanks, plastic tanks, Race-ways etc. (FAO FishStat Plus 2012).Pisciculture was derived from two words Pisce(s) which means fish(es) and culture which means rearing, raising or breeding of living things. Pisciculture is therefore defined as a branched of animal husbandry that deals with rational deliberate culturing of fish or fishes to a marketable size in a controlled water body (Encyclopedia, 2009). Consequently, there are two main types of pisciculture to be distinguished: (1) the rearing in confinement of young fishes to an edible stage, and (2) the stocking of natural waters with eggs or fry from captured breeders (Encyclopedia, 2009).
In Nigeria, total domestic fish production fluctuated between 562,972 to 524,700 metric tonnes in 1983 toyear 2003; while the output of fish farming during this period was 20,476 to 52,000 metric tonnes. Fish farming accounted for between 3.64 and 9.92% of total domestic fish production in Nigeria within this period,while the bulk of production came from artisanal fishing. Although the outlook of aquaculture production is worrisome given the growing demand forfish and the declining yield of natural fish stocks due toover-exploitation, fish farming still holds the greatestpotentials to rapidly boost domestic animal protein supply in Nigeria. Fish production currently contributes 3.5percent of Nigeria’s Gross Domestic Product (GDP) and accounts for 0.2% of the total global fish production (Central Bank of Nigeria (CBN), 2011).as well as provides direct and indirect employment to over 6 million people (Adekoya, 2004); but if optimally explored has the potential as an enterprise to contribute significantly to the possible creation of 30,000 jobs and generation of revenue of US$160 million per annum, which would invariably improve the agricultural sector and boost the Nation’s economy at large (Federal Ministry of Agriculture and Rural Development, (FMARD), 2013). Fish farming is an integral component of the overall agricultural production system in Lagos State, Nigeria.The terrain of most part of the State is swampy and prone to seasonal flooding. This makes a vast expanse of land in these areas unsuitable for crop farming. The prevailing hydrographic conditions therefore make fish farming a very attractive alternative production to which the abundant land and water resources in Lagos State can be put (Inoni and Chukwuji,2000).
An efficient method of production is that which utilizes the least quantity of resources in order to produce a given quantity of output. A production process uses more physical resources than an alternative method in producing a unit of output is thus said to be technically inefficient. However, since economic efficiency embodies both technical and allocative efficiencies, once the issues of technical inefficiency have been removed the question of choosing between the set of technically efficient alternative methods of production, allocative efficiency, comes to fore.According to Oh and Kim (1980), allocative efficiency is the ratio between total costs of producing a unit of output using actual factor proportions in a technically efficient manner, and total costs of producing a unit of output using optimal factor proportions in a technically efficient manner. However, a farm using a technically efficient input combination may not be producing optimally depending on the prevailing factor prices.Thus, the allocatively efficient level of production is where the farm operates at the least-cost combination of inputs. According to Yotopoulos and Lau (1973), a firmis allocatively efficient if it was able to equate the value of marginal product (MVP) of each resource employed to the unit cost of that resource; in other words, if it maximizes profit. Therefore allocative efficiency measure, quantifies how near an enterprise is to using the optimal combination of production inputs when the goal is maximum profit (Richetti and Reis, 2003).
In addition to the facts above, Nigeria is proudly the most resourceful and vibrant African nation in the aquaculture industry and currently the leading producer of catfish in Africa (FMARD), 2013). “It is sad to note that we are still far behind in our efforts at reaching optimality (i.e. tapping the highest potentials from every resource use and production pattern) in fish farming thereby often leading to artificial glut, low value of non–exportable aquaculture products”(FMARD, 2011). Due to these facts, value chain has gained more recognition and importance as a way of fighting poverty and achieving food security for fish farmers, this was in-line with the statement of Gradl, Ströh de, Martinez, Kükenshöner, and Schmidt (2012), who opined that involving smallholder farmers in commercial value chains can boost their incomes and improve their food security.
Value Chain according to Hempel (2010) is defined as every step, a fisheries business goes through from raw materials to the eventual end user. Value chain is thus a chain of activities; products pass through all activities of the chain in sequence and at each activity the product gains some value (Alam, Palash, Ali Mian and Mohan Dey, 2012). The chain of activities gives the products more added value than the sum of added values of all activities (FAO, 2011).Value chain therefore describes a high-level model of how fishery businesses receive raw materials as input (land, water, labour and capital), add value to the raw materials through various processes and sell finished products to customers (Alam et al, 2012). Moreover, fishery value chain can be defined as interlinked value-adding (Department of Fisheries (DoF), 2002).
The nature of value chain activities differs greatly in accordance with the types of fish production the farmer is involved in (Ardjosoediro, and Neven, 2008). Value chains for pisciculture differ between fish types as well as fish management and frequently within and outside various regions (De Silva, 2011). The goal is to deliver maximum value for the least possible total cost (FAO, 2011). The value chain framework shows that the value chain of a farmer or producer may be useful in identifying and understanding crucial aspects to achieve competitive strengths and core competencies in the marketplace (Dubay, Tokuoka, and Gereffi, 2010). Value chains have various strategies that focus on those activities that would enable the farmer to attain sustainable competitive advantageand are also tied together to ultimately create value for the consumer (DoF, 2002; Alam et al, 2012).
Furthermore, value chain offers the customer a level of value that exceeds the cost of the activities, thereby resulting profit margin (Da Silva et al, 2006). Cost advantage can be pursued by reconfiguring the value chains. Reconfiguration or structural changes of value chain refers to activities such as new production processes, new distribution channels or a different sales approach (United Nations Environment Programme (UNEP), 2009). Moreover, differentiation of value chains stems from uniqueness. Differentiation advantage may be achieved either by changing individual value chain activities to increase uniqueness in the final product or reconfiguring the value chain (Wilkinson, 2006). Value chain enables rural residents to capture more margins from their farm produce, however, this is only possible if the credit and other constraints are resolved (Stanton 2000). Value chain analysis can help fish export of developing countries to be competitive in the international market (United States Agency for International Development (USAID), 2008).
