In this post, we will look at the Cost of Hiring a Tractor in Nigeria. Most farmers in Nigeria resort to the hiring of tractors because of the high cost of purchasing a tractor in Nigeria.
Even rich farmers that are engaged in agribusiness still prefer to go with the option of hiring a tractor to eliminate the cost involved in the fueling and maintenance of a farm tractor.
As a result of this, some agricultural enterprises have decided to offer tractor leasing services. Then leasing services if properly organized and structured help to cushion the effects of the high costs involved in the procurement of a farm tractor.
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But in spite of the fact that there are advantages in setting up services that lease out tractors to farmers, the cost of hiring a tractor is still a problem to most farmers.
The cost of hiring a tractor is not only limited to money. Farmers can incur a loss in another form which will be explained in this article.
Price Model of Hiring a Tractor
Tractors are hired in Nigeria using two price models. The two price models of hiring a tractor are pay per hectare and the pay per day model of hiring the tractor.
Pay per hectare model
Some states in Nigeria use the pay per hectare model to lease out tractors to farmers. An example is Ogun state which uses this model to determine the cost at which a farmer will hire a tractor from the parastatal or department responsible for this exercise.
Using this model the farmer is charged per hectare without regard to the amount of time spent and the type of activity or operation in which the use of the tractor was engaged.
Like in Ogun State, the cost of hiring a tractor for ploughing is 7000 naira per hectare and the cost of hiring a tractor for other operations on the farm is 5000 naira per hectare.
So if a farmer hires a tractor to plough 3 hectares of farmland, the total amount the farmer has to pay is 21000 naira.
If the farmer hires the tractor for other farming operations on the same amount of 3 hectares, the total cost of hiring the tractor will be 15000 naira. This cost includes the amount that is spent on fuel and servicing of the tractor engine and maintenance.
Pay per day model
This model of determining the cost of hiring a tractor is the most popular method used in Nigeria. Most states in Nigeria and also tractor hiring businesses use this model to lease out their tractors.
In this model the farmer incurs the cost for renting a tractor per day. The cost of renting a tractor per day ranges from between 8000 and 10000 naira per day depending on the size, brand and power rating of the tractor.
For instance, if company should lease out a tractor to a farmer at the rate of 9000 naira per and the farmer is to rent the tractor for two days, the total cost for hiring the tractor for the two days of use will be 18000 naira.
Most businesses prefer to use this model to offer their tractors for rent because it is a flat rate based on time and not on the amount of land which tends to make this model more profitable than the pay per hectare model.
This is not the same as the tractor hire rates per hour as this is actually a flat fee per normal working hours during which the use of the tractor was employed. The model that charges the hiring of a tractor per hour does not exist in Nigeria.
Factors affecting the cost of hiring a tractor
Although the cost of hiring a tractor in Nigeria is a usually a flat fee whether it is based on the pay per hectare model or the pay per day model, some factors still determine the cost at which a tractor is hired in Nigeria. The factors include:
The limited numbers of tractors in the country.
The number of tractors available in the country is not enough to serve the teaming population of farmers in the country.
Even with the involvement of the private sector the number of tractors is not enough to go round. One of the reasons for this is because, the number of businesses involved in the leasing out of tractors to farmers is too small.
This has led to little competition. This little competition together with the limited amount of tractors have only encouraged the companies involved to set the prices of hiring a tractor to any amount they feel like that is they are almost able to set prices or hire rates at will. Of course this makes economic sense.
The fewer the number of companies involved in a business, the higher will be the price of the product of that business.
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Importation cost of tractors and spare parts
The cost of importing tractors and spare parts is very high. The high cost of importing tractors is one challenge businesses involved in the leasing out of tractors have to battle with.
This has also led to the limited number of tractors available automatically increasing the cost of hiring a tractor in Nigeria.
Of course, tractor leasing companies are in operation to make money, so the cost of importing a tractor will rub off on the price of hiring a tractor or else the leasing company will run at a loss.
Also recently the Federal Government of Nigeria has increased the import duty on agricultural machineries brought into the country in order to aid the local fabrication of farm machineries.
But this has only led to the increase price of tractors brought into the country. As stated earlier leasing companies must make profit to remain in business so they must factor in the price of purchasing a tractor into leasing it out for hire.
Hence the farmer will experience an increase and higher cost of hiring a tractor to work on the farm.
High exchange rate
One reason for the high cost of the importation of the tractor which in turn increases the cost of hiring a tractor is the poor value of the naira in respect to the dollar.
In recent times, the value of the naira has fallen. This has reflected also on the price at which tractor hiring services in Nigeria purchase tractors from their suppliers abroad.
The high value of the dollar to the naira has only increased the cost of importation. This as a result has greatly increased the cost of hiring a tractor in Nigeria.
Inability to fabricate a tractor locally
The failure to produce or locally fabricate a tractor in Nigeria is the major reason while businesses providing tractor leasing services decide to order for their tractors from locations outside the country.
Well, the environment in Nigeria is not conducive enough for the local fabrication of tractors and their spare parts so no business can even think of embarking on such a venture.
So to make tractors available to farmers for hire, the country has no choice but to import tractors into the country. As explained earlier, importing tractors into the country with the logistics of transportation will also increase the cost of hiring a tractor.
A hidden cost of hiring a tractor in Nigeria
It was stated in the introduction of this article that the cost of hiring a tractor in Nigeria is not only limited to money. One hidden cost is the time wasted in waiting before a farmer can hire a tractor to use.
There have been reports of long queues at tractor leasing centers set up by the government due to the limited numbers of tractors on ground.
So farmers have been faced with a situation of delay in the procurement of tractors for hire. Now the cost of hiring a tractor in this case is the time wasted before having access to the needed tractor for hire.
In waiting, the time wasted could have been employed in increasing yields and improving the output of the farmer concerned.
To solve the problem of the high cost of hiring tractors in Nigeria, efforts should be made by both the public and private sectors to increase the number of tractors available in the country.
The government should make the environment conducive for the local manufacture, fabrication and production of farmers.
Financial institutions should also be encouraged to invest in leasing out of tractors to farmers. By applying these efforts, the cost of hiring a tractor in Nigeria will be drastically reduced.Click here to see the latest Jobs opportunities in Nigeria.
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