Is Debt Financing a Burden or a Boost to the Growth of Small Scale Poultry Farms? Evidence From Nigeria

Year 2021, Volume: 18 Issue: 2, 179 - 186, 01.05.2021

Felix Achoja Nwamaka Nwokolo

https://doi.org/10.33462/jotaf.665710

Abstract

The growth of poultry industry is very relevant to the economy of Nigeria. Poultry farm growth may respond to debt financing positively over time up to a threshold, beyond which it becomes a burden to the business. The debt threshold of poultry farms is still not significantly understood by stakeholders in the industry. Therefore this study derives its significance by examining the asymmetric relationship between debt financing and the growth of small scale poultry farms in Nigeria. Multi-stage procedure for selection of sample was employed to involve two hundred and forty (240) poultry farmers in the survey. Primary data collected with structured questionnaire were analyzed using descriptive statistical tools (mean, percentage, standard deviation). Inferential statistical formula (Ordinary Least Square technique of multiple regression model) was employed for data analysis. Result indicates that 6% of total asset was financed by debt while 94% was financed by owner’s equity (personal fund). This indicates that debt threshold of 50% was neither attained nor exceeded. Further result shows that the growth indicators namely stock size, revenue and poultry owners’ equity responded positively to debt financing status but to a small extent. Significant determinants of debt financing status of poultry farms identified in the study were: farm age, farm size, terms of loan, loan duration, loan sources and owners’ equity. Debt financing positively impacted poultry farm growth. This implies that surveyed poultry farms are in the tolerable debt level where owners equity is higher than total debt owed. The study has established a positive causal relationship between debt financing and the growth of poultry farms in Delta State, Nigeria. The study has further accentuated the centrality of credit financing as a catalyst in the growth and development of the poultry industry. There is sufficient evidence to advocate for more loans to support the growth of small scale poultry farms. More access to external debt financing is recommended to boost small scale poultry farms’ growth in Nigeria. A more efficient credit market will serve as an incentive to the credit seeking behaviour of borrowers (small scale poultry farmers) in Nigeria.

Is Debt Financing a Burden or a Boost to the Growth of Small Scale Poultry Farms? Evidence From Nigeria

Abstract

The growth of poultry industry is very relevant to the economic growth in Nigeria. Poultry farm growth may respond to debt financing either positively or negatively over time. So the purpose of this research was to examine the asymmetric relationship between debt financing and the growth of poultry farms in Nigeria. Multi-stage procedure for selection of sample was employed to involve two hundred and forty (240) poultry farmers in the survey. Primary data collected with structured questionnaire were analyzed using descriptive statistical tools (mean, percentage, standard deviation). Inferential statistical formula was employed for data analysis. Result indicates that 6% of total asset was financed by debt indicating that debt threshold of 50% was neither attained nor exceeded. Growth in stock size, revenue and poultry owners’ equity responded positively to debt financing but to a small extent. Significant determinants of debt status of poultry farms identified were: farm age, farm size, loan condition, loan duration, loan sources and owners’ equity. The study focused on a sample of poultry farms in developing nation so caution should be exercised in over generalization of the outcome. More access to external debt financing is recommended to boost poultry farms’ growth in Nigeria.

Keywords

Debt financing, asymmetric relationship, burden, boost, poultry farms’ growth.

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