Information Asymmetry and Profitability of Tomato and Butternut Value Chains: A case of Nwanedi Agri-hub

Abstract

The agricultural economic subsector plays a crucial role, in food and nutrition security, trade balance, employment creation, and the supply of raw materials to agro-industries, however, the participation of smallholder farmers in the agricultural production chain and their contributions to value addition, remain poorly understood. Additionally, there are concerns regarding information asymmetry along the value chain, which may disadvantage smallholder farmers. This study aimed to address these gaps by mapping and characterizing the value chains for tomato and butternut crops and comparing the value creation and information sharing processes for these crops. In this study, a quantitative research design was employed and primary data was collected from various stakeholders along the value chains using closed-ended questionnaires. A sample of 150 smallholder farmers from 10 clusters was randomly selected. Data analysis included descriptive statistics, value chain mapping, and inferential statistics such as profitability ratios and Return on Investment (ROI), using the Statistical Package for Social Science (SPSS) version 26 and Excel. The analysis of the tomato and butternut value chains in Nwanedi showed a varied group of participants, such as agro-dealers, farmers, processors, distributors, and retailers, backed by the Nwanedi Agri-hub. In spite of the assistance provided, small-scale farmers encounter challenges, such as significant information gaps. Farmers are often unable to access up-to date market prices and demand trends, which weakens their bargaining position in centralized markets and enables intermediaries to make excessive profits, ultimately reducing farmers' profits. The statistical data showed notable differences in profitability for tomato and butternut growers, which are affected by sales methods and how the crops are managed. Butternut farmers who sell their produce directly to merchants experience increased profitability and earn an average ROI of 15%, in contrast to those who depend on intermediaries. Profits for tomato growers are significantly affected by input expenses and the ability to utilize effective market routes, with only advanced crop-management resulting in profitable returns. It is important to mention that ROI can differ among tomato farmers, with some reaching a 20% ROI from direct sales, while others face low returns because of expensive inputs and limited market opportunities. The study concludes that addressing information asymmetry through improved market linkages and providing smallholder farmers with timely market information is critical for enhancing their resilience and profitability. Strategic measures, such as farmer cooperatives, infrastructure investments, and price stabilization mechanisms are recommended to help increase farmers' share of the retail price and ensure long-term agricultural sustainability. Tailored support and interventions, hence, are essential for improving the productivity and livelihoods of smallholder farmers in the Nwanedi region.