ABSTRACT

 The study analysed investments, risk and productivity among agribusiness enterprises in Abia State, Nigeria. Specifically, it classified agribusiness enterprises investment in the area; examined various types of risks and their degrees of influence on agribusiness investment; and examined risk reducing strategies in the agribusiness investment in the area. The study also analysed the determinants of investment in agribusiness as well as productivity of agribusiness investments. Problems affecting agribusiness investment were also examined. Primary data collected from 40 fornal agribusiness firms were used in this study. Time series data on macroeconomic variables were also collected through secondary sources. Data analysis consisted of the use of simple descriptive statistics; W-statistics and Pearson criterion (X2); Vector auto regression (VAR) model and stochastic frontier production function. The data analysis revealed that the risk elements affecting the productivity of agribusiness investment were financial, marketing, currency and production in that order. The result indicated a W-statistics of 0.79. The common risk reducing strategies used by the agribusiness firms were diversification, integration, forward contracting, insurance, foreign exchange hedging, sequential marketing, borrowing and saving. The major determinants of agribusiness investment included market size with coefficient of 0.8 13 (significant at 5% probability level) and inflation rate (significant at 10% probability level). Other variables include tax paid, exchange rate and retained earnings. The investment equation had an R2of 0.99 and standard error of 0.05. The maximum likelihood estimates of the stochastic production function applied indicated that the determinants of productivity are skilled labour and cost of raw materials. Furthermore, technical efficiency factors which exerted influence on the operation of agribusiness firms in the area were years of operation, scale of operation, • access to credit and distance to nearest market. The mean technical efficiency was 78% while minimum and maximum technical efficiency were 18% and 96% respectively. The log likelihood ratio was significant confirming the presence of inefficiency in the model. The major perceived problems hindering effectiveness of agribusiness firms' operations were high cost of production, finance related problems, poor performing infrastructure, low investment, macroeconomic related problems, unpredictable government plan and lack of security. Based on these results appropriate policies and programmes that could enhance agribusiness firms operations were recommended. These include beefing up of security in the state so as to create enabling environment for agribusiness investors in the area; enforcement of policy on five-year tax holiday for young agribusiness firms; review of macroeconomic policies such as interest rate, inflation rate and exchange rate. It was also recommended that agribusiness firms should build capacities of their workers and reduce cost of raw materials by purchasing in bulk among other things.