Drivers of Farmers' Contract Compliance Behavior: Evidence From a Case Study of Dangote Tomato Processing Plant in Northern Nigeria

ABSTRACT Contract farming is a viable strategy agribusinesses rely on to strengthen coordination across actors in the value chain. However, low contract compliance remains a significant setback to agribusinesses' contract performance in low‐ and middle‐income country context. This study aims to identify what drives smallholder farmers' contract compliance behavior in northern Nigeria. Qualitative information was collected through focus group discussions to enrich the design of the survey questionnaire administered to a sample of 300 randomly selected farmers contracted by the Dangote Tomato Processing Plant in four regions of northern Nigeria. Novel transaction‐level data of tomato sales covering one season were collected in addition to socioeconomic information of the sampled farmers. Probit model results show that open fresh market tomato prices and payment delays negatively affect farmers' compliance behavior while education level, bonuses, land ownership, and resource‐provision correlated positively with compliance. The study suggests that contract compliance could improve if contracting firms devise a reliable and timely payment plan (e.g., digital payment), continuing input and service provisions (e.g., improved seeds, extension services), and incentives (e.g., loyalty rewards, bonuses) in the contract.