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Abstract
This study analyzed credit use and its effect on production efficiency
of cocoa farms in Ondo State. Primary data were collected in a crosssectional
survey of 183 randomly selected cocoa farms. These were
drawn in a multi-stage sampling process that covered the five dominant
cocoa producing Local Government Areas of Ondo State Nigeria. Data
collected were analyzed using descriptive statistics and stochastic
frontier. The study found that most (95.1%) of the cocoa farms were
operated by males, with a mean age of 49.8years. The mean cocoa
farm size was 1.28 hectares. Only 58.5% cocoa farmer’s procured credit
during the 2009/2010 production season, of which (83.2%) procured
credit mainly from produce merchants. The mean credit request was
N238,738.30, only N113,321.50 (47.5%) were granted. Farmers that
used credit had significantly (p<0.01) higher farm size (1.44Ha) and
recorded significantly (p<0.01) higher net farm income (N292, 107.23/
Ha) than those that could not secure credit (1.05Ha and N183, 046.83/
Ha respectively). The empirical results revealed that cocoa farmers
were operating at a point of decreasing return as depicted by the return
to scale of 0.153 with mean technical efficiency of 0.44. Hire labour has
positive and significant effect on output at p<0.01. Increase in credit use
brings about significant reduction in technical inefficiency among the
cocoa farms. The result revealed a direct relationship between access to credit and technical efficiency level. The study recommended that
government and other stakeholders should support farmers to form
virile farmer’s organization that will improve credit delivery through
the produce merchant.