Allocative Efficiency of Tamarind Processing Enterprises in Northern Nigeria: Evidence from a Profit Frontier Approach

This study assesses the allocative efficiency of tamarind processors in selected North-Central and North-Western states of Nigeria, using a stochastic frontier profit function. Data were collected from 304 processors through a multistage sampling method and analyzed using Maximum Likelihood Estimation techniques. The profit function incorporated input prices such as costs of raw materials, family and hired labour, equipment use, utilities, transportation, and packaging. The results reveal that most processors were not allocating resources efficiently, as indicated by the statistically significant inefficiency effects. Key factors contributing to allocative inefficiency include source of tamarind, age, and business experience, while education level and household size reduced inefficiency. The estimated gamma (γ) of 0.5526 indicates that over half of the variation in profit was due to inefficiencies in resource allocation rather than random shocks. These findings suggest a need for improved managerial training, better market linkages, and policy interventions that support price awareness and optimal resource mix. Enhancing allocative efficiency in tamarind processing has the potential to boost profitability and sustainability in the value chain, particularly for small-scale processors in rural areas.