Technical efficiency of Tilapia (Oreochromis niloticus (Linnaeus, 1758)) fish cage culture in

Nigeria (case study Badagry, Lagos state).

Ani, Chibuike Damian. Federal University of Technology, Akure, Nigeria.

+2349033824013. anidamian14@gmail.com

Abstract

Nigeria is endowed with large bodies of fresh, estuarine and marine waters, availability of huge
inland water and other influencing elements that can enhance fish production from cage
aquaculture, especially in coastal states like Lagos. This study presents the results of estimating a
stochastic frontier production model using the Battese and Coelli (1992) approach in R
programming. The model decomposes total factor productivity into a technical efficiency
component and an error component. The study was carried out in Badagry Local government area
of Lagos State, Nigeria. A total of 10 farms were visited and information were gotten from well-
structured questionnaire and personal interviews. The demographics showed that the sampled
farms consists of 8 males and 2 females. The age distribution showed that 7 respondents were
between the ages of 26-35 years, 1 was between 18-25 years, 1 was between 36-45 years, and 1
was 46 years and above. The marital status showed that 7 respondents were single, and 3 were
married. All of the respondents identified as either Christian or Muslim, with 80% identifying as
Christian and 20% as Muslim. In terms of educational status, 90% of respondents had completed
NCE/OND/HND/B.Sc. education, while only 1 respondent had completed just secondary school.
The household size ranged from 1 to 8 people, with 30% of respondents having a household size
of 2 people, and another 30% having a household size of 5 people. The primary occupation data
showed that 90% of respondents were fully engaged in fish farming, and the remaining 10% had
other unspecified occupations. The majority of respondents (80%) were owner-operators, while
the remaining 20% were non-owner operators. Also 50% of the respondents used 48m3 cage (4m
x 4m x 3m) for fish farming, while 30% used 24m3 cage (4m x 3m x 2m) and the remaining 20%
used either 2.12m3 (1.524m x 1.524m x 0.914m) i.e. 5ft x 5ft x 3ft or 18m3 (3m x 4m x
1.5m).Ninety ( 90%) of the farmers had a stocking density of 2fish/m3, and all the farms visited
cultured Tilapia (Orechromis niloticus). ). Each farm had different cycle lengths because the time
to achieve the final average weight of the traded fish (~800 g) is different. The cycles were 6
months, 5 months and 8 months. The result reveals an estimated mean technical efficiency score
of 0.7792, with the technical efficiency ranging from 0.969686 to 0.336105 implying that the
sample fish farmers are operating ~21% below the production frontier and thus, there is room for
improvement. The production function involves the use of one output and six inputs and farm,
including stocking density, feed, labour, fuel (energy), utility (operational) and other relevant
production costs. The coefficients of inputs such as cage area, labor, and feed have positive signs
and statistically significant impacts on the output, while the variable "age" also contributes to a
smaller positive effect. The output elasticity associated with cage area is the highest (3.385048),
followed by labour (1.680019) and then feed (1.229278). The analysis reveals that factors such as
cage area, labor, and feed have a positive impact on technical efficiency. However, the effect of
operational costs (-0.943737) on efficiency is not statistically significant. The findings suggest that
increasing cage area, labor, and feed can enhance technical efficiency and potentially lead to
increased yields. These insights provide valuable information for policymakers and practitioners
aiming to improve productivity in the studied industry. Further research could explore additional
factors and investigate strategies for optimizing operational costs to further enhance efficiency in
the production process.

KEYWORDS: Oreochromis niloticus, cage culture, Technical efficiency, Stochastic Frontier

Approach (SFA), R programming.

Introduction

Nigeria is blessed with large bodies of fresh, estuarine and marine waters, notwithstanding the
availability of huge inland water and other influencing elements that can enhance fish production
from cage aquaculture its growth is still at a standstill (Ita et al, 1985; Fagbenro. et al. 2003).
About 4.5 percent of the nation's GDP is made up of the fishing industry. Ojo (2021), as the country
director for the Global Alliance for Improved Nutrition (GAIN), said that although production in
Nigeria has increased significantly over the past 18 years, there is still a significant supply gap that
restricts consumer access and may be a factor in the relatively high price of aquatic foods.
According to Ojo, there are a variety of limitations present at various stages throughout the supply
chain that limit the availability of fishery goods that are both safe and reasonably priced to satisfy
customer demand. (Mafolabomi. et al. 2008).
Until sufficient numbers of fish were caught or gathered for transit to the market for sale, the first
cages were probably utilized by fishermen as temporary holding facilities for fish. Local cage
facilities have been used as temporary fish containers for many years in some coastal locations,
such as the Ilaje Local Government Area of Ondo State. The farmers now have the option to store
unsold fish until the following market day or until there is a demand. Culture in cages was
exploitable for the purpose of keeping fish for a longer amount of time. Fish might be raised close
to a farmstead so that they could be caught there rather than being caught regularly in the open
sea.
The ability to practice in existing water bodies is one of the opportunities and versatility of fish
cage farming, according to Otubusin (2001) and Harrell (2004). Marine, fresh or brackish water
could be used. Greater fish stocking density when compared to pond culture. Considering the input
and surface area, higher productivity than in the pond culture system. And better management of
the fish population, particularly that of the prolific breeder tilapia. The fish cage system takes less
money to get started than pond culture. Because the entire cage can be raised from the water and
the fish removed or simply scooped out with a net, fish harvesting is typically made simpler. It
allows for intimate monitoring and evaluation of fish during feeding, and thus their response,
health conditions and growth. Also, diseases and parasites can be easily and affordably treated.
Comparatively speaking, the system is less dangerous than catch fisheries, which are always under
attack by maritime pirates.
Nigerian marine aquaculture has recently increased. Although cage culture has existed in Nigeria
since the 1960s, scholars and commercial producers have just recently begun to pay it more
attention. This can be explained by three factors: the nation's deteriorating agriculture economy;
the current rise in fish demand by humans and animals; and the declining wild fish populations.
According to a 2010 report, "Nigeria: Floating Fish Cage Farming System, a Money Spinning
Business." In the 1970s, Norway set the standard for marine commercial cage culture with the
growth and development of salmon farming (Beveridge 2004). This can be explained by the
current increase in fish demands by humans and animals, the declining wild fish stocks and the
dwindling farm economy of the nation. (“Nigeria: Floating Fish Cage Farming System, a Money
Spinning Business,” 2010). Marine commercial cage culture was pioneered in Norway in the
seventies with the rise and development of salmon farming (Beveridge 2004). However, cage
farming in African brackish and nearshore waters is a very recent development. Africa has a rich
marine and brackish water cage farming industry in terms of species diversity and culture
intensities. According to Phillips and De Silva (2007), small-scale cage culture is extremely
effective in many African countries, but some of the main obstacles to its continuous expansion
and improvement are the management of cage farms and the technical efficiency of farms
(Hambrey 2006). Due to a lack of technology for artificial breeding, coastal finfish aquaculture
has an insufficient supply of fingerlings. It is possible to boost the production of cage cultures by
using better technology or by improving production efficiency by implementing better
management and culture systems. Studies have demonstrated that, if the producers are inefficient,
increasing production efficiency is more cost-effective than introducing new technologies
(Belbase and Grabowski 1985; Dey et al. 2000). Fish is one of the least expensive and most widely
used forms of animal protein in Nigeria, according to Pwaspo, Director of Aquaculture and Deputy
Director of the Fisheries and Aquaculture Department. With a per capita intake of 17.5 kg per
person per year, it makes up roughly 50% of all animal protein consumed in Nigeria. In this sense,
Nigeria produces 1.1 million tons of fish annually from all sources (including aquaculture, artisanal
fishing, and industrial fishing), leaving a gap of around 2.5 million tons that must be filled by
imports.
The purpose of this study is to examine the technical and financial viability of tilapia cage farming
in Nigeria and to identify the economic variables that may influence the establishment of cage
farming. Alert people to potential dangers associated with cage culture and offer a framework for
evaluating the cage culture business to guarantee it is profitable before it launches. Mafolabomi,
et al. (2008).

Materials and methods

Study area

The study was conducted at ten commercial fish farms in Afowo Community, Apa, Badagry,
Lagos state with the coordinates (6o 25’ 672” N, 2o 50’ 809” E). There were ten farms in total.
The farms used net cages to raise Nile tilapia (Oreochromis niloticus). Each farm had different
cycle lengths because the time to achieve the final average weight of the traded fish (~800 g) is
different. The cycles were 6 months, 5 months and 8 months.
Badagry, Lagos is an ideal location for a research on cage culture. The coastal town has a rich
history of fishing, with many families relying on the industry for their livelihoods. Cage culture is
a common fishing method used in Badagry, where fish are kept in floating cages, fed, and
harvested when they reach a certain size. This method is considered more sustainable compared to
other fishing methods and has gained popularity in recent years. The town's proximity to the
Atlantic Ocean also means that a wide variety of fish species are available for cage culture.
Studying cage culture in Badagry provided valuable insights into the sustainable development of
the fishing industry, and the impact of cage culture on the local economy and community.
Additionally, the study could explore the challenges and benefits of cage culture, and its potential
for replication in other coastal communities.

Figure 1: Map showing the study area

Sampling technique

Random sampling technique was used to select farms where this research will be carried out. This
technique ensured representative sample, reduced sample error, increased generalizability and
ethical considerations.
A total of 10 farms were visited for the purpose of the research.
Fish farms that participated in the study were those located at Badagry Local government and
involved in Tilapia fish cage culture.
Data collection

Data was collected by administering questionnaires to farms located at Badagry local government,
Lagos state, using on-site and online survey. Data for cage culture activities were collected through
face to face interviews of the sampled respondents using a structured questionnaire during the
months of July, 2022. The information collected through the questionnaire include the
demographic characteristics of cage aquaculturists; the physical characteristics of culture system
and type of species stocked in cage farms; inputs used and cost of production; and the quantity and
value of fish production. The study obtained data on inputs used such as seed (fish fry), feed (kg),
labor (days), fuel (liter), operational expenditure (USD), maintenance cost (USD). The study
measure all the inputs used in a cycle in the form of quantity per total size of cages (m−3). Labor
is measured in number of labor employed multiplied by number of farming days per cycle, then
divided by the size of cage area (m−3). Feed is measured in kilogram of trash fish and pellet divided
by size of cage (m−3). Seed is measured in number of stocked fry divided by size of cage (m−3).
Energy cost is measured in USD for cost of fuel for travelling to the cage. Operational expenditure
is measured in USD by total expenses for other operational costs. Other maintenance costs is
measured in USD spent on maintenance of cages and nets. The study obtained demographic
variables which include farmers age (years), education level (year), experience in cage aquaculture
(years), number of production cycle in a year (number) and number of cages operated per farmer
(number). All cost will be converted to dollar.

Data analysis

There have been many theoretical developments in and practical applications Technical Efficiency
Measurement in Aquaculture using data envelopment analysis (DEA) since its invention,
especially in the fields of banking, health, agriculture, transportation, education and
manufacturing. Liu et al. (2013) reported that among the 4,936 published articles on DEA in
citation journals, 1,802 (36.5%) and 3,134 (63.5%) are purely methodological and empirical
applications, respectively. This wide application of DEA indicates its strength and capability in
measuring the technical efficiency of firms.
However, stochastic frontier analysis (SFA) is predominantly used for estimating technical
efficiency studies in the aquaculture industry, perhaps because DEA attributes all deviations from
the production frontier to technical inefficiency, thereby making it an inappropriate technique in
some sectors, especially in agriculture, in which the data collection process is sensitive to
stochastic noise and other measurement errors (Coelli et al., 2005). This shortcoming of DEA led
Simar and Wilson (1998, 2000) to propose a technique which allows the construction of confidence
intervals for DEA technical efficiency scores with the help of bootstrapping procedures. The
reason for bootstrapping is to estimate the bias-corrected technical efficiency (BCTE), which is
more accurate estimates of efficiency scores than the conventional DEA. Despite this
development, the application of the DEA bootstrapping technique has thus far been limited in
measuring the efficiency of aquaculture. Indeed, Chang et al. (2010) work is the only study to have
used this technique to estimate BCTE in aquaculture. Most other studies have employed the
conventional DEA model to estimate the technical efficiency of aquaculture, but SFA seems to be
the most sustainable method. This therefore motivates the use of the SFA with Empirical model
estimation in this study.
Technical efficiency analysis measurement

Stochastic Frontier model (SFA)

Farrell (1957) described technical efficiency as the ability to produce a given level of output with
a minimum quantity of inputs used under certain specific production technology. Aigner et al.
(1977) and Meeusen and Van den Broeck (1997) have developed the stochastic frontier production
function to measure the technical efficiency of production. The Stochastic Frontier Production
Function is more appropriate for measuring technical efficiency because it overcomes the
inadequate characteristics of the assumed error term in conventional production functions which
have limitations on statistical inference of the parameters and the resulting efficiency estimates.
The stochastic frontier production model can be written as:
Yi = f (Xik ; βk ) + εi i = 1, 2, ...n (1)
Where, Yi denotes the output for the ith farm (i = 1, 2, …, n);
Xik is a (1 × k) vector of factor inputs of the ith farm, and
βk is a (k × 1) vector of unknown parameters to be estimated;
εi is the err term that has two elements, namely:
εi = Vi−Ui ….. (2)
Where, Vi is a random variable which is assumed to be normally, independently and identically
distributed, i.e. Vi ~ niid(0, σν 2 ), and independent of the Ui , and can be positive or negative. The
term Ui is a non-negative random variable which accounts for pure technical inefficiency in
production and is assumed to be independently distributed (Aigner et al. 1977).
The assumption of the independent distribution between Ui and Vi allows the separation of the
stochastic and inefficiency effects in the model.
Battese and Coelli (1995) defined Ui ’s as:
Ui = Ziδ + Wi (3)
where Zi is a (1 * p) vector of variables affecting farm efficiency; δ is a (p * 1) vector of parameters
to be estimated; Wi ’s represent the truncation of the normal distribution with mean 0 and variance
σu 2 , in such a way that the point of truncation is −Zi δ, i.e., Wi ≥ −Zi δ. This assumptions are
consistent with Ui being a non-negative truncation of the N(Zi δ, σu 2 ) distribution.
The maximum likelihood estimation technique is used to simultaneously estimate the parameters
of the stochastic frontier model in (1) and those for the technical inefficiency model in (3). The
parameters in Eq. (1) include β’s and the variance parameters σ2 = σu 2 + σv 2 and γ = σu 2 /σ2
(Battese and Corra 1977), where σ2 is the sum of the error variance, γ has a value between zero
and one, measures the total variation of output from the frontier that attributed to the existence of
random noise or inefficiency. Inefficiency is not present when γ = 0 which means that all deviations
from the frontier are due to random noise. However, if γ = 1 then the deviations are completely
caused by inefficiency effects (Battese and Coelli 1995).
The farm level technical efficiency of production for the ith farm (TEi) is defined as:
𝑌𝑖
𝑇𝐸𝑖 = exp(−𝑈𝑖) = (𝑓(𝑋𝑖 ; 𝛽) exp(𝑉𝑖)) (4)
The prediction of the technical efficiency is based on the conditional expectation expressed in (4),
given the model specification (Battese and Coelli 1988)

The definitions, measurements and the summary statistics for variables used in this study are
presented in Table 5.
Table 1: Description of variables in SFA and Technical inefficiency model

Variable in the model Description Unit

Dependent variable
Output (Y ) Average weight at harvest Kilogram
Independent variable
Stocking density (X1 ) Fingerlings stocked in the farm per production Number
cycle
Feed (X2 ) Total quantity of fish produced Kilogram
Labour (X3 ) Total number of family and hired labour used per Man-day
production cycle
Other costs (X4) Represents cost incurred or other input per USD
production cycle
Technical efficiency determinant
Age (Z1 ) Represents age of fish farmers or managers Year
Experience (Z2 ) Represent the number of years the farmer Year
/manager spent in fish farming
Education level (Z3 ) Level of education of fish farmer/manager Level
Operational status (Z4 ) Operation of the fish farm and (1 = owner, 0 = Dummy
otherwise)
Extension services (Z5 ) Extension visit to the fish farm in the last three Dummy
years( 1 = yes; otherwise)
Household size (Z6 ) Number of fish farmer family Number
Water management techniques (Z7 ) Water management practices ( 1 = yes; 0 = Dummy
otherwise)
*** 1USD = ₦460

Empirical Model Estimation

The Cobb-Douglas stochastic production frontier model has been commonly used in many
aquaculture studies in developing countries (Iinuma et al. 1999; Nerrie et al. 1990; Hsiao 1994).
This model will be used in the specification of (1) as follows:
LnYi = β0 + β1Ln X1 + β2Ln X2 + b3LnX3 + b4LnX4 + b5LnX5 + b6LnX6 + Vi−U (5)
Where Ln is the natural logarithm,
Y= fish production (kg) per cycle
β1, β2, β3, β4, β5, and β6 are the regression coefficients of inputs (input elasticities);
X1 = fish fry (pieces);
X2 = feed (kg);
X3 = labour (days);
X4 = fuel (litre);
X5 = utility (USD);
X6 = other maintenance (USD); and
Vi + Ui are the error terms. The definitions, measurements and summary statistics of all the
variables in (5) are presented in Table 1.
Maximum likelihood estimation of (5) provides the estimates for the β’s and the variance
parameters, σ2 = σv 2 + σu 2 and γ = σu 2 /σ2. The empirical specification for the random variable
associated with technical inefficiency as in (3) is shown in (6) below:
Uit = δ0 + δ1Zi1 + δ2Zi2 + δ3Zi3 + δ4Zi4 + δ5Zi5 + ε (6)
Where Uit, δ and ε are as defined earlier.
The variables of
Z1 = age (year);
Z2 = Education (year);
Z3 = Experience (year);
Z4 = Production cycle (number); and
Z5 = Cage area (meter square).
Z6 = Contact with extensionist
Z7 = Household size
Z8 = Adaptation to technology
Z9 = Farm status
Z10 = Access to credit facilities
Z11 = Water management techniques

Definition of Variables

In this study, one outputs and six inputs were used to measure technical efficiency. The output
represents the quantity of fish produced by farmers, measured in kilograms. We used total fish
production as a proxy for output (Iinuma et al., 1999). Inputs included stocking density, feed,
labour and costs of other relevant inputs as illustrated in Table 1. The stocking density is measured
as the number of juvenile fish stocked. The feed variable is measured as the quantity of feed used,
in kilograms. The labour variable represents the number of hours spent working on farms,
measured in man days. Other costs include the sum of chemicals, repairs, fuel, telephone calls and
other miscellaneous expenses. Asche and Roll (2013), in their study of the determinants of
inefficiency in Norwegian salmon aquaculture, also used fish produced as output, with stocking
density, feed, labour and capital used as inputs. In addition, Iinuma et al. (1999) estimated the
technical efficiency of carp pond culture in Peninsular Malaysia using total production to represent
output, while feed, stocking density, labour and other expenses were included as inputs. Table 5
also shows the variables used to investigate the determinants of technical efficiency in aquaculture.

Results

Demographics, farm specific, input and output variables

Tables 1, 2 and 3 shows the summary of demographics, farm specific, input and output variables
gotten from the respondents via the questionnaires, online and person to person interviews carried
out. The tables present information on age, gender, educational status, marital status, religion,
household size, primary occupation, cage size, operational status, source of capital, production
cycle, number of extension visits, water management practices, access to credit, stocking density,
amount of feed fed (bags), type of feed, labour, operational cost, energy (fuel), and other inputs. It
also include information on output variables such as average weight of fish at harvest, price of fish
per kg and total weight harvested per cycle.

Table 2: Summary statistics demographics variables.

Valid Cumulative
Variable Frequency Percent Percent Percent
Gender
- Male 8 80.0 80.0 80.0
- Female 2 20.0 20.0 100.0
Age
- 18-25 years 1 10.0 10.0 10.0
- 26-35 years 7 70.0 70.0 80.0
- 36-45 years 1 10.0 10.0 90.0
- 46 years and above 1 10.0 10.0 100.0
Marital Status
- Single 7 70.0 70.0 70.0
- Married 3 30.0 30.0 100.0
Religion
- Christianity 8 80.0 80.0 80.0
- Muslim 2 20.0 20.0 100.0
Educational Status
- Secondary School 1 10.0 10.0 10.0
-
NCE/OND/HND/B.Sc. 9 90.0 90.0 100.0
Household Size
-1 2 20.0 20.0 20.0
-2 3 30.0 30.0 50.0
-5 2 20.0 20.0 70.0
-6 1 10.0 10.0 80.0
-7 1 10.0 10.0 90.0
-8 1 10.0 10.0 100.0
Primary Occupation
- Fish farming 9 90.0 90.0 90.0
- Others, indicate 1 10.0 10.0 100.0
Table 3: Summary of farm specific variable
Valid Cumulative
Variable Frequency Percent Percent Percent
Operational
Status
Owner Operator 8 80.0 80.0 80.0
Non-owner
Operator 2 20.0 20.0 100.0
Total 10 100.0 100.0
3
Cage size (m )
2 1 10.0 10.0 10.0
18 1 10.0 10.0 20.0
24 3 30.0 30.0 50.0
48 5 50.0 50.0 100.0
Total 10 100.0 100.0
Source of Capital
Friends and Family 1 10.0 10.0 10.0
Personal 3 30.0 30.0 40.0
Cooperative
Society 3 30.0 30.0 70.0
Others, Specify 3 30.0 30.0 100.0
Total 10 100.0 100.0
Prod. Cycle
(months)
4.50 1 10.0 10.0 10.0
5.00 2 20.0 20.0 30.0
6.00 1 10.0 10.0 40.0
6.50 3 30.0 30.0 70.0
7.00 2 20.0 20.0 90.0
8.00 1 10.0 10.0 100.0
Total 10 100.0 100.0
Extension Visits
0 4 40.0 40.0 40.0
1 1 10.0 10.0 50.0
2 3 30.0 30.0 80.0
3 2 20.0 20.0 100.0
Total 10 100.0 100.0
Table 4: Summary of input and output variables
Valid Cumulative
Frequency Percent Percent Variable Percent
Seeds
250 250 1 10.0 10.0
1000 900 9 90.0 100.0
Total 1000 100.0 100.0
Stocking density in
fingerlings/m
62.5 6 60.0 60.0 60.0
83.3 1 10.0 10.0 70.0
107.64 1 10.0 10.0 80.0
125 2 20.0 20.0 100.0
Total 10 100.0 100.0
Feed amount in
bags
10.00 1 10.0 10.0 10.0
13.00 1 10.0 10.0 20.0
56.00 1 10.0 10.0 30.0
58.00 1 10.0 10.0 40.0
60.00 2 20.0 20.0 60.0
61.00 1 10.0 10.0 70.0
62.00 1 10.0 10.0 80.0
65.00 1 10.0 10.0 90.0
75.00 1 10.0 10.0 100.0
Total 10 100.0 100.0
Type of feed 10 100.0 100.0 100.0
person/day or total
wages paid
72.00 4 40.0 40.0 40.0
126.00 1 10.0 10.0 50.0
150.00 3 30.0 30.0 80.0
180.00 1 10.0 10.0 90.0
210.00 1 10.0 10.0 100.0
Total 10
4.2 Summary and descriptive statistics of variables in the model
Table 5: Summary Statistics for variables in the model
Variable Definition Measureme Summary statistics
name nt
Mean S.D Min Max

Output and input variables

Y Cage fish production per (kgm-2) 69.11 34.86 31.25 125.00
cycle
X1 Fish fry (pieces m-2) 81.59 27.16 62.50 125.00
X2 Feed (kgm-2) 69.01 29.01 24.38 121.88
X3 Labour (owned and (days m-2) 13.99 9.44 4.50 31.00
hired)
X4 Energy (fuel) (litres m-2) 0.22 0.40 0.00 1.29
X5 Utility (operational) (USD m-2) 101.56 44.48 40.76 172.71
X6 Other (maintenance) (USD m-2) 33.38 42.21 2.72 140.40
Farm specific variable
Z1 Age Year 33.05 8.92 21.50 30.50
Z2 Education Year 14.00 3.16 5.00 15.00
Z3 Production cycle Number 6.20 1.09 4.50 8.00
Z4 Cage area m2 11.83 4.96 2.32 16.00
Z5 Household size Number 3.90 2.60 0.00 3.00
Z6 Extension visit Number 1.30 0.40 1.00 8.00
*1USD = ₦460*

Result of Technical efficiency and error measurement by variables

Table 6 shows the technical efficiency, error component, estimate standard deviation, significance
(p value) and critical values of the sampled farms by the most impacting variables.

Table 6: Technical efficiency and Error component using SFA and Error component frontier
(Battese and Coelli 1992)
Error Estimate Std z value P (>|z|)
(Intercept) -10.157134 0.683351 -14.8637 2.2e-16 ***
log(`cage area`) 3.385048 0.525947 6.4361 1.226e-10 ***
log(labour) 1.680019 0.330795 5.0787 3.800e-07 ***
log(feed) 1.229278 0.179675 6.8417 7.827e-12 ***
Mid-age 0.117921 0.030523 3.8634 0.0001118 ***
log(Operational) -0.943737 0.719375 -1.3119 0.1895590
σ2 0.081904 0.093197 0.8788 0.3794959
Gamma 1.000000 0.051081 19.5768 < 2.2e-16 ***
*** denotes significance at 5% (0.05)
Result of Technical efficiency by sampled farms
Table 7 shows the technical efficiency of the sampled farms and from the data presented below,
farm 7 has the highest efficiency, recording an inefficiency of < 1%, while farm 6 has the lowest
efficiency with an inefficiency value of >66%.
Table 7: Table showing efficiency by farm
Farm Technical Efficiency
1 0.969686
2 0.992047
3 0.397539
4 0.85724
5 0.888299
6 0.336105
7 0.995112
8 0.786254
9 0.782432
10 0.787624
Log likelihood value: 4.5902Mean
Technical efficiency: 0.779234

Discussion

Descriptive statistics of the variables

The survey was conducted with 10 fish farmers in Badagry Local government area, consisting of
8 males and 2 females. The age distribution showed that 7 respondents were between the ages of
26-35 years, 1 was between 18-25 years, 1 was between 36-45 years, and 1 was 46 years and
above. In terms of marital status, 7 respondents were single, and 3 were married. All of the
respondents identified as either Christian or Muslim, with 80% identifying as Christian and 20%
as Muslim. In terms of educational status, 90% of respondents had completed
NCE/OND/HND/B.Sc. education, while only 1 respondent had completed secondary school. The
household size ranged from 1 to 8 people, with 30% of respondents having a household size of 2
people, and another 30% having a household size of 5 people. Regarding primary occupation, 90%
of respondents were engaged in fish farming, and the remaining 10% had other unspecified
occupations. The majority of respondents (80%) were owner-operators, while the remaining 20%
were non-owner operators. The survey also found that 50% of respondents used 48m3 cage (4m x
4m x 3m) for fish farming, while 30% used 24m3 cage (4m x 3m x 2m) and the remaining 20%
used either 2.12m3 (1.524m x 1.524m x 0.914m) i.e. 5ft x 5ft x 3ft or 18m3 (3m x 4m x 1.5m) In
terms of the source of capital, 30% of respondents used personal funds, 30% used cooperative
societies, and the remaining 40% used either friends and family or other unspecified sources. The
production cycle ranged from 4.5 to 8.0 months, with 30% of respondents having a production
cycle of 6.5 months, and another 20% having a cycle of 5.0 or 7.0 months. Extension visits from
41 agricultural professionals varied, with 40% of respondents having no visits, 30% having 2 visits,
and the remaining 30% having either 1 or 3 visits. Finally, the survey found that 80% of
respondents did not use water management techniques, while the remaining 20% did. In terms of
access to credit, 40% of respondents had access to credit, while the remaining 60% did not. The
summary statistics for variables used are presented in Tables 1, 2 and 3.

Technical efficiency Estimated Parameters of SFA

The presented Table 6 showcases the results of estimating a stochastic frontier production model
using the Battese and Coelli (1992) approach in R programming, enabling the decomposition of
total factor productivity into two components: technical efficiency and error. The intercept
estimate of -10.157134 signifies the average level of technical inefficiency when all explanatory
variables are at zero. This suggests that, in the absence of any input factors, there is a baseline level
of inefficiency. The coefficients for cage area, labor, and feed indicate positive associations with
technical efficiency, implying that increases in these factors contribute to higher expected
efficiency, holding other variables constant. Where ‘cage area’ had the highest output elasticity.
Feed had the second highest output. Specifically, a one-unit increase in the logarithm of cage area
is associated with a 3.385048 unit increase in expected efficiency, while the corresponding
increase for labor and feed is 1.680019 and 1.229278 units respectively elasticity similarly reported
by Iliyasu et al (2014), where feed does not have the highest output elasticity as one would have
thought, but in the case of Iliyasu et al (2014), was the third highest output elasticity as opposed
to being the second highest output elasticity in this study. Additionally, the coefficient for the
variable "age" suggests that farmers with more experience have a slightly higher likelihood of
being technically efficient, as a one-unit increase in "age" leads to a 0.117921 unit increase in
expected efficiency, all things being equal.
On the other hand, the coefficient for operational costs does not demonstrate statistical significance
at conventional levels, as indicated by the associated p-value of 0.1895590. Therefore, the impact
of operational costs on technical efficiency cannot be reliably inferred from the current analysis.
This is consistent with the results reported by Islam et al. (2016). The presence of the error
component is captured by the σ2 parameter, representing the variance of the error component,
which accounts for unobserved factors influencing production that are not accounted for by the
included explanatory variables. Additionally, the estimated value of 1.000000 for the γ-parameter
suggests that the error component follows a half-normal distribution, indicating the presence of
technical inefficiency.
The log likelihood value of 4.5902 provides an indication of the model's goodness of fit. A value
closer to zero implies a better fit to the data. In this case, the log likelihood value suggests a
reasonable fit of the model to the data. The mean efficiency estimate of 0.779234 reveals that, on
average, the technical efficiency of the production units in the study is approximately 78%. This
indicates that, given the current technological state and input levels, there is room for
improvement, as the sample fish farmers could potentially increase their yields by approximately
22%.
Table 6 offer insights into the factors influencing technical efficiency within the production model.
Specifically, cage area, labor, and feed demonstrate positive impacts on technical efficiency, while
the variable "Mid-age" also contributes to a smaller positive effect. However, the effect of
operational costs cannot be confidently determined based on the current analysis. The estimated
mean efficiency highlights the potential for improving the performance of the production units,
suggesting opportunities for enhancing overall efficiency, this suggests that great potential exists
for increasing cage production in Nigeria.

Technical efficiency by farms

Table 7 shows the predicted technical efficiencies of the individual sample fish farmers, together
with the average technical efficiency (TE). The TE scores range from a very small value of
0.336105 to a higher value of 0.992047
The estimated average TE score of the sample fish farmers in the study area is 0.779234 and is
relatively similar to other TE values reported in many efficiency studies of aquaculture, as shown
in Table 8. This implies that, on average, the sample fish farmers can increase their yields by
~21%, given the current technological state and input levels. In addition, the results from the
analysis of frequency distributions of the TE scores reveal that the majority (50%) of the fish
farmers have TE scores in the range of 0.86–0.99, as demonstrated in Fig 6. Similarly, 20% and
30% of the sample cage fish farmers have TE scores in the ranges of 0.34 – 0.46 and 0.73 – 0.85
respectively. 0% of the farm had a technical efficiency range of 0.47 – 0.59 and 0.60 – 0.72. Thus,
80% of the cage fish farmers in the study area have TE scores equal to or more than 70%. Similarly
reported by Iliyasu et al (2014). This shows that the majority of the fish farmers in the study area
are operating close to the production frontier; therefore, increasing the outputs should rely not only
on raising the technical efficiency effect but also on the introduction of new and improved
technology Iliyasu et al (2014).
 60

50

40
Percentage

30

20

10

0
0.34 - 0.46 0.47 - 0.59 0.60 - 0.72 0.73 - 0.85 0.86 - 1.00
Technical efficiency

Figure 2: Clustered column chart showing Frequency distribution of technical efficiency score

60

50

40
Percentage

30

20

10

0
0.34 - 0.46 0.47 - 0.59 0.60 - 0.72 0.73 - 0.85 0.86 - 1.00
Technical efficiency

Figure 3: Line Chart showing distribution of technical efficiency score

Conclusion

Cage fish farming is a promising venture that can help alleviate poverty, unemployment and reduce
food insecurity and as such the government needs to improve environment for the investors and
fish farmers by ensuring that there is provision of farmer and female friendly loans by the banking
sector, high quality and affordable seeds and feed, of importance is the supporting policy
framework on fish cage farming that can spur growth of the sector. There is also need to ensure
that extension services are effective and efficient. The Government has a role in ensuring the
type/quality of extension material/information that is given to farmers. On the other hand, farmers
should be encouraged to form strategic farmer associations to strengthen their market bargaining
power, reduce information asymmetry and help in pooling of resources thereby taking advantage
of the emerging opportunities.
Cage size, Feed cost and labor cost were identified as the significant factors influencing the
technical efficiency of tilapia fish cage culture in Nigeria. The high feed cost can be attributed to
the low local production of fish feed, which forces farmers to rely on imported feeds that are
expensive. This underscores the need for the development of a local feed industry that can supply
affordable and high-quality fish feed to farmers. On the other hand, labor cost was found to be
high, and this could be attributed to the lack of mechanization in the sector. The use of appropriate
technology and equipment could reduce labor costs and improve efficiency.

Table 8: Review of technical efficiency studies in aquaculture

Author(s) name (Year) Country *MTE (Mean Technical
efficiency)
Alam Md et al. (2012) Bangladesh 0.78
Chiang et al. (2004) Taiwan 0. 82
Dey, Paraguas, Bimbao and Regaspi (2000) Philippines 0.83
Asche and Roll (2013) Norway 0.82
Gunaratne and Leung (1997) Malaysia 0.78
Gunaratne and Leung (1996) Sri Lanka 0.79
Irz and Mckenzie (2003) Philippines 0.83
Karagiannis, Katranidis and Tzouvelekas (2002) Greece 0.84
Karagiannis, Katranidis and Tzouvelakas (2000) Greece 0.79
Onumah and Acquash (2010) Ghana 0.81
Onumah et al. (2010a) Ghana 0.79
Onumah et al. (2010b) Ghana 0.84
Ogundari and Ojo (2009) Nigeria 0.81
Ogundari and Olajide (2010) Nigeria 0.80
Sharma and Leung (2000) India 0.81
Sharma and Leung (1998) Nepal 0.80
Iliyasu .A. et al. (2014) Malaysia 0.79
Islam et al. (2016) Malaysia 0.38
Mean 0.78
Recommendation

Based on the findings of the study, several recommendations can be made to enhance technical
efficiency and productivity in the fish farming industry. Firstly, it is advisable for farmers to invest
in larger cage areas. The positive impact of cage area on technical efficiency suggests that
providing more space for fish growth and movement can lead to improved productivity. By
expanding cage areas, farmers can create optimal conditions for fish, thereby enhancing overall
efficiency and potentially increasing yields. Cages with dimension > 48m3 will result to a higher
technical efficiency of > 0.8.
Secondly, optimizing labor management is crucial for improving technical efficiency. The study
indicates that increasing the workforce has a positive effect on efficiency. However, it is essential
to ensure that labor resources are utilized effectively and efficiently. Farmers should assess their
labor needs, considering factors such as task allocation, training, and workload management. By
optimizing labor utilization, farmers can maximize productivity and minimize inefficiencies in the
production process.
Thirdly, feed management plays a significant role in enhancing technical efficiency. The positive
coefficient for feed implies that careful attention to feed practices can lead to improved efficiency.
Farmers should focus on optimizing feed management by implementing proper feeding schedules,
ensuring balanced nutrition, and minimizing feed wastage. Employing efficient feeding techniques
and closely monitoring feed usage can contribute to improved efficiency and reduced costs.
Moreover, the positive effect of the "age" variable suggests the importance of experience and
knowledge sharing in improving technical efficiency. Encouraging mentorship programs and
knowledge sharing initiatives among farmers can facilitate the dissemination of best practices and
enhance the skills of less experienced farmers. By promoting collaboration and knowledge
transfer, the industry can collectively improve efficiency and productivity.
Additionally, while the coefficient for operational costs (-0.943737) did not show statistical
significance, it is important to analyze and optimize these costs. Farmers should conduct a detailed
assessment of their operational expenses, identifying areas for cost reduction without
compromising quality or productivity. Adopting cost-effective strategies, exploring alternative
suppliers, and optimizing resource allocation can contribute to improved efficiency and
profitability.
Furthermore, continuous monitoring and evaluation of efficiency levels are essential for ongoing
improvement. Farmers should implement regular monitoring systems to track their technical
efficiency over time. This allows them to identify areas of improvement, measure the effectiveness
of implemented strategies, and make informed decisions to enhance productivity. By adopting a
proactive and data-driven approach, farmers can continuously strive for improved efficiency and
productivity.
The Government should impose on all registered cage fish farmers to provide yearly information
on their production costs and outputs, otherwise their license should be revoked. This information
can be recorded in a data bank and released on request for research and other purposes.
Lastly, promoting technological advancements is crucial for enhancing technical efficiency in the
industry. Collaboration between governments, research institutions, and industry associations is
vital to identify and adopt innovative technologies relevant to fish farming. This may include
advancements in cage design, automated feeding systems, water quality management, and data-
driven decision-making tools. By facilitating the adoption of such technologies through training
programs, financial incentives, and knowledge sharing platforms, stakeholders can collectively
drive sustainable productivity growth in the fish farming sector.
These recommendations, tailored to the specific context of the industry, require collaboration
among stakeholders to drive positive and sustainable changes in the sector.

Limitation

The limitation of this study is that it only estimates technical efficiency due to a lack of data on
input prices, whereas a great improvement in production will be achieved if all the efficiency
measures are estimated. Therefore, future research should consider estimating the overall
economic efficiency. In addition, this study used only cross-sectional data, which cannot be
employed to measure the total factor productivity, which requires panel data. Also lack of
information and data of cage culture farmers in any database, makes the process of information
gathering hectic.

References

Adegboye, K. (2010). Nigeria: Floating fish cage farming system, a money spinning business.
allafrica.com. https://allafrica.com/stories/201008090038.html.
Aigner, D., Lovell, C. K., & Schmidt, P. (1977). Formulation and estimation of stochastic frontier
production function models. Journal of econometrics, 6(1), 21-37.
Asche, F., and Roll, K.H. (2013). Determinants of inefficiency in Norwegian salmon Aquaculture.
Aquaculture Economics and Management, 17(3), 300-321.
https://doi.org/10.1080/13657305.2013.812154
Battese, G. E., & Coelli, T. J. (1988). Prediction of firm-level technical efficiencies with a
generalized frontier production function and panel data. Journal of econometrics, 38(3),
387-399.
Battese, G. E., & Coelli, T. J. (1995). A model for technical inefficiency effects in a stochastic
frontier production function for panel data. Empirical economics, 20, 325-332.
Battese, G. E., & Corra, G. S. (1977). Estimation of a production frontier model: with application
to the pastoral zone of Eastern Australia. Australian journal of agricultural
economics, 21(3), 169-179.
Battese, G.E., Coelli, T.J. Frontier production functions, technical efficiency and panel data: With
application to paddy farmers in India. J Prod Anal 3, 153-169 (1992).
https://doi.org/10.1007/BF00158774.
Belbase, K., Grabowski, R. and Sanchez, O.(1985). “The Marginal Productivity of Inputs and
Agricultural Production in Nepal.” The Pakistan Development Review, 24 (1), 51-60.
http://www.jstor.org/stable/41258692.
Beveridge M.C.M. (2004). Cage Aquaculture, 3rd edition. Oxford: Blackwell.
Coelli TJ, Rao DSP, O’Donnell CJ, Battese GE (2005) An introduction to efficiency and
productivity analysis, 2nd edn. Springer, New York.
De Silva, S.S. and Phillips, M.J. A review of cage aquaculture: Asia (excluding China). Im M.
Halwart, D. Soto and J.R. Arthur (eds). Cage aquaculture – Regional reviews and global
overview, pp. 18-48. FAO Fisheries Technical Paper. No. 498. Rome, FAO. 2007. 241 pp.
E.O Ita, E.K Sado, J.K Balogun, A Pandogari, B. Ibitoye. Inventory survey of Nigerian inland
waters and their fishery resources. Part 1. A preliminary checklist of Inland water bodies
in Nigeria with special reference to pond, Lakes, reservoirs and major rivers. Kainji lake
research institute (1985). http://hdl.handle.net/1834/18696.
Fagbenro, O.A, E.O. Adeparusi and O.O. Fapohunda, 2003: Feedstuffs and dietary substitution for
farmed fish in Nigeria. In: National workshop on Fish Feed Dev. And feeding practices in
Aquaculture organized by FISON in collaboration with NFFR and FAO Special
Programmes on Food Security (SPFS). A.A Eyo (Ed), New Bussa. 15th – 19th Sept. 2003.
pp 60-72.
Farrell, M. J. (1957). The measurement of productive efficiency. Journal of the royal statistical
society: series A (General), 120(3), 253-281.
H.H. Chang, R.N. Boisvert, L.-Y. HungLand subsidence, production efficiency, and the decision
of aquacultural firms in Taiwan to discontinue productionEcol. Econ., 69 (2010), pp. 2448-
2456.
Hambrey, J. 2006. A brief review of small-scale qaquaculture in Asia, its potential for poverty
alleviation, with a consideration of merits of investment and specialization. In M. Halwart
and J.F. Moehl (eds.) FAO regional Technical Expert Workshop on Cage culture in Africa.
Entebbe Uganda, 20-23 October 2004. FAO Fisheries proceedings. No. 6. Rome, FAO. pp
37-47.
Harrell R.M (2004): Cage culture in Maryland.
http://www.mdsg.und.edu/Extension/finfish/FF2.html. Accessed January 23rd, 2022.
Hsiao, C.K., 1994. Analysis of demand for Aquaculture water in Taiwan. In: Proceedings of
International Symposium ’93. Tungkang Marine Laboratory Conference Proceedings No.
4, Taiwan Fisheries Research Institute, pp. 341-349.
I. Pwaspo, Director of Aquaculture and Deputy Director of the Fisheries and Aquaculture. Federal
Department of Fisheries. Federal Ministry of Agriculture and rural development. (2021).
Improved aquaculture sub-sector will increase domestic production and grow the GDP.
Federal department of Fisheries. https://fdf.fmard.gov.ng/2021/07/08/improved
aquaculture-sub-sector-will-increase-domestic-production-and-grow-the-gdp-nanomo/.
Iinuma M, Sharma KR, Leung P (1999) Technical efficiency of carp pond culture in peninsula
Malaysia: an application of stochastic production frontier and technical inefficiency model.
Aquaculture 175:199–213.
Iliyasu , A., Mohamed, Z.A., Ismail, M.M., Abdullah, A.M., Kamarudin, S.M and Mazuki, H.
(2014). A review of production frontier research in Aquaculture (2001 – 2011).
Aquaculture Economics and Management, 18(3), 221- 247.
Islam, G.M.N., Yew, T.S. and Noh, K.M. 2014. A stochastic frontier analysis of technical
efficiency of fish cage culture in Peninsular Malaysia. SpringerPlus, 5(1): 127 – 137.
https://doi.org/10.1186/s40064-016-2775-3
J.S. Liu, Louis Y.Y. Lu, Wen-Min Lu, Bruce J.Y. Lin, A survey of DEA applications, Omega,
Volume 41, Issue 5, 2013, Pages 893-902, ISSN 0305-0483,
 https://doi.org/10.1016/j.omega.2012.11.004.
(https://www.sciencedirect.com/science/article/pii/S0305048312002186).
L.Simar, P.W. Wilson, (1998) Sensitivity Analysis of Efficiency Scores: How to Bootstrap in
Nonparametric Frontier Models. Management Science 44(1):49-61.
https://doi.org/10.1287/mnsc.44.1.49
M.M. Dey, F.J. Paraguas, G.B. Bimbao & P.B. Regaspi (2000) Technical efficiency of tilapia
growout pond operations in the Philippines, Aquaculture Economics & Management, 4:1-
2, 33-47, DOI: 10.1080/13657300009380259
Mafolabomi, M.W.; Adeparusi, E.O.; Balogun, A.M (2009). A review of essential checklists for
fish cage culture. Handle Proxy. http://hdl.handle.nrt/183438053.
Meeusen, W. and J. Van Den Broeck. (1977). Efficiency estimation from Cobb-Douglas
Production Functions with Composed Error.” International Economic Review, 18(2), 435
– 444. https://doi.org/10.2307/2525757.
Nerrie, B.L., Hatch, L.U., Engle, C.R., and Smitherman, R.O. (1990). The economics of
intensifying catfish production. A production function analysis. Journal of the World
Aquaculture Society, 21(3), 216-224. https://doi.org/10.1111/j.1749-7345.1990.tb01026.x.
Ojo, M. Country director, Global alliance for Improved Nutrition (GAIN). Federal Department of
Fisheries. Federal Ministry of Agriculture and rural development. (2021). Improved
aquaculture sub-sector will increase domestic production and grow the GDP. Federal
department of Fisheries. https://fdf.fmard.gov.ng/2021/07/08/improved aquaculture-sub-
sector-will-increase-domestic-production-and-grow-the-gdp-nanomo/
Otubusin. S.O. (2001): Economics of Small Scale Tilapia Production in Floating Net-Cages. An
International journal of Agricultural Sciences. Science, Environment and Technology.
Series A: Agriculture and Environment. Asset series A (2001) volume I Number I. ISSN
1595-9694 (C) UNAAB 2001.
Simar, L., & Wilson, P. W. (2000). A general methodology for bootstrapping in non-parametric
frontier models. Journal of applied statistics, 27(6), 779-802.