Transaction costs, inefficiency and productivity of acha (Digitaria exilis) farmers in Kaduna State, Nigeria

This paper analyses the role which barriers to acha production in the form of high transaction costs have on farmers’ production efficiency. Particular attention is paid to the effects of transaction cost on acha farmers’ output and total production cost. An empirical application is presented on a sample of 200 households randomly selected from Kaduna State. The stochastic translog production and cost functions were used to analyse the data. The results revealed that although acha farmers are small scale producers with an average land productivity of 498kg/ha, they are 81% technically efficient, 85% allocative efficient and 76% economically efficient. The results also confirm the contribution of transaction costs to inefficiency and their role in orienting households towards making decision to produce as they affect output, increase cost of production and hence, increase inefficiency in production. Although these transaction costs effects are not large, they do significantly affect (P<0.05) the output and total cost of production. Policy makers therefore need to focus on providing institutional support to producers which is necessary for technical and managerial skills and for reducing cost inefficiencies in production.