IDENTIFICATION OF RISKS
In Nigeria, like other emerging nations where aquaculture is practiced, the industry is of great diversity due to the large number of species produced. Many fish species are farmed in Nigeria using various systems and practices, which vary according to different resources in different parts of the country (Fagbenro et al.,2004). Most are pond farms on land adjacent to the coast or inland water bodies. The main risks facing the activity in Nigeria are:
Pure risks
These are due to the uncontrollable physical forces of nature. It arises occasionally due to extreme climatic and meteorological conditions. The prime risks are flooding, drought and depositions of silts. The consequences of flooding are not only physical damage to the farm structures and consequential loss of fish; it also causes great changes in the quality of water on the farm. Floodwaters may also introduce predators into such farms or new pathogens. It also provides an opportunity for cultured fish to escape confinement. Drought is equally serious but its occurrence is rare. Water provides the fishes with dissolved oxygen for life and the volume of water passing through the farm regulates the carrying capacity. As the water resources decline due to drought, the carrying capacity drops below profitable levels, the growth rate decreases below optimum and finally all the stock may die. Other pure risks include common social risks such as theft, malicious damage and fraud. There are also the less common political risks such as riot and sabotage. Of all these, poaching has been a major risk to farmers. Random malicious damage is also common. Chemicals are poured on the water body thereby killing the fish and rendering the water body lifeless. Frauds do occur; it may be external (individuals and companies supplying inputs) or internal (employees handling bookkeeping or cash). Liability is a very common risk in Nigeria. Often times, it arises due to litigations on land issues against the farmer. There are also legal actions arising from polluted waters.
Business risks
These are those directly related to tilapia production and the associated commercial business of the enterprise. The risks are many and are the principal concern in the daily routine of the farmer as the production process is his sole responsibility. In Nigeria, a large number of farms have failed to attain profitability in one or more years because of major disruptions in the production process (Fapohunda,2005). It may be due to late delivery of supplies of fingerlings and other related services. Lack of adequate technology or technical information and expertise as regards hatchery propagation remains a bane of the venture. There are also financial risks, which the farmer must contend with; these are due to unstable government financial policies. A change of government or changes in government policies are risks to the utilization of capital by the farmer. Tilapia farmers invariably require repeated loans in addition to loans for capital constructions and initial operational costs. These may be followed by short-term loans for annual supplies of seed, feed, new equipment or expansion. The risk to farmers in this regard emanated from the terms of credit and changes in the operational cost (Afolabi & Fagbenro,1998).
A vivid example is the government’s measure to control inflation or high interest rate on loans that were not effectively implemented. There is also a risk arising from changes in the industries which are peripheral to aquaculture and which will influence the farmer’s profitability. For instance, change in the prices of feedstuffs will change the price of the feed. Increase in the price of fuel will increase not only his transportation costs, but also the general energy costs on the farm. Changes in salaries and wages obviously alter the monthly balance sheet of the farmer. Tilapia farmers also face social risks resulting from increase in competition for both inland and coastal waters and space from tourism and recreational industries. Also for the farmer, there are social problems arising from delayed or non-renewal of lease (if he does not own the property) or limit important expansion plans. Farmers also face market and consumer related risks. Such risks are due to loss of quality, lack of market information, actions of marketing middlemen, loss of consumer appeal, health regulations and actions of the consumers. For example, if the quality of his products changes due to any factor like delayed delivery, both the consumer and the marketing middlemen will not make future purchases hence a negative influence on the profitability of the enterprise.
In Nigeria, like other emerging nations where aquaculture is practiced, the industry is of great diversity due to the large number of species produced. Many fish species are farmed in Nigeria using various systems and practices, which vary according to different resources in different parts of the country (Fagbenro et al.,2004). Most are pond farms on land adjacent to the coast or inland water bodies. The main risks facing the activity in Nigeria are:
Pure risks
These are due to the uncontrollable physical forces of nature. It arises occasionally due to extreme climatic and meteorological conditions. The prime risks are flooding, drought and depositions of silts. The consequences of flooding are not only physical damage to the farm structures and consequential loss of fish; it also causes great changes in the quality of water on the farm. Floodwaters may also introduce predators into such farms or new pathogens. It also provides an opportunity for cultured fish to escape confinement. Drought is equally serious but its occurrence is rare. Water provides the fishes with dissolved oxygen for life and the volume of water passing through the farm regulates the carrying capacity. As the water resources decline due to drought, the carrying capacity drops below profitable levels, the growth rate decreases below optimum and finally all the stock may die. Other pure risks include common social risks such as theft, malicious damage and fraud. There are also the less common political risks such as riot and sabotage. Of all these, poaching has been a major risk to farmers. Random malicious damage is also common. Chemicals are poured on the water body thereby killing the fish and rendering the water body lifeless. Frauds do occur; it may be external (individuals and companies supplying inputs) or internal (employees handling bookkeeping or cash). Liability is a very common risk in Nigeria. Often times, it arises due to litigations on land issues against the farmer. There are also legal actions arising from polluted waters.
Business risks
These are those directly related to tilapia production and the associated commercial business of the enterprise. The risks are many and are the principal concern in the daily routine of the farmer as the production process is his sole responsibility. In Nigeria, a large number of farms have failed to attain profitability in one or more years because of major disruptions in the production process (Fapohunda,2005). It may be due to late delivery of supplies of fingerlings and other related services. Lack of adequate technology or technical information and expertise as regards hatchery propagation remains a bane of the venture. There are also financial risks, which the farmer must contend with; these are due to unstable government financial policies. A change of government or changes in government policies are risks to the utilization of capital by the farmer. Tilapia farmers invariably require repeated loans in addition to loans for capital constructions and initial operational costs. These may be followed by short-term loans for annual supplies of seed, feed, new equipment or expansion. The risk to farmers in this regard emanated from the terms of credit and changes in the operational cost (Afolabi & Fagbenro,1998).
A vivid example is the government’s measure to control inflation or high interest rate on loans that were not effectively implemented. There is also a risk arising from changes in the industries which are peripheral to aquaculture and which will influence the farmer’s profitability. For instance, change in the prices of feedstuffs will change the price of the feed. Increase in the price of fuel will increase not only his transportation costs, but also the general energy costs on the farm. Changes in salaries and wages obviously alter the monthly balance sheet of the farmer. Tilapia farmers also face social risks resulting from increase in competition for both inland and coastal waters and space from tourism and recreational industries. Also for the farmer, there are social problems arising from delayed or non-renewal of lease (if he does not own the property) or limit important expansion plans. Farmers also face market and consumer related risks. Such risks are due to loss of quality, lack of market information, actions of marketing middlemen, loss of consumer appeal, health regulations and actions of the consumers. For example, if the quality of his products changes due to any factor like delayed delivery, both the consumer and the marketing middlemen will not make future purchases hence a negative influence on the profitability of the enterprise.