Determinants of willingness to pay for externalities in cocoa production in Osun State, Nigeria

Using primary data from 180 cocoa farmers in Osun State, Nigeria, the study defined the externalities associated with cocoa production, evaluated farmers' willingness to pay for externalities and identified the determinants impacting farmers' willingness to pay for externalities in cocoa production. To analyze the demographic traits of the sampled farmers in the research area, descriptive statistics were used. Farmers' willingness to pay for externalities and the price they are willing to pay for them were estimated using the double-hurdle model. The findings showed that the majority of the examined farmers were able to name externalities brought on by pesticide leaching and bad odor, but very few of them could name externalities brought on by fermentation. For pesticides leaking, offensive odor and fermentation externalities, the average projected amount farmers were willing to pay per kg of cocoa is 60, 81 and 54 k, respectively. The findings also indicated that a variety of explanatory factors, including age, household size, years of schooling, farming experience, participation in farmers' associations, farm size and income from cocoa farms, had an impact on farmers' decisions to pay for the identified externalities. According to the study's findings, producers were willing to spend an estimated average of 140.54 k per kilogram of cocoa produced in order to compensate for the externalities. Therefore, if conveyed through market mechanisms, the hidden costs and benefits resulting from identified externalities could lead to efficiency in the price of cocoa.