International Journal of Agricultural Marketing

IJAM

Vol. 2(5), pp. 084-089, December, 2015. www.premierpublishers.org. ISSN: 2167-0470

Research Article

Cost and returns of paddy rice production in Kaduna

State of Nigeria
Ben-Chendo G.N1*, N. Lawal2, M.N. Osuji3, I.I. Osugiri4 and B.O. Ibeagwa5
1*,2,3,4,5

Department of Agricultural Economics, Federal University of Technology Owerri, Imo State, Nigeria.
As a result of increasing population growth and urbanization, there is a high and increasing
demand for rice, this necessitates the high attention for its production. This research was
conducted to determine the profitability of paddy rice production in Chikun Local Government
Area of Kaduna State. Data were collected from 60 randomly selected paddy rice farmers using
a well structured questionnaire and analyzed using the descriptive statistics, net income and
multiple regression models. The result showed that 97% were male, 88% married and had an
average household size of 10 people. All respondents had one form of education and their
average farm size was 15ha producing about 3.2tonnes of paddy per hectare. Paddy rice
production in the area was estimated to have a profit $902.51 (N179,600) and a net returns of
$766.83 (N152,600). Farm size, system of rice cultivation and household size accounted for 78%
of the observe variation in the farmers income. The study however concluded that paddy rice
production in the study area is a profitable enterprise and it also recommended that consistent
government policies that would favour increase in paddy production, market information,
extension service delivery, input subsidization and credit facilities be implemented.

Keywords: Paddy rice, production, profitability, costs, returns, Kaduna

INTRODUCTION
Rice (Oryza sativa L.) being the second largest
consumed cereal (after wheat) shapes the lives of
millions of people. More than half the worlds population
depends on rice for about 80% of its food calorie
requirements. It has become a staple food in Nigeria
such that every household; both the rich and the poor
consume a great quantity (Godwin, 2012). A combination
of various factors seems to have triggered the structural
increase in rice consumption over the years with
consumption broadening across all socio-economic
classes, including the poor. Rising demand is as a result
of increasing population growth and income level (GAIN,
2012) coupled with the ease of its preparation and
storage. Rice has changed from being a luxury food to a
necessity because of its availability and affordability, so
consumption will continue to increase with per capita
GDP growth, thus implying that its importance in the
Nigerian diet as a major food item will increase as
economic growth increases (Ojogho and Alufohai, 2010).

Despite the relative importance of rice as Nigerian major

food and industrial material, the domestic supply is still
considered insufficient to match the consumption demand
which leads to huge import to meet local demand. The
local production falls short of the demand (Basorum and
Fasakin, 2012) hence, leading to augmentation of
shortfall through import. According to Ekeleme et al.,
(2008), and (USAID, 2013), Nigeria consumes 5.4 million
metric tonnes of rice annually, of this value, annual
domestic output of rice still hovers around 3.0 million
metric tonnes leaving the huge gap of about 2 million
metric tons to importation.

*Corresponding author: Dr (Mrs) Ben-Chendo Glory

Nkiruka, Department of Agricultural Economics, Federal
University of Technology Owerri, Imo State, Nigeria.
Email: gbenchendo@gmail.com, Tel.: +234803584847

Cost and returns of paddy rice production in Kaduna State of Nigeria

Ben-Chendo et al.

084

This is consistent with the Daramola (2005) that rice

importation in Nigeria is around $2.2 Billion which is to
the detriment of the scarce foreign exchange reserve.
This is an unfortunate scenario for a country that is
presumed to be the largest producer of rice in West
Africa also depending on imports from countries like
Thailand, India and USA etc.
Rice is cultivated in virtually all agro-ecological zones of
the country as it constitutes one major cereal crop
produced by Nigerian farmers. It covers both the upland
and the swamps, depending on the variety (KNARDA,
2007). Traditionally, domestic paddy rice production was
limited to flooded system until irrigated rice production
was introduced with the development of pump irrigation
schemes beginning in the mid-1990s; and this has
permitted rice area and production to expand at par with
population growth in recent years (West Africa Rice
Development Association WARDA, 1997).
Given the crucial role of rice in the food security of urban
and rural households alike, development of rice growing
has long been considered a priority in Nigeria. The
country has adopted a range of instruments designed to
protect and increase local production. The Nigerian
National Rice Development Strategy (NRDS) set up in
2009 aims to make the country self-sufficient in rice by
raising production of paddy rice from 3.4 million tonnes in
2007 to 12.8 million tonnes in 2018. The NRDS outlines
three priority areas of focus to achieve this level of
production such as improving post-harvest processing
and treatment; developing irrigation and extending
cultivated lands and making seed, fertilizer and farming
equipment more readily available.
In a bid to also achieve rice self sufficiency in line with the
rice transformation plan, the Ministry of Agriculture and
Rural Development have rolled out a special intervention
programme on dry season paddy production plan in
2013. The dry season paddy production is scheduled to
take place across ten states of the Federation namely;
Kaduna, Kebbi, Zamfara, Kano, Jigawa, Sokoto, Katsina,
Bauchi, Gombe and Kogi states. Considering the recent
policies and programmes designed by the government to
increase paddy rice production in the country, the
inadequate supply of paddy for processing by integrated
mills, this research work is designed to assess the
production of the crop with regard to its profitability in the
study area to isolate factors affecting the farmers income
(producers), and invariably the growth of the Nigerian
economy.

longitudes 7 45' and 7 75' East of the Greenwich

meridian and has 23 local government areas. The state
experiences both wet and dry seasons with the wet
season commencing in the month of April in the southern
part of the state and between May and June in the
northern part of the state. The dry season sets in
immediately after the rainy season and is characterized
by Harmattan (dry and dusty West African trade wind that
blows between the end of November and the middle of
0
March) period with a temperature ranging from 18 C to
0
26 C and the heat period with a temperature that ranges
0
0
from 32 C to 39 C.
Chikun Local Government Area shares a common
boundary in the North with Igabi and Kaduna North Local
Government in the North West with Birnin Gwari and
South West with Niger State, Kajuru and Kachia Local
Government Area respectively. According to Shaidu,
(2008), the climate of the state favours the production of
crops such as rice, maize, beans, guinea corn, millet,
cotton, yam, carrot, sugarcane, tomatoes, pepper,
onions, garden egg plant, lettuce, Amaranthus and
tobacco. The state is also known for rearing of livestock
such as poultry, sheep, goat, cattle and pig.
Chikun Local Government Area was selected purposively
on the basis of being a prominent rice producing area in
the State. A three step sampling procedure was adopted
in the choice of sample for this study. The first step
involved the purposive selection of two communities
where rice is produced in relatively large quantities, these
are; Kujama and Kakau. The second stage was to
identify the registered paddy rice farmers with farm sizes
of 1ha and above in the two rice producing communities,
already selected with the help of Agricultural
Development Programme (ADP) extension agents and
other rice farmer groups (RIFAN). This list served as the
sampling frame for the study. The third stage involved a
random sampling of thirty (30) rice farmers from each of
the two rice communities bringing the sample size for the
study to sixty farmers.
To determine the cost and returns to paddy rice
production in Chikun Local government Area of Kaduna
State the gross margin model was employed. The gross
margin (GM) is the difference between the total revenue
(TR) and the total variable cost (TVC). Meanwhile total
revenue is the product of paddy rice quantity per unit-bag
(Q) and the price of paddy rice per unit-bag (P). The total
cost is given by sum of the total fixed cost depreciated
(TFC) and the total variable cost (TVC). Mathematically:
GM = GR TVC----------------------------------------------eqn 1

METHODOLOGY
The study was conducted in Chikun Local Government
Area of Kaduna State. Kaduna state lies between
0
0
latitudes 10 21' and 10 33' North of the equator and

Where, GM = Gross Margin (N/ha)

GR = Gross Returns (N/ha)
TVC = Total Variable Costs (N/ha)
While the net income model states;

Cost and returns of paddy rice production in Kaduna State of Nigeria

Int. J. Agric. Mark.

P= Gross Margin TFC(depreciated)----------------- eqn 2

Where, P= Profit or Net income (N/ha)
TFC = Total Fixed Cost (N/ha).
And to ascertain the profitability of this venture, the
benefit cost ratio was used as stated;

Benefit cost Ratio = Total Benefit -------------------- eqn 3

Total Cost
Multiple Regression Analysis
Multiple regression analysis was used to quantitatively
determine the effect of postulated independent variables
on the dependent variable. The implicit form of the model
is presented thus as:
Y = f (X1 , X2 , X3 , X4 + +..Xn + m)--------------------eqn 4
Where,
Y = Income (Naira)
X1 = Farm Size (ha)
X2 = System of rice cultivation (Dummy: 1 if upland and 0
if otherwise)
X3 = Farming experience (years)
X4 = Age (years)
X5 = Household size (Number of persons)
X6 = Method of land acquisition (Dummy: 1 if farmer
inherited the land and 0 if otherwise)
m = Error Term
The relationship between the endogenous and each of
the exogenous variables were examined using four
functional forms; Linear, semi log, Exponential and
double log while the best fit functional form was selected
based on a priori expectations, level of significance of the
variables and the coefficients of multiple determination
2
(R ).

Linear
Y = + 1X1 + 2X2 + 3X3 + 4X4 +
5X5 +
Semi log
Log Y = + 1 logX1 + 2logX2 +
3logX3 + 4logX4 + 5logX5 +
Double log
Log y = + 1 logX1 + 2logX2 +
3logX3 + 4logX4 + 5logX5 +
Exponential form
Log y = + 1X1 + 2X2 +
3X3 + 4X4 + 5X5 +
RESULTS AND DISCUSSION
Table 1 revealed that majority of the respondent fell
within the age bracket of 40 49years accounting for
36.72% of the total farming population. This was closely
followed by 26.7% of the respondent belonging to the age
bracket of 50 59years. The mean age of the
respondents was 49years and only 6.7% fell below
30years of age. This result implies that majority of the

085

total farming population in the study area are still within

the productive age and can adequately manage and
carry out production activities at an optimal level. The
table also revealed that 97% of the total paddy rice
farmers populations were male while only 3% were
females. This phenomenon could be explained based on
the cultural values and religion prevalent in the study
area that restricts women to house chores and does not
allow them engage in labour intensive farming activities
such as rice production. From the study conducted,
virtually all the respondents were married, with a total of
88% constituting 53 farmers while only 7 farmers made
up the remaining 12% that were single. Farmers within
the study area had varying household sizes ranging from
1 to 30 persons. The average family size is 10persons
which are relatively small compared to the labour
intensive farming activity prevalent in the area. This
therefore accounted for the use of hired labour in place of
the family labour. Majority of the respondents were not
privileged to attain higher education. Respondents who
attained secondary school were 33%
the least
respondent of 13% were privileged to attain tertiary
education the study also revealed that majority of the
farmers 54% had primary education and an average of
9years farming experience was recorded. Their farm
sizes ranged from 1 to 40 hectares and above and the
study revealed an estimation of 15hectares as the mean
farm size. Three basic production systems were identified
as follows in the study area; the upland, lowland and
developed irrigated perimeter with varying constraints
and opportunity in terms of water availability, cost of
production, variety and quality of crop. The table showed
that in the study area 75%, 22% and 3% of the farmers
operate in the upland, lowland Fadama and irrigated
perimeter production systems respectively.
The cost and returns analysis of paddy rice production
per hectare of farmland in Chikun Local Government
Area of Kaduna state is contained in Table 2. For the
purpose of this study, the gross margin analysis and
other profitability ratios were used to determine the
profitability of paddy rice production on 1 hectare
farmland in the study area. This is estimated by adding
up the gross revenue less total variable cost. However,
the study survey showed that total gross revenue of
$1768.8 ( 352,000) is generated from sales of paddy
rice per hectare. The average cost incurred purchasing
seeds, agro-chemicals; fertilizer and packaging are of
$126.6 (25,200), $183.9 (36,600), $229.2 (45,600)
and $12.1 (2,400) respectively. Other variable cost such
as planting, fertilizer application, harvesting among others
brought the total variable cost to a sum of $866.3
(172,400). The gross margin was however estimated to
be $902.5 (179,600). The net farm income was further
estimated by subtracting the total cost (i.e total variable
cost + total fixed cost,= 199,400 {$1002}) from the
gross revenue. This amounted to $766.8 (152,600). The

Cost and returns of paddy rice production in Kaduna State of Nigeria

Ben-Chendo et al.

086

Table 1. Distribution of farmers by socio-economic characteristics

Socio-economic characteristics
Gender
Male
Female
Martital status
Married
Single
Age
20 -29
30 39
40 49
50 59
60 years and above
Household size
1 - 10 persons
11 - 20 persons
21 - 30 persons
31 persons and above
Educational Background
No formal education
Primary education
Secondary education
Tertiary education
Farm sizes
1 - 10
11 20
21 30
31 40
41 hectares and above
Methods of land acquisition
Inheritance
Purchase
Lease
Gift
Communal ownership
Farming Experience
1- 5
6 - 10
11 15
16 20
21 years and above
Systems of paddy rice cultivation
Upland
Lowland
Irrigated

Farmers N = 60
Percentage
Frequency
(%)

Mean

58
2

97
3

53
7

88
12

4
10
22
16
8

6.7
16.7
36.7
26.7
13.3

49

31
26
2
1

52
43
3
2

10

32
20
8

54
33
13

30
15
8
4
3

50
25
13
7
5

45
16
13
9
22

75
26.7
21.7
15
36.7

5
30
18
6
1

8
50
30
10
2

45
13
2

75
22
3

15

Source: Field survey data, 2014.

benefit cost ratio amounted to 1.77 which implies for

every 1($0.005) in costs the farmer can expect a benefit
of 1.77($0.008) while the gross margin ratio was
estimated to be 0.51. This result implies that for every
1($0.005) generated in sales of paddy the, farmer has
51($0.256) left over to cover basic operating costs and
profit. This indicates that paddy rice production in the
study area is profitable. The study therefore, concluded
that paddy rice production in Chikun Local Government

Area of Kaduna State is a profitable enterprise. There is

no alternative to rice in this Local Government area as it
is a staple crop and its processed to another meal called
tuwo chinkafa. However, maize and soya bean are also
cereals produced in the state and are not more profitable.
According to Sadig et al., (2013) maize production per
hectare is highly profitable with 150% profit with a gross
ratio of 0.39. This conforms to the study of (Ogaji Abu
(2010) Federal University of Technology, Minna,

Cost and returns of paddy rice production in Kaduna State of Nigeria

Int. J. Agric. Mark.

087

Table 2. Cost And Returns Analysis For Paddy Rice Production In Kaduna State

Average Per Ha
Items

Quantity

Units
Price/
Cost ()

Kg
()

3200

110

352,000
352,000

Kg
Bags (50Kg /Bag)
L
No

70
8
14
60

360
5700
2400
40

25,200
45,600
33,600
2,400

MD
MD
MD
MD
MD

3
12
10
2
4

3000
300
1000
1500
10000

9,000
3,600
10,000
3,000
40,000
172,400

Units

REVENUE:
Paddy rice yield (output)
TOTAL REVENUE (A)
VARIABLE COSTS (INPUTS) :
Rice seeds
Fertilizer
Agro-chemicals (pre and post emergence)
Bags
LABOUR COST:
Ploughing, harrowing & leveling
Planting
Fertilizer application
Weeding Herbicide application
Harvesting / threshing
TOTAL VARIABLE COST (B)
FIXED COST (DEPRECIATION)
Rent on Land
Interest on loan
Depreciation on implement/machines used
TOTAL DEPRECIATION (C )
TOTAL COST (D)
GROSS MARGIN (A - B) = E
NET RETURNS (E - C) OR (A - D) = F
BENEFIT/COST RATIO (A / D)
GROSS MARGIN RATIO

Value ()

6,480
8,000
12,520
27,000
199,400
179,600
152,600
1.77
0.51

Source: Field survey data, 2014. ($1 = N199).

individual contribution) stated that the lower the gross

and operating ratios, the higher the profitability of the
farm enterprise and vice versa.
The Effect of Socioeconomic Characteristics on the
Income of Paddy Rice Farmers in Chikun L.G.A of
Kaduna State
Based on the regression result in table 3, of the four
functional forms estimated, the coefficients in the linear
regression were the most significant as it was observed
from their t-values, as well as the appropriateness of their
signs with relation to aprori expectations and the
2
2
coefficient of multiple determination (R ). The R for the
linear model (0.78) indicated that the explanatory
variables investigated highly accounted about 78% of
variations or changes in the dependent variable. Based
on the afore-mentioned, the linear model was adopted as
the lead equation. The linear model is therefore given as:
Y = -0.923+ 0.182X1** + 0.00163X2** + 0.00098X3** 0.00134X4** + 0.598X5** + 0.583X6

The result showed that farm size (X1), system of rice

cultivation(X2), Farming experience (X3), household size
(X5) were statistically significant at 5% probability level (P
< 0.05). It further showed that the method of land
acquisition (X6) was not statistically significant at 5% level
of significance.
The significant variables accounted for 78% of the
observed variation in the farmers income. From the
regression result, (X1) which is the farm size was
positively related to farmers income by a constant
magnitude of 0.182 for every 1unit increase in the farm
2
size (1m ). This implies that an expansion in the area of
farm land increases the level of output made in the
course of production, hence the income. The system of
rice cultivation used (X2), farming experience(X3) and
household size (X5) also gave a positive relationship
indicating that with a unit increase in X2, X3, and X5, the
income (Y) will increase by a constant amount of 1.6x10
3
-4
, 9.8x10 and 0.598 respectively. This also implies that
improving on system of rice cultivation; increase in
farming experience increases the profitability. Variable X4
(age) was significant but negatively related to the level of

Cost and returns of paddy rice production in Kaduna State of Nigeria

Ben-Chendo et al.

088

Table 3. Multiple Regression Result of the Relationship between Income and Socioeconomic Characteristics

Functions

Constant

Farm
Size
(X1)

System of
rice
cultivation
(X2)

Farming
experience
(X3)

Age
(X4)

Household
size
(X5)

Method of
land
acquisition
(X6)

Linear

-0.923

0.182

0.00163

9.8E- 4

-0.00134

0.598

0.583

SE

(0.931)

(0.035)

(0.002)

(0.004)

(4.6E - 4)

(0.557)

(0.834)

t-value

-0.990

5.179**

Semi-log

-8.663

3.243

-0.133

0.777

-0.185

0.117

0.612

SE

(2.916)

(0.589)

(0.373)

(0.597)

(0.229)

(0.65)

(0.886)

t-value

-2.971**

5.509**

-0.356

1.302

-0.803

0.273

0.691

Double log

-4.152

0.867

0.054

0.233

-0.011

0.265

0.968

SE

(1.413)

(0.285)

(0.181)

(0.289)

0.111

(0.315)

(0.431)

t-value
Exponential

-2.939**

3.040**

0.296

0.804

-0.098

0.842

-1.572

0.031

0.012

3.6E -4

2.2E -4

0.543

1.138

SE

(0.505)

(0.191)

(1.2E - 2)

(2.6E -4)

(2.5E -4)

(0.303)

(0.453)

t-value

-3.108**

1.614

0.698**

0.958

2.037**

1.403

-2.899**

-0.892

1.073*

1.792**

FValue

0.78

60

30.9**

0.74

60

25.6**

0.58

60

12.6**

0.55

60

10.9**

0.699

2.253**

2.514**

** F-value significant at 5%, ** t ratio Significant at 5%, figure in ( ) = Standard error (SE)
Source: Field survey data, 2014.

profit made. This implies that a unit increase in age

decreases the level of profit made by a constant
magnitude of 0.00134. This is contrary to a priori
expectations and can be attributed to the inability of
elderly people to adopt new technologies to ensure
higher output.
Variable X6 (method of land acquisition), positively related
to the farmers income was however not statistically
significant. This implies that the method of land
acquisition did not matter but the level of farming
experience could influence the farmers income.
The analysis finally indicates that in the absence of all the
independent variables investigated, the farmers net
income will decrease by a constant magnitude of 0.923.
CONCLUSION
Rice production has become a major source of livelihood
for farmers in Kaduna state not only providing them with
basic food requirement but also generating income for
farmers through the sales of paddy rice, increasing the
number of jobs created particularly at the rural
communities and contributing to the growth of the
economy by increasing the Gross Domestic Product
(GDP) of the country. Paddy rice production in Kaduna
state has not reached it maximum however, the major
findings of this study showed that Kaduna State has great
potentials for rice production. At all levels of operation,
the study revealed that paddy rice production in the study
area holds a promising prospect for investors as evident

in the net returns obtained, the gross margin ratio and

benefit cost ratios. All these profitability ratios estimated
proved positive and hence depict good profit element for
paddy rice farmers in the area. This work therefore,
recommends that, there should be consistent policy
support by government to transform the rice farmers
mindset from seeing rice as only a food to a cash crop
through the provision of farmer education on rice
cultivation systems, extension service delivery, credit
facilities available and the minimization of risk associated
with high level of price fluctuation especially during
bumper harvests.

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Accepted November 18, 2015
Citation: Ben-Chendo GN, Lawal N, Osuji MN, Osugiri II,
Ibeagwa BO (2015). Cost and returns of paddy rice
production in Kaduna State of Nigeria. International
Journal of Agricultural Marketing, 2(5): 084-089.

Copyright: 2015 Ben-Chendo et al. This is an openaccess article distributed under the terms of the Creative
Commons Attribution License, which permits unrestricted
use, distribution, and reproduction in any medium,
provided the original author and source are cited.

Cost and returns of paddy rice production in Kaduna State of Nigeria

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