Determinants of the Risk Attitudes of Agribusiness Entrepreneurs in Abia State

Abstract

Agribusiness is a viable sector where entrepreneurs can invest, considering the agrarian nature of Nigeria and in the face of growing unemployment and poverty rate. The peculiarity of risk in agribusiness motivated the study on the determinants of the risk attitude of agribusiness entrepreneurs in Abia State, Nigeria. A multistage sampling technique was adopted in the selection of the agribusiness entrepreneurs for the study. A well structured questionnaire and interview schedule were used to collect the required data. Descriptive statistics and multinomial logit (MNL) regression technique were used in the analysis of the data. The agribusiness entrepreneurs were identified with different risk types which included financial, political, currency, market, price etc. while the risk reduction strategies adopted include diversification, integration, insurance, forward contracting, sequential marketing, cooperative marketing, foreign exchange hedging, borrowing, savings and other strategies. The multinomial logit (MNL) regression model was statistically significant at 1% based on the chi square value of   124.93. The (Pseudo R-square) Cox and Snell, Mcfadden and the Nagelkerke R square value which provide the information on the strength of the model, were 0.750, 0.853 and 0.656 respectively suggesting that 75.0, 85.3 and 65.6 percent of the variability is explained by the set of variables used in the model. The proportional by chance accuracy rate indicates that the model is 83.3 percent correct. The significant positive determinants of average risk attitude include gender, labour size, income and sources of capital while the significant negative determinant is experience. The significant positive determinants of high risk attitude are capital and investment while the significant negative determinants of high risk attitude are capital structure, cost of capital and sources of capital. The study recommends among others, that the entrepreneurs should understand their attitude towards risk, as well as identify the types of risk attributed to their nature of agribusiness and consult risk experts on the risk reduction and management strategies that will suit the peculiar agribusiness enterprise.