Agricultural technology adoption, commercialization and smallholder rice farmers' welfare in rural Nigeria

Awotide, Bola Amoke; Karimov, Aziz A.; Diagne, Aliou Article Agricultural technology adoption, commercialization and smallholder rice farmers' welfare in rural Nigeria Agricultural and Food Economics Provided in Cooperation with: Italian Society of Agricultural Economics (SIDEA) Suggested Citation: Awotide, Bola Amoke; Karimov, Aziz A.; Diagne, Aliou (2016) : Agricultural technology adoption, commercialization and smallholder rice farmers' welfare in rural Nigeria, Agricultural and Food Economics, ISSN 2193-7532, Springer, Heidelberg, Vol. 4, Iss. 3, pp. 1-24, https://doi.org/10.1186/s40100-016-0047-8 This Version is available at: https://hdl.handle.net/10419/179065 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ RESEARCH Open Access Agricultural technology adoption, commercialization and smallholder rice farmers’welfare in rural Nigeria Bola Amoke Awotide 1* , Aziz A. Karimov 2 and Aliou Diagne 3 * Correspondence: [email protected] 1 Agricultural Economics, University of Ibadan, Ibadan, Ibadan 200001, Nigeria Full list of author information is available at the end of the article Abstract This study assessed the determinants of intensity of adoption of Improved Rice Varieties (IRVs) and the effect of market participation on farmers’welfare in Nigeria using the Tobit and Heckman two-stage models, respectively. The sample consists of crosssectional data of 600 rice farmers selected randomly from three notable rice producing States in Nigeria. The variables that positively and significantly influenced the intensity of IRVs adoption include income from rice production, membership of a farmers’organization, and the distance to the nearest sources of seed, cost of seed, yield and level of training. Gender of household head, access to improved seed, years of formal education, and average rice yield were those variables that are positive and statistically significant in increasing the probability that a farmer would participate in the market. The result further suggests that any increase in the farmers’welfare is conditional on the probability of the farmer participating in the rice output markets. In addition, higher yield, income from rice production, gender of household head, and years of formal education are the variables that are positive and statistically significant in determining households’welfare. Therefore, it is recommended that formation of associations among the rural farmers should be encouraged. Access to seed and information about the IRVs are also essential to increase the intensity of its adoption. Programmes to improve contact with extension agents, increased access to credit, raising educational background and increasing the area devoted to cultivating IRVs are the factors to be promoted in order to increase market participation and hence improve the welfare of rural households. Keywords: Rice, Adoption, Commercialization, Farming, Welfare, Nigeria JEL classification: Q13, Q16, O13 Background The agricultural sector continues to play a dominant and strategic role in the development and growth of most developing nations of the world. Most importantly, its role as a source of employment cannot be overemphasised. In Sub-Saharan Africa (SSA), Asia and the Pacific, the agriculture-dependent population is over 60 %, while in Latin America and high income economies the proportions are estimated to be around 18 % and 4 %, respectively (World Bank, 2006). Therefore, the agricultural sector is vital for bringing about economic growth and development, overcoming poverty and enhancing food security. However, the aforementioned potentials of the agricultural sector could © 2016 Awotide et al. Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. Awotide et al. Agricultural and Food Economics (2016) 4:3 DOI 10.1186/s40100-016-0047-8 only be achieved through an increase in productivity of smallholder farmers as emphasised in the 2008 World Development Report. Thus, boosting agricultural productivity has been an issue of paramount importance to development institutions across the globe and in order to achieve this, the use of technological improvements have played a key role (Maertens and Barrett, 2013). Agricultural innovations also play a significant role in fighting poverty, lowering per unit costs of production (Kassie et al. 2011), boosting rural incomes and reducing hunger (Maertens and Barrett, 2013). Based on the success stories that emanated from the Green Revolution in Asia, efforts to increase agricultural productivity in Africa have been directed towards the adoption of improved agricultural innovations. It is believed that improved agricultural technology adoption, such as using improved seed varieties, could inspire the changeover from the presently low productivity, peasant, and subsistence farming to commercial farming (which is able to produce surpluses). Improved agricultural technology adoption has the potential to deepen the market share of agricultural output through which the smallholder farmers’resource use and output diversification decisions could be guided increasingly by their objective of profit maximization. Thus, leading to an emphasis on the importance of purchased inputs and a reduction in the use of non-traded inputs —boosting the growth of specialized commercial farming units (Omiti et al. 2009) in developing countries. This emphasis in turn will boost competition in the market, lower marketing and processing costs and lead to a decrease in real food price (Jayne et al. 2005). In Nigeria for instance, due to the fact that rice is the most important staple food crop, the government prioritized the development and dissemination of IRVs (e.g. NERICA 1, 2 and 8, Faro 52, 54 etc.) and provision of adequate seed in a timely manner and at affordable prices to rice farmers (Awotide et al. 2013). These improved varieties offer new opportunities for farmers because of their unique characteristics, such as shorter period of growth, higher yield and greater tolerance to major stresses, increased protein contents and tasting better than the traditional cultivars/varieties. The adoption of these improved varieties is very vital, in view of the fact that it is becoming more obvious that traditional subsistence smallholding farming systems can no longer meet the needs and expectation of an everincreasing population of Nigeria. Evidence abounds in the literature on the positive impact of IRVs adoption on productivity, poverty reduction and welfare (Mendola, 2007; Diagne et al., 2009; Dontsop-Nguezet et al. 2011; Awotide et al. 2012), however, it is also recorded that in Nigeria despite the adoption of improved varieties and the consequent positive impact on productivity, poverty among farmers is still highly endemic and the rural areas are still characterised by deplorable living conditions. The World Bank (2007) posited that one important route to reduce poverty in rural areas is to enhance the market participation of smallholder rural farmers, as this can increase the net returns to agricultural production. For smallholder agriculture to achieve sustainable increase in productivity and improvement in farm profit, intensification and commercialisation are fundamental. However, evidence suggests that currently smallholder farmers do not often participate in staple food markets and their overall market share is still very low (Jayne et al. 2005). For instance, Jayne et al. (2005) found that top 2 % of Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 2 of 24 commercial farmers sold about 50 % of the maize marketed in Kenya, Mozambique and Zambia. Ellis (2005) also showed that farmers in semi-arid areas of Africa are able to market only a very low proportion of their output. Therefore, these facts raise some vital questions that this study intends to answer. For instance, what are the factors that influence the intensity of IRVs adoption? What are those socio-economic/demographic characteristics of farmers that determine their participation in output markets and, what is the likely subsequent effect of market participation on rice farmers’welfare in Nigeria? Many studies have been conducted to assess the determinants and intensity of agricultural technology adoption (Adesina and Seidi, 1995; Adesina, 1996; Awotide et al. 2012) and its impact on welfare and poverty reduction (Diagne and Demont, 2007; Diagne et al. 2009; Wu et al. 2010; Awotide et al. 2011; Dontsop-Nguezet et al. 2011; Amare et al. 2012). These studies underline the positive impact of adoption of improved (seed) varieties on household livelihoods. However, studies that have analysed the relationship between improved agricultural technology adoption, market participation and overall welfare among the rural farming households is still very scarce in the literature. This study intends to identify the physical and socioeconomic factors that affect the intensity of adoption of IRVs, to examine the determinants of market participation and then to analyse the subsequent effect of market participation on rice farmers’welfare in Nigeria. Through the results that emanated from this study, the policy makers would be informed on why there has been an increase in rice yield without a proportionate improvement in the welfare of rural farming households. In addition, it will also shed light on the socio-economic variables that influence market participation, which can help in the development of policies that would assist farmers to shift from subsistence farming to commercial production. The remaining part of the paper is organized as follows: section two presents research methods used in this study, section three and four are concerned with results and discussion and the last section is devoted to conclusions and policy recommendations. Research methods Data collection This study used primary data collected by the Africa Rice Centre (AfricaRice) under the Emergency Rice Initiative programme financially supported by the United State Agency for International Development (USAID). The data was collected in 2010 through multistage random sampling. In the first stage three major rice growing systems (lowland, upland and irrigated) were purposively selected, and Kano, Osun and Niger States were randomly chosen to represent each of the selected rice growing systems of interest in the second stage. In the third stage, two rural Agricultural Development Programmes (ADP) zones were purposively chosen from each of the three selected States. Five Local Government Areas (LGAs) from the two selected ADP zones were randomly selected in the fourth stage. The fifth stage involved random selection of three villages from Niger state and two each from Kano and Osun states. In the final stage, rice growing households were randomly selected from the chosen villages. Hence, 20 rice farming households were selected from each of the selected villages in Niger state and 15 each from other two States. Overall, 600 rice farmers participated in the survey. Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 3 of 24 Analytical framework and estimation techniques Intensity of adoption of improved rice varieties: the tobit model Rogers and Shoemaker (1971) defined adoption as the decision to apply an innovation and to continue using it. This study employs the utility maximization theory, to describe responsiveness of farmers to new technology adoption (Adesina and Seidi, 1995; Adesina, 1996). A farmer switches from traditional to IRVs only if utility achieved from the latter is higher than from the former. If U i0 is the utility derived from the use of the traditional rice variety, while U i1 is the expected utility from the adoption of new IRVs, then, although not observed directly, the utility that a farmer iderived from adopting a given measure of the IRVs (j) can be expressed as: Uij ¼Xiβjþτij j¼1;0;i¼1; ::::::; nð1Þ Where X i is a farm–specific function, β j is a parameter to be estimated, τ ij is a disturbance term with mean zero and constant variance. The adoption variable is a dummy, with 1 indicating adoption and 0 otherwise. A farmer adopts any of the new IRVs (j = 1), if U i1 >U i0 . Many of the studies that have assessed the adoption of improved agricultural technologies utilized either probit, logit or Tobit model. Following Dereje (2006) and Taha (2007), among many other studies, we utilised the Tobit model to analyse the intensity of adoption; measured by the average proportion of farmland devoted by the farmers to the production of IRVs. The Tobit model is a hybrid of the discrete and the continuous dependent variable proposed by Tobin (1958) and shows the link between a non-negative exogenous variable y i and an independent variable (or vector) X i . The Tobit model assumes a latent unobservable y iwhich linearly depends on x i via a parameter vector βand a normally distributed error term u i captures the random influence of this relation. The observed variable y i is equal to the latent variable if the latent variable is higher than zero but equals to zero if this is not the case. yi¼y iif y i>0 0if y i≤0 ð2Þ where: y iis a latent variable which is equal to y i¼βxiþui;and u i N(0, σ 2 ) Following Chebil et al. (2009), the likelihood function of the model (2) is given by L and it is presented as follows: L¼Y 0 Fy 0i ðÞ Y 1 fiyi ðÞ ð3Þ L¼Y 0 1−Fx iβ=σðÞ½ Y 1 σ−1fy i−xiβðÞ=σ½ where f, and F are the standard normal density and cumulative distribution functions, respectively. A log-likelihood function can be written as follows: LogL ¼X 0 logð1−Fx iβ=σðÞþ X 1 logð1 ð2Yσ2Þ1=2Þ−X 1 1 2σ2yi−βxi ðÞ 2ð4Þ The βand σparameters are estimated by maximization of log-likelihood function Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 4 of 24 ∂LogL ∂β¼−X 0 xifx iβðÞ=σÞ 1−Fx iβ=σðÞ þ1 σ2X 1 yi−βxi ðÞxi¼0 ∂LogL ∂σ2¼1 2σ2X 0 βxifx iβ=σðÞ 1−Fx iβ=σðÞ −ni 2σ2þ1 2σ4X 1 yi−βxi ðÞ 2¼0 8 > > > > > > < > > > > > > : ð5Þ The Tobit model has been adopted in a number of studies (see, Taha, 2007; Rahmeto, 2007; Dereje, 2006). The empirical Tobit model 1 estimate is presented below: Yi¼β0þβ1YIELD þβ2SEACES þβ3ACREDIT þβ4AGE2þβ5RICINC þβ6HSIZE þβ7GNR þβ8EXCONT þβ9NCRI þβ10HOWN þβ11MAIN þβ12NTRAIN þβ13OFFINC þβ14KANO þβ15NIGER þβ16TRAINB þβ17AGE þβ18MEORG þβ19INOCRP þβ20TOTAREA þβ21SEDIST þβ22COSEED þβ23EDUB þβ24FYEXP þνi ð6Þ Determinants of market participation and its effect on welfare: Heckman selection model In this study, a farmer is considered to participate in the output market if part of his/her rice output is marketed. Since one of the objectives of the study is to investigate the determinants of market participation and how it affects the welfare of rural farming households, we specified the basic relationship of the effect of market participation on welfare by the following regression model: Gi¼X0 iλþγDiþεið7Þ Where: G i = consumption expenditure per capita ε i = normal random distribution term D i = dummy (1 = commercialized; 0 = not commercialized) representing market participation. It takes the value of 1 if the farmer sells part of the rice output and 0 otherwise. X i = vector of household and farm characteristics. By deciding to participate in the market, the rice farmer self-selects to participate in the market instead of it being a random assignment. Therefore, following, we assume that the farmer is risk–neutral. The index function used to estimate market participation by the rice farmers can be expressed as: D i¼X0 iαþνið8Þ D i= is a latent variable representing the difference between utility gained from market participation U iA and the utility from not participating in the market U IN . The farmer will participate in the market if D i¼UIA−UIN >0. The term X0 iαprovides an estimate of the difference in utility from market participation (U IA −U IN ) using the household and farm-level characteristics X i , as explanatory variables, while ν i is an error term. In estimating equations (7) and (8), there is a need to note that the relationship between the market participation and farmers’welfare could be interdependent. Specifically, the selection bias occurs if unobservable factors influence both error terms of the welfare (per capita consumption expenditure) equation (ε i ) and the market Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 5 of 24 participation choice equation (ν i ), thus, resulting in the correlation between the error terms of the two equation (7 and 8). This implies that there are unobserved factors that bias the outcome on welfare as a result of market participation. Thus, estimating equation (7) using Ordinary Least Square (OLS) will lead to biased estimates. To address this problem, a two-step Heckman’s procedure was used in this study. This model is appropriate because it addresses simultaneity problems. In the literature, the Heckman (1976) two stage procedure is used to address selection bias when the correlation between the two error terms is greater than zero (Hoffman and Kassouf, 2005; Adeoti, 2009; Johannes et al. 2010; Siziba et al. 2011). The approach depends on the restrictive assumption of normally distributed errors (Wooldridge, 2002). The procedure involves, first, the estimation of the selection equation using a probit model (Market participation; equation (8)) and second, the estimation of the per capita consumption expenditure equation (7). The probit model predicts the probability of market participation and also gives the Inverse Mill’s Ratio (IMR). IMR is denoted by a symbol λand describes the ratio of the ordinate of a standard normal to the tail area of the distribution (Greene, 2003): λi¼φρþαXi ðÞ ΦρþαXi ðÞ ð9Þ Where φand Φare, respectively, the standard normal density function and standard normal distribution functions. The calculated IMR term λ i provides OLS selection corrected estimates (Greene, 2003). If λ i is not statistically significant, then sample selection bias is not a problem (Heckman, 1979; 1980). However, the finding of a statistically significant λ i in the welfare equation would suggest that an important difference exists between the farmers that participate in the market and those that did not participate. This difference needs to be taken into consideration in estimating the welfare equation. The Heckman two-step model 2 is specified as follows; the first step (selection equation) of deciding whether to participate in rice marketing or not is empirically specified as: MARKPARi¼α0þα1MEORG þα2VOCT þα3YEDUC þα4GNR þα5AGE2 þα6AGE þα7HSIZE þα8SEACES þα9RICINC þα10COSEED þα11ACREDIT þα12HOWN þα13OFFINC þα14TOTAREA þα15SEDIST þα16YIELD þνi ð10Þ The second step (outcome equation), which assesses the effect of market participation on the welfare of households (consumption expenditure per capita), is estimated empirically using OLS as follows: Gi¼γ0þγ1YIELD þγ2EXCONT þγ3GNR þγ4VOCT þγ5RICINC þγ6COSEED þγ7AGE2þγ8AGE þγ9HSIZE þγ10YRESID þγ11YEDUC þγ12HOWN þþγ13OFFINC þγ14SEACES þγ15ACREDIT þγ16SEDIST þγ17TOTAREA þγ18IMR þεi ð11Þ Results and discussion Descriptive analysis The distribution of socioeconomic/demographic characteristics of respondents (Tables 1 and 2) reveals that the average family size for sampled households consists of 8 persons Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 6 of 24 per household. The average age of the head of the household is 45 years and about 76 % of them are below 50 years of age, with an average of 37 years of farming experience. This implies that the majority of the households were still young and in their productive age and are highly experienced in rice production. This could positively influence the adoption of IRVs as Polson and Spencer (1992) observed that younger household heads are more dynamic with regards to adoption of innovations. The farming households in the sampled area are male dominated as evidenced by 81% share of male household heads. The majority (88 %) of households in the sample acquired additional income from off-farm activities. About 68 % of them received formal education. The proportions of the respondents that had contact with extension agents (36 %) and those that belong to Table 1 Variable definition and their descriptive statistics Variable Description Mean Std.Dev. Dependent Variables YIRVs area divided by the total farm size 0.78 2.30 GPer capita consumption expenditure 34347.99 18226.89 MARKTPAR 1 if farmer sell part of produce, 0 otherwise 0.71 0.46 Independent Variables YIELD Average yield (Kg/ha) 3271.07 2238.76 AGE Age of household head 45.00 8.62 AGE2 Square of the age of household head 2117.67 790.36 HSIZE Number of person living in the household 8.00 4.09 EDUB 1 if farmer has formal education, 0 otherwise 0.68 0.47 VOCT 1 if farmer attended vocational training, 0 otherwise 0.15 0.36 GNR 1 if household head is male, 0 if female 0.81 0.40 OFFINC 1 if farmer has non-farm income , 0 otherwise 0.89 0.32 TOTAREA(HA) Total farm size in hectare 2.39 1.59 EXCONT 1 if farmer has contact with extension agents, 0 otherwise 0.36 0.48 HOWN 1 if respondent is the landlord, 0 otherwise 0.86 0.35 ACSEED 1 if farmer has access to seed, 0 otherwise 0.70 0.46 MEORG 1 if farmer is a member of any organisation, 0 otherwise 0.31 0.46 SECOST The average cost of seed in Naira per kg 124.97 1.56 INOCRP(N) Average income from other crops 90405.00 72470.89 RICINC Income generated from the sale of rice 189231.70 111276.60 SEDIST(KM)) The distance from the village to the nearest sources of seed 4.39 6.48 FUPL 1 if farmer practice upland rice farming 0.31 0.46 FLOWL 1 if farmer practice lowland rice farming 0.81 0.39 FIRRIG 1 if farmer practice irrigated rice farming 0.16 0.37 ACREDIT 1 if farmer has access to credit 0.24 0.42 YRESID Years of residence in the village 40.17 14.79 YEDUC Years of formal education 4.62 5.88 NCRI a 1 if farmer has relationship with NCRI 0.217 0.41 MAIN 1 if the farming is the main occupation, 0 otherwise 0.90 0.31 FYEXP Years of farming experience 37.12 11.32 TRAINB 1 if farmer had attended any training, 0 otherwise 0.21 0.41 NTRAIN Number of training attended by the farmer 3.00 2.70 a NCRI National Cereal Research Institute Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 7 of 24 farmers’organization (31 %) were below satisfactory levels. Only 15 % attended agricultural vocational training. The average landholding size for the sampled households is 2.39 ha and about 1.7 ha is devoted to production of IRVs. In terms of household size, about 98 % of the respondents had less than 20 persons. This predominantly large household size could be responsible for the small and fragmented farm size, such that a large percentage of the population (75 %) had farmland of less than 4 ha. The majority of the respondents (70 %) harvested less than 4 tons of rice from their farms. Farmers in the study area appear to be challenged in relation to seed access due to excessive distance to the nearest sources of seed. Only about 70 % of the farmers have access to seed, and the seed can possibly be obtained by travelling an average distance of about 4.39 km. This implies that a majority of the farmers will rely on their own saved seed, seed obtained from other farmers within the village or on seed purchased from the nearby rural market. This practice give rise to the use of low quality, uncertified and unimproved rice seed, with a negative effect on productivity. Results also illustrate that about 76 % of respondents sold their product in the market. The yields of improved and local/traditional rice varieties were compared by rice growing systems and the State. The results are presented in Table 3. Findings show expectedly that the yield of improved varieties is highest under the irrigated system, Table 2 Description statistics of some socio-economic characteristics of the farmers Socio-Economic/Demographic characteristics Frequency Percentage Age of Household Head (Years) 20–30 30–40 40–50 50–60 60–70 70-80 30 147 252 116 13 5 5.33 26.11 44.76 20.60 02.30 0.90 Household size (Number) 1–10 10–20 20-30 429 125 9 76.19 22.20 01.59 Farm Size (Ha) 1–1.5 2–3.5 4–5.5 5–6.5 Mean Farm size 215 206 129 13 2.39 38.19 36.59 22.91 02.31 Rice Output (kg) 100–1000 67 11.01 1000–2000 2000–3000 3000–4000 4000–5000 5000–6000 >6000 Mean output 78 90 164 109 31 24 3307.50 13.85 15.99 29.13 19.36 05.51 04.26 Proportion that participate in market by Rice Producing system UplandLowlandIrrigated 153.00 306.00 89.00 88.95 66.81 97.80 Source: Field Survey, 2010 Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 8 of 24 NCRI (NCRI) in the pooled data and among the lowland farmers. This implies that the proportion of farmland devoted to the cultivation of IRVs is higher among the noneducated farmers compared to the educated ones. The educated farmers are more likely to participate in other secondary activities such as wage employment, private business activity or mining which can limit the time available for farming and hence, have a negative effect on the intensity of their adoption of IRVs. The negative and statistically significance of the coefficient of access to credit (ACREDIT) suggests that intensity of adoption of IRVs is higher among those farmers that lack access to credit. It is worthy of note that the majority of rural farmers in Nigeria are credit constrained. Hence, intensive production of IRVs through devoting more land to it may enhance financial stability, especially in times of need. Furthermore, in this study we observed a negative, but increasing effect of age (AGE) on market participation. The negative and significant coefficient of age of household head implies that older households are less likely to increase the intensity to which they adopt IRVs. This may be because they are less receptive to new ideas and are less willing to take risks associated with new innovations as are the younger farmers (Roger, 1983; Alavalapati et al. 1995). Risk aversion has been found in the literature to be a major constraint to technology adoption in developing countries (Eswaran and Kotwal 1990; Rosenzweig and Binswanger, 1993; Dercon and Christiaensen, 2007; Yesuf et al. 2009). This finding about risk aversion is in agreement with other studies such as Itana (1985), Hassan et al. (1998), Alene et al.(2000), Kaguongo et al. (2010) and Awotide et al. (2014). However, the positive and statistical significance of the coefficient of age squared (AGE2) implies that the age of the farmers will decrease adoption to a certain level and then intensity of adoption will start to increase. It is also remarkable to observe that the intensity of IRVs adoption decreases as farmland (TOAREA) increases only among the farmers that practice irrigation. This suggests that those who have larger farm size among the irrigation farmers devote less of their farmland to the cultivation of IRVs. On the one hand, this could be linked to the fact that some households may not want to experiment with new technologies on large farmlands because of uncertainty. On the other hand, it could be due to the fact that farmers with large farm size may want to maximise profit and hence, are more likely to practice multiple cropping from the available farmland. This is consistent with the finding of Shiyani et al. (2002), who reported a negative relationship between farm size and level of adoption of improved varieties and fertilizer and Awotide et al. (2014) on intensity of adoption of improved cassava varieties in south-western Nigeria. Market participation and welfare: Heckman two-step model A multivariate analysis was adopted to evaluate the effect of market participation on households’welfare using Heckman’s two-step model. The dependent variable of the market participation model (Selection model) was specified as binary, which is equal to 1 if the farmers sell part of their rice output, and 0 otherwise. The second stage of the Heckman two–stage model estimates the factors that determine households’welfare proxy by the annual consumption expenditure per capita and also tests if there is selection bias by inserting the lambda obtained from the Probit model. Membership of a farm organization was used as the identification variable. This variable is assumed to Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 15 of 24 affect the probability of participation in rice output markets, but is assumed not to influence the farmers’welfare. The overall joint goodness of fit for the Heckman selection model parameter estimates was assessed. The diagnostic statistics shows that all of the estimated three models are well fitted with chi-square test statistics significant at 1 %. This implies that jointly the independent variables included in the selection models are relevant in explaining the farmers’market participation decision and welfare. The results of the Heckman two-step model for the selection and the outcome equations are presented in Table 7. In order to ascertain differences in the factors that influence the determinants of market participation and its effect on welfare. We have also run four different models —one for the pooled data and other models for the upland, lowland and irrigation farmers. Interestingly, we found the regression for the sub-population of the farmers that practice irrigated rice farming spurious. This is due to the fact that almost all the farmers (98 %) in the irrigated farming households participated in the rice output market, thus there is no variation in the dependent variable. The results of the Heckman two-step model for the pooled data, upland and lowland rice producing system are presented in column 1, 2, and 3 of Table 7, respectively. Findings showed that out of the 18 variables included in the market participation equation, 13, 5, 10 were statistically significant (positive and negative) for the pooled data, the upland and the lowland farming households, respectively. The gender (GNR) of the household head has Positive and statistically significant coefficients in the pooled data, upland and lowland farming households.This result implies that the probability that they would participate in the market is higher among the male headed households than the female counterparts. This could be due to the fact that the male headed households tend to have larger output than the female headed households as a result of their better access to productive inputs. Vigneri and Vargas (2011) revealed that women rarely had similar access to assets and markets as men, which led to a different level of participation in cash crop markets. Chikuvire et al. (2006) reported that women in SSA are disadvantaged in marketing because of unequal distribution of resources as well as cultural barriers. Dorward et al. (2004) also concluded that the discriminatory tendencies towards women tend to weaken their negotiation talent and therefore making them less effective in ago-commodity trade. In addition, women also spend much of their time doing house work and allocate less time to other matters like market transactions (Wang’ombe, 2008). This finding is similar to the finding of Cunningham et al. (2008), Wang’ombe (2008), Sigei et al. (2013) and Sebatta et al. (2014). However, this finding is different from that of Onoja et al. (2012) in which they found a higher probability of fish commercialization if the head of the household is female. The coefficient of the years of formal education (YEDUC) was also positive and statistically significant in the pooled data and among the lowland farming households. This means that a higher level of education is associated with increased sales of rice. Makhura et al. (2001) reported that the educational level of the household head will have an effect on households’understanding of market dynamics and hence can enhance the farmers decision about the quantity of output sold, inter alia. This finding is in agreement with the finding of Martey et al. (2012), Enete and Igbokwe (2009), Randela et al. (2008) who are of the opinion that education of the household head has Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 16 of 24 Table 7 Result of the Heckman two-step model Pooled data (1) Upland system (2) Lowland system (3) Variable Coefficient Coefficient Coefficient Effect of Market Participation on Welfare: Outcome Equation-OLS YIELD 1.182** (0.571) −1.2503 (0.8632) 0.8636 (0.6168) EXCONT 1577.404 (2522.187) 9733.857 (6310.524) −2477.328 (4412.423) GNR 17033.220*** (3305.896) 23811.81*** (5882.429) 16028.38*** (3289.288) VOCT 6154.037** (3006.475) 6707.037(5754.729) 1002.409 (3375.999) RICINC 0.017* (0.009) 0.0661*** (0.0163) 0.0221** (0.0104) COSEED 7.753 (47.103) −9.0323 (68.8715) 24.76333 (47.5518) AGE2 14.295* (8.606) −6.2775 (4.9782) 13.9342 (8.9275) AGE −1458.261* (795.262) 822.0033 (373.587) −989.1075 (855.5659) HSIZE −2194.872*** (309.838) −2613.632*** (504.914) −2599.768*** (427.7767) YRESID 210.599** (82.123) −50.5019 (228.7992) 209.3046** (94.1272) YEDUC 644.065*** (165.175) 130.358 (217.61) 759.556*** (244.9649) HOWN 3593.435 (3504.657) 12928.19 (9626.319) 3786.609 (3662.154) OFFINC 6124.644* (3411.996) 2027.904 (7291.49) 8152.286** (3957.274) SEACES 4642.414 (3554.374) −2443.123 (5420.077) 2981.639 (3392.325) ACREDIT −2291.433 (2228.743) 3121.345 (3700.875) 504.0302 (2638.233) SEDIST 99.407 (158.767) −304.55 (281.2507) 32.52597 (254.5398) TOTAREA −179.980 (455.375) 175.0563 (877.4499) 810.1287 (533.2662) CONSTANT 47485.940** (23754.530) 4070.513 (32750.9) 36323.91 (24493.74) Mills Lambda 15272.930** (6612.894) 17344.93* (9388.366) 12547.09* (7334.769) Determinants of Market Participation: Probit Model MEORG −0.504*** (0.172) −0.6321(0.7890) −0.3546* (0.1992) EXCONT −0.341** (0.165) −0.5191(0.9021) −0.8787*** (0.2050) VOCT −0.442** (0.193) −2.8322** (1.3907) −0.3375 (0.2339) YEDUC 0.023* (0.013) 0.1591(0.1271) 0.0332** (0.0163) GNR 0.666*** (0.176) 3.0568**(1.2142) 0.5249*** (0.2016) AGE2 −0.001 (0.001) −0.0016 (0.0020) −0.0004 (0.0005) AGE 0.072 (0.047) 0.1184 (0.2049) 7.49E-02 (5.07E-02) HSIZE −0.063*** (0.019) 0.1113 (0.1474) −0.1132*** (0.0243) YRESID −0.0025 (0.0664) −0.0128 (0.0283) −0.0061 (0.0075) SEACES 0.971*** (0.150) 1.1562 (0.7573) 0.8023*** (0.1741) RICINC 1.32E-06* (7.99E-07) −3.03E-06 (4.41E-06) 1.86E-07(9.79E-07) COSEED 0.011*** (0.003) −0.0060 (0.0158) 0.0042261 (0.0039) ACREDIT 0.353* (0.186) 0.0927 (0.8604) 0.6325*** (0.2040) HOWN 0.312 (0.257) 2.1323** (1.0402) 0.1723 (0.2997) OFFINC −0.537* (0.276) −2.7412** (1.3619) −0.8467*** (0.3119) TOTAREA 0.003 (0.042) 0.1239 (0.1607) 0.0696 (0.0498) SEDIST −0.026* (0.011) −0.0306 (0.0325) −0.0411*** (0.0135) YIELD 0.000*** (0.000) 0.0007** (0.0003) 0.0002*** (0.0000) CONSTANT −3.672*** (1.235) −3.8903 (5.8576) −2.2379 (1.3921) RHO 0.881 1.0000 0.78613 SIGMA 17344.686 17344.934 15963.17 Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 17 of 24 the capacity to provide the farmer with a better production and managerial ability which lead to an increase in market participation The coefficient of access to seed (SEACES) and credit (ACREDIT) was positive and statistically significant in the pooled data and among the lowland rice farming households. This suggests that increase in access to improved seed varieties would also lead to increase in the probability that a farmer would participate in market. It is noted that adoption of improved seed will be impossible without access to such seed (Dontsop-Nguezet et al. 2012). Hence, access to seed will aid adoption and adoption is expected to generate increase in output leading to increase in marketable surplus. The higher profits generated from output grown from IRVs, will further encourage the farmers to participate in market. In the same vein, access to credit increases the probability that a farmer will participate in the market. This could be due to the fact that access to credit enables the farmers to cover labour cost, transportation cost and all other production related costs. Hence, the farmers that have access to credit have higher chances of having marketable surplus to sell than those that did not have access to credit. This result is consistent with the findings of Alene et al. (2007) and Abayneh and Tefera (2012). Yield (YIELD) is positive and statistically significant in the pooled data and among the upland and lowland rice farming households. The positive coefficient of rice yield signifies that an increase in yield, increases the probability that a farmer will participate in the market. In other words, increase in yield will increase the households’marketable surplus. This result is consistent with the findings of Omiti et al. (2009), Astewel (2010) and Olwande and Mathenga (2010) who report that increase in the quantity of production will increase the likelihood of market participation. In the same vein, Abay (2007) and Adugna (2009) also found that an increase in the yield of tomato and papaya significantly increase their marketable surpluses. Cost of seed (COSEED) and income from rice production (RICINC) was positive and statistically significant only in the pooled data. This implies that as the price of seed and income from rice production increase, the farmers are motivated to participate more in the market. Similarly, the coefficient of house ownership (HOWN) —a measure of wealth —was also positive and statistically significant in the sub-population of the upland rice farming households.The coefficient of off-farm income (OFFINC) was also negative and statistically significant in the pooled data and sub-population of the upland and lowland rice farming households. Participating in any secondary occupation generally discourages households from participating in the market. Those who have income from off-farm activities generally do not have enough time to engage in the market activities. This implies that off-farm income has the tendency to initiate Table 7 Result of the Heckman two-step model (Continued) Number of observations 557.000 170.000 454.000 Censored observations 161.00 18.000 150.000 Uncensored observations 396.00 152.000 304.000 Wald chi2 (17) 142.40 93.680 99.480 Prob > chi2 0.0000 0.0000 0.0000 Source: Field survey, 2010. ***, **, and * implies significant at 1 %, 5 %, and 10 % respectively Note: Figures in Parentheses are the standard error Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 18 of 24 off-farm diversification. Jaleta et al. (2009) posited that ownership of livestock, which is usually one of the major sources of off-farm /non-arable income, negatively influence households’participation in the crop market as a result of the possibility of distraction away from farming. This finding is consistent with the findings by Alene et al. (2008), Omiti et al. (2009) and Martey et al. (2012). Similarly, coefficient of membership of any organization (MEORG) and contact with extension agents (EXCONT) were also negative and statistically significant in the subpopulation of the upland rice farming households.However as contact with extension agents increases, the probability that a farmer would participate in the market decreases. This could be due to the fact that the primary function of the extension agents in Nigeria is mainly limited to the dissemination of IRVs and training of farmers on the best-bet production technologies. Essentially, their contact with the farmers may be only to encourage adoption of IRVs and may not have anything to do with linking farmers to the markets or encouraging them to participate in output markets. The negative and significant coefficient of MEORG implies that farmers that belong to farmers’organizations participate less in rice output market. This finding is in agreement with the finding of Martey et al. (2012) in their study on commercialization of smallholder agriculture in Ghana, but contradicts the findings of Matungul et al. (2001), Olwanda and Mathenge (2012) and Musah et al. (2014). In the same vein, being a member of any organization (MEORG) is regarded is a form of social capital. The results show that those farmers that are not members of any organization are more likely to participate in rice markets than those who are members. This implies that membership of any organization decreases the probability of market participation. This may be explained by the fact that most farmers’organizations in Nigeria are not market oriented. Basically, they focus more on credit access and input distribution. This finding is consistent with the finding of Abayneh and Tefera (2013), but it is contrary to the findings of other studies such as Jagwe (2011) and Sebatta et al. (2014) which found that belonging to a farmer’s group significantly influenced the extent of farmers’participation in Banana and potato markets, respectively. Similarly, Shepherd (2007) also suggested that collective action by means of a farmer cooperative society increases smallholder market participation. The coefficient of vocational training (VOCT) was also negative and statistically significant in the pooled data and sub-population of the upland rice farming households. Those farmers that attended vocational training are also more likely to have other sources of income apart from rice production and so may not be really interested in participating in the markets. The coefficients of household size (HSIZE) and distance to the nearest sources of seed (SEDIST) were also negative and statistically significant in the pooled data and sub-population of the lowland rice farming households. Large household size reduces the probability that a farmer will participate in the market. This could be due to the fact that large household size has the tendency to reduce the marketable surplus, as more of the rice output would be consumed within the household since rice is the most important staple food crop in the Nigerian diets. This is in line with the findings of Mekhura et al. (2001) and Siziba et al. (2011). In the same vein, distance to the seed source is an indication of travel time and transportation cost and as these increase, farmers may not find it worthwhile to sell all their paddy rice, but rather prefer to keep Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 19 of 24 some as seed for next season planting. This attitude will therefore probably decrease market participation. This finding confirms the findings of Omiti et al. (2009), Martey et al. (2012) and Musah et al. (2014). The second stage (OLS outcome model) involved examination of the effect of market participation on welfare. The IMR for all the estimated models for the pooled data, upland and lowland farmers was positive and significant, which implies that the error terms in the selection and the outcome equations are positively correlated, hence unobserved factors that make participation more likely tend to be associated with higher household welfare. This indicates that sample selection bias is a problem and it therefore justifies the use of the Heckman two-step model. The result further suggests that any increase in the farmers’welfare (consumption expenditure per capita) is conditional on the probability of the farmer participating in the output market. The coefficient of gender (GNR) of household head is statistically significant in the pooled data, among the sub-population of the upland and lowland rice farming households. This implies that the male headed households have better welfare than the female headed households. The positive and statistically significant coefficients of yield (YIELD) and vocational training (VOCT) in the pooled data suggest that welfare of the farming households is positively influenced by the yield and vocational training. In addition, income from rice production (RICINC), and off-farm income (OFFINC) exerted a positive and statistically significant effect on the households’welfare in the pooled data and among the sub-population of the upland and lowland rice farming households. The years of formal education (YEDUC) and years of residence in the village, were positive and statistically significant in generating welfare improvement in the pooled data and among the lowland rice farming households. Household size negatively affects welfare in the pooled data and among the subpopulations of the upland and lowland rice farmers. In the pooled data, the coefficient of age has a negative and statistically significant effect on welfare. This implies that as age of the household increases, welfare also increases. However, as revealed by` the positive and statistically significant coefficient of age2, age will increase to a certain level and then welfare will start to decrease. Summary, conclusion and policy recommendations The study assessed factors that determined the intensity of IRVs adoption and the determinants of market participation and their effect on welfare of rural households. It can be stated that higher adoption of IRVs would lead to an increase in rice yield and rural farmers could, consequently, have marketable surplus. It this is marketed it would lead to an increase in household income and by extension generate improvement in household’s welfare. The farmers are still in the productive age at 45 years. The majority of the rice farmers also participate and obtain addition income from off-farm activities. Contact with extension agents and membership of farmers’organisation is still very low. The farm size is small and fragmented. Access to credit is major constraint in rice production and farmers need to travel an average of 4.39 km to the nearest seed sources. The IRVs have higher yield compared to the traditional rice varieties. Adopters of IRVs are better off in terms of welfare than the non-adopters. In addition, farmers that participate in the market are wealthier than those who did not participate in the market. Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 20 of 24 Variation exists in the factors that significantly determine the intensity of IRV adoption in the entire collection/range of data —data of the upland, lowland and irrigated rice producing systems. The results of the multivariate analyses adopted to examine the effect of market participation on welfare using the Heckman two-step model also show significant variation in the effects of the included variables by rice producing systems. Gender of the household head (GNR), Yield, years of formal education, (YEDUC), access to seed (SEACES) and cost of seed in kg are the variables that increase the probability that a farmer will participate in the rice producers’market. The probability that the farmer in the upland rice system will participate in the rice output market is significantly increased by the gender of the household head (GNR), yield and ownership of the/a house (HOWN), while the probability of participating in the market among the farmers in the lowland rice producing system is significantly increased by gender of household head (GNR), years of formal education (YEDUC), yield and ease of access to seed (SEACES). Welfare of the farming households is influenced by yield, income and education of the household head. It is necessary to increase the intensity of IRVs adoption to generate an increase in yield. Excess output above the consumption level of the households will generate marketable surplus, which encourages farmers to participate in the output market. The findings show that market participation increases households’welfare. Therefore, increase in those variables that lead to increasing IRVs adoption and market participation should be the focus of any welfare enhancing programs or policy. Specifically, we recommend the formation of farmers’associations should be encouraged. Access to seed and information about the improved rice varieties are also essential in order to increase the intensity of its adoption. Programmes that would improve contact with extension agents, access to credit, educational background and enlarging the area devoted to the cultivation of improved rice varieties should be promoted in order to increase market participation and generate improvement in the welfare of rural households. Endnotes 1 See the description and definition of the variables in Table 1. 2 See the description and definition of the variables used in the model in Table 1. Competing interests The authors declare that they have no any competing interests. Authors’contributions BAA: Paricipated in the data collection, analysis and result interpretation. AK: participated in the paper writing, analysis and organization of the Tables. AD: coordinated the data collection, data entry and supervised the report wrting. All authors read and approved the final manuscript. Acknowledgements This study benefited tremendously from the financial support of USAID and the scientific support of the Africa Rice Center, Cotonou, Benin Republic. We also gratefully appreciate the supports of all the collaborating institutes (NCRI, CRS, NBS, and Department of Agricultural Economics, University of Ibadan, Nigeria). To all the farmers and the enumerators in all the study areas we say a very big thank you. Author details 1 Agricultural Economics, University of Ibadan, Ibadan, Ibadan 200001, Nigeria. 2 Socio-Economic Program, International Maize and Wheat Improvement Centre (CIMMYT), Ankara 06170, Turkey. 3 Economic Sciences and Management, Gaston Berger University, Saint-Louis, Senegal. Received: 26 October 2014 Accepted: 31 January 2016 Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 21 of 24 References Abay, A. (2007). Vegetable Market Chain Analysis: The Case of FogeraWoreda in ANRS of Ethiopia. An Msc.Thesis Presented to the School of Graduate Studies of Haramaya University Abayneh Y, Tefera T (2013) Factors influencing market participation decision and extent of participation of haricot bean farmers in Meskan District, Ethiopia. Int J Manag Dev Stud 2(8):17–25 Adeoti AI (2009) Factors Influencing Irrigation Technology Adoption and Its Impact on Household Poverty in Ghana. 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Submit your manuscript to a journal and benefi t from: 7 Convenient online submission 7 Rigorous peer review 7 Immediate publication on acceptance 7 Open access: articles freely available online 7 High visibility within the fi eld 7 Retaining the copyright to your article Submit your next manuscript at 7 springeropen.com Awotide et al. Agricultural and Food Economics (2016) 4:3 Page 24 of 24