A THESIS SUBMITTED TO THE DEPARTMENT OF

FACULTY OF

OKWOR, CHINYERE LAURETTA PG/M.Sc/06/40910

GROUNDNUT OIL PRODUCTION AND MARKETING IN KADUNA STATE, NIGERIA.

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A THESIS SUBMITTED TO THE DEPARTMENT OF AGRICULTURE ECONOMICS

FACULTY OF AGRICULTURE, UNIVERSITY OF NIGERIA, NSUKKA

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OKWOR, CHINYERE LAURETTA

GROUNDNUT OIL PRODUCTION AND MARKETING IN KADUNA

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AGRICULTURE ECONOMICS,

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TITLE PAGE

GROUNDNUT OIL PRODUCTION AND MARKETING IN KADUNA STATE, NIGERIA.

BY

OKWOR, CHINYERE LAURETTA PG/M.Sc/06/40910

A RESEARCH DISSERTATION SUBMITTED TO THE DEPARTMENT OF

AGRICULTURAL ECONOMICS, FACULTY OF AGRICULTURE,

UNIVERSITY OF NIGERIA, NSUKKA, IN PARTIAL FULFILMENT OF THE

REQUIRMENTS FOR THE AWARD OF MASTER OF SCIENCE (M.Sc)

DEGREE IN AGRICULTURAL ECONOMICS.

SUPERVISOR: PROF. S.A.N.D. CHIDEBELU

JUNE, 2010

CERTIFICATION

iii

Okwor Lauretta Chinyere, a postgraduate student in the Department of Agricultural

Economics with Registration Number PG/M.Sc/06/40910 has satisfactorily completed

the requirements for course and research work for the degree of Master of Science

(M.Sc) in Agricultural Economics. The work embodied in the dissertation is original and

has not been submitted in part or full for any other Diploma or Degree of this or any

other University.

______________________________ __________________________ Prof. S.A.N.D. Chidebelu Prof. E.C. Nwagbo Supervisor Head of Department Date……………………… Date…………………………

________________________ External Examiner

Date………………. DEDICATION

iv

This research is dedicated to God, my husband and children.

ACKNOWLEDGEMENT

v

I thank God for His Grace which made the completion of this work a reality. My

heartfelt gratitude goes to my supervisor, Prof. S.A.N.D. Chidebelu whose stern principles

and stringent guidelines brought out a meticulous me. Sir, it was not easy, but every single

correction was worth the while.

My special appreciation to all my lecturers especially Dr A. A Enete, Dr B.

Okpukpara, Prof. C. L. Asadu of soil science.

Gratitude, the French say is the memory of the heart. I remain grateful to my

husband, Dr Fidelis Okwor, my parents for their endless prayers, my siblings; my Uncle;

Dr E. Ugwu and family of St. Raphael hospital Ibagwa, Mrs L.L. Yakubu of I.A.R. Zaria,

Pastor E. Ajayi of Holiness and Power Bible church Zonkwa, my fellowship brethren, my

colleagues and friends. May the good Lord bless you all.

OKWOR, CHINYERE LAURETTA B. Agric Uniben, PGDM Unijos,

M.Sc, Agricultural Economics University of Nigeria, Nsukka. June, 2010.

vi

ABSTRACT

This study examined groundnut oil production and marketing in Kaduna State, Nigeria. The specific objectives were to: examine the socio economic factors that influenced the production of groundnut oil; examine the socioeconomic factors that influenced marketing of groundnut oil; describe gender roles in the production and marketing of groundnut oil in the study area; describe the marketing channels employed in the distribution of groundnut oil; analyse margins of groundnut oil production and marketing; and identify constraints militating against the production and marketing of groundnut oil. Multi-stage random sampling technique was used to stratify the state into northern (mostly Moslems) and southern (mostly Christians) areas. A total of 100 respondents (50 producers and 50 marketers) were randomly selected. Data were collected from producers and marketers based on the list from the extension agents using two sets of structured and pre-tested questionnaires. Multiple regression model, descriptive statistics and marketing margin analysis were used to achieve the objectives. Socioeconomic factor such as sex, education, occupation, and years of experience were significant at 1% level for production with an R- square of about 70%, while for marketing, age and education were highly significant at 1% level with an R-square of about 90%. Production of groundnut oil was dominated by females, while both sexes had almost equal percentage in the marketing of the product. More retailers (76%) bought groundnut oil directly from the producers at more frequent intervals because they had low capital base. But the wholesalers (24%) bought less frequently at larger quantities because of larger capital. The producer’s margin was 36%, with a Net Income of N43, 925.04 per annum. The wholesaler’s margin was 28% with a Net Income of N 615, 960.00 per annum, while the retailer’s margin was 36% with a Net Income of N 201,636.00 per annum. The total marketing margin was 100. The constraints of notable importance that affected production were lack of capital (92%), high cost of groundnut (82%), poor variety (50%), and crude processing method (70%). For marketing, high cost of groundnut oil (92%), high interest rate on borrowed money (80%) and fluctuation in price of groundnut oil (70%) and competition from other vegetable oils (50%). The production and marketing of groundnut oil if given a favourable environment by reducing the problems facing the industry to its barest minimum would thrive better. So, by way of recommendation, research institutes should be encouraged through adequate funding to produce high oil yielding varieties of groundnut. Loans should be made accessible and at reasonable and affordable interest rate to producers and marketers. The indigenous manufacturers should fabricate groundnut oil extractors and groundnut oil producers encouraged to use them so that larger quantities of oil would be produced to meet market demand at a relatively lower price. Proper market information should be disseminated so that all the market players would be in the picture and finally policies should be put in place to discourage unlawful importation of the vegetable oils into the country to avoid unnecessary competition in the market.

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TABLE OF CONTENTS

Title page - - - - - - - - - i

Certification page - - - - - - - ii

Dedication - - - - - - - - - iii

Acknowledgement - - - - - - - - iv

Abstract - - - - - - - - - v

Table of Contents - - - - - - - - vi

List of Tables - - - - - - - - - ix

List of Figures - - - - - - - - x

CHAPTER ONE: INTRODUCTION - - - - - - 1

1.1 Background of the Study - - - - - - 1

1.2 Statement of the Problem - - - - - - - 3

1.3 Objective of the Study - - - - - - 6

1.4 Hypotheses of the Study - - - - - - 6

1.5 Justification of the Study - - - - - - 7

1.6 Definition of Terms - - - - - - 8

CHAPTER TWO: LITERATURE REVIEW - - - - - 9

2.1 Concept of Agricultural Marketing - - - - 9

2.2 Agricultural Markets in Developing Countries - - - 10

2.3 The Role of Gender in Agricultural Marketing - - - 13

2.3.1 Causes and consequences of the ‘gendered’ nature of agricultural

marketing system - - - - - - - 15

2.4 Changes in Marketing Activity and System - - - - 16

2.5 Problems Facing Agricultural Marketing - - - - 18

2.5.1 Marketing Problems - - - - - - 18

2.6 Stages in Groundnut Processing - - - - - 21

2.7 Marketing Channel - - - - - - - 22

2.8 Hausa Purdah Women in the Groundnut Processing Enterprise - 25

2.9 Profitability- - - - - - - - - 25

2.9.1 Gross Profit Margin Ratio - - - - - - - 27

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2.9.2 Gross Profit as a Percentage of Sales - - - - - 28

2.10 Analytical Framework - - - - - - - 28

2.10.1 Concept of Marketing Margin - - - - - - 28

2.10.2 Marketing Margin Analysis - - - - - - 30

2.10.3 Empirical Studies of Marketing Margins - - - - - 32

2.10.4 Marketing Cost - - - - - - - - 33

2.10.5 Regression Analysis - - - - - - - 35

2.11 Theoretical Framework - - - - - - 35

CHAPTER THREE: METHODOLOGY - - - - - 37

3.1 Study Area - - - - - - - - 37

3.2 Sampling Procedure - - - - - - - 38

3.3 Data Collection - - - - - - - 38

3.4 Data Analysis - - - - - - - - 39

3.5 Test of Hypothesis - - - - - - - 39

3.6 Model Specification - - - - - - - 39

3.6.1 Multiple Regression Model - - - - - - 39

3.6.2 Marketing Margin Analysis - - - - - - 41

3.6.3 Producer’s Margin - - - - - - 41

CHAPTER FOUR: RESULTS AND DISCUSSION - - - 43

4.1 Effects of Socioeconomic Characteristics on the Production of Groundnut oil - - - - - - - 43

4.1.1 Socioeconomic Characteristics of Groundnut Oil Producers - - 43

4.1.2 Effects of Socioeconomic Characteristics on Production of Groundnut oil - - - - - - - 45

4.2 Effects of the Socioeconomic Characteristics on the Marketing of Groundnut oil - - - - - - - 46

4.2.1 Socioeconomic Characteristics of Groundnut oil Marketers - - 46

4.2.2 Effects of Socioeconomic Characteristics on Groundnut Oil Marketing - - - - - - - - 49

4.3 Gender Roles in the Production and Marketing of Groundnut Oil - - 50

4.3.1 Role of Gender in the Production of Groundnut Oil - - - 50

4.3.2 Role of Gender in the Marketing of Groundnut Oil - - - 51

4.4 Marketing Channels Employed in the Distribution of Groundnut Oil- - 52

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4.5 Margins of Groundnut Oil Produced and Marketed - - - 52

4.5.1 Producer’s Income and Margin - - - - - - 52

4.5.2 Wholesaler’s Income and Margin - - - - - - 55

4.5.3 Retailer’s Income and Margin - - - - - - 56

4.6 Constraints Militating Against the Production and Marketing of Groundnut Oil - - - - - - - - 47

4.6.1 Constraints militating Against the Production of Groundnut Oil- - 57

4.6.2 Constraints militating Against the Marketing of Groundnut Oil- - 58

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION- 60

5.1 Summary - - - - - - - - 60

5.2 Conclusion - - - - - - - - 62

5.3 Recommendations - - - - - - - 62

REFRENCES - - - - - - - - 64

APPENDICES - - - - - - - - 69

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LIST OF TABLES

Table 2.1 Gendered Nature of Rural Commodity Marketers - - 15

Table 4.1 Socioeconomic Characteristics of Groundnut Oil Producers - 44

Table 4.2 Results of the Multiple Regression Analysis of the Socioeconomic Factors Affecting the Production of Groundnut Oil - - 47 Table 4.3 Socioeconomic Characteristics of Groundnut Oil Marketers - 48

Table 4.4 Result of Multiple Regression Analysis of the Socioeconomic Characteristics Affecting the Marketing of Groundnut Oil - - 49 Table 4.5 Gender Role in the Production of Groundnut Oil - - - 51

Table 4.6 Gender Role in the Marketing of Ground nut Oil - - - 51

Table 4.7 Enterprise Budget (Net Income) - - - - - 53

Table 4.8 Wholesaler’s Income and Margin - - - - - 55

Table 4.9 Retailer’s Income and Margin - - - - 56

Table 4.10 Constraints militating against the Production of Groundnut Oil - 57

Table 4.11 Constraints militating against the Marketing of Groundnut Oil - 58

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LIST OF FIGURES.

Figure 2.1 Illustration of Concept of marketing Margin.----------------------------------30

Figure 4.1 Marketing Channels employed in the distribution groundnut oil ----------52

CHAPTER ONE

INTRODUCTION

1.1 Background Information

Groundnut (Arachis hypogaea L.) originated from South America (Wiess, 2000).

It is one of the most popular and universal crops cultivated in more than 100 countries in

six continents; Asia, Africa, Oceania, North and South America and Europe (Nwokolo,

1996; ICRISAT, 1999).

Major groundnut producing countries are China (40 percent), India (23 percent)

and Nigeria (8.4 percent) (World Bank, 2003). Developing countries account for over 95

percent of total world groundnut area and about 94 percent of total world production.

Production is concentrated in Asia and Africa, with Africa accounting for 35 percent of

global area and 21 percent of total output mainly in Nigeria, Senegal and Sudan

(RMRDC, 2005). In Nigeria, groundnut is cultivated mainly in the northern parts

especially Kano, North Central, North West and North Eastern states (RMRDC, 2005).

World production of groundnut was 35.9 million tonnes. Asia remained the largest

producer with 20.5 million tonnes, India 10.9 million tonnes, and Africa, 4.5 million

tonnes. According to RMRDC (2005) report, the total output of groundnut for Nigeria as

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at 2002 was 1,976,490.80 tonnes with a range of 47.00 – 73,000 tonness for the States.

Bauchi State had the largest output (73,000 tonnes) followed by Nasarawa (70,420

tonnes) and Edo State had the least with 47.00 tonnes. The mean groundnut output from

farmer’s field for all the States was 15.72 tonnes. Sokoto State had the highest mean

output of 57.00 tonnes, followed by Benue with 52.0 tonnes, Jigawa 27.33 tonnes, Kano,

26.29 tonnes, Yobe, 25.70 tonnes, Zamfara, 25.55 tonnes and Kaduna, 22.67 tonnes.

Abuja had the least with 2.25 tonnes. Annual average production figure for Nigeria was

456 metric tonnes of groundnut oil, 713 metric tonnes of groundnut cake and 2,652

metric tonnes of unshelled groundnut (FAO, 2002).

Groundnut oil production is actually a post-harvest operation which is referred to

as processing. Processing may be regarded as a way of converting harvested agricultural

produce into other forms of products that can be preserved over a long period of time. In

this case it is converting groundnut seeds into groundnut oil and groundnut cake

commonly called “kuli-kuli” in the North. Processing of agricultural products serves as a

source of additional income to the processor as well as boost household food security

especially among the rural poor. In the process of transforming this product from

subsistence to commercial, socio-economic changes of the processor is vital as he

occupies key position in production, processing and marketing of agricultural product

(NAERLS, 2000).

The extraction of oil from groundnut constitutes an important agricultural

processing activity for women in Nigeria especially in the northern States. The process

involves a number of steps that include cleaning, roasting, de-skinning, kneading and

frying and the extraction of oil. The oil extraction process is mainly traditional,

characterized by drudgery and time consuming.

xiii

In Nigeria, groundnut oil accounts for as much as 17 percent of the total

agricultural export earnings because it does not meet domestic demand. The shortfall in

domestic demand is 300,000 to 400,000 metric tones (Ojowo, 2004). Its husk (shell) is

used as fuel, roughage, and litter for livestock, mulch, and manure and as soil conditioner

(Misari, 1980).Groundnut seed contains 40-50 percent protein and 10-20 percent

carbohydrate. Groundnut seeds are nutritional sources of vitamin E, niacin, flavin,

calcium, phosphorous, magnesium, zinc, iron, riboflavin, thiamine and potassium.

It is also used as animal feed, raw material for oil, cake and fertilizers. The multiple uses

of groundnut plant make it an excellent cash crop for domestic markets as well as for

foreign trade in several developing and developed countries (Stigter,2006).Refined

groundnut oil could be used in a variety of manufactured food products such as biscuits,

cakes, crisps and ready meals. The unique property of stability and long shelf life can

makes it a preferred choice for frying. As stable oil, it is often used as a base for some

pharmaceutical products and minor food ingredients such as colours and flavours.

Groundnut oil is also used in the preparation of skin cream, for instance, eczema cream

though they could be problematic to those with a history of allergy due to the presence of

groundnut protein (Warner, 1997). Groundnut oil is used extensively for massaging polio

patients. It is also used as a carrier in the treatment of asthma and other ailments (Asiedu,

1990).

1.2 Statement of the Problem

Groundnut has contributed immensely to the development of Nigeria. Up to 1969,

Nigeria was the third largest exporter of groundnut in the world after India and China. 78

percent of the area put to groundnut production and 88 percent of the production in

Nigeria is accounted for by the then Kano, North Central, North West and North Eastern

states. It was the country’s most important agricultural export commodity. The total

xiv

groundnut production up to1974 was 1.95 million tonnes but this dropped to about 0.40

million tonnes in 1983 (RMRDC, 2005). This decline is attributed to the drought of 1972

and 1973, followed by the devastating rosette disease of 1975 and 1976, increased local

consumption caused by increased population, improved living standards, and reduction in

the number of farming families caused by the oil boom of the early 70s. This drew out a

substantial number of the able labour force to urban industries, have resulted in Nigeria

becoming a net importer of groundnut particularly in the form of oil. For instance,

Nigeria imported about 200,000 tonnes of vegetable oils worth about N77 million in the

1980 fiscal year. Although production has improved over the years, Nigeria is still a net

importer of groundnut oils.

The total amount of groundnut required by groundnut processing companies

amounted to 413,784 tonnes but only 21,417 tonnes were supplied, representing only 5.2

percent of their requirement (RMRDC, 2005).This indicates that there still exists a ready

market for producers. But this decline and shortage in supply of raw material led to the

closure of groundnut oil mills in the country which resulted in decreased demand of the

crop. Consequently, farmers were forced to take up the production of other crops such as

cowpea, maize, sorghum, pearl millet and horticultural crops.

The increase in the price of agricultural inputs such as fertilizers and pest control

chemicals also discouraged farmers from growing groundnuts especially since the

relative turn-over from groundnut was much smaller compared to crops such as maize,

sorghum, and millet. Also, the dissolution of the marketing boards and the decline in

groundnut production resulted in the collapse of the marketing structure such that farmers

were no more assured of a ready market for their produce.

With the coming of the SAP (structural adjustment programme) in 1986 and the

concomitant devaluation of the naira, Nigerian manufacturers found it difficult to import

xv

the needed raw material and machinery needed to produce profitably. The local machines

are less sophisticated and mainly used for oil extraction, expelling, decortication and

shelling.

Generally, groundnut processing (oil extraction) in Nigeria and especially in the

study area is usually by traditional method associated with high expenditure in energy,

labour and time. For instance, during kneading operation, at least two women (one

kneading and the other holding the mortar for stability) are needed, making the operation

strenuous, costly and time consuming. These factors result in relatively lower output,

high labour input and low income for the processors (Nalumansi and Kaul, 1992).

The distribution of groundnut oil is to a large extent sold within the local markets.

This limitation in the channel of distribution reduces the extent to which the product

travels to other parts of the country thus giving the product a small market share and

reducing its contribution to the gross domestic product.

The over all efficiency of the marketing system is hindered by gender biases

which favour accumulation and sometimes excessive profits by male-controlled, large

trading concerns or support services higher up the marketing chain. Women, although

often the majority of traders tend to be trapped in the vicious cycle of petty trading lower

down the marketing chain. Lack of economies of scale and poor integration in

agricultural markets is linked to these gender biases.

In the study area, even though groundnut oil is produced and marketed, it is done

at a loss. Most of the gain comes from the by-product; groundnut cake popularly called

‘Kuli-kuli’ in the north. Also the poor financial status of the rural producers hinders them

from purchasing oil extractors to facilitate production.

xvi

In conclusion therefore, because very little has been done in this area, this

research is meant to bridge the gap of information on the problems militating against the

production and marketing of groundnut oil in the study area.

1.3 Objectives of the Study

The broad objective of this study is to examine groundnut oil production and its

marketing in Kaduna State, Nigeria. The specific objectives are to:

i examine the socio-economic factors that influence the production of

groundnut oil in the study area;

ii examine the socio-economic factors that influence the marketing of

groundnut oil in the study area;

iii describe gender roles in the production and marketing of groundnut oil

in the study area;

iv describe marketing channels employed in the distribution of groundnut

oil;

v analyse margins of groundnut oil producers and marketers;

vi identify constraints militating against the production and marketing of

groundnut oil in the study area; and

vii make recommendations based on findings.

1.4 Hypotheses of the Study

The following null hypotheses guided the study;

i there is no significant effect of the socio-economic factors (such as

age, marital status, education, household size etc) on the quantity of

groundnut oil produced; and

ii there is no significant effect of the socio-economic factors on the

quantity of groundnut oil sold.

1.5 Justification

xvii

The study on groundnut oil production and marketing is apt in such a time as this

bearing in mind that the groundnut pyramid of Kano in the 70s once boosted the economy

of the nation before the oil boom. It is also timely at a time when Government is agitating

and looking for possible ways of laying less emphasis on petroleum and diversifying the

economy by encouraging the agricultural sector and other sectors like Tourism as seen in

the Presidential 7-point Agenda.

Effort in the direction of this study will create employment opportunities for all

those involved in the production of groundnut oil such as crushers, sorters, transporters and

consequently improve the living standard of the people. Rather than import other vegetable

oils, this study will encourage and create a solid base for marketers who will in turn be

exporters, thus contributing to the GDP of the nation. Other subsidiary industries like the

plastic industry, cosmetic and pharmaceutical industries will be encouraged.

For the researchers, this study will serve as a base on which further work will be

done and ways in which groundnut oil will be produced at less cost so as to maximize

profit will also be considered. Policy makers will come up with policies which will

discourage the importation of other vegetable oils competing with the locally produced

groundnut oil hereby encouraging the patronage/consumption of locally produced

groundnut oil.

Knowing that the producer’s margin is small using the low, oil-rich variety of

groundnut, producers of groundnut oil will therefore purchase the high, oil-rich variety

for their production and consequently encourage farmers to cultivate more of the high, oil

rich variety.

1.6 Definition of Terms

xviii

Almajiris – These are people usually, children who in most cases do not leave with their

parents but under the care of an Immam. They fend for themselves through aids got from

begging. They are found in the north among muslim.

Purdah – This is a practice of keeping muslim women (married) under seclusion, either

partial or total seclusion.

Spread

This is the difference between the bid and offer prices quoted by a market marker.

The prices at which market-makers are willing to sell are higher than those at which they

are willing to buy. The spread has to cover the market makers operating costs and

provide profits, and includes a premium against the risk that any particular customer has

inside knowledge about. Spreads tend to be smaller on more widely traded securities.

Kuli-kuli – This is the groundnut residue from which oil has been extracted.

CHAPTER TWO

REVIEW OF RELEVANT LITERATURE

xix

In this chapter, literatures relevant to this study were reviewed. The study of

groundnut oil production and marketing falls under the area of agricultural marketing.

However, the following were considered: concept of agricultural marketing, agricultural

marketing in developing countries, the role of gender in agriculture, problems facing

agricultural marketing, concept of marketing margin, stages in groundnut processing,

marketing channels, analytical framework and theoretical framework.

2.1 Concept of Agricultural Marketing

Modern production tries to recognize consumer sovereignty by upholding the

philosophy of the ‘marketing concept’. The marketing concept holds that the goals of the

producers are to determine the needs and wants of the consumers and to satisfy them at a

profit. These goals direct all other producers’ activities including product packaging,

distribution and storage (Christopher, 1981). Without prejudice to what has been said so

far in the foregoing paragraph, marketing is not merely exchange of money for a want

satisfying good or service, neither does it just consist of the movement of goods from the

farm to the home of the farmer or the market or from one zone of the state to another. But

rather, it is according to Christopher (1981), the way in which an organization matches

its own human, financial and physical resources with the ones of its customers.

Everything done by marketing is weighed against the views of the consumers who give

to every marketing organization a healthy certificate to remain in business or stamps the

‘off the mad’ sign on it to show it the way to the gallows. Hence, the consumer is at the

core of every marketing thought and effort (consumer orientation). Thus, the ‘marketing

view’ looks at business as directed towards the satisfaction of a consumer’s want and as a

surveyor of customer’s utility (Massey and Boyd, 1992).

Agricultural marketing, according to Kohls and Uhl (1990), is the process of

performing all the business activities concerning the flow of commodities and services

xx

from the point of initial agricultural production to ultimate consumer. In the light of the

above, everything the producer (agricultural, industrial or entrepreneur) does should be

oriented towards the satisfaction of the consumers. The total package of the satisfaction

comes in the way of a well blended marketing mix which is the utmost combination of

the 4Ps viz: product, price, place and promotion.

2.2 Agricultural Markets in Developing Countries

There is a variety of perspectives on and approaches to the analysis of agricultural

marketing. Broadly speaking, these divide into those that favour an unfettered market

mechanism and those that are mere cautions about the potential of markets to bring about

a desirable allocation of agricultural products. ‘Market optimism’ draws on neoclassical

welfare economics, essentially arguing that where markets are competitive, an

economically efficient (Pareto optimal) allocation of resources will result. Studies of

agricultural markets from this perspective use price data to ascertain the competitiveness

and efficiency of existing market system, through analysis of marketing margins and of

correlations between price series in spatially and temporarily separated markets.

Conventional neoclassical economics proposes a positive association between

increased trade (whether domestic or international) and economic development, seeing

processes of exchange as mutually (even if not equally) beneficial. According to Baden

(1998), value added associated with transformation in time, space or form increases as

income increases and demand becomes more sophisticated. Abbott (1987) took the point

further and argued that the importance of agricultural marketing, not just as a means of

distributing agricultural produce, but also in stimulating new forms of production and

value added, was often under-played in economic analysis.

In other views, rooted in political economy, trade was not necessarily beneficial

to either allocative efficiency or equity but might be characterized by speculation,

xxi

unequal exchange and non-productive accumulation by particular classes, fuelling

increased economic and social inequality. Increased commercial activity is not always a

sign of increasing wealth; it may be an indicator of distress sales and increased poverty

(Hewitt de Alcantara, 1993). Such views emphasize the importance of protecting

farmer’s interests against powerful merchants, the need to reduce the risks of agricultural

production through price stabilization, and to protect rural livelihood and food security at

both micro and macro-levels.

In the early 1980s, ‘market optimism’ began to dominate the debate on

agricultural policy, arguing that in the absence of state intervention, agricultural markets

will function competitively and that the indigenous marketing capacity exists for an

efficient marketing system. The 1980s and 1990s have seen challenges to this dominant

model, both conceptually and empirically. These have been in the forms of the ‘real

markets’ critique (Hewitt de Alcantara, 1993; Harris-white, 1996); and the development

of theoretical models drawing on the ‘new economics of information’, enabling a clearer

distinction to be made between market efficiency due to high transaction cost and risks

and the economic motivation of farmers and traders. New econometric techniques have

also been developed which throw into question some of the assumptions of earlier

economic literature with respect to market integration (Jones, 1996).

A problem with the ‘market optimism’ approach is that it neglects considerations

of the institutional infrastructure required for the functioning of markets and of the

political economics of policy formation (Jones, 1996). This is highly relevant to gender

concerns, since the legal and social norms governing transactions are closely intertwined

with prevailing gender ideologies and inequalities, relating to property rights, legal

capacity, social and familial obligations and appropriate forms of behaviour. Collective

actions to influence policy formulation also reflects gender-specific interests and in

xxii

general, men’s interest are much more dominant in policy making process because of

women’s relative lack of social and political power, both formal and informal.

In the ‘new’ institutional economics, market interlinkages and personalized

relationships are seen as a rational response to high transaction cost and the absence of

key markets. However, this functional analysis is questionable since the interests of

dominant power groups may not always be conquent with allocative efficiency (Jones,

1996). In a similar way, it could be argued that there are conflicts between current

patterns of accumulation by men, subsidized by the cheap or free labour of women and

allocative efficiency.

Produce markets in Nigeria are mainly involved in the exchange of agricultural

commodities such as grains, tubers, vegetables, fruits, oil seeds and assorted livestock.

Along side these are manufactured goods and services like tailoring, barbing and catering

(Adekanye, 1982). These produce are often displayed in bags, wares and baskets in stalls,

open spaces and floors by sellers where the process of bargaining takes place. The

ultimate price the buyer pays is a function of such economic factors as the quantities

demanded and supplied, the price of substitutes as well as non-economic factors such as

skill at bargaining, knowledge of the market and status symbol of the buyer

(Adeyokunnu, 1980). Haggling is still a common feature in arriving at the ruling market

price (Adekanye; 1982, Damisa and Rahman, 2004).

2.3 The Role of Gender in Agricultural Marketing

Women and men are differently located in the marketing system or, more

broadly, agricultural marketing systems are ‘gendered’. The structure and length of

marketing chains, their degree of concentration and functional specialization vary

considerably between contexts depending on a range of factors (for example, nature of

commodity, whether in a surplus or deficit area, distance and transport issues, and size

xxiii

and location of market) (Bryceson, 1993). Moreover, there may be parallel marketing

systems, that is, official alongside private, private alongside cooperative or segmented

private sector systems serving different markets. The precise location of men and women

in any given marketing system will thus vary considerably. However, some general

features of agricultural marketing systems can be ascertained with regard to their

gendered nature.

Numerically, women dominate the trading sector in some areas, or for specific

commodities, particularly food stuffs as the case in West Africa. In Eastern Guinea, 90%

of rice trading is done by women. In Zimbabwe, women have come to dominate fresh

produce market in urban areas because of the migrant labour system which created

demand in urban and mining areas, while creating a need for women to earn cash

incomes (Horn, 1994). It was also the case in a study carried out on rice in the market of

Eastern Guinea. Findings were that female traders tended to be confined to small-scale,

specialized exchange, with a level of activity that varied seasonally, whereas male traders

were generally wholesalers who dealt with a wide range of products (Pujo, 1996: 264).

Similarly, Jones (1996) found that men dominated wholesale trade. Typically, women are

concentrated in small-scale retail trading with fewer women involved in trading high up

the marketing hierarchy, for example, mobile intermediaries or wholesalers (Bryceson,

1993). It is not just the function and scale of operations which differentiates men and

women involved in trading. Women tend to be involved in trading of particular

commodities. Fresh produce (vegetables, fruits) with a high degree of perishability are

typical for women traders. Be it as it may, there are exceptions to this ‘rule’ in the

northern states of Nigeria where Muslim men are highly involved in marketing

perishable vegetables such as cabbage and lettuce and fruits such as water melon,

tomatoes, cucumber, pepper and okro (KADP, 2003). This can be attributed to their

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peculiar religion which does not allow their women to engage in ‘open trade’ but rather

‘hidden trade’. Trading in small quantities of food stuff is an extension of women’s

widespread role in household food provision and thus accords with prevailing gender

ideology in many societies, while providing a legitimate means for women to meet the

needs for cash income on a regular basis (Horn, 1994).

Gender divisions over commodities in trading are related to gender divisions of

labour in agricultural production, though not always in direct and obvious ways (Haris-

White, 1996). Trading relationships also operate within household, often in the form of

men selling products to women who then process and / or market the produce for a fixed

price or in exchange for labour on men’s field or other payment in kind (Palmer, 1991).

For instance in Kaduna , men do the bulk purchase of grains and groundnuts and in turn

retail to the women.

The degree to which women control the incomes from sale of household produce

is highly varied and relates to the nature of gender relations in a given context and

particularly to the relative bargaining power of men and women within the household.

Given inequalities of power between men and women and the ‘monopolistic power of the

male household head, the terms of exchange are likely to disfavour women. Other ways

in which commodity markets are ‘genedered’, identified by Haris-White (1996),

summarized in table 2.1.

Table 2.1: Gendered Nature of Rural Commodity Markets

Item Explanation Commodity Women tend to trade in staple foods, cooked foods and beer

where production can be carried out domestically; also commodities themselves may be ‘gendered’ with female goods seen as inferior. Men trade in a wide range of goods including major crops.

Points in the market system

Women are concentrated in small-scale processing and retailing, while men dominate wholesaling activities.

Organizational form Women mainly run individual enterprises which are oriented to subsistence rather than accumulation.

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Motivation Women’s trading is motivated by the need for regular income for household expenditure rather than by profit.

By season Women’s trading is concentrated in rapid turnover activities. Source: Harris-White (1996)

2.3.1 Causes and consequences of the ‘gendered’ nature of agricultural marketing system

The different ways and terms on which men and women are engaged in

agricultural production and marketing systems and the gendered nature of these systems

have evolved through a dynamic, historical process. Gender bias which is s a result of

women’s lack of credit for trading and lack of information about prices, also reflects in

their lack of political organization and influence over state policy, as well as lack of

social and bargaining power.

The harassment and scapegoating of women traders, in a variety of settings,

exemplifies the way in which state policy on marketing has gendered consequences. The

state also restricts women’s trading activities through taxation (Pujo, 1996), through

licensing requirements, credit policy, biases in the supply of information and inferior

education. In some contexts, men are either legally or socially expected to give

permission for their wives to engage in business activities, or to travel in order to trade.

In Bwisha, Zaire, women’s trading opportunities were restricted because of this

requirement for husband’s permission for long-distance travel (Fairhead, 1993).

The gendered nature of marketing and marketing policy have consequences for

the nature and structure of the marketing system, in this case leading to greater

concentration and reduced competition. More generally, Pujo (1996) argues that the

gendered nature of trading has consequences for the macro-economy.

Women receive limited rewards from marketing systems and so lack incentives to

produce. Economies of scale are lost because of women’s concentration among retailers

and small traders, so that services are at high cost and these are passed on to consumers.

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Accumulation and concentration of higher level marketing activities among men

potentially leads to collusive price practices and oligopolistic service sectors (processing,

transportation etc). Again, these result in high costs being transmitted to consumers.

2.4 Changes in marketing activity and systems

Evidence suggests that there has been an increase in the number of women

engaging in agricultural trading activities, in absolute and in relative terms. A higher

proportion of female than male traders set up in business since market liberalization

began in the mod 1980s, suggesting that previous regulations acted as a major deterrent

to women trading (Bryceson, 1993). Large-scale trading corporation are increasingly

hiring women as buying agents particularly where women are involved in production of

cash crops. The increase in women trading may reflect rising poverty and the need for

women to earn cash to supplement household income particularly as unemployment has

risen among men.

Food crop marketing and processing tend to be competitive. Under liberalization,

there is typically rapid entry into small-scale trading as the regulatory barriers are

removed. These are, however, barriers to the expansion of individual enterprises which

keep most of these enterprises small and make it difficult for them to capture economies

of scale (Jones, 1996). The barriers include lack of investment in storage, which is due to

lack of access to formal sector credit and high interest rates for informal credit, which

make storage uneconomic. Other constraints to newly liberalized marketing systems are:

inadequate roads and reduction or lack of trade credit, unavailability of storage

chemicals, lack of market information and lack of supportive legal frameworks. All these

constraints have gender specific dimensions, so that women’s enterprises are more likely

to be trapped in the vicious cycle of petty trading (Pujo, 1996).

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Deregulation of trading has reduced entry barriers and led to massive expansion

in small-scale trading activity. There has also been a reduction in harassment of traders

by government, to which women were particularly vulnerable. Nevertheless, in some

places, local or informal taxation on trading is still imposed and women maybe especially

vulnerable to this. As small-scale and often unlicensed traders, women are still the most

vulnerable to harassment and may be denied access to marketing support services, or

wholesale market because of their unlicensed status.

Increase in market entrants has increased competitive pressures such that the rate

of attrition of trading enterprises may have increased, particularly among small-scale

women traders operating on very tight margins. There has been increased dependence of

small-scale traders (predominantly women) on larger traders, due to problems of

accessing working capital. Women traders most times experience pressures to sell on

credit and also increased problems of enforcing payment by clients (Verstalen, 1995).

2.5 Problems Facing Agricultural Marketing

There are several problems facing agricultural marketing especially in developing

countries. These problems arise mainly because of the unique characteristics of

agricultural products and certain features of agricultural production. These problems

greatly contribute to the inefficient use of resources by the marketing agencies, leading to

inefficient marketing, which is reflected in higher prices paid by consumers and lower

output price received by farmers. This is largely due to the higher marketing cost

incurred in marketing by marketing agencies.

2.5.1 Marketing problems

Among the problems are: inadequate market transparency and information, low

management capacity, insecure marketing outlets, high post- harvest losses, inadequate

infrastructure and supporting services, low marketing research and development

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assistant, non-availability of pricing policies, excessive government intervention, nature

of agricultural products (bulkiness and perishability) and unattractive producers and

marketing incentives (Opportunities Industrialization Centre-Tamale)

According to Opportunities Industrialization Centre-Tamale, there is a strong

evidence of inadequate market information at nearly all levels of marketing decision-

making. Both the small scale farmers and other marketing agencies know little about

prices prevailing for their products in markets other than their own trading points. This

deficiency in information leads to higher risk in production and marketing and therefore

higher cost and margins than other conditions of full market transparency.

As trade volume increase and the methods used become capital intensive with the

organizational network more complex, skilled people are needed to run marketing

enterprises at both local and international levels. But this is not so in developing

countries as education and training of marketing personnel seemed to be seriously

neglected.

A very important incentive for small-scale farmers to enter cash crop production

is reliability of market outlets yet most of the agricultural products are not assured of

markets with certainty. Couple with this is the fluctuation in supply due to other hazards

such as weather, pest and disease etc this creates problems for both the farmers and the

marketing agents in meeting uncoordinated supply to meet demands of the market or

clearing the markets of excess supply.

Wastage of food supplies between production and consumption centres had been

a long standing problem in most developing countries. Losses in the range of 20-30

percent are often reported. Poor methods of handling and inadequate infrastructure are

the major causes of these problems.

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Facilities, all weather access roads to the farming areas, and services are

inadequate. Storage facilities are few; market places need better weather protection, ore

hygienic flooring, improved drainage and more spaces. The non-existence of standard

sale units and grades reduces farmers’ bargaining power and the prices they receive.

Inadequate knowledge on marketing processes call for priority in applied

marketing research in national research programmes. This seriously impedes the

development of marketing as the necessary information for determining government

policies, especially interventions, depends on such researches.

Often, governments are tempted to fix prices to consumers artificially too low to

help low income urban population with the aim of fighting inflation and to satisfy labour

unions. In such situations, prices going to farmers provide little incentives to increase

production for the markets. This depresses rural income due to frequent price fixing

without much economic considerations such as adequate seasonal fluctuation, spatial

differentials, forces of demand and supply.

Government interventions in marketing agricultural produces can serve as catalyst

for faster development. This can be done by formulating and implementing policies that

can accelerate the marketing process. However, most times, policies rather stifle the

efficient running of the system. Especially in situations where higher taxes are imposed

on traders and higher interest rates on capital.

Most agricultural products are bulky in relation to their value. This makes

transportation costs per volume very high compared to industrial products. Where

distances from farms to market places are long and especially where roads are bad, the

transportation costs which are passed on to the consumers can be very high. Similarly,

most of agricultural products are perishable and deteriorate faster if not properly stored or

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processed. In the absence of such facilities, producers are usually forced to sell at low

prices to avoid losing the product.

The duty of official marketing system is to faithfully reflect back to the

producers, consumers’ desires through the prices they paid. To do this, the marketing

systems must ensure producers stable and remunerative prices and for marketing

agencies, realistic margins as incentives to produce more and transmit to the markets.

Yet problems of inadequate marketing centres, high marketing risk, inefficient

flow of market information and poor market conducts had made prices paid for

agricultural produce by consumers not a true reflect of the market price.

(Opportunities Industrialization Centre-Tamale)

2.6 Stages in Groundnut Processing

According to RMRDC (2005), post-harvest technologies in groundnut processing

include:

i) Threshing – This is the renewal and separation of groundnut vines from the

pods.

ii) Shelling /Decortication-this involves the breaking of the shells and separating

the broken shell from the seeds (decortication).

iii) Seed grading-This involves the separation of different size range of groundnut

seeds to enable preparation of seeds for mechanical planting and or for export

of the commodity.

iv) Seed chemical mixing-This involves mixing, sorting and grading of groundnut

seeds with chemical seed dresser.

v) Roasting-This is the process whereby the seeds are fried to enable quick

polishing and easier oil extraction.

vi) Polishing-This involves removal of seed coat or test from the seeds.

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vii) Grinding or pasting-this is the process of turning the roasted polished and

cleaned groundnut seed into paste.

viii) Oil extraction-The process of removal of oil from the groundnut paste.

There are principally two methods of oil extraction, with a third which is a

combination of the two methods (RMRDC, 2005).

1) Mechanical extraction

Screw presses or expeller and hydraulic presses are the common machines used.

Basically, both machines extract oil from pre-treated groundnut by subjecting the oil

bearing material to pressure. The main components of the screw press are a horizontal

crank shaft. There seems to be a general preference for hydraulic press than the screw

press.

2) Solvent extraction

This is achieved by either percolation or total seed immersion or a combination of

both. Most solvent extraction employs percolation method. The solvent commonly used

is hexane, because of its toxic acceptability.

3) Combination of mechanical and solvent extraction

In this process, part of the oil is removed by pressing and the oil left in the cake is

then extracted by solvent.

2.7 Marketing Channel

As the marketing process becomes complex, more and more middlemen come

between the producer and consumer. Intermediaries appear whose only business is to

facilitate the process. These marketing intermediaries constitute marketing channels. A

marketing channel is the sequence of marketing agencies (such as wholesalers and

retailers) through which a produce passes on its way from the producer to the final user

(Rachman and Mescon, 1985). According to Alamu (2004), a marketing channel is the

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path a product passes through from the producer to the final consumer. Channel structure

reveals the kind of participants involved in the production and ultimate use of a product.

It shows the nature of linkages connecting the producer, the middlemen and consumers

(Nwokoye, 1987). Intermediaries are involved essentially in financing, dissemination of

the market information, physical movement and storage of goods (Kotter, 2003). Thus,

time, place and possession gaps that separate goods and services from those who want

them are overcome.

Each middleman or intermediary that performs some work in bringing the product

and its title closer to the final buyer constitutes a channel level (Kotler, 2003). Kotler

(2003) described a zero channel (also called a direct marketing channel) as consisting of

producers selling directly to consumers, for instance, a consumer buying maize directly

from the farmer. This does not make for a developed marketing system as it consequently

affects the productivity of the farmer (Olukosi and Isitor, 1990). In fact, if it were not

more economical to have these functions performed by specialized agencies, the

marketing process would by-pass the marketers and connect producers directly with

consumers (Bressler and King, 1970). But, by the virtue of their extensive contact,

experience, specialization and scale of operation, intermediaries usually offer the

producing farm firm more than it can achieve on its own (Kotler, 2003). Marketing

channels are important in evaluating marketing systems because they indicate how

various participants are organized to accomplish the movement of a product from the

producer to the final consumer (Alamu, 2004).

In Nigeria, commodities most often pass through the following channels: from

compound to rural village market, to the rural bulking markets and then to urban retail

markets (Mejeha, 2000). In the case of maize marketing, the principal routes are from

farmers to wholesalers to retailers and to consumers (Aihonsu and Akorede, 2004). The

xxxiii

marketing channel for agricultural products in Nigeria is mainly the decentralized type.

This does not use established large market facilities, rather wholesalers and processors

purchase directly from the farmers (Olukosi and Isitor, 1990).

Middlemen facilitate the marketing of groundnuts and groundnut oil. They carry

out most of the purchases for exporters/agents on commission (Ochigbo and Idowu,

2002; Omojor, 1998).The existence of a number of middlemen in Nigeria are well known

(Adekanye, 1982). The reasons given for the large number of middlemen include relative

ease of entry, the small capital outlay needed, the fact that little or no specialized skills

are required and lack of alternative remunerative employments (Adekanye, 1982).

Marketing channels can influence marketing margin in the following ways:

i) marketing intermediaries or agencies produce services associated with

commodities and necessary to their distribution-the creation of place, time and

ownership utilities (Bressler and King, 1970; Shepherd, 1989). The cost of

these services determines the size of the margin;

ii) marketing chain is part of the marketing channel. It describes the succession

of markets through which products pass until they reach the consumers. The

length of the chain tends to affect the margin accruable to the marketers as

well as the price paid by the consumers. The longer the chain, the higher the

final price is likely to be (Aihonsu and Akorede, 2004). This will also imply a

high marketing margin; and

iii) middlemen operate with superior efficiency in making goods widely

available and accessible to target markets (Kotler, 2003). Superior efficiency

means lower costs and implied lower margin.

2.8 Hausa Purdah Women in the Groundnut Processing Enterprise.

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The groundnut processing enterprise is one of the oldest indigenous enterprises in

the Hausa society. It is among the few local industries that survived the various measures

that inevitably stunted the development of local production. The colonial economic

policies that were designed primarily to supply British Industries with raw materials to

the detriment of local industries had negative consequences on groundnut processing

industries. More so, the massive importation of vegetable oil by the government in the

1970s and early 80s had all negatively affected the industry. The survival of the industry

could perhaps be attributed to its crucial and significant role in rural Hausa economy.

Groundnut is processed into oil and ‘Kulikuli’ by women for sale and for family

consumption. Hausa society virtually depended and to a large extent still depends on

groundnut oil for domestic usage. ‘Kulikuli’ is used to prepare food of different varieties.

The low cost of the ‘Kulikuli’ makes it one of the most popular sources of protein to

many rural households. Thus, the industry is significant in terms of food availability to

the nation and also as a source of employment for women (Adamu, 1990)

2.9 Profitability

Profit generally is the making of gain in business activity for the benefit of the

owners of the business. Pure economic profit is the increase in wealth that an investor has

from making an investment taking into consideration all costs associated with that

investment including the opportunity cost of capital. Accounting profit is the difference

between price and the costs of bringing to market what ever it is that is accounted as an

enterprise (whether by harvest, extraction, manufacturing, or purchase ) in terms of the

component costs of delivered goods and / or services and any operating or other

expenses. (Profitability, 2008)

According to Profitablity (2008), in economics, a firm is said to be making a

normal profit when total revenues equal total costs. These normal profits then match the

xxxv

rate of return that is the minimum rate required by equity investors to maintain their

present level of investment. Economically, the normal profit is thus treated as a cost, and

recognized as one of the two components of the cost of capital.

An economic profit arises when its revenue exceeds the total (opportunity) cost of

its inputs, noting that these costs include the cost of equity capital that is met by ‘normal

profit’. A business is said to be making an accounting profit if its revenue exceeds the

accounting cost of the firm. Economics treats the normal profit as a cost, so when

deducted from total accounting profit what is left is economic profit ( economic loss ).

All enterprises can be stated in financial capital of the owners of the enterprise.

The economic profit may include an element in recognition of the risks that an investor

takes. It is often uncertain, because of incomplete information, whether an enterprise will

succeed or not. This extra risk is included in the minimum rate of return that providers of

financial capital require, and so is treated as still a cost within economics. The size of that

return is commensurate with the riskiness associated with each type of investment, as per

the risk-return spectrum. Normal profits arise in circumstances of perfect competition

when economic equilibrium is reached. At equilibrium, average cost equals marginal cost

at the profit-maximizing position. Since normal profit is economically a cost, there is no

economic profit at equilibrium. In a single-good case, a positive economic profit happens

when the firm’s average cost is less than the price of the product or service at the profit-

maximizing output. The economic profit is equal to the quantity of output multiplied by

the difference between the average cost and the price.

Economic profit does not occur in perfect competition in long-run equilibrium.

Once risk is accounted for, long-lasting economic profit is thus viewed as the result of

constant cost-cutting and performance improvement ahead of industry competitors, or an

inefficiency caused by monopolies or some form of market failure.

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Profitability is a term of economic efficiency. Mathematically it is a relative

index- a fraction with profit as numeration and generating profit flows or asset

denominator. Optimum profit is the right amount of profit a business can achieve. In

business, this figure takes account of marketing strategy, market position and other

methods of increasing returns above the competitive rate (Profitability, 2008).

Profitability is calculated to measure the operating efficiency of the firm (Arene, 1998).

Profitability is the net result of a large number of policies and decisions. The profitability

ratios show the combined effects of liquidity, asset management and debt management

on operating results (Brigham, 1986). They are computed on the basis of sales or

investments and are of special interest to management, stockholders, union officials,

employees and creditors (Solomon, 1983). Generally two major types of profitability

ratios are calculated: profitability in relation to sales and profitability in relation to

investment (Arene, 1988).

2.9.1 Gross profit margin (GPM) ratio

This is the first profitability ratio in relation to sales. It is calculated by dividing

the gross profit by sales, that is, sales less cost of goods sold divided by sales. This ratio

indicates the average spread between the cost of goods sold and the sales revenue. A high

gross profit margin relative to the industry average implies that the firm is able to

produce at a relatively lower cost (Arene, 1998).

2.9.2 Gross profit as a percentage of sales

This represents the amount of gross profit per N100 of sales. The ratio is used as a

test of the profitability of the sales. Just because sales increased does not indicate that the

gross profit will increases (Omuya, 1982). If there is a fall in gross profit, there can be

many reasons .Perhaps the goods being sold have cost more but the selling price has not

risen to the same extent. May be in order to boost sales, reductions have been made in the

xxxvii

selling price of goods. There could be a difference in the composition of types of goods

sold, called the sales mix, between this year and the last, with different product lines

carrying different rates of gross profit per N100 of sales. Alternatively there may have

been a greater wastage of goods. These are only some of the possible reasons for the

decrease. The idea of calculating the ratio is to highlight the fact that the profitability per

N100 of sales has changed and so promote an enquiry as to the way and how such a

change is taking place (Omoya, 1982).

2.10 Analytical Framework

The analytical framework is organized under the following sub-headings:

marketing margin analysis, correlation analysis and regression analysis.

2.10.1 Concept of marketing margin

Marketing margin is also referred to as price spread (Barallat, 1987; Arene,

2003). Marketing margin can be defined in several ways. The different elements in the

various definitions provide for clarity and better understanding of the concept. Simply,

marketing margins reflect both the costs of marketing and profits of marketing agents

(Minot and Goletti, 2001).

Marketing margin is the difference between the price at the retail end of the

market and producers and wholesale prices of the commodity (Arene, 1998). However,

there are several basic types of marketing margins based on market levels or stages being

considered. Also, great care must be used in making conclusions based on marketing

margin values alone as many other factors influence the performance of the marketing

system (International Livestock Research Institute, 1995). Producer’s prices generally

relates to prices at the primary market or factory gate prices. The producer’s price could

be in some circumstances the market price or administered price, determined by the

government (Ahmed and Rustagi, 1993).

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Marketing margin can be explained by using the concept of primary demand,

derived demand, primary supply and derived supply. As illustrated in fig 2.2 retail price

is established at the point where primary demand and derived supply intersect. The farm

gate price is established at the intersection of the derived demand and primary supply

curves. The difference between the retail and farm gate price is the marketing margin.

Primary demand is the demand for the final product at the consumer end while derived

demand refers to the demand for the resource inputs needed to make the final product

(Arene, 2003).

Fig 2.1 Illustration of concept of marketing margin

Source: Tomek and Robinson (1991).

Qo = Quantity demanded

Dd = derived demand curve

Pd = primary demand curve

Ds = derived supply curve

Ps = primary supply curve

FGP = farm gate price

Ds

Ps

Pd Dd

Pd

Dd Ps Ds

Qo O

FGP

GMM

RP

Quantity

Price

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GMM = gross marketing margin

RP = retail price

Net marketing margin is the gross marketing margin minus marketing cost

(Adekanye, 1982; Gabre-Madhin, 2001). It is often called mark-up, which reveals the

size of the profit margin made by marketing agents (Rachman and Mescon, 1985).

2.10.2 Marketing margin analysis

According to Arene (1998), marketing margin is a descriptive tool widely used by

researchers in assessing marketing efficiency. This is because of its easiness in

computation. According to Abbott and Makeham (1986), marketing margin can be

estimated using three approaches viz: Samples of representation of certain product

followed through the whole marketing system. Prices and charges are noted at each stage

and averages are computed. The gross receipt and outlays of each handler along a

marketing channel is divided by the number of volume units handled. Prices at each stage

from producer averaged for a standard quality over a time period.

Gross marketing margin can be estimated by computing the difference between

the price consumers pay (retail price) and the price the farmer gets (Olukosi and Isitor,

1990; Amobi, 1996). In this case, gross marketing margin is the same as total marketing

margin. This can be stated mathematically as:

GMM( N) = CP – FP

This is expressed as a percentage of purchase prices as:

GMM% = CP – FP X 100 …………(1)

FP

GMM = wholesale margin

Retail margin

Where GMM = Gross Marketing Margin

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CP = Consumer or retail price (N)

FP = The price the farmer gets (N)

In various studies, Mejeha (2000), Gabre-Madhin (2001) and Alamu (2004)

computed gross marketing margin by finding the difference between selling and supply

(in some cases, buying) price

This can be stated mathematically as:

GMM (N) = SP – PP

This is expressed as percentage of retail price as:

GMM (%) = SP – PP X 100 ……………………..(2)

PP

Where:

GMM = Gross Marketing margin

SP = Selling price (N)

PP = Purchase price (N)

This can be used to estimate gross marketing margin at each stage by marketing

agents. Total marketing margin can be obtained by summing up marketing margins of all

participants involved. Marketing margins of participants will be estimated in the same

way to reveal trends in price fluctuations and provide information for calculating net

marketing margin.

2.10.3 Empirical studies of marketing margins

There are variations in marketing margins from one product to another and from

one location to another. Many factors account for these variations. Downey and Erickson

(1987) identified some of the factors that affect marketing margins as:

i) degree of perishability: Increased marketing costs as a result of spoilage,

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special handling and special storage facilities can substantially increase

marketing margin;

ii) bulkiness of the product: Increased marketing costs may result from the

physical size of the product in relation to the value. The bulkier the product,

the higher the cost of storage and transportation;

iii) seasonality: If the product is harvested over only a short period, storage and

handling costs may be much greater; and

iv) differences between raw and final product form.

Basically, the more processing and other work that must be completed before

the product goes to the consumer, the higher the total marketing costs will be.

In literature, there are indications that various shifts in the supply and demand for

food are likely to affect retail-farm price ratios and the farmer’s share of retail food

expenditure (Barallat, 1987).

Lower marketing margin is possible in firms that are vertically integrated because

the marketing chain is shortened, while high marketing margin could be as a result of the

integrated firms gaining market power and control over the price paid by consumers

(Olukosi and Isitor, 1990).

2.10.4 Marketing cost

Marketing cost is the actual expense incurred in the performance of the marketing

function as a commodity moves from the farm to the ultimate consumers or users. This

includes; cost of marketing services rendered by marketing intermediaries, such as the

cost of transportation and handling, packaging costs, storage cost, processing costs and

terminal charges (Ahmed and Rustagi, 1993; Arene, 1998;).

xlii

The marketing functions and services performed by marketing organizations and

agencies, which make it possible for the consumer to obtain the product usually attracts

cost of considerable magnitude. Hence, the magnitude of the margins and costs usually

give an indication of the performance or efficiency of the marketing system.

Marketing cost, according to Shepherd (1989), is summarized as follows:

i) produce preparation and packaging costs-They include costs incurred during

cleaning, sorting, grading and packaging;

ii) handling costs-These include cost of packaging and unpacking, loading and

off-loading.;

iii) transport costs-These are costs incurred by farmers when they take their

produce to the market and as the trader buys them and move them down the

marketing chain to the consumers. These costs vary with type of transport,

nature of roads, quantity transported and distance traveled;

iv) storage costs-These are costs incurred to extend the availability of produce

over a longer period than it was sold immediately after harvest. These costs

depends on the cost of building and operating the store, cost of capital used to

purchase the produce being stored;

v) processing costs –These are costs of converting a commodity into another

usable form. These costs vary according to the efficiency of the organization

during the processing, processing facility and the frequency of its operation. It

will also vary according to the organization cost, which depends on factors

such as fuel costs, depreciation costs, import duties, taxes and wages;

vi) capital cost-This is the cost of interest paid on the money borrowed to carry

out a business by a trader;

vii) product losses-These are costs of losses in weight, quality, quantity and value;

xliii

and

viii) fees, commissions and unofficial payments-These are miscellaneous costs

such as marketing fees, taxes, weighing and commission.

2.10.5 Regression Analysis

Simple linear regression model is used for testing hypothesis and prediction about

the relationship between a dependant and an independent variable, (Olaitan and Ndomi,

2000). The extent to which changes in retail price affects producer’s price can be

determined by the use of simple regression analysis.

The objective of such analysis is to estimate and or predict the mean or average

values of the dependent variables on the basis of the known or fixed values of the

explanatory variables. The success of any regression analysis depends on the availability

of appropriate data.

2.10.6 Theoretical Framework

The theoretical framework for this work is based on the value chain concept.

Every entity uses a range of activities to bring its product or service to the market or

customer. It is a combination of primary and support activities plus a profit margin. The

value chain concept is based on the economic value of a product to the customer. The

value chain also known as value chain analysis is a concept from business management

that is all about creating and sustaining superior performance. A value chain is a chain of

activities which a product passes through. At each stage of the activity the product gains

some value. The chain of activities gives the products added value than the sum of added

values of all activities. It is important not to mix the concept of the value chain with the

costs occurring throughout the activities. For instance, ordinary groundnut seed is of low

value but when it goes through the various stages of processing the value increases and

xliv

so the end product, groundnut oil, which is the focus of this work, is of much more value

than the groundnut seed.

The value chain categorizes the generic value-adding activities of an organization.

The ‘primary activities’ include: unbound logistic operations (production), outbound

logistics, marketing and sales (demand), and services (maintenance). The ‘support

activities’ include: administrative infrastructure management, human resource

management, information technology, and procurement. The costs and value drivers are

identified for each value activity. The value chain framework quickly made its way to the

forefront of management as an analytical tool for strategic planning. Its ultimate good is

to maximize value creation which manifests in the maximization of profit and the

minimization of costs which is the goal of the firm.

This concept extends beyond individual organizations. It applies to whole supply

chains and distribution networks. The delivery of a mix of products and services to the

end customer. The larger interconnected system of value chain called the ‘value system’

includes the value chains of the firm’s supplier, the firm itself, the distribution channels

and the firms’ buyers (Value chain concept, 2008).

Also, processing is the creation of utility; form utility. This not only adds value to

the product as explained earlier but also is a means of increasing the shelf-life of the

product.

xlv

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 The Study Area

The study area is Kaduna State. The State occupies almost the central portion of

Northern Nigeria and shares boundaries with Sokoto, Katsina, Niger, Kano, Bauchi,

Nassarawa and Plateau States. The State also shares borders with the Federal Capital

Territory Abuja. The global location of the State is toward the south of the high plains of

Northern Nigeria bounded by Latitude 9� 03�N and 11� 32�N, and extends from the upper

River Mariga on Longitude 6� 05�E and 8� 48�E on the foot slopes of the scarp of Jos

Plateau, while the state capital lies on latitude 10� 30�N of the equator (KADP, 2007).

According to the National Population Census, (2006). Kaduna State has a population of

6,066,562 people (NPC, 2006).

The main ethnic groups are Bajju, Kataf, Kagoro, Maroa, Jaba, Gbaggyi,

Kanninkon, Nirizam, Hausa, Fulani, Chawai, Kunama, (KADP, 2007). The State

extends from the Guinea Savanna to the Sudan Savanna in the North with about 80% of

its population engaged in small-scale farming, producing both food and cash crops, the

production of which is through the traditional method. Crops produced in Kaduna State

include cotton, groundnut, tobacco, beans, maize, yam, guinea corn, millet, ginger, rice,

cassava and tomatoes. Groundnut oil is basically used for cooking, frying and baking.

There are 23 LGAs in Kaduna State, namely: Birni-Gwari, Chikun, Giwa, Igabi,

Ikara, Jaba, Jema’a, Kachia, Kaduna North, Kaduna South, Kagarko, Kajuru, Kaura,

Kauru, Kubau, Kudan, lere, Makarfi, Sabon-Gwari, Sanga, Soba, Zango-Kataf, and

Zaria (Kaduna State, 2007).

3.2 Sampling Procedure

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The State has four operational zones (Agricultural zones) called KADP Zones.

They are: Maigana zone which comprises Giwa, Soba, Kubau, Ikara, Markafi, and Zaria.

Samaru zone which include Kachia, Zango Kataf, Kagarko, Jaba, Jema’a, Sanga, Kaura.

Birni Gwari zone which includes Birni Gwari, Chikun, Kajuru, Kaduna North, Kaduna

South, and Lere zone, which includes Igabi, Kauru and Lere (KADP, 2007).

For the purpose of this study, multi-stage random sampling technique was used to

stratify the state into northern (mostly Moslems) and southern (mostly Christians) areas.

A total of 100 respondents (50 producers and 50 marketers) were randomly selected

based on the list with the extension agents.

The markets selected and visited were Zongo, Kafanchan, Sanga, Zaria, Sabon

Gari and Birni Gwari. The markets were purposively selected based on the level of

groundnut oil sales. It was assumed that areas of large production would support larger

markets.

3.3 Data Collection

Data were collected from primary sources. Primary data were collected using two

sets of structured and pre-tested questionnaires. Information was collected with the help

of trained research assistants. Selected groundnut oil producers were visited and data

collected used to reinforce the ones from questionnaire. Also, some of the major and

minor marketers were visited to observe groundnut oil marketing process and collect data

by weighing some of the ‘measuring containers’. [

3.4 Data Analysis

Multiple regression analysis model was used to realize objectives (i) and (ii),

Objectives (iii), (iv), and (vi) were realized through descriptive statistics using frequency

xlvii

tables, percentages. Objective (v) was achieved using marketing margin analysis and

producer margins.

3.5 Test of Hypotheses

The result of the multiple regressions was used to determine the relationship

between the dependent and the independent variable and to ascertain the one with the

largest coefficient of determination.

3.6 Model Specification

3.6.1 Multiple regression model

This model was adopted to relate the quantity of groundnut oil produced to the socio-

economic variables of the producer and stated implicitly as:

eXXXXfY += ),...,,( 8321

where =Y Output of groundnut oil produced (liters )

=1X Age (in years)

=2X Sex (Male= 1, Female = 2)

=3X Marital Status (Married =1, Not Married =2)

=4X Educational Level (years)

=5X Occupation (groundnut oil producer=1, Non- groundnut oil Producer)

=6X Family size (in Number)

=7X Years of experience (years)

=8X Distance to market (km) and

e= error term

Three functional forms, linear, semi-log and double- log were tried and the best fit

chosen as the lead equation. These forms are stated in equations (1), (2), and (3),

respectively.

)1.........(88776655443322110 eXbXbXbXbXbXbXbXbbY +++++++++=

xlviii

)2.........(logloglogloglogloglogloglog 88776655443322110eXbXbXbXbXbXbXbXbbY +++++++++=

)3.........(loglogloglogloglogloglogloglog 88776655443322110 eXbXbXbXbXbXbXbXbbY +++++++++=

Another multiple regression model was adopted to relate the quantity of groundnut oil

marketed to the socio- economic variables of the marketer, as stated implicitly:

eXXXXfY += ),...,,( 8321

where Y =Quantity of groundnut oil sold (liters),

=1X Age (in years)

=2X Sex (Male =1, Female =2)

=3X Marital status (Married =1, Not Married =2)

=4X Educational Level (Years)

=5X Occupation (Groundnut oil Marketer =1, Non-Marketer =2)

=6X Family size (in Number)

=7X Years of experience, and

X8 =Distance to market (km) and

E = error term

Three functional forms, linear, semi-log and double-log, were tried and the best fit

chosen as the lead equation. These forms are stated in equations (1), (2), and (3),

respectively.

)1.........(88776655443322110 eXbXbXbXbXbXbXbXbbY +++++++++=

)2.........(logloglogloglogloglogloglog 88776655443322110 eXbXbXbXbXbXbXbXbbY +++++++++=

)3.........(loglogloglogloglogloglogloglog 88776655443322110 eXbXbXbXbXbXbXbXbbY +++++++++=3.6.2 Producer’s margin

This is obtained from the difference between selling price and cost of production.

PM = SP - CoP

Where PM = producer margin,

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SP = selling price, and

CoP = cost of production

PM (%) = Producer’s price – Cost of production X 100 Cost of production

3.6.3 Marketing Margin Analysis

According to Arene (1998), marketing margin is a descriptive tool widely used by

researchers in assessing marketing efficiency. Gross marketing margin, according to

studies conducted by Mejeha (2000), Gabre-Madhin (2001) and Alamu (2004), can be

computed by finding the difference between selling and purchase prices. This can be

mathematically stated as:

GMM (N) = SP –PP

This is expressed as percentage of retail prices as:

GMM (%) = SP – PP X 100

PP

Where:

GMM = Gross marketing margin of groundnut oil

SP = Selling price of groundnut oil (N)

PP = Purchase Price of groundnut oil (N)

This can be used to estimate gross marketing margin at each stage by marketing agents.

Total marketing margin can be obtained by summing up marketing margins of all

participants.

3.6.4 General Formulae

Net Income = Total Revenue – Total Cost

Wholesale Margin = Wholesale price – Purchase price

Retail Margin = Retail Price – Wholesale Price

l

Total Marketing Margin (%) = Retail Price – Producer’s Price X 100 Producer’s Price 1

li

lii

CHAPTER FOUR

RESULTS AND DISCUSSION

4.1 Effects of Socio-economic Characteristics on the Production of Groundnut Oil.

4.1.1 Socioeconomic characteristics of groundnut oil producers.

The socio-economic characteristics of groundnut oil producers are presented in

Table 4.1. The highlights discussed are age, sex, marital status, educational qualification,

occupational status and family size. From Table 4.1, the average age of the producers

was about 45 years. This meant that the producers of middle age were energetic enough

to go through the rigors of groundnut oil production and if given a favourable

environment would excel much more.

It is also seen from Table 4.1 that the production of groundnut oil was largely

dominated by females (92%). This confirms the result of Harris-White (1996) which

found women to concentrate more in small-scale processing than their male counterpart.

Married people dominated groundnut oil production (72%). This was because

groundnut oil production was basically an indoor activity and being that most of the

liii

producers in the study area were Moslems, by the nature of their religion should stay

more at home. So, these women engage in this economic activity and other indoor petty-

trading to assist their husbands in the running of the home.

About 24% of the respondents had Koranic education while 62% had low formal

education. It was revealed that groundnut oil production was carried out by the not too

educated people, and this explains why the level of production and quality of oil

produced is low.

Table 4.1: Socioeconomic characteristics of groundnut oil producers.

Item Frequency Percent Age < 20 0 0.0 20 – 30 3 6.0 31 – 40 14 28.0 41 – 50 27 54.0 51 – 60 6 12.0 Total 50 100 Sex Male 4 8.0 Female 46 92.0 Total 50 100 Marital Status Frequency Percent Married 36 72.0 Single 2 4.0 Divorced 1 2.0 Widows 11 22.0 Total 50 100 Educational Qualification No formal education 7 14.0 Koranic education 12 24.0 Adult literacy 6 12.0 Primary Education 15 30.0 Secondary education 10 20.0 Total 50 100.0 Occupation Farming 17 34.0 Civil service 1 2.0 Business/Trading 32 64.0 Total 50 100.0 Family Size 1 – 4 6 12.0 5 – 9 38 76..0

liv

10 -14 4 8.0 > 14 2 4.0 Total 50 100.0

Source: Field Survey, 2008.

Most of the processors (64%) engaged in trading of the commodity making the

distribution chain short and the commodity relatively cheaper than if the distribution

chain was longer. The average family size was seven indicating that, they had fairly large

families. This is of advantage to the producers as each family had enough hands to

engage in the processing activities thus providing cheap labour.

4.1.2 Effects of Socioeconomic characteristics on production of groundnut-oil

Regression model was used to estimate the effect of socio-economic

characteristics on the production of groundnut oil. Three functional forms were tried,

namely; linear, semi-log, and double log forms (Table 4.2).

The double – log function was chosen as the lead equation because it had the

highest R2 value of 0.732 and least standard error of estimate value of 0.63416. Also, the

value of the F-ratio was 9.222 which showed that there was significant difference among

the variables in the model.

From the regression result, sex, educational qualification, years of experience and

occupation significantly affected the production of groundnut oil at the 1% level of

significance. However, sex was the most significant. The negative regression coefficient

(-1.885) indicated the inverse effect with quantity of groundnut oil .produced, which

meant that being a woman increased the chance of producing more as revealed by the

study. This agreed with Harris-White (1996) who found that women concentrated in

small- scale processing and retailing of agricultural commodities.

Educational qualification had a positive and significant effect on groundnut oil

produced (1% level of significance). This meant that having a good education would

enhance production as higher level managerial ability would be exercised. Years of

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experience in the production activity was also significant, meaning that the more

production took place the more proficient the producer got.

Other socio-economic factors such as age, marital status and family size had no

significant effect on the quantity of groundnut oil produced.

4.2 Effects of Socioeconomic Characteristics on the Marketing of Groundnut Oil.

4.2.1 Socioeconomic characteristics of groundnut oil marketers.

The socioeconomic characteristics of groundnut oil marketers are presented in

Table 4.3. The highlights discussed were age, sex, marital status, educational level, and

occupation, size of family and years of experience. The average age of groundnut oil

marketers was about 45years which accounts for about 44%. Marketing activity by nature

requires ‘energetic people’ and this explains why in this case people within this age range

are seen as participants.

Females dominated (56%) marketing. There were more females than males in

retailing of this product because with little money they could purchase little quantity at a

time. While the men who were the household heads and controlled the bulk of the money

engaged in wholesaling.

From Table 4.3, it can be seen that the marketing of groundnut oil is people

dominated (all categories of people) and handled more by married people (72%), the

young ones engage in other neater business. The study revealed that most of the

marketers attended Koranic and primary schools. As was the case of the producers,

because the respondents were mostly Muslim, they tended to patronize Koranic school a

lot. Also due to the rural nature and low financial status of the respondents, they might

not be able to afford formal forms of education. The low level of education among the

marketers reflected in their poor marketing skills and thus poor sales.

The study showed that most of the marketers engaged in trade and this accounted

for 86%, almost full time. The average family size for marketers was seven and this

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accounted for about 56%. This means that they generally kept large families who assisted

them in their marketing activities.

Table 4.2 Results of the Multiple Regression Analysis of the Socioeconomic Factors Affecting the Production of Groundnut Oil

Variables Linear Semi-Log Double-Log Constant -297.388 -233.109 4.214 (-1.446) (-0.801) (4.759)*** Age 70.709 154.222 .157 (1.231) (.763) (.255) Sex -213.342 -480.162 -1.885 (-2.524)** (-2.953)*** (-3.812)*** Marital Status 2.724 25.697 .193 (.096) (.391) (.965) Educational Qualification

111.256 254.390 .730

(3.563)*** (3.178)*** (2.997)*** Occupation 162.363 241.908 1.160 (1.909)* (1.866)* (2.942)*** Family Size -50.972 -156.186 -.317 (-.647) (-1.015) (-.677) Years of Experience 120.424 264.168 .951 (2.820)*** (2.580)** (3.054)*** Distance in km 2.765 103.686 .220 (1.890)* (1.7887)* (1.246) R2 .726 .681 .732 Adjusted R2 .645 .581 .653 F-ratio 8.963 7.208 9.222 Observation 50 50 50 N:B * = Significant at 10% ** = Significant at 5% *** = Significant at 1% Source: Extract from Computer Analysis Result

lvii

Table 4.3 Socioeconomic characteristics of groundnut oil marketers Item Frequency Percent Age < 20 2 4.0 20 – 30 3 6.0 31 – 40 10 20.0 41 – 50 22 44.0 51 – 60 13 26.0 Total 50 100 Sex Male 22 44.0 Female 28 56 Total 50 100 Marital Status Frequency Percent Married 36 72.0 Single 4 8 Divorced 10 20 Total 50 100 Educational Qualification No formal education 7 14.0 Koranic education 20 40.0 Adult literacy 1 2.0 Primary Education 9 18.0 Secondary education 13 26.0 Total 50 100.0 Occupation Farming 7 14.0 Business 43 86.0 Total 50 100.0 Family Size 1 – 4 6 12.0 5 – 9 28 56..0 10 -14 13 26.0 > 14 3 6.0 Total 50 100.0 Years of Experience <5 6 12..0 5-9 16 32.0 10-14 16 32.0 15-19 6 12.0 >19 6 12.0 Total 50 100.0

Source: Field Survey, 2008.

4.2.2 Effects of socioeconomic characteristics on groundnut oil marketing.

lviii

The socio-economic characteristics and how they affect the marketing of groundnut oil are seen in Table 4.4

Table 4.4 Result of Multiple Regression Analysis of the Socioeconomic Characteristics Affecting the Marketing of Groundnut Oil.

Variables Linear Semi-Log Double-Log Constant -842.021 2766.286 -592.792 (-1.681) (-7.288)*** (-2.175)** Age 326.783 1891.443 333.220 (3.421)*** (-2.546)** (3.986)*** Sex -23.647 -143.000 -236.776 (-.160) (-1.335) (1.688) Marital Status 17.133 23.877 23.213 (.348) (.539) (.420) Educational Qualification

102.024 152.234 132.024

(2.352)*** (2.781)** (2.999)** Occupation 289.371 267.707 278.707 (.721) (.667) (.677) Family Size -293.041 -303.041 -303.407 (-2.723)*** (-2.578)*** (-2.602)*** Years of Experience 11.220 24.398 17.398 (.164) (.416) (.219) R2 0.931 0.782 0.876 Adjusted R2 0.483 0.323 0.415 F-ratio 9.411 9.054 5.868 Observation 50 50 50

N:B * = Significant at 10% ** = Significant at 5% *** = Significant at 1% t-value = figures in bracket Source: Extract from computer analysis results

Multiple regression model was employed to estimate the effects of socioeconomic

factors on the marketing of groundnut oil in the study are. Three functional forms were

tried namely; linear, semi-log and double-log. The linear form was chosen as the lead

lix

equation because it had the highest R2 value of 0.931. From the regression result, age,

educational qualification significantly affected the quantity of groundnut oil marketed at

the 1% level of significance while the other variables were not significant.

Educational level was also very significant, indicating that the acquisition of

knowledge aided the marketing as better managerial skills were employed. Age prove

significant revealing that the older the marketers the more groundnut oil that was sold as

better marketing skills were employed.

Based on the result of the multiple regression analysis, the hypothesis tested

showed that there were significant effect of the socioeconomic factors on the quantity of

groundnut oil produced at 1% level of significance and as such we rejected the null

hypothesis and accepted the alternate hypothesis. On the marketing aspect, the

socioeconomic factors affected the quantity of groundnut oil sold and as such we rejected

the null hypothesis and accepted the alternate hypothesis.

4.3 Gender Roles in the Production and Marketing of Groundnut Oil.

4.3.1 Role of gender in the production of groundnut oil

The essence was to find out if the production of groundnut oil was gender biased

(Table 4.5)

Table 4.5: Gender Role in Production of Groundnut Oil.

Tasks Males (%) Females (%) Total Cleaning 34 66 100 Sorting 28 72 100 Grading 24 76 100 Crushing 64 36 100 Packaging 32 68 100 Buying of groundnut 56 44 100 Transportation 74 26 100

lx

Source: Field survey, 2008.

From Table 4.5, males dominated crushing (64%), transportation (74%) and buying of

groundnuts (56%). This was because these activities were more masculine in orientation,

that is, more energy demanding and basically outdoors. But activities such as cleaning

(66%), sorting (72%), grading (76%), and packaging (68%), which were less stressful

and indoors, were dominated by females. The Muslim religion encourages women to stay

within the confines of their homes especially if they were within child bearing age.

4.3.2 Role of Gender in the Marketing of Groundnut Oil.

As was in the case of production, the essence of this was to find out if the

marketing of groundnut oil was gender biased (Table 4.6).

Table 4.6 Gender Roles in Marketing Groundnut Oil.

Tasks Males (%) Females (%) Total Bottling 54 46 100 Loading 70 30 100 Off-loading 74 26 100 Transportation mode

-Wheelbarrow 60 40 100 -Head portage 16 84 100 -Motor cycle 98 2 100 -Vehicle Wholesaling Retailing

74 70 20

26 30 80

100 100 100

Source: Field survey, 2008 From Table 4.6, it was revealed that men dominated virtually all the tasks of

marketing. This was because most of the tasks were energy demanding and more of out-

door activities.

4.4 Marketing Channels Employed in the Distribution of Groundnut Oil. Figure 4.1 went contrary to the a priori expectation of what really takes place in

the market scene, where producers sold more to the wholesalers than the retailers. In this

case, though the wholesalers bought larger quantities at a time, the retailers bought more

frequently since they had little capital which would not afford them to make bulk

purchase. So, 75.86% attributed to retailers represented the percentage of retailers and

not the strength of their purchase (the quantity of groundnut oil bought). In the study

lxi

area, because of the rural nature of the place and perhaps the poor economy of the people,

those involved in this business were the poor ones.

The wholesalers as well as the retailers both existed in the same market and they had

associations through which they handled problems concerning them.

4.5 Margins of Groundnut Oil Producers and Marketers.

4.5.1 Producer’s income and margin.

Net income analysis was employed to derive the total income of the producer per

month and subsequently per annum as each producer produces at least once a month on

the average. So, to obtain figures per annum was simply to multiply by 12 months. Net

income was used because some of the equipments used in the production of groundnut

oil depreciated over time and as such the depreciated value over the useful life was

calculated. Cost incurred included labour cost, transport and running cost. The market

price for a bag of shelled groundnut varied depending on the market and season. A bag of

shelled groundnut produced about 30 liters of oil and about 80 ‘mudus’ of groundnut

cake ‘kuli-kuli.’

Table 4.7: Net Income (Enterprise Budget)

Items Unit(Litre/Bag) Qtty Useful life

span(years) Unit Price (N) Total (N)

Revenue from Kuli-kuli mudu 80 100 8,000

Revenue from groundnut oil 30L 1 6,000

Total Revenue(A) 14,000

Fig 4.1: Marketing channels employed in the distribution of groundnut oil

Producer 24.14% Wholesaler Retailer Consumer

75.86%

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Variable Cost(VC) -cost of groundnut seeds Bag 1 10,000 10,000

-Transportation of groundnut from market

Bag 1 20 20

-cost of milling Bag 1 50 50 -cost of wood 100 100 -cost of water 20L 2 10 20 -cost of jerrycan (oil container) 30L 1 100 100

-cost of transport to mill 1 20 20

Total variable costs(B) (TVC) 10,310

Gross margin C(A-B) 3,690 Fixed Costs (FC) -Mortar and Pistle 1 10 1,500 12.50 -Giant pot 1 10 1,500 12.50 -Wooden Spoon 1 10 250 2.08 Total Fixed Cost (TFC)D 29.58

Net Income E(C-D) 3,660.42

Producer’s Margin

Return per naira on investment (TR/TC)

Total Cost (TC) TVC+TFC

36% 1.40 10,339.58

Source: Field survey, 2008 From Table 4.7, the cost price for a bag of groundnut was N10, 000 during the

study period which was between August and December, but could rise to as much as

N18, 000 per bag of shelled groundnut between January and August. A bag containing up

to 100 ‘mudus’ of shelled groundnut produces 30 litres of groundnut oil which cost about

N6000. It is quite revealing to find out that the producer produces groundnut oil at a loss

but what sustains her in the business are the gains made from the groundnut cake

popularly called ‘kuli-kuli’. A bag of groundnut produces about 80 “mudus’ of kuli-kuli

which cost about N100 per ‘mudu’. For any amount invested in the production of

groundnut oil from 1 bag of groundnut per month, the return on investment is N1.40 with

a Net Income of about N43, 925.04 per annum.

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From Tables 4.7, 4.8 and 4.9, the producer’s margin was 36%, with a Net Income

of N43,925.04 per annum, the wholesaler’s margin was 28%, with a Net Income of

N615, 960.00 per annum, while the retailer’s margin was 36% with a Net Income of

N201, 636.00 per annum. The total marketing margin was 100.

4.5.2 Wholesaler’s Income and Margin Table 4.8 Wholesaler’s income and margin

Item Unit Qty Unit price (N)

Useful life (years)

Total (N)

Revenue from kuli-kuli Revenue from groundnut oil

mudu 30L

80 30

200 7,500

16,000 225,000 Total Revenue (A) 241,000

Variable Cost -cost of groundnut oil -cost of kuli-kuli

30L mudu

30 80

6,000 100

180,000 8,000

-cost of transportation of groundnut oil from the market. -cost of transportation of kuli-kuli from the market

30

50

1,500 70

Total variable cost (B) 189,570 Gross margin C (A-B) 51,430 Fixed cost (C) -Cost of stall 1 1,000 10 100 Total fixed cost (D) 100 Net income E (C -D) 51,330

lxiv

Wholesaler,sMargin Return per naira on investment (TR/TC)

28% 1.30

4.5.3 Retailer’s Income and Margin Table 4.9 Retailer’s income and margin

Item Unit Qtty Unit Price (N)

Useful shelf life (Years)

Total (N)

Revenue from groundnut oil Revenue from kuli-kuli

30L mudu

2 160

8,000 300

16,000 48,000

Total Revenue TR(A) 64,000 Variable Cost -cost of groundnut oil -cost of kuli-kuli

30L mudu

2 160

7,500 200

15,000 32,000

-cost of transportation of groundnut oil & kuli-kuli From wholesaler

30L

2

20

50

-cost of selling space 1 20 20 -cost of cellophane 5 packs 20 100 Total variable cost TVC(B)

47,170

Gross margin C (A-B) 16,830 Fixed cost (FC) -cost of funnel 1 20 3 7 -cost of bottles 2 30 3 20 Total fixed cost TFC(D)

27

Net Income E (C-D) 16,803 Retailer’s Margin

36%

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4.6 Constraints Militating Against the Production and Marketing of Groundnut Oil

4.6.1 Constraints militating against the production of groundnut oil

Every business enterprise encounters one problem or the other which militates

against its optimal performance. It is against this backdrop that this study sought to find

out the problems facing groundnut oil producers.

Table 4.10 Constraints in the Production of Groundnut Oil

Constraints Frequency (N=50) Percent Capital 46 92

High cost of groundnut 41 82 Transportation 15 30 Low quality of groundnut seed

25 50

Unavailability of groundnut 15 30 Absence of market 4 8 Home consumption 6 12 Storage Difficulty in traditional method of processing

7 35

14 70

Source: Field survey, 2008

N:B The percent adds to more than 100 because of multiple answers by the respondents.

From table 4.10, constraints of noticeable impact were lack of capital (92%), high

cost of groundnut seed (82%), and low quality of groundnut seeds in terms of variety

(50%) and difficulty in traditional method of processing (70%). Poor funding of the

Return per naira on investment (TR/TC) Total cost (B+D)

1.40 47,197

lxvi

business due to lack of capital affected the production in that only very little quantity was

usually produced which did not meet the market demand; this was reflected in high price

of the product.

High cost of groundnut seeds also reflected in the quantity of groundnut bought

for processing. There are two varieties of groundnut; the high, oil- rich and the low, oil-

rich varieties. Most times the low oil type floods the market while the other is rarely seen

and if found was at exorbitant price beyond the reach of the small-scale processor.

4.6.2 Constraints in the marketing of groundnut oil Lots of problems face marketing of agricultural commodities generally. With this

in mind this research sought to find out the problems facing the marketing of groundnut

oil in the study area (table 4.11)

Table 4.11 Constraints militating against groundnut oil marketers Constraints Frequency (N =50) Percent High cost of groundnut oil 46 92 Transportation 15 30 Unavailability of groundnut oil

26 52

Taxes 5 10 Household consumption 10 20 Storage 1 2 High interest rate on borrowed money

40

80

Fluctuation in price of groundnuts oil

35 70

Low quality oil 15 30 Other vegetable oil in the market

25 50

Source: Field survey, 2008

N:B The percent is more than 100 because of multiple answers by the respondents.

The problems of notable impact were high cost of groundnut oil (92%), high

interest rate on borrowed money (80%), fluctuations in price of groundnut oil (70%),

unavailability of groundnut oil (52%) and competition from other imported vegetable oils

(50%). With high cost of groundnut oil only few quantities would be purchased and the

lxvii

resultant effect would be high price, thus causing consumers to go for other substitutes of

lower price.

Marketers are deterred from borrowing money to support their businesses even

when they know they really need to because of high interest they have to pay in return.

Most of the marketers complained that the fluctuation in the price of groundnut oil from

time to time created an unstable marketing environment in the sense that they added

more money to make purchases when they think they have made gains. Others

complained of scarcity of product at some other times and all these hamper the business.

Other problems like transportation, storage, household consumption and quality of oil

were really of no significance.

lxviii

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION 5.1 Summary

This study examined Groundnut oil production and marketing in Kaduna state,

Nigeria. Groundnut which used to be Nigeria’s most important agricultural export

commodity in the 70,s dropped due to the devastating rosette disease of 1975 and1976,

increased local consumption, improved standard of living, and reduction in the number of

farming families due to the oil boom. Although production has improved over the years,

Nigeria is still a net importer of groundnut oil. Specific objectives were also examined

which were to examine the socioeconomic factors that influenced the production of

groundnut oil in the study area; examine the socioeconomic factors that influenced the

marketing of groundnut oil in the study area; describe gender roles in the production and

marketing of groundnut oil in the study area; describe marketing channels employed in

the distribution of groundnut oil; analysed margins of groundnut oil production and

marketing; and identified constraints militating against the production and marketing of

groundnut oil in the study area.

Multi-stage random sampling technique was used to stratify the state into

Northern (mostly Moslems) and Southern (mostly Christians) areas. 100 respondents

were randomly selected, 50 from the North (25 producers and 25 marketers) and 50 from

the South (25 producers and 25 marketers) based on the list from the extension agent in

the study area. ̀

Data were collected from primary sources using two sets of structured and pre-

tested questionnaires. Information collected was through the help of trained research

assistants. Multiple regression analysis model was used to realize objectives (i) and (ii),

while objectives (iii), (iv), and (vi) were realized using descriptive statistics such as

lxix

frequency tables and percentages. Objective (v) was achieved using marketing and

producer margin analyses.

The study revealed that some socio-economic factors such as sex, educational

qualification, occupation, and years of experience greatly influenced the quantity of

groundnut oil produced at 1% level of significance (R-Square is about 70%) unlike age,

marital status, family size and distance to market which though were also significant but

at a lower level. On the marketing side, the study also revealed that age, and education

had very high significant effect on the quantity of groundnut oil sold with an R-square of

about 90% at 1% level of significance. Other factors like marital status, occupation and

years of experience showed very little significance and family size showed negative

significance.

The production of groundnut oil was dominated by females while in the

marketing they shared almost equal percentages though the males carried out more of the

tasks. About 76% of retailers buy directly from the producers while about 24% of the

market players were wholesalers.

In groundnut oil production and marketing, the producer’s Net Income was N43,

925.04 per annum, with a margin of 36%. Net Income for wholesaler was N615,960.oo

per annum with a margin of 28%. Net Income for retailer was N201, 636 .00 per annum

with a margin of 36% .The marketing margin therefore was 100%.

Constraints to production which were of importance were lack of capital (92%),

high cost of groundnut seed (82%) and poor variety of groundnut seeds (50%), traditional

method of groundnut oil production (70%). For marketing, the constraints of high

significance were high cost of groundnut oil (92%), high interest rate on borrowed

money (80%), fluctuation in price of groundnut oil (70%) and competition from other

imported vegetable in the market (50%).

lxx

5.2 Conclusion

In conclusion therefore, the study has shown that groundnut oil production and

marketing is not an entirely feminine business even though the women dominated in the

area of production (processing), males and females shared almost equal percentage in the

marketing. Despite the numerous constraints facing the participants in this industry,

production and marketing of groundnut oil would thrive if these constraints were reduced

to their barest minimum.

5.3 Recommendations

� The Government should also encourage both public and private investors into this

business so that with their high level of education and expertise, the sky will be the limit

in the groundnut oil industry.

� The government should encourage agricultural banks, micro-finance banks and

corporative societies to give out loans to investors at reasonable interest rate.

� Research institutes such as Institute of Agricultural Research (IAR), Zaria should

be well funded and encouraged in the area of research so as to enable them produces

more improved varieties of groundnuts which are disease resistant and high-oil yielding

and thus make them available to the farmers.

� Government should enforce policies that would discourage the unlawful

importation of vegetable oils into the country and also put in place penalties for

defaulters. This will help in reducing competition among different varieties of oil to its

barest minimum and consequent high price.

� Hoarding of groundnut oil should be discouraged as this would solve the problem

of artificial scarcity of commodity and consequent rise in price.

� The industrial sector should be encouraged to produce durable oil extraction

machines which would facilitate the production of groundnut oil and at a cheaper rate

lxxi

due to economies of scale. With this, there would be sufficient product to meet the

market demand.

� Also, market information services should be rendered to assist both marketers

and consumers in knowing the market situation.

lxxii

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APPENDIX I

QUESTIONNAIRE FOR GROUNDNUT OIL PRODUCERS IN KADUNA STATE

(Please tick the correct answer(s) and/or fill in the blank spaces)

1. LGA ……………………………………………………………….

SECTION A

SOCIO – ECONOMIC CHARATERCTERISTICS OF RESPONDENTS

2. Age:

(a) < 20

(b) 20 - 30

(c) 31- 40

(d) 41 -50

lxxvii

(e) 51-60

(f) Above 60

3. Sex

(a) male

(b) Female

4. Marital status (a) Married

(b) Single

(c) Divorced

(d) Widow(er)

5. Educational Qualification: (a) No formal education

��� Koranic school

(c ) Adult literacy training

(d) Primary School

(e) Secondary School

(f) Post Secondary

(g) Others (specify)…………………

�� Occupation

(a) Farming

(b) Civil service

(c) Business/trading

(d) Others (specify) ……………………

�� Family size:

(a) 0-4

(b) 5-9

(c) 10-14

(e) Above 15

SECTION B

GENDER ROLES

8. Who does the following task?

lxxviii

Task Male Female Cleaning Sorting Grading Crushing Packaging Buying of Groundnuts

SECTION C

PRODUCTION DATA (MARGIN)

9. How long have you been in this Business?

(a) < 5 years

(b) 5- 9 years

(c) 10-14 years

(d) 15-19years

(e) Above 20 years

10. What is your level of involvement?

(a) Full time

(b) Part time

11. Why are you engaged in this business?

(a) For money/income

(b) As a hobby

(c) For family consumption

(d) Others (specify) ………

12. What quantity of groundnut do you buy per month?

(a) Tiya (s)/mudu……………… (Number)

(b) Bags …………………… (Number)

13. What quantity of groundnut do you process per month?

(a) Tiya/mudu …………….. (Number)

(b) Bags …………………… (Number)

14. What is the cost price of Tiya/mudu (N..................................)

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15. What is the cost price of a bag of groundnut (N...................................)

16. Where do you buy your groundnuts?

(a) Don’t buy (own product)

(b) Farmer’s farm/house

(c) From open market

18. How much oil do you extract from one bag of groundnut?

(a) Number of gallons ………………………

(b) Number of jerry cans…………………………………………..

19. What is the cost of oil?

(a) Per bottle (N ……………………)

(b) Per gallon (N ………………………)

(c) Per Jerry can (N ……………………)

(d) Per Drum (N …………………)

20. How much does it cost you to transport groundnut from market to your

House per bag (N ………………)

21. How much does it cost you to transport groundnut to oil production

Station per bag (N.....................)

22. What is the distance (Kilometer) to market where you purchase groundnuts?........................

23. Do you store your groundnuts?

(a) Yes

(b) No

24. What method do you employ in oil extraction?

(a) Mechanical/improved

(b) Traditional

(c) Both

(d) Others (specify)……………………

25. Which of the methods give more oil?

(a) Mechanical/Improved

(b) Traditional (c) Others (specify)…………………….

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26. How do you find machine extractor compared to traditional method?

(a) Less time consuming

(b) Less drudgery

(c) No difference

(d) Easy to manage

(e) Others (specify)……………….

27. How much does it cost you to buy the oil extraction equipment?

(a) Machine extractor N………………………………………………………..

(b) Traditional N……………………………………………………………..

(c) Did not buy

28. If you use the local or traditional method of extraction how much does it

cost you to process the groundnut per month?

ITEMS COST(N)

Firewood

Water

Labour

Motar

Pestle

Giant pot

29. How much do you pay for labour?

Labour No. of people Monthly(N)

Family

Self

Hired

30. At what season of the year do you produce the most groundnut oil? …………………………………………

31. Do you belong to any cooperative society?

lxxxi

(a) yes

(b) No

32. If yes, what are the three most important benefits?

(a)

(b)

(c)

33. Did you borrow money from any source for the sake of this business?

(a) Yes

(b) No

34. If yes, from what source?

Source Amount Formal Community Bank Commercial Bank Cooperative bank Informal Relatives/Friends Money lenders Others (specify)

SECTION D

CONSTRAINTS

35. Do you face some constraints in your production?

(a) Yes

(b) No

36. If yes, what are the constraints

(a) Lack of capital

(b) High cost of groundnuts seeds

(c) High cost of transportation

(d) Low quantity of groundnut oil

(e) Unavailability of supply of ground nut s

(f) Absence of market for the groundnut oil

(g) Household consumption

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(h) Storage

(i) Others (specify)………………………..

lxxxiii

APPENDIX II

QUESTIONNAIRE FOR GROUNDNUT OIL MARKETERS IN KADUNA STATE

(Please tick the correct answer(s) and or fill in the blank spaces)

SECTION A

1. LGA……………………………………………………………

A. SOCIO-ECONOMIC CHARACTERISTICS OF RESPONDENTS

2. Age:

(a) <20

(b). 2 1- 30

(c) 31 - 40

(d) 41 - 50

(e) 51 - 60

(f) Above 60

3. Sex:

(a) Male

(b) Female

4. Marital status:

(a) Married

(b) Single

(c) Widow

(d) Divorced

5. Educational Qualification:

(a) No formal education

(b) Koranic school

(c) Adult (literacy

(d) Primary School

(e) Secondary School

(f) Post Secondary

lxxxiv

(g) Others (specify)…………………….

�� Occupation

(a) Farming

(b) Civil service

(c) Business/trading

(d) Others (specify)………………….

�� Family size:

(a) 0-4

(b) 5-9

(c) 10-14

(d) Above 15

8. How long have you been in this business?

(a) < than 5years

(b) 5- 9 years

(c) 10-14 years

(d) 15-19 years

(e) Above 20 years

SECTION B

GENDER ROLE

�� Who sells the groundnut oil?

(a) Old women

(b) Unmarried women

(c) Married women

(d) Men

(e) (1) Girls (2) Boys

(f) All of the above

9. Who does these tasks?

TASKS MALE FEMALE

Bottling

lxxxv

Loading

Off-loading

Others (specify)

�� How is groundnut oil carried to the market?

(a) Wheelbarrow

(b) Head portage

(c) Motor cycle

(d) Vehicle

SECTION C

MARKETING DATA (MARGINS)

11. What is your level of involvement?

(a) Full time

(b) Part time

12. Why are you engaged in this business?

(a) For cash/income

(b) As a hobby

(c) Family use

(d) Others (specify)…………………..

lxxxvi

13. What unit do you use to sell groundnut oil and at what price per month?

UNIT NUMBER(QUANTITY) PRICE Bottle Gallon Jerry can Drum Others specify 14. What unit and quantity of groundnut oil do you buy to sell and what price per

month?

UNIT NUMBER(QUANTITY) PRICE Bottle Gallon Jeri can Drum Others specify

15. At what season of the year do you make the most sale ?...............................

16. Do you hire labour in selling your groundnut oil?

(a) Yes

(b) No

17. If yes, fill the table below

No. of Labour hired Amount per month (N)

18. How much do you buy the following equipments per month?

lxxxvii

Equipments Number(quantity) Cost per unit Useful life(how long each is used)

Bottles

Gallons

Jerry cans

Drums

19. How much do you spend in carrying out the following marketing activities

per month?

(a) Bottling (N ……………..)

(b) Shed (N …………….)

(c) Transportation (N …………..)

(d) Market taxes (N……………)

(e) Food eaten in the market (N ………….)

(f) Others (specify N……………)

20. Do you belong to any cooperative society?

(a) Yes

(b) No.

21. If yes, what are the three most important benefits?

(a)

(b)

(c)

22. Did you borrow money from any source for the sake of this business?

(a) Yes

(b) No

23. If yes, from what source?

SOURCE AMOUNT INTEREST PAID

Formal

lxxxviii

Community Bank

Commercial Bank

Cooperative

Informal

Relatives/Friends

Money lenders

Others (specify)……….

SECTION D

CHANNEL OF DISTRIBUTION

24. What category of seller are you?

(a) Retailer

(b) Wholesaler

(c) Others (specify)

25. Who do you buy groundnut oil from?

(a) Retailer

(b) Wholesaler market

(c) Others (specify)

26. Where do you sell the groundnut oil?

(a) At home

(b) Open market

(c) Export

(d) Others (specify)………………………….

SECTION E

CONSTRAINTS

27. Do you face problems in this business?

(a) Yes

lxxxix

(b) No

28. If yes, indicate below

(a) Lack of capital

(b) High cost of groundnut oil

(c) High cost of transportation (due to rise in fuel price and bad roads)

(d) Unavailability of supply

(e) Absence of market

(f) Pay tax

(g) Household consumption

(h) Storage

(i) High interest on borrowed money

(j) Fluctuation in price of groundnut oil

xc

APPENDIX III

Producer’s Margin (PM)

= Producer’s price – cost of Production x 100 Cost of production 1

= 14,000 – 10,319.58 x 100 10,391.58 1

= 36% Wholesaler’s Margin (WM) = Selling Price – Purchase Price x 100 Purchase Price 1 = 241,000 – (180,000 + 8,000) x 100

18,800 1 = 28% Retailer’s Margin (RM) = Selling price – Buying price x 100 Buying price 1 = 36% Market Margin (MM) = PM + WM + RM = 36 + 28 + 36 = 100%