Economies of scale and technical efficiency of smallholder pepper (capsicum species) production in Abuja, Nigeria

Abstract

This study examined the economies of scale and technical efficiency of smallholder pepper (Capsicum species) production in Abuja, Nigeria. The multi-stage sampling technique was adopted to obtain a total sample size of 100 smallholder pepper farmers. The primary sources of data were obtained from pepper farmers through a well-structured and well-designed questionnaire. The data obtained were analysed using descriptive statistics, gross margin model, financial analysis, stochastic production frontier model, the elasticity of production, return to scale, and principal component analysis. The results from the study showed that the mean age of pepper farmers observed was 38.3 years. The average household size was 5 persons. The gross margin was N 167, 741.60 per hectare, the rate of returns of the investment in pepper production amounted to 0.89, and the operating ratio was 0.49. The gross margin ratio (GMR) was calculated to be 0.48, and this implies that for every naira that is invested in smallholder pepper production, 48 kobos would be used to cover profits, interest, expenses, taxes, and depreciation. Labour input (P < 0.10), seed input (P < 0.01), farm size (P < 0.01) were significant factors affecting output of smallholder pepper production. The mean technical efficiency was 0.79, leaving a gap of 0.21 for improvement. The returns to scale of 1.2363 imply increasing returns to scale. The study recommends that measures should be put in place to address the challenges of inadequate rainfall through proper irrigation policies.