Investment in cocoa production in Nigeria: A cost and return analysis of three cocoa production management systems in the Cross River State cocoa belt

The study examined costs and returns in cocoa production in Cross River State by comparing three identified management systems of cocoa production in the area. A two-stage sampling procedure was used to select a hundred and fifty cocoa farmers for the study. Data used in the study were collected using structured questionnaires which were administered by the Agricultural Development Programme (ADP) extension agents using the participatory approach while the data were analysed using descriptive statistics such as mean, median, standard deviation, etc. and an investment decision model comprising the net present value (NPV) and benefit-cost ratio (BCR) analysis. Results show that the respondents were predominantly small scale farmers with farm sizes ranging from one to five hectares. The age distribution of the farmers showed that 61.3% of them were among the active farming population falling within the age range of 21 to 40 years, and 16.67% of the respondents had no formal education. More than 50% of the total respondents sourced funds from their personal savings in all the management systems considered. Importantly, the study found that cocoa production is a profitable business irrespective of management system, since all of the management systems had positive net present values (NPV) at 10% discount rate. The NPV for lease-managed farms is highest. The benefit-cost ratio (BCR) at 10% discount rate was greater than one for all the three management systems, which indicates that the returns from cocoa production are high. Owner-managed farms had the highest BCR followed by lease-managed farms and sharecropped farms in that order. Lease-managed farms were more viable compared with other management systems in terms of their high NPVs. The study recommends that given the high benefits relative to costs involved in cocoa production irrespective of management system, investments in cocoa production can be increased by providing expanded access to cheap and flexible credit and land, which have presented as limiting factors in cocoa production based on the descriptive statistical analysis in the study. Keywords: Cocoa, benefit, cost, investment, management African Journal of Food, Agriculture, Nutrition and Development Vol. 9 (2) 2009: pp. 713-727