traditional and modern groundnut … peter maisaje.pdfii traditional and modern groundnut processing...

157
i Digitally Signed by: Content manager’s Name DN : CN = Weabmaster’s name O= University of Nigeria, Nsukka Nwamarah Uche Faculty of Agricultural Department of Agricultural Economics TRADITIONAL AND MODERN GROUNDNUT PROCESSING AND MARKETING IN NORTH CENTRAL NIGERIA ABOKI, PETER MAISAJE PG/Ph.D./06/42156

Upload: letuyen

Post on 19-Jun-2018

238 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

i

Digitally Signed by: Content manager’s Name

DN : CN = Weabmaster’s name

O= University of Nigeria, Nsukka

Nwamarah Uche

Faculty of Agricultural

Department of Agricultural Economics

TRADITIONAL AND MODERN GROUNDNUT

PROCESSING AND MARKETING IN NORTH CENTRAL

NIGERIA

ABOKI, PETER MAISAJE

PG/Ph.D./06/42156

Page 2: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

ii

TRADITIONAL AND MODERN GROUNDNUT PROCESSING

AND MARKETING IN NORTH CENTRAL NIGERIA

BY

ABOKI, PETER MAISAJE

PG/Ph.D./06/42156

DEPARTMENT OF AGRICULTURAL ECONOMICS,

FACULTY OF AGRICULTURE, UNIVERSITY OF NIGERIA,

NSUKKA

Page 3: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

iii

JANUARY, 2015

Page 4: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

i

Title Page

TRADITIONAL AND MODERN GROUNDNUT PROCESSING AND

MARKETING IN NORTH CENTRAL NIGERIA

BY

ABOKI, PETER MAISAJE

B.Agric. Tech-Agricultural Economics and Extension (FUTO), M.Sc. Agricultural

Economics (ABU)

A Ph.D. Thesis Submitted to the

Department of Agricultural Economics,

Faculty of Agriculture, University of Nigeria, Nsukka

In partial Fulfillment of the Requirements for the Award of Doctor of

Philosophy (Ph.D) in Agricultural Economics of University of Nigeria, Nsukka

JANUARY, 2015

Page 5: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

ii

Certification

This is to certify that ABOKI, PETER MAISAJE, a post graduate student of the Department of

Agricultural Economics, Faculty of Agriculture, University of Nigeria, Nsukka, with the

registration number PG/Ph.D./06/42156 has satisfactorily completed the requirement for the

award of degree of Doctor of Philosophy (Ph.D.) in Agricultural Economics (Agricultural

Marketing and Agribusiness Management). The work embodied in this thesis has not been

submitted in part or in full for any other degree or diploma of this or any other University.

..………………………………… …....……….

Aboki, Peter Maisaje Date

(Student)

--------------------------------- ----------------- ------------------------------- ---------------

Prof. S.A.N.D. Chidebelu Date Prof. C.J. Arene Date

(Supervisor) (Supervisor)

---------------------------------- -------------------------

Prof. S.A.N.D. Chidebelu Date

(Head of Department)

Page 6: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

iii

Dedication

To Almighty God for His grace and mercy thus far, and which endure forever; to

the memory of my Father Mr. M R Aboki, and my Mother, Mrs. L. M. Aboki

Page 7: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

iv

Acknowledgement

I am much gratitude to almighty God for His grace and enablement thus far. I express my

gratitude and appreciation to my supervisors, Prof. S.A.N.D. Chidebelu, the Head of department,

and Prof. C.J. Arene for their valuable contributions, prompt attention and encouragement in the

course of this thesis. The various contributions of the followings are highly noted- Prof. E.C.

Okorji, Dr. A. A. Enete (Post graduate seminar co-ordinator), Prof. Noble J. Nweze, Prof. (Mrs)

A.I. Achike, Prof. C.U. Okoye, Dr. F.U. Agbo, other lecturers, and my colleagues, the post

graduate students, Department of Agricultural Economics, University of Nigeria, Nsukka.

My appreciation also goes to Prof. D.O.A. Phillips who gave me the frontier software,

Prof. S. A. Rahaman for the initial backup. To my friends, Dr. T.A.K. Anzaku, Dr. M.M. Ari, Dr.

I. Joshua, and Dr. R. E. Barde for the encouragements. I gratefully appreciate my wife Mrs.

Felicia M. Aboki and my entire family for the support to complete this work; I cannot forget

Henry Ajuzie Dozie a Ph.D. student in the University, for always being available to run my

errands. Thank you all.

Page 8: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

v

ABSTRACT

The study evaluated the traditional and modern groundnut processing and marketing in North

Central Nigeria. The focus was on groundnut oil processing and marketing systems; input use

efficiency in production and factors that made for efficiency; profitability of the processing

activity and factors that determined profitability; examination of value added by processing;

integration of markets for the processed products and problems of the industry. A total of 175

traditional processors were selected and 17 small-Scale modern processors covered from

Nasarawa, Benue and Niger States. Pre-tested, structured questionnaires and observations were

used as instruments of data collection. Types of data collected were those on socio-economic

characteristics of processors, groundnut procurement, processing, and ground nut oil (GNO) and

groundnut cake (GNC) marketing. Weekly price series for GNO and GNC were also collected at

various markets within the region. Data analyses were attained by use of descriptive and

inferential statistics, stochastic frontier analysis (SFA), profit function analysis, t-test statistic and

Johansen test for co-integration. Hypotheses were also tested appropriately. The average age of

traditional processors in North Central Nigeria was 38 years and 41years for modern processors.

Ninety-four percent of the traditional processors were women while 88% of modern processors

were men. Majority of the processors did not participate in co-operative activities. Sixty percent

of groundnut processed by traditional processors came from farmers while 94% of groundnut

processed by modern processors was obtained from traders. The maximum likelihood result for

traditional processors indicated the presence of inefficiency. Raw groundnut variable was

significant at 1% level of significance (LOS) in Nasarawa and Niger States. Fuel-wood and salt

were both significant at 1% LOS in Nasarawa and Benue States. In the inefficiency aspects, age

and years of experience were significant at 1% LOS in all the states. For the zone, labour and salt

were significant at 1% LOS; fuel-wood 5% and raw groundnut 10% LOS. In the inefficiency

aspect for the zone, household size was significant at 5% LOS, while level of education was

significant at 10% level of probability. Raw groundnut and labour were significant in modern

processing, while education and experience at 10% in the inefficiency aspect. Most of the

traditional processors had their efficiency scores above 0.80 and modern processors were from

0.47. In the profit function results for traditional processors, fuel-wood and packaging variables

were significant at 1% LOS. Raw groundnut, procurement and maintenance were significant at

1% in modern processing. Value added was 41% for traditional processors and 44% for modern

processors. There was significant difference in the value of groundnut before and value after

processing. The Johansen trace test result indicated five co-integration vectors at 5% level of

probability for GNO and two co-integration equations for GNC. The markets for GNO and GNC

were not fully integrated. Administrative regulations affected market integration for GNO which

was significant at 5% LOS. Constraints identified included inadequate finance, inadequate

electricity, machine breakdown and transportation. Recommendations made included improved

packaging, finance, electricity supply and co-operative education.

Page 9: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

vi

TABLE OF CONTENTS

Content Page

Cover page

Title page i

Certification ii

Dedication iii

Acknowledgement iv

Abstract v

Table of contents vi

List of tables x

List of figures xii

CHAPTER ONE: INTRODUCTION

1.1 Background of the study 1

1.2 Statement of the problem 6

1.3 Objectives of the study 9

1.4 Hypotheses 10

1.5 Justification 10

1.6 Limitation of the Study 12

CHAPTER TWO: LITERATURE REVIEW

2.1 Groundnut Processing Technologies and Systems 13

2.1.1 The traditional and modern methods of groundnut oil extraction in Nigeria 15

2.1.2 Capital ownership and organizational structures of agricultural processing 17

2.2 Marketing of Finished Products 18

2.2.1 Marketing strategies for agro-industrial products 21

2.2.2 Market demand for agro-industrial products 22

Page 10: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

vii

2.3 Profitability Measures and Value addition 24

2.3.1 Profitability analysis 26

2.3.2 The value adding process in agriculture 27

2.4 Input Use and Efficiency 29

2.4.1 Efficiency measurement 30

2.5 Market Integration 34

2.5.1 Market integration and the law of one price (LOP) 35

2.5.1.1 Stochastic Process and the Unit Root Problem 36

2.5.1.2 Co-integration 38

2.5.1.3 Co-integration and Error correction Mechanism (ECM) 39

2.5.1.4 The Johansen Trace test 39

2.6 Problems of Agricultural Processing Industry 40

2.7Theoretical Framework 41

2.7.1 Value chain in Agricultural Processing and marketing 44

2.8 Analytical Framework 47

2.8.1 Stochastic frontier production function 47

2.8.2 Profitability analysis 51

2.8.3 Measurement of co-integration and the law of one price (LOP) 52

2.8.3.1 The unit root problem 53

2.8.3.2 Unit root test 54

2.8.3.3 Co-integration: The Johansen test 56

2.8.3.4 Determinants of co-integration 58

CHAPTER THREE: METHODOLOGY

3.1 Study area 59

3.2 Sampling technique 60

3.3 Data collection 61

3.4 Data Analysis 62

Page 11: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

viii

3.4.1. Stochastic Frontier Model 62

3.4.2 Profit Function Analysis 65

3.4.3 Value addition model 66

3.4.3 Johansen trace test 67

3.4.3.1Determinants of co-integration 67

CHAPTER FOUR: RESULTS AND DISCUSSION

4.1 Socio-economic Characteristics of Small-scale traditional and modern Groundnut

Processors in Northern Central Nigeria 69

4.1.1 Age distribution of groundnut oil processors 69

4.1.2 Gender distribution of the processors 70

4.1.3 Marital status 71

4.1.4 Household size 71

4.1.5 Educational level of processors 72

4.1.6 Cooperative participation 72

4.1.7 Years of experience 73

4.2 Groundnut Oil Production, Marketing, and the Value Chain in the Study Area 75

4.2.1 Procurement 77

4.2.2Traditional groundnut oil production method 79

4.2.3 Modern groundnut oil production method 80

4.2.4 Marketing 82

4.3. Input Use Efficiency in Traditional and Modern Groundnut Oil Production in North

Central Nigeria 86

4.3.1Technical efficiency estimates for groundnut oil producers in North Central Nigeria 89

4. 4. The Profitability Analysis of Traditional and Small-scale Modern Processing and

Marketing of GNO and GNC 94

4.4.1 Gross margin results of groundnut processing 94

4.4.2 Determinants of profitability of groundnut processing in North Central Nigeria 97

4.5 Value Added by Processing Groundnut into GNC and GNC 100

Page 12: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

ix

4.5.1Test of significance of value added 102

4.6 Level of Integration of Markets Groundnut oil (GNO) and Groundnut cake (GNC) 103

4.6.1 Result of the unit root test 104

4.6.2 Result of the Johansen test for co-integration 105

4.6.3 Determinants of market integration 107

4. 7 Constraints Facing the Groundnut Processing Industry 109

4.7.1 Identified constraints 109

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary 113

5.2 Conclusion 118

5.3 Recommendations 119

5.4 Addition to knowledge 120

5.5 Areas needing further research 121

REFERENCES 123

APPENDIX A 131

APPENDIX B 141

LIST OF TABLES

Page 13: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

x

Table Page

1.1 Categories of Agro-processing by level of transformation of raw materials 3

1.2. Top ten world producers of peanuts - 2008/2009 5

3.1: Population and sample selection for the study 61

4.1 Socio-economic characteristics of traditional small-scale modern processors in North

Central Nigeria 73

4.2 Statistical summary of selected activities of traditional and small-scale modern GNO

processors in North Central Nigeria 77

4.3 Marketing activities of processors in the States and North Central Nigeria 84

4.4 Generalized log likelihood-ratio tests of the complete technical efficiency of

groundnut oil processors in North Central Nigeria 86

4.5 Maximum likelihood estimates (MLE) of the stochastic frontier production

(processing) function for traditional GNO processors in Nasarawa and Benue States 90

4.6 Maximum likelihood estimates (MLE) of the stochastic frontier production

(processing) function for GNO processing in Niger state and North Central Nigeria 91

4.7 Maximum likelihood estimation (MLE) of the stochastic frontier production

(processing) function for modern GNO processors in North Central Nigeria 92

4.8 Distribution of technical efficiency estimates for traditional (small – scale) and modern

GNO processors in the states and the North Central 93

4.9 Gross Margin for Traditional and modern GNO processing the States and the Region 95

4.10 Regression results of the determinants of profitability of traditional GNO processing in

Nasrawa, Benue and Niger states 98

Page 14: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

xi

4.11 Regression results of the profit function of determinants of profitability of traditional

and small-Scale modern GNO processing in North Central Nigeria 99

4.12 Value added by processing groundnut into oil and cake in North Central Nigeria 100

4.13 Result of test of differences in value of groundnut seed before and after processing 102

4.14 Augmented Dickey -Fuller (ADF) Unit root test for price series at level and at first

difference 103

4.15 Result of the multivariate Johansen test for Co-integration for GNO price series 105

4.16 Result of the multivariate Johansen test for Co-integration for GNC price series 105

4.17 Result of factors that determine the level of integration of groundnut oil markets in

North Central Nigeria 107

4.18 Result of factors that determine the level of integration of groundnut cake market in

North Central Nigeria 107

4.19 Constraints to groundnut oil processing in the selected states in North Central Zone 111

Page 15: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

xii

LIST OF FIGURES

Figure Page

1.1 Peanut (Arachis hypogea) plant 4

2.1 Illustration of production efficiency 33

2.2: The generic value chain of Michael E Porter 44

2.3 Flow chart of Agro-processing value chain 46

4.1 The Groundnut oil processing chain in North Central Nigeria 75

Page 16: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

xiii

Page 17: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

1

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Processing, storage and marketing of agricultural produce have become increasingly

important to the economies of most developing countries, as they have been to industrialized

nations at various stages of their development. Due to technical progress, marketable surpluses

from agricultural production have grown significantly; while rapid growth in urban populations

and rising per capita incomes have enlarged and diversified the demand for processed

agricultural products, whether food or raw materials for industries. Perhaps Processing is one of

the most important physical functions of agricultural marketing. Olayide & Heady (1982) opined

that processing was an important component of agribusiness development, because a large

portion of farm production underwent some degree of change between harvesting and final use.

More so agro-processing is capable of strongly shaping farm production decisions. It enables

quality enhancement, preservation and differentiation of farm production thereby enhancing its

marketability. It has also been noted that Agricultural processing activities are small-scale and

require low investment capital, hence can easily be undertaken by women (Fellows & Hampton,

1997; RMRDC, 2004; Kadurumba, Kadurumba & Umeh, 2009; FAO, 2011).

Farm products’ processing play a significant role in the economies of developing

countries, where it accounts for between 51% and 60% of value added by manufacturing and

between 60% and 70% of total industrial development. Over half of the manufacturing activities

in the developing countries of the world consist of agro-industries preserving and transforming

agricultural raw materials (Olayide & Heady, 1982; Brown, 1986). FAO (2012) observed that

Page 18: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

2

increased urbanization, distance between home and work-place, working women and changes in

family cohesion has increased demand for shelf-stable, convenience and value added food.

Agricultural processing facilities have a strong impact of stimulating consumer demands

backward to the farm sector, to keep pace with demand for raw materials supply for processing.

Based on farm products, agricultural processing schemes can be sited in areas where other

industries will not be viable, as they are more intensive users of domestic rather than imported

raw materials due to their local availability (Brown, 1986; Austin, 1992; Brown, Deloitte &

Touche, 1994). More importantly, the gains of increased agricultural production through

technical progress will be lost if it is not consolidated through the development of economically

viable processing sector. So also the skills developed through planning and implementation of

agricultural processing and preservation will strengthen stakeholders’ entrepreneurial attributes,

thereby enhancing their economic empowerment (FAO, 2011). As a means of mitigating

problem of food shortage, FAO (2012) among other issues emphasized adding value or

improving the food agro- processing for consumption and the market.

An efficient marketing system connects producers and consumers, directs efficient

allocation of resources in production and distribution of output, while ensuring maximum

economic benefits to participants. Conceptually, agricultural processing which is a segment in

agricultural marketing, involves the transformation of raw materials to the forms required by the

consumer or for the next stage in a manufacturing and distribution chain (Olukosi & Isitor, 1990;

Boland, 2009).This entails transforming and preserving agricultural output, through physical

and/ or chemical alteration. FAO (2011) defined food processing and preservation as a set of

physical, chemical and biological processes that are performed to prolong shelf-life of foods, and

at the same time retain the features that determine the quality, such as colour, texture, flavour

Page 19: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

3

and especially its nutritional value. Austin (1992) also viewed agricultural processing industry as

any enterprise that is involved in the processing of materials of plant or animal origin, which he

also described as agro-industry. In the World Bank development activities, the term “agro-

industry” covered agro-industrial processes such as grain milling, fruit and vegetable canning, oil

seeds crushing, and meat packaging as well as the function of marketing(Brown,1986). Hence it

was touted that starting a small rice mill or an oil press marked an early stage in the first steps on

the road to industrialization. The nature of processing and level of transformation can vary

tremendously ranging from cleaning, grading and boxing fruits and milling to oil extraction,

mixing and chemical alteration(Austin,1992), (Table 1.1).

Table 1.1: Categories of Agro-processing by level of transformation of raw materials

Level Activities Illustrative Product

L1 Cleaning, grading, storage Fresh fruits, eggs, fresh vegetables.

L2 Ginning, milling, cutting, mixing Cereals (grains), meat, spices, animal

feeds, jute, cotton, rubber, lumber and

flour

L3 Cooking, pasteurization, dehydration Dairy products, canned or frozen fruits,

refined vegetable oils, furniture, sugar

and beverages.

L4 Chemical alteration and texturization Instant foods, texture vegetable,

Products, tires

Source: Adapted from Austin (1992)

Groundnut (Arachis hypogea) is known to the Hausas as ‘Gyadda’, to the Ibos as

‘Opapa’, the Yorubas as ‘Epa,’ the Americans as peanuts, and the French as arachides. It is a

Page 20: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

4

leguminous crop grown all over the world as an important oil seed crop native to South America.

Groundnut is thought to have been introduced to West Africa early in the slave trade by the

Portuguese, mainly to supplement the diet of slaves in transit. Its spread into the interior of West

Africa was rapid in the eighteenth century. By 1850s it was common in parts of Hausa land of

Nigeria and thought to be as important as potatoes in Europe by a British traveler (Hogendorn,

1978). Groundnut is a short herbaceous annual crop that produces its pods inside the soil, (figure

1.1).

Plate 1.1 : Peanut (Arachis hypogea) plant

Source : Wikipedia (2010)

Historically, the Sudan and northern guinea savanna of Nigeria have been the high

producing zones. However, the development of several varieties by the Institute for Agricultural

Research (IAR), Ahmadu Bello University, Zaria, has led to even higher output in the southern

Page 21: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

5

guinea savannah zone, covering the North Central States of Nigeria (RMRDC, 2004). Nigeria

was third among the world ten highest producers of groundnut with 3, 835,600 tonnes

(unshelled) after China and India in 2007/2008 output year (USDA, 2010), but now fourth with

1.55million metric tonnes (shelled) in the 2008/2009 output season (USDA, 2010), ( Table 1. 2).

Table 1. 2: Top ten world producers of peanuts - 2008/2009

Country

Production (Million Metric Tonnes)

People's Republic of China

14.30

India 6.25

United States 2.34

Nigeria 1.55

Indonesia 1.25

Myanmar 1.00

Sudan 0.85

Senegal 0.71

Argentina 0.58

Vietnam 0.50

World 34.43

Source: USDA Foreign Agricultural Service( 2010)

A mature groundnut pod contains 2-4 kernels (nuts) per pod depending on the variety and

is traded decorticated and unshelled. In Nigeria, it is eaten as whole nut, raw, boiled or roasted

and also crushed to get the oil and the cake. The oil is known as groundnut oil (GNO) and the

residue known as groundnut cake (GNC). Groundnut is rated the third major oil seed of the

world after soya bean and cotton (USDA, 2010). Groundnut oil is used for cooking, as salad oil,

for canning sardines, and margarine manufacturing (Sharma & Caralli, 2004).The residue after

oil extraction is a source of protein for animal feed. In traditional oil extraction method, this

residue is fried into a local delicacy known as groundnut cake (GNC) or ‘kulikuli’in Hausa. This

Page 22: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

6

is ground and consumed in composite with several local dishes. Elsewhere, groundnut is

processed into peanut butter, peanut flour, peanut flakes and many other products.

Bulk export of groundnuts from Nigeria started to decline in the 1960s in favour of local

crushing by mills in and around Kano and else-where. In 1973/74 cropping season, only 35% of

the 559,000 metric tonnes purchased by the marketing board was exported. By 1973/74 also a

policy decision to discontinue export of groundnuts entirely was put in place to allow for local

processing. Any export of groundnut after then was in form of groundnut oil (GNO) or cake

(GNC) (Hogendorn, 1978).

The petroleum oil boom and its consequence upon the agricultural sector saw Nigeria

importing groundnut oil. In 1980, about 200,000 tonnes of groundnut products were imported in

form of vegetable oil. The 1.95million tonnes output in 1974 dropped to 0.4million tonnes in

1983. Consequently many groundnut processing mills had to close down because of

unavailability of the raw material (RMRDC, 2004). However, with the abolition of organized

marketing of agricultural products in 1986, the processing and marketing of groundnuts and its

products have been left to the private sector (Ingawa, 2004). A survey by RMRDC (2004)

showed groundnut output to be 1.98million tonnes for 2003, with greater portion coming from

Bauchi and Nasarawa States with 72,000 tonnes and 70,420 tonnes, respectively, and higher

estimates for 2004. The rain fed output for Nasarawa State in 2008 was put at 92,450 metric

tonnes (NADP, 2009). The soaring demand for groundnut oil in manufacturing and domestic

need has kept the pressure on the groundnut crushing industry.

1.2 Statement of the Problem

Agricultural development policies and programmes have tended to lay emphasis on

improving farm productivity, but with less attention on the processing and storage of the

Page 23: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

7

resultant output. For instance, 95% of funding of the Consultative Group on International

Agricultural Research (CGIAR) in about 20 to 30 years was devoted to production related

research activities (Ferris, 1999). Agricultural credit disbursement in Nigeria has also been in

favour of crop production with grain alone taking 67% (CBN, 1998). Consequently, the gains of

increased agricultural productivity will not be fully realized if not sustained through the

development of a viable processing and marketing sector to support the technical progress

attained in production. Market forces have instigated greater opportunities for product

differentiation and value addition in some respects (Boland, 2009). These include i) increased

consumer demand regarding health, nutrition, and convenience food; ii) efforts by food

processors to improve their productivity; and iii) technological advances that enable producers to

produce what consumers and processors/manufacturers desire. Importantly, improvement of

efficiency in the value chain fosters more equitable, transparent and sustainable distribution of

benefits to the various stakeholders (FAO, 2011)

Local processing of groundnut and other sources of oil have still not met the domestic

demand for vegetable oil. This is shown in the importation of vegetable oil to supplement local

production, with its attendant drain on foreign exchange. The short fall in demand has been

estimated at between 300,000 tonnes and 400,000 tonnes per annum. Hence the Presidential

Initiative on Vegetable Oil was put in place, to obtain three million tonnes of vegetable oil per

annum from five million tonnes of groundnut and to start exportation by the year 2010 (Ojowu,

2004). Consequent upon the above, the challenge of achieving this target was on the groundnut

processing industry. Hence this study focused on critical areas in groundnut processing and

products marketing chain for appropriate intervention measures to achieve efficiency and

increase products availability.

Page 24: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

8

In agricultural processing schemes as in production, several inputs are involved. Raw

material that is the farm produce can constitute 90% of the entire inputs needed depending on the

level of processing (Austin, 1992). The efficiencies involved in transforming inputs into desired

output need be known (Olayide & Heady, 1982). One of the problems responsible for poor

performance of developing countries especially in sub- Sahara Africa in international trade is

attributed to low value addition. Consequently, products do not meet international standards, and

do not compete favourably in the international trade. Optimization of groundnut oil (GNO) and

groundnut cake) GNC processing and marketing, is therefore an ultimate desire.

It is also understood from the foregoing that there are information and product gaps in the

value chain with respect to groundnut oil, all pointing to inefficiency along the value chain. Most

technical and economic efficiency studies have concentrated on primary production of crops and

livestock with few on processing, for example Okoh, (1999) worked on cassava roots and its

processed products. Kadurumba, Kadurumba & Umeh, (2009) also worked on allocative

efficiency of traditional palm oil processing in Imo State. Analysis of technical and economic

efficiency data from processing through marketing, with its positive effects in the chain, and

integration of markets for processed products is crucial, but unavailable. Consequently, this

research has addressed the inefficiencies in the value chain, as depicted in capacity under

utilization of plants, poor quality products, low quantity of output from given level of raw

material, inadequate price and output information, unattractive profit incentives, and income

fluctuations.

It has been established that initiating activities from the market - end of the commodity

value chain, using improvements in processing and market expansion to provide “demand pull”

that benefits raw material producers, especially small- holder farmers, is necessary for

Page 25: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

9

sustainable agricultural development (Ojowu, 2006). A survey by RMRDC (2004) revealed

Nigerian’s groundnut output of 1.976million tonnes. With the entire crop consumed in Nigeria,

examining the performance of the processing segment and hence the downstream segment of

groundnut industry will improve efficiency in operations for processors, and entire value chain.

The synchronous movement over time among prices in different markets has become an

important index of efficiency in the markets. For a market system, domestic or foreign, efficient

performances of its developmental functions depend on the ease with which price changes and

responses are transmitted spatially and temporally within the system. Market integration modeled

within the framework of the spatial price equilibrium (SPE) model of inter market linkages in the

point space tradition, that is subject to production shocks and general price information is crucial

for attainment of efficiency of the markets. The poor infrastructural development in developing

countries as Nigeria leaves lots of doubts in the attainment of integration of the markets for agro-

industrial products, such as groundnut oil and groundnut cake and hence the much desired

efficiency in their marketing systems. Acquah & Owusu (2012) suggested further investigation

into influence of external factors such as market infrastructure, government policy and self

sufficient production, product characteristics and utilization towards market integration.

1.3 Objectives of the Study.

The broad objective of the study was to examine the performance of traditional and

modern groundnut processing and marketing in North Central Nigeria. The specific objectives

were to:

(i) examine the socio- economic characteristics of traditional and modern groundnut oil

processors;

Page 26: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

10

(ii) describe the traditional and modern groundnut oil processing and marketing systems in

the area and hence the processing value chain;

(iii) examine the technical efficiency in traditional and modern groundnut oil production and

identify the factors that determine efficiency;

(iv) estimate the profitability of groundnut oil (GNO) processing and identify the factors that

make for their profit;

(v) examine value added by processing groundnut into GNO and GNC in the area;

(vi) estimate the level of integration of GNO and GNC markets and identify the factors that

influence their integration; and

(vii) examine the problems of groundnut oil processing and marketing.

1.4 Hypotheses

The null hypotheses tested were:

H01: Groundnut processing into GNO and GNC is not efficient;

H02: Variable input and output prices of GNO and GNC do not affect their variable profit;

H03: There is no significant difference in value of groundnut before and after processing; and

H04: Markets for GNO and GNC are not integrated.

1.5 Justification of the Study

Positive net returns in any business is an incentive to continue the business. The

continuity of investment in crop processing will largely depend on its profitability. Ojowu (2006)

noted that “demand- pull” and profit incentive make the changes achieved in developing

agricultural processing sustainable. More so that participants in groundnut processing are the low

income group who depend largely on what is generated for their sustenance. Therefore the

Page 27: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

11

findings of this study will be of immense importance to the participants in the attainment of their

business goal.

This study will particularly benefit groundnut processors in increasing the value (quality

and quantity) of products at lower cost and hence increase their income. For the marketing

agencies, efficiency in the marketing system will increase their returns and lower cost to

consumers and manufacturers that use the products as raw materials. Households will be able to

acquire GNO and GNC at lower cost for domestic needs. On the whole, the entire value chain

from raw material supply (groundnut farmers) through traders to consumers and manufacturers

(Bakers, confectioneries, margarine manufacturers, etc) will be improved.

An inverse relationship between increased mechanization of crop processing and women

participation was observed by Bruinsma (1999); and that some technologies targeted at

alleviating poverty among women did not actually benefit them. The findings of this study will

provide technology related information for purpose of intervention and development of

appropriate technologies to alleviate poverty among the rural poor, particularly in the study area

where religion and other cultural values restrict women from some outdoor income generating

activities. It is understood that spatial market integration ensures that a regional balance is

attained among food-deficit, food-surplus and non-food producing areas through effective

transmission of price signals (Chirwa, 2000).

The findings of this study will set the pace for further research into the groundnut

industry. It will also generally provide base-line information to the private sector, government

agencies and the non- governmental organizations (NGOs) in their businesses and development

activities which will also increase the supply of GNO needed for both domestic and industrial

purposes.

Page 28: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

12

1.6 Limitations of the Study

The major limitations in this study were those inherent in social and economic research.

Foremost of which was poor record keeping especially among the traditional processors, with

consequent dependency on memory recall for processing and marketing activities with inherent

unreliability. Probing and leading questions were however used during data collection to assist

respondents affirm their responses. Secondly, the study had to contend with the mood and the

on-going activities of the processors during data collection. Because processors could not just

stop their processing work or selling products to respond to questions, it was difficult getting

them to do that. To enhance the quality of information collected, interviews and observations

were used during data collection. This however extended data collection period with its attendant

cost.

This study covered only groundnut oil processors in the selected states. Only those

actively involved in the groundnut oil processing and products marketing activities comprised

the elements in the study, hence other groundnut products were not covered.

Page 29: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

13

CHAPTER TWO

LITERATURE REVIEW

2.1 Groundnut Processing Technologies and Systems

Technology is seen as the body of know-how about materials, techniques of production,

and operation of equipment based on the application of scientific knowledge (Black,

2002).Modern technology enables the achievement of objectives at a faster rate. Therefore, a

sound understanding of current technology, their technical, social and economic environment, is

necessary to promote processing enterprises (Bruinsma, 1999). Every technology must be

assessed to determine its adaptability and attendant social, economic and environmental

consequence. Arene, Nwagbo & Okoye (2004) stressed that an existing technology can be

assessed to determine the extent it contributes to satisfying basic human needs; its promotion of

self reliance through the use of local human and material resources; and how it affects social and

cultural structures, norms and attitudes of the society.

Technology selection is often the most crucial decision in designing and undertaking an

agricultural processing project (Austin, 1992). Consequent upon that, Austin (1992) noted that

before choosing an agro-processing technology, the market requirement, technical processing

requirement, cost and availability of labour, capital, energy, raw materials, capacity utilization,

skill capabilities and nutritional consequence must be taken into account. It has been observed

that most technologies for food processing are technology driven rather than product or market

driven hence have had problems of adaptation (Bruinsma and Nont, 1991; Connry et al, 1995;

and Zommers, 1995). In agricultural processing, Orji (2008) suggested a vibrant linkage among

processors, industrial users of products and agro- equipment manufacturers. This will enable the

Page 30: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

14

fabrication of appropriate machines for agro- processing activities and optimization of the

processing segment in the commodity chain.

Bruinsma (1999) compiled technology selection guidelines from Fellows and Hampton

(1997) as follows; (i) technological effectiveness (whether the equipment will do the job required

at the intended scale of production); (ii) relative cost of the equipment and its maintenance; (iii)

operating cost and overall profitability; (iv) conformity with existing administrative and

production conditions; (v) conformity with the existing supplies of raw material and the

marketing opportunities; (vi) social effects, such as displacement of the work force; (vii) training

and skill levels required for equipment operation, maintenance and repair; (Viii) health and

safety features and environmental impact; (ix) flexibility to perform more than one function; and

(x) compatibility with other parts of a process and stages in the food chain.

In groundnut oil extraction, the basic principle is the same worldwide. These are: (i) pre-

treatment, which involves cleaning, scorching and crushing the groundnut; and (ii) extraction,

which is the separation of the raw material into oil and residue (cake) (Sharma & Carilli, 1999;

RMRDC, 2004). The cells of groundnut embryo contain oil in an extremely fine emulsion

(Woodroof & Leahy, 1940). When nuts or kernels are broken or bruised, a sufficient number of

cells are injured, hence cause tiny drops of free oil to ooze out and collect on the surface (Asiedu,

1989). In Nigeria and elsewhere, oil extraction from groundnut kernel is done by mechanical

pressing or by use of solvent (RMRDC, 2004; Asiedu, 1989). Solvent extraction is capable of

bringing out nearly all the oil from the groundnut material, a high yield of oil of better quality

and high protein meal (Khan & Hanna, 1983). In the mechanical extraction, the efficiency of oil

expression rarely exceeds 90% but it has the advantage of yielding end-products free of

dissolved chemicals, and is safer and less expensive to undertake (Asiedu, 1989). The residue,

Page 31: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

15

the groundnut cake is further fried dry and is used for human consumption popularly known as

‘kulikuli’ in Hausa dialect of Northern Nigeria (RMRDC, 2004).

In Nigeria and West Africa, mechanical and other methods of extraction co-exist. They

all follow the sequence thus: (i) shelling/decortications and drying of groundnut kernels; (ii)

roasting/scorching, the process where the kernels are fried to enable quick polishing and easier

oil extraction; (iii) polishing, which is the removal of the redskin or testa from the groundnut

kernel; (iv) grinding/crushing or pasting, a process that turns the roasted polished and cleaned

groundnut seeds into paste; (v) oil extraction, a process which removes the oil from the

groundnut paste by means of some mechanical effort or solvent and; (vi) refining and quality

control(Asiedu, 1989).

2.1.1 The traditional and modern methods of groundnut oil extraction in Nigeria

In the traditional method, groundnut is shelled, cleaned and roasted lightly. Next, the testa or

redskins are removed by rubbing kernels against each other by hand. The de-skinned kernels are

pounded with mortar and pestle or ground with stones. The hammer mills used to mill grains in

the villages is also used to mill the groundnut kernel in some of the communities. The oil-rich

paste is kneaded and pressed by hand or with pestle and mortar to extract the oil. Small quantity

of warm water is usually added following each pressing operation until as much of the oil-water

mixture as possible has been extracted. The oil-water mixture is fried or ‘fire dried’ over a low

fire to remove the water. Lastly, the oil is decanted into bottles or cans, for home use or the

market. Alternatively, the paste is boiled and the oil rising to the surface is skimmed off. This

may continue until no sign of oil is seen. The traditional method has low oil extraction rate, but

the resulting press cake is used for human consumption (Asiedu, 1989; RMRDC, 2004;

NAERLS, 2006).

Page 32: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

16

The modern methods used are the expeller methods and solvent extraction process. For

the expeller pressing method, the pre-treated, crushed groundnut is continuously fed into the

expeller, consisting of a screw which rotates within a sturdily built cylinder. The groundnut mass

is fed from the top larger end of the expeller chamber and pressure exerted as the screw turns

forcing the mass towards the discharge end. Friction and pressure cause the mass to heat, which

facilitates oil extraction. The groundnut oil passes through the perforated screen walls and is

collected beneath the expeller chamber, while the press cake is extruded from the discharge end.

The resulting press cake contains 5% oil and can be made into ‘kulikuli’.

The solvent extraction of groundnut oil is similar to solvent extraction of soya bean oil.

Groundnut destined for oil is not fried, but the red skin is removed. Next, the nuts are cracked

into pieces and conditioned to 10-11 percent moisture content at 70oc or more, and then flaked

by passing through rolls. Sometimes the flakes are cooked before being conveyed into the

extractor. In the extractor, the oil is removed by means of a solvent. The solvent laden flakes

are then passed through a desolvenizer which recovers the solvent. The defatted and de-

solvenized cake may undergo further treatment before it is used as feed. The crude oil is

clarified by passing it through a filter press. After which it may be dehydrated and sent for

refining. Solvent used in oil extractor include ethanol and hexane (Asiedu, 1989; RMRDC,

2004).

This process is basically the same for most vegetable oils. It can also be applied to oil

extracted using hydraulic press or screw expeller. Refining consists of alkali refining which

neutralizes the free fatty acids using sodium hydroxide (NaOH), bleaching to improve flavor

stability using natural bleaching earth, and deodorizing to remove odour using steam distillation

under vacuum. If GNO is to be used as salad oil, it undergoes a process of winterization prior to

Page 33: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

17

deodorization. The alkaline refined and bleached oil, if necessary, is hydrogenated to an iodine

value of about 105 before it is winterized to remove fats that crystallize out at about 0oC (Asiedu,

1989).

2.1.2 Capital ownership and organizational structures of agricultural processing

Capital has been viewed by Erikson, Akridge, Bernard & Downey (2002) as financial

resources of a business, comprising in the broadest sense, all assets of the business and

representing both owned and borrowed funds. Black (2002) sees capital as man- made means of

production. It is any good that is designed for production of other goods and services, example

machinery. These include financial assets which will be used to provide income. Olayide &

Heady (1982) explained that capital resources came into agricultural production in form of farm

machinery, as tractors, harvesters, tools and equipment for threshing, shelling, grinding, milking;

biological capital, in form of fertilizers, herbicides, insecticides, and certified seeds; and also in

form of livestock feeds, feed mixes and additives, drugs and improved breeds.

In agricultural processing, capital items will include the raw materials (farm produce),

processing machines and equipment, packaging items, additives, and money capital among

others required for running of the outfit (Brown, 1986; Austin, 1992). Capital in form of

machines, tools and equipment are of critical importance to an agricultural processing activity.

Many processors have encountered problems of capacity under-utilization due to improper

estimation of working capital needs, such that they are not able to acquire adequate raw materials

during harvest, hence leaving the plant short of raw materials for the processing activity.

Consequently, enterprise development and the secondary processing sector have sometimes

failed because the approach taken was technology driven, rather than market oriented (Bruinsma,

Page 34: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

18

1999). Therefore, decision to purchase a machine must be based on market demand for the

products to be processed (Austin, 1992).

Technologies for food processing are normally small-scale as they are accessible and

affordable (Clarke, 1987). They can be sited near raw material or where other industries cannot

be located, as was the case with small-scale rice processing in Java (FAO, 1982). In small-scale

agricultural processing in sub-Sahara Africa (SSA), most machines and equipment operate on

contract providing services to owners of the crops or farm output (Clarke, 1987; Bruinsma,

1999). This was shown in cassava processing in Benue State, Nigeria. Aboki & Saingbe (2007)

also reported that all the small-scale rice hulling machines in Lafia, Nasarawa State, operated as

contract mills, providing milling services to paddy owners on hire.

Bruisma (1999) compiled the various forms of organization and ownership arrangement

for processing equipment as follows:

i the village cooperative or interest group can own and run the processing plant and pay a salary

to the machine operator(s) and labourers;

ii. the village cooperative or interest group leases equipment from a local workshop with

sufficient experience in equipment manufacture and maintenance;

iii. a private enterprise functions as a service mill and processes small batches for individual

families, or larger batches on contract for the village cooperative or individual business persons;

and, (iv) a private processing enterprise operating on a fully commercial basis where it buys raw

materials from the village and the surrounding area for further processing.

2.2 Marketing of Finished Products

One of the challenges of agricultural processing industry is the identification of the target

markets for the products. This can be based on consumer needs, market segmentation and buying

Page 35: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

19

pattern (Austin, 1992). For processed foods, which form bulk of the agro-industrial products,

consumers’ needs are expressed in preference for products’ taste, smell, colour, texture,

appearance and convenience for users, and, most importantly, nutritional requirement (Austin,

1992; Brown et al, 1994). For other agro-industrial products such as cotton, jute and wood,

whose consumers are industrial users; the emphasis is on price and physical quality (Austin,

1992).

Products are purchased based on the various segments of the markets. These may include

geographical location of consumers which reveals ethnic or regional taste, or other socio –

cultural attributes of the consumers. Income levels of consumers are also strong determinants of

purchases hence an important segment. Also, effective demand and food preferences change as

income levels rise, which also reflect product pricing and product characteristics (Gould &

Villarreal, 2006; Abdullai & Aubert, 2004). For instance, packaging of products is made in

various sizes to cater for the low and high income consumers (Austin, 1992; Ganewatta,

Waschik, Jayasuriya & Edwards, 2005).

Another market for agro – industrial products is the export market. This market requires

high quality products with good packaging. There is increasing difficulty in export of agro –

industrial products to other countries because of increasing protection of domestic agro-

industries in the traditional export markets (Brown, 1986 and Austin, 1992). Access to such

markets may require a thorough knowledge of regulations and trade structure, changes in

packaging or distributional channel, or even new product development (Brown, 1986).

Domestic markets appear to offer growing opportunities for agro-industrial products for

both product diversification and import substitution. With increasing income and status, demand

for high value products is on the rise (Gould & Villarreal, 2006 and Brown et al, 1994). Agro-

Page 36: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

20

industrial product user type such as industrial consumers, institutional consumers, wholesale and

retail businessmen, and end consumers need to be considered. Product type- necessities, status

items, convenience goods or specialty products, health foods, food away from home (FAH)

require attention (Austin, 1992; Gould & Villarreal, 2006). In India, 50% of the value of

agricultural production is now high value, but in Africa it is only 5% (Morris, 1994). The buying

process of agro-industrial products can also be examined based on who decides the purchase of

the product, how they decide, and where to make the purchase (Austin, 1992; Fousekis &

Lazaradis 2005). Market information helps in marketing decision for agro – products to be taken

adequately. Potential buyers, producers and marketers can be identified; while location and

prices of products can be revealed via market information research. Costs can be tremendously

reduced if reliable information on a product is available to the producer, marketer or even the

consumer (Austin, 1992).

The market place is normally crowded with agro- industrial firms and products,

especially in developed countries, each aiming at controlling or accessing the market, hence the

competitive environment. The five sources of competition of Michael Porter- rivals, potential

entrants, substitutes, suppliers and buyers- need be considered in marketing process of agro-

industrial products (Austin, 1992). Agro-industries present a typical representation of

monopolistic competition with several firms. Market place will be explored by providing buyers

with greater values, which are attainable through cost advantage or product differentiation

(Bruinsma, 1999). Cost advantage allows more effective price competition and product

differentiation enables more effective quality competition, so that the price-quality interplay

yields the ultimate consumer value. In the USA, major meat packers reduced transportation and

labor costs by relocating to rural livestock production areas. Differentiation of product can be in

Page 37: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

21

form of, for instance, vegetable oil, with varying oleic acid, distinct flavor and special consumer

preferences (Sharma & Carralli, 2002). Packaging is also a differentiating factor. South

American banana companies’ use of cartons created value for distribution and retailers through

more efficient handling, quality control and branding. There is a difference between intrinsic and

perceived quality of products. Brand and image creation is a strategy for perceived quality

competition, but packaging, product content and services are means of intrinsic quality

differentiation; value is therefore in the eyes of the buyer (Austin, 1992).

2.2.1 Marketing strategies for agro-industrial products

The basic consideration in product marketing includes design, pricing, promotion and

distribution referred to as the marketing mix. Several design options are acceptable for agro –

industrial products. These include taste, texture, cooking ease, colour, odour, nutritive value,

convenience, size and packaging. For furniture, leather or wood products, consideration will

include durability and fashion (Austin, 1992). In Nigeria the iodization of salt and fortification of

vegetable oil, and sugar with vitamins is an example. Cost of product designs and final price of

the product must be evaluated to avoid prohibitive cost. Demand and supply forces in the

markets set prices for most agro – industrial commodities. Internationally, most developing

countries are price takers, while the exporting countries set the prices (Austin, 1992). For locally

processed products, pricing vary from market to market within regions and between regions,

attributable to such imperfections as lack of information, poor infrastructure and so on (Damisa

& Rahaman, 2004).

Sales promotion creates awareness and stimulates demand for products in a consumer. A

superior product will not reach its sales potential unless consumers are aware of its advantages.

In the USA food processors spend about 3% of their revenue on advertising, which amounts to

Page 38: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

22

about 1.5 percent of consumers’ at home food expenditure (Kolhs & Uhls, 2002). Promotion is

much less for staples and undifferentiated products and more for processed products.

Promotional activities are commonly seen in the print and electronic media in Nigeria, and road

shows among others; they all stress real and imaginary advantages of products.

The distribution system is important because it links the processors to the market place.

The structure of the marketing and distribution system describes the length of channel and the

number of intermediaries between the manufacturers and the consumer. These include the

wholesalers, commission agents, brokers and retailers operating at different levels of the

product’s chain (Austin, 1992). Several marketing functions carried out include logistics

operations (transportation, storage, repackaging), financing, and promotion. In an efficient

marketing system of developed countries like USA, 28 percent of the consumers food dollar

went to farmers, 72 percent went for processing and marketing functions (Kolhs & Uhls, 2000).

The reverse was the case in Ghana where farmers received 71 percent of the retail price of rice,

processor 12 percent, assemblers / wholesalers 12 percent and retailers 5 percent (Timmer,

Walter & Scott, 1983).The nature of agricultural produce requires specialized and speedy

transportation, storage arrangement for both procured raw materials and processed products,

(Austin, 1992). Food wholesaling in developing countries tends to be highly fragmented and

relatively small-scale though effort to improve the system is being stepped up (Brown, 1986).

2.2.2 Market demand for agro-industrial products

Demand as defined by Erikson, Akridge, Bernard & Downey (2004) is the quantity of a

commodity that consumers are willing and able to buy in the market at various prices. Arising

from the theory of consumers’ behaviour, in which consumers are rational and thrive towards

maximizing utility given their income (Nellis & Parker, 2000).The demand situation for agro-

Page 39: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

23

industrial products set the pace for its marketing plans, and because it makes no economic sense

producing a product that cannot be sold (Kotler & Keller, 2006). Therefore, consumer demand

analysis becomes critical in the processing and marketing of a product. To grapple with this,

Austin (1992) suggested consumer analysis to include consumer needs, market segmentation, the

processing process and market research ; competitive environment to include market structure,

the basis for competition and government influence; the marketing plan analysis to include

product design, pricing, promotion and distribution, and demand forecasting which include

examining data needs for forecasting technique and projecting sales.

A cross-section analysis of household demand for food and nutrients in Tanzania

(Abdullai & Aubert, 2004) revealed that income and other socio- economic variables exerted

significant effects on the demand for food and nutrients. The other socio- economic variables

included women’s schooling, size of household and urban residence. The study also showed that

households in urban areas consumed more fats and oils than their rural counterparts. In a study of

Greek households, Fousekis & Lazaradis (2005) concluded that the age of the household head,

the degree of urbanization, the percentage of expenditure devoted to food away-from home

(FAH), and per capita consumption expenditure affected the intake of nutrients; while household

head gender and educational achievements were effective only in certain locations in the study.

Gould & Villarreal (2006) in a study in China reported that 26% of household income was spent

on food at home (FAH); with household in the lowest income group spending 40% of household

income on FAH, while the highest income bracket household spent 15%. It was revealed that

percentage of food expenditure on food away from home (FAFH) was higher than on FAH.

Also, noted was decrease in percentage of income devoted to food with increase in income of

household.

Page 40: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

24

Sabates et al (2001) noted that educational attainment of the main meal planner had

impact on food choice and nutritional quality of the resulting diet. Gould & Villarreal (2006)

observed that 40% of the household meal planners did not have a high school education. They,

also, hypothesized that household food choice patterns were influenced by the age structure of

the household members. Sub-Saharan Africa (SSA) is expected to experience growth in food

demand largely driven by rapid population growth. Demand for roots and tubers has also

increased over the years due to increased consumer and industrial needs emanating from

population pressure, favourable markets, government support and price interactions (

Nwachukwu, Agwu, Onyewaku & Egeonu, 2009). Agro – industries enhance product

diversification and improvement necessary to change the demand pattern for farm producers

(Brown, 1986).

2.3 Profitability Measures and Value addition

Profit is defined as total revenue minus total cost (Erikson, et al 2004). They outlined

four perspectives of profit; (i) profit is a reward for taking risks in business; (ii) profit results

from the control of scarce resources; when a citizen owns a resource that others want, the others

will bid up the price which will then generate profit for the owner; (iii) profits exist because

some people have access to information others do not have. This special knowledge include

secret formulas or processes, exclusive right to inventions, property rights and patents, e.t.c.,

ensuring profit for the creator; and (iv)profits could exist simply because some businesses are

managed better than others; their managers are often creative planners and thinkers with efficient

organizational abilities.

The accountant looks at profit as the income that remains after all contractual, measurable

costs are subtracted. The economists however determine profits by examining alternative uses of

Page 41: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

25

resources within the firm. Hence, economic profit is defined as accounting profit less opportunity

cost. It forces an examination of alternative uses of resources and helps in analyzing alternative

courses of action by the firm (Kay, 2000).

It is contended that the entrepreneur’s motive for producing any given product is that of

the attainment of maximum profit, while consumers or buyers’ motive is that of utility

maximization (Olayide & Heady, 1982). The profit motive is the ‘spark plug’ of a market

oriented capitalist economy. The prospect of earning and keeping a profit serves as the incentive

for creativity and efficiency among people. It stimulates risky ventures and drives people to

develop ways of cutting costs and improving techniques, always in an effort to satisfy consumers

desires (Erikson et al, 2002).

Kotler & Keller (2006) suggested that firms should be able to measure the profitability

of their products, territories, customer groups, segments, trade channels and other sizes;

emphasizing that this will help the management to determine whether any products or marketing

activity should be expanded, reduced or eliminated. Marketing profitability analysis generally

indicates the relative profitability of different channels, products, territories or other marketing

entities. More so, companies are showing interest in using market profitability analysis or broad

version activity based cost accounting (ABC) to quantify the true profitability of different

activities (Cooper & Kaplan, 1991). Profitability can be improved by managers if there is

reduction in resources needed to perform various activities or make resources more productive or

acquire them at least cost; or alternatively raise prices on products that consume heavy amount of

support services (Kotler & Keller, 2006).

Various models of profitability have been used in production and marketing researches.

Onuoha, Okereke & Asumugha (2009) applied the gross margin and net income analysis in

Page 42: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

26

determining profitability of feed-mills in Umudike, Abia State, Nigeria; in which profitability

was reported at 1.06 for every naira spent. In similar study on paddy enterprises, Okoye &

Anuebunwa (2009) reported gross margin of 33% and 27% for the two enterprises. Ezedinma

(2007) noted that the profitability of a market is a direct indicator of degree of efficiency of the

marketing system.

2.3.1Profitability analysis

In economic theory, profit is maximized at output level where marginal cost equals

marginal revenue (Koutsiyianis, 1979). Thus, one can determine profit by comparing total

revenue with total cost, or by comparing average price and average total cost. Multiplying the

difference by the total output gives the total profit or loss (Nellis & Parker, 2000).

Olayide & Heady (1982) derived unconstrained profit maximization given two factors and one

product production function as follows;

Q = f (x1, x2) ……………………………………. 2.1

C = r1 x1 + r2 x2 + b……………………………. 2.2

Where,

Q = output, C= cost, x1, x2 are inputs;, r= price of input, b= fixed cost.

Understanding that profit (π) is given as revenue (price multiplied by quantity) less cost,

and then one has a function of the form:

π = Pf (X1, X2) – r1 X1 – r2 X2 – b) ……………………. 2.3

To maximize profits, we set the partial derivatives of π with respect to Xs and equate to

zero and solve. Hence profit is maximized at output level where marginal cost (MC)

equals marginal revenue (MR), given p= price of output. This is given as

δπ/δx1= pf1-r1 = 0 …………………..2.4

Page 43: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

27

δπ/δx2 = pf2 – r2 = 0 …………………… 2.5

Solving 1and 2 then

Pf1 = r1; pf2=r2 ……………………… 2.6

If the price of a commodity exceeds the average total cost (ATC) of production,

supernormal (pure) profits are made as opposed to normal profits; and if the price is below

average variable cost (AVC), the firm is at shut down point, in the short run (Nellis & Parker,

2000). Normal profit is the minimum rate of profit which must be earned to ensure that

sufficient number of people are prepared to invest, organize production and undertake risk in an

industry (Nellis & Parker, 2000; Frank & Bernanke, 2001).

2.3.2 The value adding process in agriculture

The difference in values of raw agricultural product before processing and after

processing is the added value. Black (2002) defined value adding as the total value of a firm’s

output less the value of inputs purchased from other firms. Value added is thus what is left to be

shared between wages of the employees and profits for owners of the business. Gittinger (1972)

noted that one could have gross value added, in which case the value of inputs is not subtracted,

and the net value added where deductions are made for inputs including depreciation, labor,

management, and cost, among others. In this case value added could be positive or negative as

the case may be. In agricultural processing, Austin (1992) and Brown et al, (1994) explained that

the difference between cost of ingredients (including farm produce), and the ex-factory or post-

processing price of the finished products is the value added through processing. Without

prejudice to other opinions, this will be the working definition for this study.

Agricultural marketing provides form, place, time and possession utilities to consumers

(Kohls & Uhls, 2000). Agricultural processing changes the form of the farm produce to a state

Page 44: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

28

required by consumers or next stage in a manufacturing scheme, hence creating form utility.

Olukosi & Isitor (1990) described processors and manufacturers’ activities as increasing the

quality and value of farm produce.

The value adding process however runs in the entire food marketing channel from

production through processors, the traders to the final consumer. The optimization of the food

marketing chain is now attracting attention from agencies involved in agricultural research and

rural development (Fellows & Hampton, 1997; Bruinsma, 1999). The technical advisory

committee to CGIAR also takes the view that research on agricultural productivity needs to be

complemented by more research on product utilization and post-production activities, storage,

processing and marketing as part of a coherent approach (Bruinsman, 1999). Ezedinma (2007)

also advocated commodity chain approach to agricultural development. Ganewatta, Waschik,

Jayasuriya & Edward (2005) observed that the East Asian industrialized countries adapted

policies to enhance domestic processing of primary commodities as a tool for accelerating

employment, growth, export revenues and development.

Agricultural processing industry or Agro-industry has grown in size because of its

integration of agricultural and industrial activities (Austin, 1992). It is seen as probably the most

important component of agribusiness (Olayide & Heady, 1982). In the United States of America,

food processing constitutes the bulk of value adding activities and small businesses (Torok, et al,

1990). Agro- industry has also been defined as any activity that deals with the processing of

material of plant or animal origin, which is why agro-processing industries dominate

manufacturing activities in less developed countries where agriculture is the main stay of the

economies (Brown, Deloitte & Touch, 1994). Brown (1986) & Austin (1992) explained agro-

Page 45: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

29

industries to include such activities as oil seed crushing, grain milling, fruit and vegetable

canning, meat packaging, the textile industry, and function of marketing.

It is said that one of the first steps on the road to industrialization is the processing

industry, so that starting a small rice mill or an oil press marks an early stage in industrialization

(Austin, 1992). More so a nation may not fully use its agronomic resources without a viable

agricultural processing sector, because most agricultural products including subsistence products

are processed to some extent (Brown, 1986). Brown, Deloitte & Touche (1994) pointed out that a

post-harvest enterprise can influence the volume and disposition of agricultural production,

likewise the degree of food self-sufficiency, it induces changes in infrastructure; enhance

employment and contribution to foreign exchange earnings. The establishment of agro allied

industry can in addition to immediate and direct benefits to farmers bring about development of

other infrastructural amenities such as improved transportation facilities, water and electricity

supply, schools and health services (Barau, 1979; Orewa, 1978).

2.4 Input Use and Efficiency Measurement

Agricultural productivity is an index of the ratio of the value of total farm input to the

value of output. The attainment of social welfare ‘parieto optimality’ of every society hinges on

the maximum use of available resources, which with every re-allocation of resources, everyone

is made better and no one is made worst off (Kutsoyianis, 1979; Black, 2000). The input- output

relationship in production process becomes important in four areas; (i) distribution of income,

(ii) allocation of resources, (iii) the relationship between stock and flow resources, and (iv)the

measurement of efficiency or productivity (Olayide & Heady, 1982). Kutsoyianis (1979) also

emphasized the principle of efficiency in the overall equilibrium of the consumers, producers

and the markets. Maximum resource productivity then means obtaining the maximum possible

Page 46: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

30

output from the minimum possible set of inputs. In this perspective, optimal resource

productivity implies an efficient utilization of resources in the production process; thereby

expressing synonymy of productivity and efficiency (Olayide & Heady, 1982). Lassita &

Odening (2003) noted that maximum productivity also called ‘best practice’ is revealed in the

production frontier and, hence, efficiency involves the distance to this frontier.

2.4.1 Efficiency measurement

Efficiency is a term that applies in several aspects of economic life, defined by Black

(2000) as getting any given results with the smallest possible inputs, or getting the maximum

possible output from given resources. This is applied both in agricultural production and

marketing. In agricultural marketing, the term market efficiency is used to describe the

performance of the marketing system, encompassed in performance of marketing factors in

which efficiency is defined as increasing the output – input ratio (Erikson et al, (2002). Olukosi

& Isitor (1990) observed that efficiency was an engineering terminology commonly used in

machines to measure the ratio of output to input. Hence, marketing efficiency can be defined as

the maximization of the ratio of output to input of marketing (Kotler & Keller, 2006). The inputs

of marketing include the resources expended in providing marketing services such as capital,

labour and management.

Meanwhile, marketing output includes time, form, place and possession utilities which

consumers derive from the marketing of products. Therefore, marketing inputs are the cost of

providing marketing services whereas marketing outputs are the benefits or satisfaction created,

or the value added to the commodity when it passes through the marketing system (Olukosi &

Isitor, 1990; Kotler & Keller, 2006). Efficiency ratios can be measured in physical terms or in

monetary terms (Bamire et al, 2007). If in monetary terms, the concept becomes a ratio of

Page 47: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

31

benefits to cost (Olukosi & Isitor, 1990).The higher the ratio the higher the marketing efficiency,

and the better the marketing system.

Estimating the inputs of marketing is much easier than the outputs of marketing. The

input cost of marketing is the value of all resources used in the marketing process. The best

measure of marketing output (consumers’ satisfaction) is the price consumers are willing to pay

for the farm products with different levels of marketing utilities (Shepherd & Futrell, 1970;

Downey and Trocke, 1981; Olukosi & Isitor, 1990).

Marketing efficiency, according to Kohls & Uhls (2000), Erikson et al, (2002), and

Kotler & Keller (2006) could be attained in any of the following situations:

(a) output remains constant while input decreases;

(b) output increases while input remains constant;

(c) output increase more than input increase; and

(d) output decreases more slowly than decreases in input

Marketing efficiency can be looked upon in two perspectives, operational efficiency or

technical efficiency and pricing efficiency or economic efficiency. Operational or technical

efficiency measures the productivity of performing marketing services within a firm, with

emphasis on the cost of providing marketing services. This assumes that the essential nature of

output of goods and services remain unchanged, hence the focus is on reducing the cost of inputs

used in doing the job. For instance, an innovative method of crating eggs or tomatoes may not

only increase the quantity handled in a given space, but also reduce damages during

transportation. In this, one has improved operation efficiency.

Olukosi & Isitor (1990) posit that pricing efficiency assumes a physical input-output

relationship that remains constant; hence, pricing efficiency is concerned with how effectively

Page 48: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

32

prices reflect the costs of moving the output through the marketing system. In this case, prices

that consumers pay for goods delivered by the marketing system should adequately reflect all

marketing and production costs, therefore bringing about improvements in the operations of

buying and selling and the pricing aspect reflecting consumers’ wishes. In a perfectly

competitive economic environment, prices will adequately serve this purpose by reflecting all

costs of marketing. Marketing imperfections such as dominance of few firms or inadequate price

information will give rise to pricing inefficiency (Truet & Truet, 1990; Olukosi & Isitor, 1990;

Frank & Bernanke, 2002).

In the light of the above, Bressler & King (1970) noted that efficiency models were

closely related to and sometimes identical with competitive models. Here, the theoretical

construct must come largely from the theory of perfect market in which efficient market will

establish prices that are interrelated through space by transportation costs, through form by costs

of processing and through time as a consequence of the costs of storage. Therefore, only a

normal profit is earned by participants in the marketing system (Kutsoyianis; 1979; Nellis &

Parker, 1999).

In production, efficiency is concerned with the relative performance of the process in

transforming inputs into output (Arene, 2003). Efficiency of a production system then compares

between observed and optimal values of its output and the inputs used in the production process.

This is in the form of ratio of observed output to the maximum potential of observed inputs

required to produce a given level of output or some combinations of the two scenarios (Olayide

& Heady, 1982)

Arising from the initial definitions of efficiency by Farell (1957), Alvarez & Arias (2004)

said that a firm is considered to be technically efficient if it obtains the maximum attainable

Page 49: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

33

output given a level of inputs and the technology used. Also from Farell’s work, Osborne &

Trueblood (2006) made a distinction among technical efficiency (TE), allocation efficiency (AE)

and economic efficiency (EE). Furtherance to that, with an input orientation, TE refers to the

ability to minimize physical input use for a given level of output; AE refers to the ability to

achieve cost minimization for a given output level, while EE refers to the combined effect of

achieving both TE and AE. Most empirical studies of efficiency are on technical efficiency

rather than economic efficiency because data on price, input and output for economic efficiency

analysis are difficult to gather due to price instability, (Osborne & Trueblood, 2006). Efficiency

is illustrated in figure 2.1.

Figure 2.1: Illustration of efficiency adopted from Osborne & Trueblood (2006)

In Figure 2.1, given an efficient isoquant Y and the Iso- cost line, point A is technically

inefficient since it is located away from the production isoquant for output level Y. Point B is

technically efficient because it lies on the isoquant for the output level Y, however this point is

not allocatively efficient because it does not lie on the iso-cost line, that is no tangency between

Y Isoquant

Iso-cost line

B

A

C

y

x

Page 50: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

34

the isoquant and the iso-cost line. Point C lies on both the isoquant and the iso- cost line, where it

is both technically and allocatively efficient, that is economically efficient (Osborne &

Trueblood, 2006). Parametric and non- parametric approaches have been used to measure

efficiency (Alvarez and Arias, 2004; Latruffe, Belcombe, Davidora & Zawalinska, 2005;

Osborne & Trueblood, 2006; Amaefula, Onyenweaku & Asumugha, 2009).

2.5 Market Integration

Market integration has been studied by several authors, with several approaches to testing

spatial market integration using market price to examine the concepts of spatial arbitrage of food

marketing systems in developing countries. Jones (1972) and Dadi et al (1992) applied

correlation analysis in the study of food market integration in Nigeria and Ethiopia, respectively.

Damisa & Rahaman (2004) also used static regression analysis to study market integration of

cowpea, ground nut, sorghum and millet in Kano in which prices in some markets affected the

others, while some others did not.

Markets are said to be integrated or efficient if the correlation coefficient (R) or

regression (β) attain values greater than zero but not greater than one. If R> 0.9, markets are said

to be highly integrated; if R<0.8, the markets are said to be moderately integrated. But if R<0.5,

then there is no integration and prices move independently of each other (Adeleye, 1988, Damisa

& Rahaman 2004).

Okoh (1999) and Akintola (1999) also adopted the Mendoza & Rosegrant (1995)

approach to study market co-integration, but avoided the problem of non stationarity by

undertaking unit root test and differencing the series; they observed that cassava root and gari

markets in the study area were weakly associated, and had some form of price leadership in the

system. Kindie et al (2005) applied the auto regressive distributed lagged (ARDL) via OLS in

Page 51: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

35

the analysis of markets integration for white teff in Ethiopia. Dittoh (1994) applied the Ravallion

model using ARDL to study market efficiency in vegetable markets in Nigeria. Static regression

models and some others have been found to be inadequate for analysis of LOP and co-integration

due to possible non-stationarity of the series which may lead to spurious regression (Chirwa

2000, Okoh & Egbon 2005, Asche et al, 1999). The Johansen trace test has been found to be

more suitable. The price series used in various studies were collected weekly or fortnightly

(Damisa & Rahaman, 2004; Ali & Rahaman 2009). Those that used monthly data include Okoh

(1999), Okoh & Akintola 1999; Chirwa, 2000; Kindie et al, 2005; Asche et al, 2005).

Several studies on the integration of Nigerian markets and elsewhere point to some major

sources of poor integration and inefficiency to include poor price information transmission, too

many intermediaries and high cost of transportation as well as the sources and validity of price

data (Okoh & Egbon, 2005). Chirwa (2000) also noticed factors influencing market integration

to include infrastructure, consisting of transport costs, extent of the transport network,

communication facilities and availability and access to credit facilities.

2.5.1 Market integration and the law of one price (LOP)

Two markets are said to be spatially integrated if when trade takes place between

them; price in the importing market equals price in the exporting market plus the transportation

cost and the other transfer costs involved in moving the commodity (Chirwa, 2000); rural prices

and urban prices plus transportation or other transfer costs (Okoh & Egbon, 2005); producer

price and wholesale price plus transportation and other cost (Kindie et al, 2005); wild Salmon

price and Farmed Salmon prices (Asche et al, 2005).

The perfectly competitive market conditions represent an ideal market structure for

market integration, given the attributes that prices adjust instantaneously to any new information.

Page 52: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

36

The principle of market integration is itself hinged on the ‘law of one price’ (LOP), which is

analysed within the framework of perfect market model. By the Marshallian propositions on

economic market, two regions are in the same economic markets for a homogeneous good if the

price for that good differs by exactly the inter – regional transportation cost (Okoh & Egbon,

2005). The expression for the LOP can be given as

Pti + Kt

ij = Pt

j …………… 2.7

Where,

Pti = Price of product in the exporting market in the period t.

Ptj = the contemporaneous price of the product in the importing market.

Ktij = the transfer cost in the same period

a strict version of the LOP; trade exist between the markets. But if

Pti + Kt

ij > Pt

i ………………… 2.8

then there is no incentives to trade; or if Ktij ≠ 0 , then the prices have a proportional

relationship, but their levels would differ due to factors such as transportation cost , processing

cost, market fees, quality differences e.t.c. This is a weak version of LOP. If no barriers to trade

exist between markets, trade will cause prices in the two markets to move on a one-for-one basis

and the spatial arbitrage conditions are holding (Asche et al, 1999; Okoh & Egbon, 2005).

2.5.1.1 Stochastic Process and the Unit Root Problem

The unit root analysis and test are the starting point in the analysis of market integration.

Consequently stationary stochastic process is of great interest to the price series analyst with

respect to market integration. This implies stationarity (weak stationarity) in a random or

stochastic process in a collection of random variables ordered in time (Gujarathi, 2007). This is

expressed as

Page 53: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

37

Mean: E (Yt) = µ

Variance: Var (Yt) = E (Yt – µ) 2

= σ2

Covariance: Yt = E [(Yt – µ) (Yt+k - µ)]

A time series is stationary if its mean, variance and auto covariance remain the same at various

lags or points of measurement that is they are time invariant. Hence non-stationary time series

will have a time varying mean or time varying variance or both. A stochastic process (time

series) is purely random or white noise if it has zero mean, constant variance and is serially

uncorrelated, denoted as Ut iidN (0, σ2) (Gujarathi, 2007).

Although the interest lies in stationarity of series, economic series are seldom stationary (non

stationary). A classical example is in the random walk model (RWM). This is distinguished into

random work without drift given as:

Yt = Yt-t + Ut ……………………………… 2.9

Yt = Value of y at time t

Yt-1 = value of Yt lag 1 period

Equation (1) can be written as (Yt-Yt-1) = Yt = Ut ……………….. 2.10

Random walk with drift given as

Yt = δ + Yt-1 + Ut …………….. 2.11

where δ is the drift parameter. Equation (2.11) can also be written as,

Yt - Yt-1= Yt = δ + Ut …………… 2.12

Which shows that Yt drifts upward or downward depending whether δ is positive or negative.

Equation (4) is an AR (1) model. The random walk model is an example of a unit root process. If

we rewrite equation (1) as

Yt = ρYt-1 + Ut -1 ≤ ρ ≤ 1 ………….. 2.13

Page 54: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

38

If ρ =1, equation (5) becomes a RWM without drift and we face a unit root problem, situation of

non-stationarity where the variance of Yt is non-stationary. If however the absolute value /ρ/ ≤ 1

the time series Yt is stationary.

To achieve stationarity and avoid the phenomenon of spurious and nonsensical regression in the

case of the unit root or RWM model i e the series is integrated of the order one I (1), differencing

the series of I (0) has to take place. Most economic time series are I (1) and generally become

stationary only after taking their first difference. If a series is differenced d times to become

stationary, then it is integrated of order d, I (d).

2.5.1.2 Co-integration

A time series is stationery if it is I (0), and non stationary if I(1), that is they have

stochastic trend. Hence a linear combination can cancel out the stochastic trends in the two series

that are I (1), and we do not have a spurious regression. In which case we say the two variables

are co-integrated. From the economic point of view two series are co- integrated if they have a

long-term, or equilibrium relationship between them. Therefore the traditional regression

methodology applies including the t and F tests. As Granger puts it “a test for co- integration”

can be thought of as a pre-test to avoid nonsensical regression situations. Some sample tests for

certification are the Engle-Granger (EG) or Augmented Engle-Granger (AEG) test which has its

roots in ADF (Ali & Rahaman, 2009). The co-integrating Regression Durbin–Watson (CRDW)

test, whose critical values were provided by Sargen and Bhargana, used the Durbin – Watson d-

statistic obtained from the co-integrating regression (Gujarathi, 2007).

2.5.1.3 Co-integration and Error correction Mechanism (ECM)

Co-integration implies a long term or equilibrium relationship between two variables. In the

short run, there may be disequilibrium. Here we can treat the error term in the co integrated

Page 55: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

39

variables regression as equilibrium error. This error can be tied to the short run behaviour of the

series (or variable) to its long term value. This was used by Engle and Granger to correct for

disequilibrium. As Granger puts it, if two variables Y and X are co-integrated, the relationship

between the two can be expressed as ECM given as

Yt = a0 + α1tXt + α2µt-1 + εt …………….. 2.14

2.5.1.4 The Johansen Trace test

The Johansen test (Bivariate and multivariate) are based on vector auto regressive (VAR)

model; a reduced form which avoids the problem of simultaneity (Asche et al, 1999; 2005). The

Johansen trace test detects the number of co integration vectors that exists between two or more

integrated series. The test follows the maximum likelihood estimation procedure that provides

estimates of all co-integration vectors existing among a group of variables. The presence of co-

integration among for instance pairs of price series shows the existence of integration among the

series. A further test of residuals and test for variable exclusion confirms the existence of market

integration between spatially differentiated markets. The Johansen bi-variate and multivariate

tests (Johansen 1998; Johansen & Juselius 1992; Asche et al, 1999; Asche , 2005) has gained

popularity; and is widely used for the test of the Law of one price (LOP) in agriculture and food

markets and is preferred to the Engel–Granger procedure(Okoh & Egbon 2005; Asche et al,

2005)

2.6 Problems of Agricultural Processing Industry

There are peculiar problems associated with agricultural processing which make it

different from other forms of businesses. Most raw materials are perishable and will quickly

deteriorate if not processed immediately. Special and speedy transportation and processing

facilities are required to maintain the quality of both the raw materials and the processed

Page 56: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

40

products (Fellows & Hampton, 1997). The cost of these facilities could be prohibitive for small-

scale processors.

For crop and animal products, seasonality is a critical factor in the capacity utilization of

processing machines and increases in unit cost of production (Brown, 1986). Seasonality of raw

materials means that they can only be processed for part of the year, while the plants may be idle

at some other periods. During the peak season, supplies waiting to be processed can even

deteriorate, and high risk of plant breakdown due to intensive operations (Browm, 1986; Austin,

1992). Plants that can handle a variety of crops can be installed to reduce risk.

Technological incompatibility and technical incompetence have brought so much to bear

on ago- processing industry. Most processing machines are operated by unskilled personnel,

which reduce the efficiencies of these machines and consequent poor quality of the products.

Traditions can simply not allow some technologies to flourish (Barau, 1979; Brown, 1986). In

addition to operating frequently in economically hostile environment, majority of food

processing enterprises are small-scale and within the informal sector hence have little economic

powers. These include poor access to credit and infrastructure (Fellows and Hampton, 1997).

Brown (1986) outlined two types of labour related problems in the World Bank assisted

agro-industries; (i) for public enterprises there is pressure to absorb excess labour, though

economically beneficial, can inflate labour cost to the financial detriment of the enterprises; and

(ii) low labour turn over. In the same study he observed that in their locations (rural areas),

agricultural industries suffered from lack of access to rail system, water supply, electricity and

facilities for waste disposal. Financial management and process management are closely related

and in the World Bank lending to agro-industries have been serious problems; in which Brown

Page 57: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

41

(1986) and Austin (1992) suggested adequate financial planning that actually takes care of

inventory management as it affects raw material supplies and liquidity management.

It was specifically observed by Brown (1986) that high level of optimism regarding the

supply of raw material markets led to wide spread under capacity utilization in agro-industrial

projects. Several agro- allied industries have collapsed due to irregular supplies and shortage of

raw material. A typical case is that of Cadbury tomato processing plant located in Zaria that had

to close down on the 25th

May, 1978 due to lack of raw material for processing(Orewa, 1978).

Crop processing is an activity traditionally undertaken by women (Clarke, 1987; Paris,

1988). The techniques are quite arduous, involving large investment of time for a little result.

Two categories of women are involved. The farm women who process their own crops for family

consumption, and the landless women or wives of marginal farmers who process other people’s

crops as a means of supplementing family income (Clarke, 1987). Even then the development of

modern processing and its wide spread had destroyed millions of part- time jobs for the poorest

section of the society. Some 7 to 8 million women were estimated to have lost their jobs

following mechanization of rice in Java. In Bangladesh, each new rice mill is said to put about

350 women out of part-time employment (Clarke, 1987; Austin, 1992).

2.7 Theoretical Framework

Theoretical perspective for this research is the value chain analysis or value addition

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

consumer. It is a business concept concerned with creating and sustaining superior performance.

A product gains value as it passes through stages of activities in the value chain, as it moves

from producer to the ultimate consumer. Michael Porter of Harvard University proposed the

value chain as a tool for identifying ways to create more customer value. According to this

Page 58: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

42

model, every firm is a synthesis of activities performed to design, produce, market, and support

its product (Kotler & Keller, 2006). The ultimate goal is maximization of value creation, which

culminates into cost minimization and profit maximization.

Of course marketing involves satisfying consumers’ needs and wants; therefore the task

of any business is to deliver customers’ value at a profit (Kotler & Keller, 2006). In that

perspective, Kotler & Armstrong (2008) emphasized the following: (i ) creating values for

customers to capture values from customers in return;(ii) building and managing strong value

creating brands; (iii) managing returns from marketing to recapture value; (iv) harnessing new

marketing technologies and; and (v) marketing in a socially responsible way around the globe.

In analyzing the value delivery (value chain) process, Kotler & Keller (2006) made two

observations. Firstly, the traditional view of marketing in which the firm makes a product and

sells it. In this view, marketing takes place in the second half of the process, that is, after the

product had been made. Here, the company knew what to produce and the market would buy

enough units for the firm to make profit. Market institutions or agencies that subscribe to this

approach can best succeed in economies marked by goods shortages, where consumers are not

fussy about quality, features, or style. Examples are the markets for basic staple goods in

developing countries or evolving markets. Secondly, in developed economies, where people face

abundant choices, the traditional views of the business process will not work. Here, the “mass

market” is actually splintering into numerous micro-markets, each with its own wants,

perceptions, preferences, and buying criteria. Therefore, the belief at the core of the new view of

business process is proper definition of target markets. This places marketing at the beginning of

planning. In the value delivery process, firms see themselves as part of the chain instead of

emphasizing making and selling. Nimalya Kumar (2004) put forth ‘3Vs’ approach to value

Page 59: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

43

delivery in marketing; (i) define the value segment or customers; (ii) define the value

proposition; and (iii) the value network that will deliver the promised service. Other similar

views expressed by Webster (1997) are; (i) value defining process, e g market research and

company self-analysis; (ii) value developing process, example new product development,

sourcing strategy and vendor selection; and (iii) value delivery process such as advertising and

managing distribution.

The value chain as proposed by Michael Porter (1985) is shown in figure 2.2. In this

model, the value chain identifies nine strategically relevant activities that create value and cost in

a specific business. These value creating activities consist of five primary activities and four

supportive activities (Kotler & Keller, 2006). The primary activities cover the sequence of

bringing materials into the business(in-bound logistics), converting them into

products(operations), shipping out final products (out-bound logistics), marketing

them(marketing and sales), and servicing them(service); while the supportive activities include

procurement, technology development, human resources management, and firm infrastructure.

These are handled by specialized departments or elsewhere. Note the firm’s infrastructure covers

general management such as planning, finance, accounting, legal, and government affairs.

Page 60: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

44

Figure 2.2: The generic value chain of Michael E Porter adapted from Kotler & Keller (2006)

2.7.1 Value chain in agricultural processing and marketing

Value chain optimization can be an efficient tool in the development of food processing

and marketing (Hagelaar, 1994). The improvement of each step in the food marketing chain

needs to be analyzed and monitored in relation to other links in the chain. This calls for good

cooperation between the different actors in the chain. An important aspect of chain optimization

is chain marketing, defined as cooperation in marketing through the whole chain. The

management of improvement in the value delivery network is called chain management

(Bruinsma, 1999). This will develop as agricultural production becomes more market driven than

production driven. A flow chart of a typical agricultural value chain is shown in figure 2.3.

In an analysis of development in food chain in Europe, Bruinsma (1999) in quoting

Zuurbiov (1981) noted some reasons for greater emphasis on cooperation with other actors in the

food marketing chain most of which are applicable in Africa. They include: (a) reduction of

Margin Firm infrastructure

Human resources management

Technology development

Procurement

Inbound

logistics Operations

Outbound logistics

Marketing

& Sales Services

Margin

Margin

Support

Page 61: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

45

transaction and coordination costs through better organization; (b) greater access to information

about new technologies as well as the technologies themselves; (c) reduction in uncertainty about

actions that other individuals or groups in the chain may take; (d) possible increased

competitiveness; and (e) reduction in logistical problems regarding the handling of perishables

which otherwise may lead to loss of product quality. Another concept that is of great importance

to the optimization of the food marketing chain is quality assurance. Instituting quality assurance

measures at all stages (production, processing and trade) of the marketing chain will ensure that

the marketed product is demanded by consumers and is also safe for consumption.

Critical factors or approaches that underline the understanding of value delivery network

and eventual successful operation of agro-processing enterprises as set out by Brown (1986),

Austin (1992); Brown, Deloitte, and Touche (1994) include; (i) raw material supply and

procurement, (ii) processing component, and (iii) marketing. Although this is the operational

order of the material flow in the production chain, the marketing factor is the logical starting

point, because it will make no economic sense to invest in processing a product that there is no

demand for it.

Page 62: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

46

Figure 2.3: Flow chart of Agro-processing value chain

Source: Adapted from Austin (1992)

Breed stock Extension

& Research Others Agro-

chemicalSeeds Equipment

Transport

Farm Storage

Produce

Land&

Irrigation

On-farm/Home

use Transportation

Agro-

industry

Products

Transportation

Export Storage Distributor Storag

Products

Transportation

Retailer Storage

Products

Consumer

Page 63: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

47

2.8 Analytical Framework

The analytical framework for this research is based on the optimization of value chain

from Groundnut processing through products marketing. Production efficiency and profitability

analysis models of the firms in groundnut oil processing and product marketing, market co-

integration analysis and the law of one price (LOP) as a measure of market efficiency were also

adopted. Hypotheses were tested appropriately as required.

2.8.1 Stochastic frontier production function

This was used to evaluate the production efficiency of groundnut oil and groundnut cake

together. Production has been defined by Olayide & Heady (1982) as a process whereby some

goods and services referred to as inputs are transformed into other goods and services called

output. In agricultural processing this changing of input form into output involves changing of

farm produce into another form desired by consumers or manufacturers (Austin, 1992; Olukosi

& Isitor, 1990). Brown et al (1994) observed this activity adds more value to the raw farm

produce. The technical efficiency involved in changing the input into output as well as factors

that determine the inefficiency were analysed using the stochastic frontier production function.

The stochastic frontier analysis (SFA) is based on the premise which represents an

improvement over the traditional production function and deterministic functions using

mathematical programming to construct production frontiers. It recognizes the possibility that a

firm’s performance may be affected by factors completely outside its control, such as bad

weather and input supply breakdowns as well as factors under its control. To lump the effects of

exogenous shocks, both favourable and unfavourable to the firm together with the effects of

measurement errors and efficiency into a single one- sided error term is incorrect, as is the case

with deterministic frontiers. Again, in the statistical noise that every econometric empirical

Page 64: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

48

relationship carries, the standard interpretation is that, first, there may be measurement errors on

dependent variables; secondly, the equation may not be completely specified due to omitted

variables. This argument holds for production functions as it is for any other equations assuming

a one - sided noise. The essential idea in stochastic frontier model as put forward by Aigner,

Lovell & Schmit (1977) and Meuesen & van den Brook (1977) is that the error term is composed

of two parts, the effects of measurement error, other statistical noise, and random shocks outside

the firm’s control. The original specification which involved a production function for cross-

sectional data had an error term with two components, one to account for random effects and

another to account for technical inefficiency. Several specifications of the frontier production

function have been developed by Battese & Coelli (1992, 1995). For this research the model is

given as,

Yi = Xi β+ (vi-ui) …………………. 2.15

i =1, ……, N

Where,

Yi = the production (or logarithm of production) of the ith firm;

Xi = kx1 vector of (transformation of the) input quantities of the ith firm;

β = vector of unknown parameters;

Vi = random variables which are assumed to be iidN (0, σ v2) and independent of the

Ui which are non-negative random variables that are assumed to account for technical

inefficiency in production and are said to be iid, N (0, σv2).

Equation (1) above can also be approximated in a translog form (Karagiannis & Sarris 2005;

Amefula et al, 2009) as follows

Yit = β0 + βγt +1/2βγγt2

+∑βjxjit + 1/2∑∑βjkxkit +∑βjtxjitt +eit …………………….. 2.16

Page 65: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

49

Where Yit is the logarithm of the observed output by the ith firm at period t, xjit is the logarithm

of the quantity of the jth input used by the firm at period t, β is a vector of parameters to be

estimated. Symmetrically imposed, βij = βkj and eit = vit- uit being a composite error term. The vit

term corresponds to white noise and represents those factors that cannot be controlled by

processors, such as weather conditions, labour market conflicts, access to credit as well as

measurement error and omitted explanatory variables. On the other hand Uit term is a non

negative random variable associated with technical inefficiency. The vit and the uit are assumed

to be independently distributed from each other. The technical inefficiency effects uit, can be

replaced with a linear function of explanatory variables (Battese & coelli, 1995). The technical

inefficiency effects are assumed to be independent and non negative truncations (at zero) of

normal distribution with unknown mean and variance. Specifically,

Uit = δ0 + ∑δmzmi + wit…………………… 2.17

Where zmi a column vector of hypothesized explanatory variables associated with technical

inefficiency; δ0 and δm (m=1...h) are parameters to be estimated, and uit is independently and

identically distributed with N (0, σu2) random variable truncated at – (δ0 + ∑δmzmi) from below.

Equation (3), an average level technical efficiency measured by mode of truncated normal

distribution (i. e, Uit) has been assumed to be function of socio-economic factors (Kumbhakar &

Heshmati, 1995; Yau and Liu, 1998; Ogundele & Okoruwa, 2006). If uit does not exist or uit =0,

the stochastic frontier production function reduces to the traditional production function of Cobb-

Douglas. The distributional parameters Uit and δu2 are hence inefficiency indicators of the

processor, indicating the level of technical inefficiency and later dispersion of inefficiency level

across observable units (Battese & Coelli, 1995; Bamire, Oluwasola & Adesanya, 2007).

Together, equations (2) and (3) can be estimated by means of the computer programme

Page 66: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

50

FRONTIER version 4.1c developed to obtain the maximum likelihood estimates of the Frontier

production model detailed in Battese & Coelli (1988,1992, 1995) and Coelli (1996), Battese,

Coelli & Colby (1989) which are special cases of Coelli(1992). The programme can

accommodate panel data, time-varying and invariant efficiencies; cost and production functions;

half normal and truncated normal distribution; and functional forms which have a dependant

variable in logged or original units.

Hypotheses can be tested using the generalized likelihood ratio test statistic λ = - 2lnL

(H0) – lnL(H1), where L(H0) and L(H1) are values of the likelihood function under the null H0

and the alternative H1 hypotheses respectively. If γ= δ0 = δm (m=1 …….h), then inefficiency

effects are not present and consequently each firm in the sample operates on the frontier. It

should be noted that γ=0 if there is no difference between the null and alternative hypotheses,

and if not the likelihood function (LF) will diverge. Asymptotically the λ follows the χ2 (mixed

χ2) distribution hence the statistical significance can be tested at a chosen α with degree of

freedom equal number of restrictions.

Coelli (1996) also observed that this model has been used in a vast number of

applications over two decades. That the original version has been altered and extended in many

ways which include more general specification of distributional assumptions for the non-

negative random variables which account for technical inefficiency; consideration of panel data

and time varying technical efficiency, and the extension of the method to cost functions and

estimation of systems of equations among many. A comprehensive review of literature on the

model can be found in Forsund, Lovell & Schmit(1980), Baur(1990) and Greene(1993).

Page 67: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

51

2.8.2 Profitability analysis

The profit function was employed to estimate the profitability of resource input in

groundnut processing enterprise. These inputs include variable (groundnut, firewood, water, salt,

grinding) and fixed input (frying equipment, pressing equipment, kneading surface) and labour.

The profit function was used because of its importance in diagnostic analysis reflecting marginal

resource profitability at mean level on input price.

Following Sankhayan (1981), Olayide & Heady (1982) and Arene (2002), the linear profit

function analytical model is stated thus: Given a production function in which m variable inputs,

x1, x2 ….xm; Z1, Z2 …Zn, are related to Y as follows,

Y= f(x1, x2, xm; Z1, Z2…Zn) ………………………….. 2.18

In the short run, the opportunity cost of fixed inputs is zero. Therefore the processor needs only

to maximize the returns to variable inputs, that is, the sales value of output less the cost of

variable inputs, called the variable cost. The resulting returns also called the variable profit (π),

the variable inputs in respect to the production function given in (2.18) above can be written as:

π = Py f(x1, x2… xm; Z1, Z2….Zn) - ∑ Pixi ………….. 2.19

Where Py is the price of output and Pi is the output per unit price of the ith variable inputs, i = 1,

2…m.

For profit maximization of π in the short run, the first order partial derivative with respect to the

variable inputs equated to zero are each taken (Olayide & Heady, 1982). Hence the partial

derivative from (2.19) with respect to Xi, i=1, 2 …., m, equated to zero is given by

δy/δx1 = Py fi = pi ……….. 2.20,

where fi denotes the first order partial derivative with respect to the ith input. Since from (2.18),

f(x1, x2… xm; z1, z2 …Zn) is equal to Y, (2.20) can also be written as

Page 68: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

52

pyδy/δx1 = pi or δy/δx1 = pi/py, i=1, 2 ….m …………… 2.21.

There will thus be m simultaneous equations in m unknowns, which can be solved to obtain the

optimum input quantities X*i, I = 1, 2 ….m, given by

Xi*= Xi*(py,p1, p2, ….pm,z1 ,z2, ….zn), i = 1, 2,……m ……….2.22

Equation (5) gives the demand function for the ith variable input.

Substituting the demand functions given by (2.22) and (2.20), what is obtained is given as

π* = P f(xi*x2*,…x*m; z1,z2,…...,zn) - ∑pixi* …………..2.23,

Where xi* (i=1, 2….m) is the optimum quantity of the ith variable input and π* corresponds to

the amount of maximum variable profits or gross margin (GM). Obviously however, π* with a

harsh in (2.23) is expressed as a function of the price of inputs and the fixed inputs quantities.

Given that the alternative use of fixed input is zero in the short run, that is profit horizon, the

interest is on the analysis of variable input to be used in groundnut oil processing. Thus

π* = π*(py, p1, p2… pm; z1, z2, …….,zn) …………….2.24.

2.8.3 Measurement of co-integration and the law of one price (LOP)

The law of one price (LOP) captures the existence of equilibrium due to efficient

commodity arbitrage between two or more trading markets. It assumes that if markets are

integrated, price change in one market will be transmitted on a one-for-one basis to other markets

instantaneously (Chirwa, 2000).

This can be written as

Pti = α +βPt

j …………………… 2.25

Where,

Ptj and Pt

j are the natural logarithm of prices of homogeneous goods in markets i and j

respectively. In empirical work, evidence of how price change in one market generate price

Page 69: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

53

changes in another market so as to bring about long run equilibrium relationship (Asche et al

2005), can be written as

Pt 1 – β0- B1 Pt

2 = et ……………………… 2.26

where,

Pt is the logarithm of the price observed in market i at time t, β0 is a constant term that captures

transportation, or transaction cost and other quality differences, and β1 gives the relationship

between the processes. If β = 0 there is no relationship between the two price series, if β1 =1, the

LOP holds and the relative price is constant. If β1 is different from 0 but not equal to 1, there is

relationship between the prices, the relative price is not constant and the markets are not fully

integrated. If Pt1 and Pt

2 are co-integrated, the error term, et, will be stationary. This forms the

basis of Engle and Granger test for co-integration and the unit root test by performing the

Augmented Dickey-Fuller (ADF) unit root test (Asche et al, 2005). Due to the weakness inherent

in the Engle–Granger procedure, it is replaced by the more powerful Johansen trace test in the

analysis of co-integrated markets (Chirwa, 2000; Okoh & Egbon, 2005; Gujarathi, 2007).

2.8.3.1The unit root problem

Random walk process may have no drift, may have drift or may have both deterministic

and stochastic trends. For these reasons, the actual procedure of ADF test for unit root on the

price series will require estimation of the three models for the three possibilities (Gujarathi,

2007; Ali & Rahaman, 2009). These are:

the random walk (RMW) without drift,

Yt = δyt-1 + αt∑Yt-1 + e………………… 2.27;

the random walk with drift,

Yt = β1+ δYt-1 + α1∑Yt-1 +e ………… 2.28; and

Page 70: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

54

the random walk with drift around a deterministic trend,

Yt = βt + β2t + δYt-1 + α∑Yt-1 + e ………… 2.29;

where,

Yt = price series in market Y during period t,

Yt = first difference of series Y, ie Yt-Yt-1,

t = trend variable (1, 2, 3… n) n being the length of data series in years; m = no of lagged

difference; and

e = Error.

Β1, β2, δ, α = parameters to be estimated.

2.8.3.2 Unit root test

Unit root test is a test of stationarity (non stationarity) required to avoid spurious

regression. Given that equation (2.29)

Yt = ρYt- 1 + Ut …….. 2.30 -1 ≤ ρ ≤ 1

Where Ut is a white noise error term; recall that if ρ= 1, a case of unit root, equation (2.30) an

RWM is I (1). We regress Yt on its lagged value Yt-1 and see if estimated ρ is statistically equal

to 1. If so, then Yt is non-stationary. If we subtract Yt-1 from both sides of equation (2.30), we

obtain

Yt – Yt–1 = ρYt-1- Yt-1 + Ut …………….. 2.31

= (ρ-1) Yt-1 + Ut

Which can be written alternatively as

Yt = δYt-1 + Ut ……………… (2.32)

Where δ = (ρ-1) and is the first difference operator. In practice equation (2.32) is estimated to

test the (null) hypothesis that δ = 0. If δ = 0 then ρ = 1, hence we have a unit root which means

Page 71: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

55

the time series under consideration is non-stationary. If negative, it is stationary. Note also that if

δ = 0, equation (2.32) becomes

Yt = (Yt-Yt-1) = Ut ……………………. 2.33.

Here Ut is white noise error term and stationary, which implies that the first difference of a

RWM time series is stationary.

Testing the null hypothesis of non stationary against the alternative of stationary, the Augmented

Dickey - Fuller (ADF) and Phillips Perron (PP) tests are applied. The ADF is a parametric tests,

whereas the PP test statistics uses a non parametric modification of the Dickey – Fuller test.

Under the null hypothesis that δ = 0 (ie ρ = 1), the t-value of the estimated coefficient of yt-1 does

not follow the t-distribution even in large samples, that is it does not have asymptotic normal

distribution. The Dickey- Fuller statistic has shown under the null hypothesis that δ = 0 and the

estimated coefficient of yt-1 in equation (2.33) follows the τ (tau) statistic. If the hypothesis δ = 0

is rejected, the series is stationary. The Augmented Dickey- Fuller (ADF) is based on statistics

obtained from applying the OLS method to the following equation (Gujarathi, 2007; Ali &

Rahaman 2009)

Pt = µ + βt + ΦPt-1 + ∑dPt-1 + εt ………………… 2.34

Where Pt = price series, t = time trend; Pt-1 = Pt-1- Pt-1+1; εt iid(0, σ2)

To determine whether Pt is non- stationary, the unit root test statistic is calculated and tested as

above.

In addition, the Dickey-Fuller (DF) test assumption is the error terms, Ut, being white

noise. The ADF adjusts it to take care of possible serial correlation in the error terms by adding

the lagged difference terms of the regressand. Phillips and Perron (Gujarathi, 2007) used non-

parametric statistical methods to take care of the serial correlation in the error term without

Page 72: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

56

adding lagged difference terms. Asymptotically, the Phillips – Perron test is the same as ADF

test statistic.

2.8.3.3 Co-integration: The Johansen test

The multivariate Johansen model can be expressed as follows. Let Xt denote an nx1 vector,

where the maintained hypothesis is that Xt follows an unrestricted vector auto regression (VAR)

in the levels of the variables (Asche et al, 2005).

Xt = П1Xt-1 + …..+ ПkXt-k + ФDt + µ +εt ……….. 2.35

where each Пt is an nxn matrix of parameters, µ a constant term, and εt iid (0,σ2) matrix Ω. In

(ECM) or difference equation (10) can be written as

Xt = Ґt Xt-1 + …….. + Ґk-1 Xt-1+1 +ПXt-k + ψDXt + εt ………… 2.36

With Ґi = -1 +П1 + ……. + Пi, i =1 ……k-1

Пi = -1 + П1 + …..+ Пk. Hence Π is the long run “level” solution to equation (2.35).

Given that Xt is a vector I(1) variables, the left hand side and the first (k-1) elements of equation

(2.36) are I(0), and the kth element of equation (2.36) is linear combination of I(1) variables. If

the assumptions on error term holds, the kth element must also be I (0); Пt-k I(0). Thus either Xt

contains a number of co-integration vectors, or П be matrix of zeros.

A 2 variable system model of the Johansen VAR procedure (Chirwa, 2000) is given as ECM

Xt = µ + ∑Ґt-1 + ПXt-1 + ε ………………. 2.37

Where Xt is nx1 vector containing the series of interest (spatial prices); Ґ and П are the matrices

of parameters, k is asymptotic to capture the short run dynamics of the underlying VAR and to

produce normally distributed white noise residuals, and εt is the vector of the white noise error.

Given that rank (П) = r; П, r, indicates the number of linear combinations of Xt that are

stationary. If r = n, the variables in levels are stationary; if r = 0 so that П = 0, none of the linear

Page 73: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

57

combinations are stationary. When 0<r<n, there exist r co-integration vectors, or r stationary

combinations of Xt. П = αβ, where both α and β are nxr matrices, and β contains the co-

integration vectors (the ECM in the system) and α adjustment parameters.

The Johansen procedures involves two tests for the number of co-integration vectors in the

system, that is whether the П matrices in equation (2.35) has less than full rank using the

maximal eigenvalue (2.36) and the trace test (2.37). These are given (Hjalmarsson &Osterholm,

2007) as

Jmax = - Tln (1- λr+1) …………………………. 2.38

Jtrace = -T∑ni-r+1 ln (1-λi)…………………………. 2.39

T is sample size, and λ is the i:th largest canonical correlation (largest eigenvalue). The trace test

tests the null hypothesis of r co-integrating vectors against the alternative hypothesis of n co-

integrating vectors. The maximum eigenvalues test on the other hand tests the null hypothesis of

r co-integrating vectors against the alternative hypothesis of r + 1 co-integrating vectors

A wide range of hypothesis testing on the coefficients α and β, is allowed by the Johansen

procedure, using the likelihood ratio test (Johansen and Juselius 1990). If the LOP hypothesis is

of interest, it is the restrictions on the parameters in the co-integration vector β that is to be

tested. Where there are two price series in Xt vector, and provided that these series co-integrate,

the rank of П = αβ is equal to 1 and α and β are 2x1 vectors. A test of LOP is actually a test of

whether β = (1,-1). If a group of goods are to be in the same market, all prices must be pair –

wise co-integrated. This allows a multivariate test of LOP, since it implies only one common

stochastic trend in the system, and therefore with n prices in the system, there must be n-1 co-

integration vectors (Asche et al, 1999; Gonzalez- Rivera & Helfand 2001; Asche at al, 2005).

Page 74: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

58

Generally, in a system with n data series and r co-integration vectors, there will be n-1 different

stochastic trends.

2.8.3.4 Determinants of co-integration

Market integration is consequent of activities of participants and the operating environment

defined by government policies, and infrastructural development among others. The cost of

carrying out marketing functions of transportation, processing and storage as well as profit

margin, of traders is central to the concept of spatial arbitrage. Several factors influencing the

extent of market integration have been identified in literature to include market infrastructure,

production differentials and shocks, and the policy environment (Golletti et al, 1995, Felchamps

& Gavien 1996; Chirwa, 2000; Kindie, Verbeke & Viaene, 2005; Asche, Gutternsen, Sebulonsen

and Sissener, 2005; Ali & Rahaman, 2009).

Page 75: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

59

CHAPTER THREE

METHODOLOGY

3.1 Study Area

The location for this research is the geo-political area described as North Central Nigeria.

North Central Nigeria politically comprises Benue, Kogi, Kwara, Nasarawa, Niger, Plateau

States and the Federal Capital Territory (FCT). This area is located between longitudes 4o35’E

and 9o4’E and latitudes 7

o 09’ N and 9

o53’N (Phillips, 1996). This area lies within the guinea

savanna zone of Nigeria. The vegetation is characteristic of the tropical, deciduous forests that

existed centuries ago, with interspersion of thicket, grassland, fringing forests and woodland or

gallery forest along the river valleys (Iloeje, 1985). Some areas in some of the seven states such

as Kogi, Benue and Kwara fall within the tropical rain forest zone of Nigeria.

The north central Nigeria (NCN) has an estimated population of 21, 682, 776 people as

estimated by 2006 population census, with land area of 242, 425 km2. The selected states of

Nasarawa, Benue and Niger have a combined population of 11, 121, 989 people with a land mass

of 137, 536km2 (Wikipedia, 2013). The major regional markets include Gboko, Makurdi, Otukpo

and Zaki Biam in Benue State; Lafia. Keffi, Nasarawa Eggon and Mararaba in Nasarawa state;

Suleija, Bida, Minna and Kontagora markets in Niger State; Lokoja, Okenne and Anyangba in

Kogi State; Jos and Shendam markets in Plateau State; Offa and Ilorin in Kwara State; and Wuse

and Gwagwalada markets in the Federal Capital Territory (FCT). These markets are noted for

trade in agricultural commodities. The zone links the north and the southern parts of the country.

Major roads and railway lines pass through these states from north to southern Nigeria. The two

Page 76: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

60

rivers, Niger and Benue and their tributaries run through the zone and provide potentials for in-

land water ways and ports for trading activities.

The North Central States are known for the production of crops including yam, rice,

groundnut, cassava, beans, maize, citrus, cashew, cocoa and variety of other fruits. These crops

form the basis of trade within the region and with other parts of the country. Livestock

production is also vibrant here (Agboola, 1979; Iloeje, 1985; Olam, 2006). Groundnut processing

and processed products marketing are very vibrant business activity involving men, women and

youths; both in traditional and modern processing in this area. Generally small-scale industries,

especially agro-based provide impetus for economic growth and development of the area.

3.2 Sampling Technique

The population for this study comprised traditional and modern groundnut oil processors

in North Central Nigeria. Four groundnut producing states (Nasarawa, Plateau, Benue and Niger)

and the FCT were identified as reported by RMRDC (2004). Three groundnut producing states

were randomly selected for the study. The LGAs were purposively selected based on groundnut

processing and marketing activities, while the respondents were taken randomly. The formula

applied is as given below

SS = SP / ZP x TS

Where,

SS = state sample size selected,

SP = state total sampling frame, and

ZP = zonal total sampling frame (selected states).

TS = Total sample size.

Sampling from the two producing LGAs of each state, given as

Page 77: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

61

LS = LT/ST x TL,

Where

LS = LGA sample size selected,

LT = total LGA sampling frame,

ST =state total sampling frame (selected LGAs), and

TL = total sample size.

The samples were randomly and proportionally taken based on the estimated population of

traditional processors in the selected LGAs of the States. The estimated populations (sampling

frame) of processors were Nasarawa State 350; Benue State, 225; and Niger State, 300; obtained

from Agricultural Development Programmes (ADPs), Ministry of Commerce and Industries and

groundnut oil (GNO) processors in the states. The distribution of the proportionately selected

samples for the states was Nasarawa state 70; Benue State 45 state; Niger State 60; and the total

sample for North Central Nigeria was 175, (Table 3.1). The active population of modern

processors in the selected states within the zone was 17 and all were taken for the study.

Table 3.1: Population and sample selection for the study

State Population Sample LGA LGA Sample

Nasarawa 350 70 Lafia 30

N/Eggon 40

Niger 300 60 Bida 36

Chachaga(Minna) 24

Benue 225 45 Gboko 20

Makurdi 25

Total 875 175 175

3.3 Data Collection

Primary data were used for this study. These were collected through survey by means of

structured and pre-tested questionnaires. Personal interview was used to administer the

Page 78: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

62

questionnaires. Observations were employed for on the spot assessment of processing and

marketing activities at various processing sites and markets where possible (Alamu & Olukosi,

2008). Price data chart was used to collect price data.

Socio-economic characteristics such as age, sex, experience, cooperatives participation,

and educational attainment were covered. Data on procurement of groundnut for processing,

processes involved in processing of the groundnut into oil and cake and costs involved at each

stage were obtained as well as other inputs used, their respective quantities and prices. Quantities

and values of oil and cake sold by processors were also collected. Processing cost and other

charges involved also obtained from the respondents, and many others. Data collection took

place between December 2010 and November 2011. Weekly price data on market prices of

groundnut oil (GNO) and groundnut cake (GNC) were collected for 52 weeks from December

2010 t0 May 2011 in six strategic markets. These were Lafia, Nasarawa –Eggon in Narawa state;

Minna (Chachaga) and Bida in Niger state, Makurdi in Benue State and Wuse in the Federal

Capital Territory (FCT).

3.4 Data Analysis

Data were analyzed by means of descriptive and inferential statistics. Descriptive statistics was

used to achieve objectives 1, and 6. Objective 2 was attained with stochastic frontier analysis.

Gross margin and profit function were used to achieve objective 3 and t-test was used to achieve

objective 4. Objective 5 was realized with the Johansen test for co-integration analysis.

3.4.1. Stochastic frontier model

The Stochastic frontier production function was used to evaluate the processing efficiency

involved in traditional and modern groundnut oil processing. This enabled the attainment of

objective two of the study. The model for traditional processing is specified as follows:

Page 79: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

63

LnY =β0+ β1lnX1 + β2lnX2+ β3lnX3 +β4lnX4 + (vij – Uij)………….. 3.1

Where,

Y = output of processors (GNO +GNC) (kg)

X1 = Raw groundnut seeds (kg)

X2 = Labour (hours)

X3 =Fuel-wood (N)

X4 =salt (kg)

Vij = random effect which are assumed to be iid N (0, σ)

Uij = technical inefficiency effect, which is assumed to be independent of Vij. If Uij=0, then there

is no technical inefficiency occurring, therefore the production lies on the stochastic frontier. IF

Uij >0, then the production lies below the frontier and is inefficient.

The absolute value of Uij is expressed as follows:

Uij=δ0 +δ1Z1 +δ2Z2 +δ3Z3 +δ4Z4 + δ5Z5+ δ6Z6+ δ7Z7 …………….3.2

where,

Uij= technical inefficiency or characteristics related to inefficiency;

Z1 =age of processors in years

Z2 = level of education (years of formal education)

Z3 = years of experience in GNO processing;

Z 4 = gender (1 male, 0 female);

Z5 = household size (actual number of members);

Z6 = marital status (1 married, 0 otherwise)

Z7 = Cooperative participation (1menber, 0 otherwise)

The model used to evaluate the efficiency in modern processing is presented below.

Page 80: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

64

LnY =β0+ β1lnX1 + β2lnX2+ β3lnX3 +β4lnX4 + (vij – Uij)………….. 3.3

Where,

Y = output of processors (GNO +GNC) (kg)

X1 = Raw groundnut seeds (kg)

X2 = Labour (hours)

X3 =Maintenance of equipment/machines (N)

X4 = Price of raw groundnut (N)

The inefficiency model was given as follows:

Uij=δ0 +δ1Z1 +δ2Z2 +δ3Z3 …………………….3.4

where,

Uij= technical inefficiency or characteristics related to inefficiency;

Z1 = level of education (years of formal education)

Z2 = years of experience in GNO processing;

Z 3 = gender (1 male, 0 female);

The maximum likelihood estimation of the βs and δs coefficients above was done simultaneously

using the Frontier 4.1c computer programme by Coelli (1996). Hypotheses were tested using the

generalized likelihood ratio test statistic λ = - 2lnL (H0) – lnL(H1), where L(H0) and L(H1) are

values of the likelihood function under the null (H0:) and the alternative (H1:) hypotheses

respectively. If γ= δ0 = δm (m=1 …….h), then inefficiency effects are not present and

consequently each firm in the sample operates on the frontier. It should be noted that γ=0 if there

is no difference between the null and alternative hypotheses, and if not the likelihood function

(LF) will diverge. Asymptotically the λ follows the χ2 (mixed χ2

) distribution hence the statistical

significance can be tested at a chosen α with degree of freedom equal number of restrictions.

Page 81: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

65

3.4.2 Profit Function Analysis

As a prelude to the estimation of the profit function, gross profit margin was adopted to estimate

the average costs and returns per week to the processors who processed groundnut oil for the

achievement of part of objective three. The model is given as;

GM = TR – TVC ………….. .. 3.5

Where,

GM= Gross margin (in Naira); TR = Total Revenue (in Naira); TVC = Total Variable Cost (in

Naira).

The generalized profit function model is expressed thus:

π* =π*(py1py2, p1, p2,p3;z1,z2) ……………….3.6

Where;

π* = amount of maximum variable profits (GM) from sales of GNO and GNC per week

py = price of output GNO and GNC (N)

p1= per unit price of groundnut (N)

p2= per unit price of labour (N/man hour)

p3=per unit price of fuel wood (N)

p4=per unit price of packaging (N)

p5= per unit price of transportation cost (N)

P6 = per unit price of salt (N)

Zs are fixed cost items and so were not anaysed because the analysis is based on the short run

effects of input costs, Arene (2002). The result of the regression analysis was evaluated on the

basis of the coefficient of multiple determination (R2), t-values and the F-values for the

respective states studied.

Page 82: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

66

3.4.3 Value addition model

Value addition is the difference in value of agricultural product before and after processing

(Gitinger 1972; Brown, 1986). Brown et al, (1994) explained further that the difference between

the cost of ingredients and the ex-factory or post processing price of the finished product is the

value added through processing. This could be gross value added or net value added. It was

applied to achieve part of objective 4.

In this study the gross value added was determined as follows:

Va = Vp – Vb ……………….. 3.7

Where

Va = Value added to raw groundnut after processing (N/tonne)

Vp = value of processed groundnut products (GNO and GNC) from one tonne of

groundnut (N)

Vb = value of unprocessed groundnut per tonne (N)

This can also be presented in percentage as follows

Va% = Vp – Vb/Vp x100 …………………. 3.8

A test of significance was done to verify the null hypothesis (H0: X1 = X2), given as

t = X1 – X2/√σ21 +σ2

2/N1 +N2 -2 …………………. 3.9

Where

t = test statistic

X1 = mean value of groundnut before processing

X2 = mean value of processed groundnut products (GNO&GNC).

σ1 = variance of value of groundnut before processing

σ2= variance of Value of groundnut products (GNO&GNC)

N1 and N2 are equal sample sizes

Page 83: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

67

When the value of input used in processing is subtracted from va in equation (3.7) above,

we obtain net value added. This principle can be applied at any point in the value chain to

determine value added at that point.

3.4.3 Johansen trace test (a measure of market integration)

This is based on the maximum likelihood estimation of the error correction model. This is for the

attainment of part of objective 5 of the study, (Chirwa, 2000; Asche et al, 2005). The model

underlining the co-integrating VAR option is given by the VECM thus:

Xt = a0t + αβXt-1 + ∑ГiXt-1 + Ut ………………….. 3.10

Where,

Xt = wholesale (processors) prices in market i) with respect to GNO, GNC per week;

mt x1 vector of jointly determined I (0) variable.

a0t = intercepts, an mt x1 vector

αβ = the long run multiplier matrix of order mx1(ECM)

Гi = mx1 (n=number of lagged difference of Xt) coefficients of lagged Xt variables

= change operator

Ut = error term

The ECM model estimation was preceded by Augmented Dickey-Fuller (ADF) unit root test, to

test the non-stationarity of the series or otherwise.

The Johansen trace statistic for testing the null hypothesis of r co-integration relationships was

given as LRtrace(r/k) = -T∑r+i log (1-λi), where λ is the largest eigenvalue of the П matrix, and T is

the sample size.

3.4.4 Determinants of market integration

An empirical model for analysing the determinants of market integration for the attainment of

part of objective 5 in this study is expressed as follows:

Yij = ao + β1x1 + β2X2 + β3X3 +β4X4 + ε …………………. 3.11

Page 84: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

68

Where

Yij = the Johansen bi-variate trace statistics for paired markets as a measure of market

integration for GNO and GNC

X1 = the shortest distance between market i and market j (km) proxy for transport cost,

X2 = the number of telephones owned by processors in markets i and j,

X3 = average no of groundnut processing facilities in markets i and j,

X4 = membership of groundnut processing associations in districts of markets i and j,

X5 = administrative regulations on groundnut oil (dummy) in markets i and j, and

ε = error term.

Page 85: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

69

CHAPTER FOUR

RESULTS AND DISCUSSION

This chapter presents the results and discussion of the study on traditional and modern

groundnut processing and marketing in North Central Nigeria. Firstly, it examined the socio-

economic characteristics of groundnut oil processors; then described the groundnut processing

and marketing systems and hence the processing value chain; examined the input use efficiency

in groundnut processing and the factors that made for efficiency. It also dealt with the

profitability of processing and the marketing of groundnut oil (GNO) and groundnut cake

(GNC), and the factors that determined profitability. It also assessed the value added by

processing groundnut into oil and cake; and examined the integration of GNO and GNC markets

and the factors that influenced market integration. Finally it examined the problems of GNO

processing industry in the study area.

4.1 Socio-economic Characteristics of Traditional and Modern Groundnut Oil Processors

in North Central Nigeria

The socio-economic characteristics of groundnut oil processors in North Central Nigeria

(NCN) are shown in Table 4.1. This is presented for traditional processors and modern

processors.

4.1.1 Age distribution of groundnut oil processors.

The age distribution of the processors in the selected states (Table 4.1) shows that 45% of

the traditional processors in Nasarawa State and 56% in Niger state were aged between 31 and

40 years, constituting the largest group of respondents. In Benue State, the age group 21 to 30

years was the highest with 33%. The lowest group was that of those aged 51 years and above

having 17% in Benue State; 7% in Nasarawa State and 1.67% in Niger State.

Page 86: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

70

In the pooled result for the North Central Nigeria, the age group, 31 to 40 years, was the

highest with 42% and the lowest was 51 years and above with 8%. Among the modern

processors, this age group was also the highest with 47%. The average age of traditional

processors in the entire North Central Nigeria was 38years. The minimum age of 20 years was

found in Benue State and the maximum age of 65 years was in Niger State. For modern

processors the average age was 41 years with a minimum of 28 years and a maximum of 58

years.

4.1.2 Gender distribution of the processors

The gender distribution of the processors also presented in Table 4.1 shows that 97%,

96% and 94% of the traditional processors in Benue, Niger and Nasarawa States, respectively,

were female. The males were 3%, 4% and 6% for the respective states. This showed that women

were more involved in small-scale traditional GNO processing than men, probably because of

their involvement in processing food for home consumption. This agrees with Bruinsma & Nout

(1991) that more women are involved in food processing because of their domestic role in

processing food for home consumption.

For the North Central Zone, the females accounted for 94.86% of traditional processors

and males, 5.14%. In modern processing, 88.2% were males and 11.76%, females. This drastic

switch in gender participation might be attributed to the fact that female processors did not have

the needed capital to invest in modern processing requiring modern machines and processing

technologies. This agreed with Bruinsvma & Nout, (1991) and Bruinsma (1999) that an inverse

relationship existed between investment in processing and women participation in agro-

processing. They also reported a direct relationship for men; which is also shown in their

participation in modern processing.

Page 87: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

71

4.1.3 Marital status

The results showed that most of the traditional processors in the states were married.

Ninety eight percent of them were married in Niger State while Nasarawa and Benue States had

96% each. The result for the entire North central zone showed that 96.6% of the traditional

processors were married. For modern processors, all (100%) of them were married. The result

implied that most of the processors were married and needed to work so as to earn some income

to support their families, hence their involvement in small-scale groundnut oil processing and

marketing.

4.1.4 Household size

The household sizes for the states, the zone and modern processors are also shown in

Table 4.1. The household size of 6 to10 persons was the highest in all the states, with the highest

percentage in Niger State (70%) and lowest in Nasarawa State (54%). This was followed by

household size of one to five persons with the highest percentage in Nasarawa State (25%) and

lowest in Niger State (11%). Other details are as shown in the Table. For both the traditional

processors and small-scale modern processors in the zone, processors with six to ten persons per

household were still dominant with 61.71% and 58.83%, respectively. The average household

sizes for the states were eight persons for Nasarawa State, seven persons for Benue State and

eight persons per household for Niger State. The maximum household size for traditional

processors in the zone was 25 persons per household and the minimum was one, with a mean of

eight persons per household.

For modern processors, household size of six to ten persons was the highest with 58%.

Their maximum household size was nineteen persons per household, and a minimum of three

persons with a mean of 7.5 ≈ 8 persons. Household size is important because it provides cheap

Page 88: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

72

and available labour in traditional processing especially in groundnut roasting, polishing, and

cake moulding and frying. This result agrees with findings of Otitoju & Arene (2010), that

households of farmers in Benue State in North Central Nigeria had an average household size of

seven persons.

4.1.5 Educational level of processors

For the traditional processors (Table 4.1) those with less than three years of formal

education were more, with 72% in Nasarawa State and 53% in Benue. This was followed by

those with 4 – 6 years (primary education) with 51% in Niger State. The highest average years of

education was in Niger State with 6.4 years and the lowest in Nasarawa State with two years.

The average for North Central Nigeria was four years of formal education. This showed that

most traditional processors only attempted primary education which may explain why they have

remained at that level of processing.

For the modern processors, those in the range of 13years and above of formal education

were the highest with 47%, followed by those with 7-9 years of formal education (41%). The

average years of education for modern processors were thirteen years; the maximum was

eighteen years and the minimum was four years. This implied that modern processors of

groundnut oil were more educated than the traditional processors. This implied too that education

had positive effect on the level of investment in processing, consequent upon access to modern

processing technology, information and risk bearing abilities.

4.1.6 Cooperative participation

The result in Table 4.1 indicated that majority of traditional processors did not belong to

any processing co-operative organization. They were 84% in Nasarawa State, 100% in Benue

Page 89: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

73

State and 93% in Niger State. For the zone, 91% did not belong to any co-operative organization.

All (100%) of modern processors were not members of any processing and marketing co-

operative. The implication is that the derivable benefits in co-operative organization are missed

by these processors. Processing and product marketing experiences and information could not be

shared. So also information concerning raw materials availability and processing technologies

were not readily accessed by the processors. This in another perspective portrays the competitive

nature of the industry in which processors acted independently in their processing and marketing

decisions. However the processors requested to be assisted to form cooperatives and self-help

organizations in their communities.

4.1.7 Years of experience

Table 4.1 also shows the processors’ years of experience in groundnut oil processing.

Sixty percent were those with 11- 20 years experience and were found in Niger State; 45% in

Nasarawa Sate and 28% in Benue State. They were the highest in the North Central zone with

45%. Those with 21 – 30 years and above of experience were fewer.

The average years of experience were 15 years in Nasarawa State, 13 years in Benue

State and 12 years in Niger State. The average year of experience for the zone was 14 years, with

the maximum being 35 and minimum one year. For the modern processors, those with 1 -10

years experience were 88.24% while those with 11 – 20 years had 11.96%. The average years of

experience were 6.5 years. The maximum was 15 years and the minimum was two years. This

indicated that years of experience were high enough for the processors to have acquired wealth

of experiences to enable them carry on their processing and marketing activities effectively.

Most of them actually learned the trade through experiences gathered from apprenticeship with

their parents, neighbours or established processors

Page 90: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

74

Table 4.1 Distribution of traditional and modern groundnut oil processors by socio-

economic characteristics Variable Nasarawa

N = 70

Benue

N = 45

Niger

N = 60

North Central

N = 175

Modern

N=17

Freq (%) Freq (%) Freq (%) Freq (%) Freq (%)

Age in years

21 – 30 16 (22.86) 17 (33.33) 6 (10) 39 (22.28) 1 (5.88)

31 – 40 32 (45.71) 9 (20.00) 34 (56.67) 75 (42.86) 8 (47.06)

41 – 50 17 (24.29) 11 (24.44) 19 (31.67) 47 (26.86) 7 (41.18)

51 – and above 5 (7.14) 8 (17.78) 1 (1.67) 14 (7.99) 1 (5.88)

Mean 38.34years 38.6years 37.9years 38.3years 41.2years

Max 60 65 55 65 58

Min 25 20 26 22 28

Gender

Male 6 (8.58) 1 (2.22) 2 (3.33) 9 (5.14) 15 (88.24)

Female 64 (91.42) 44 (97.78) 58 (96.67) 166 (94.86) 2 (11.76)

Marital Status

Married 67 (95.71) 43 (93.55) 58 (96.67) 169 (96.57) 17 (100)

Single 2 (2.86) 2 (4.44) 1 (1.67) 5 (2.86) 0 (0.00)

Widow 1 (1.43) 0 (22) 11 (1.0) 1 (0.57) 0 (0.00)

Household Size (No. of persons)

1 – 5 18 (25.71) 10 (22.22) 7 (11.67) 34 (19.43) 5 (29.41)

6 – 10 38 (54.29) 28 (62.22) 42 (70.00) 108 (61.71) 10 (58.83)

11 – 15 7 (10.00) 7 (15.55) 9 (15.0) 24 (13.7) 1 (5.88)

15 – and above 7 (10.00) 0 (00) 2 (3.33) 9 (5.14) 1 (5.88)

Mean(persons) 8.6 7.3 8.4 8 7.5

Max 25 12 20 25 19

Min 3 1 2 1 3

Education level (years)

1 – 3 51 (72.86) 24 (53.33) 11 (18.34) 86 (49.14) 1 (5.88)

4 – 6 16 (22.86) 8 (17.78) 31 (51.68) 53 (30.29) 1 (5.88)

7 – 9 2 (2.86) 5 (11.11) 4 (6.68) 11 (6.29) 7 (41.18)

10 – 12 2 (2.86) 7 (15.55) 14 (23.34) 23 (13.14) -

13 and above 1 (1.49) 1 (2.22) 0 2 (1.14) 8 (47.06)

Mean (years) 2.02 3.69 6.4 4 13

Max 12 14 12 14 18

Min 0 0 0 0 4

Co-operative participation

Yes 11 (15.171 0 (0.00) 4 (6.67) 15 (8.57) 0 (00)

No 59 (84.26) 45 (100) 56 (93.33) 160 (91.43) 17 (100)

Years of Experience

1 – 10 24 (34.29) 25 (55.55) 22 (36.67) 71 (40.57) 15 (88.24)

11 – 20 32 (45.71) 12 (26.66) 36 (60) 80 (45.71) 2 (11.76)

21 – 30 12 (17.14) 5 (11.11) 2 (3.33) 19 (10.86) - (0.00)

31 and above 2 (2.86) 3 (6.67) 0 (0.00) 5 (2.86) - (0.00)

Mean (years) 15.67 13.58 12.73 14.13 6.45

Max 35 35 25 35 15

Min 2 1 5 1 2

Source: Computed from field survey data, 2010/2011

Page 91: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

75

4.2 Groundnut Oil Processing, Marketing systems in the Study Area

In this study, the traditional and the small-scale modern processing methods were

practiced. The traditional method applied some mechanical and modern methods in its activities;

therefore, there may not be a purely traditional method of groundnut oil processing. Hence, a

description of traditional and small-scale modern processing seemed more appropriate because

all the operations were small-scale; though most modern groundnut oil processing activities were

automated and processed larger quantities than the traditional methods. The major activities in

groundnut oil processing industry, as in other agro-processing schemes, began with the

procurement of raw groundnut from rural and urban markets and farmsteads. The raw groundnut

was then transported to the processing sites for processing. The final stage was the marketing of

the processed products. In this study the products marketed were groundnut oil (GNO) and

groundnut cake (GNC). The groundnut oil processing chain is shown figure 4.1

The major buyers of GNO included traders, consumers, food processors,

bakeries/catering firms, and oil processing and packaging companies. The major buyers of GNC

from traditional processors were consumers, retailers and other traders from far north and eastern

states; and food/meat processors such as the ‘suya’ steak meat roasters. The GNC from modern

processors was sold entirely to the feed mills and poultry farms, and used for animal feeds only.

Page 92: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

76

Fig 4.1: Groundnut oil processing chain in North Central Nigeria

Source: Computed from field survey data, 2010/2011

Farms

Raw groundnut

Transportation

Processing Pre - treatment

Cake frying

Oil expelling

Products

Groundnut cake Consumers

Feed mill

Groundnut oil Consumers

Distribution

Canning/Bakery

Food/manufacturers

Traders

Consumers

Oil Packaging

Consumers

Consumers

Poultry feeds

Food processors

Farm inputs

Page 93: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

77

4.2.1 Procurement (traditional and modern)

This activity involved organizing the purchase and transportation of required raw

groundnut from rural markets, urban markets, farm stead and other sources to the processing

sites or mills. These sources were scattered in markets and locations within the local government

areas, states and even outside the states. Hence, organizing and buying the needed quantity of

raw groundnut for all year processing was very challenging especially for modern processors.

In this study, 81% of raw groundnuts procured by traditional processors in Nasarawa

State was from farmers while 19% was from traders (Table 4.2). In Benue State, it was 51%

from traders and 49% from farmers. Niger State was 55% from traders and 45% from farmers.

For the North Central zone, 60% was obtained from farmers and 40% from traders, for

traditional processing. For the modern mills, 94% of their entire groundnut came from traders

and agents, while only 6% came from farmers directly.

The respective quantities and value of the groundnuts procured per state and the zone are

also shown in Table 4.2. The highest quantity procured and processed by traditional processors

was in Nasarawa State with 263kg/week valued at N36, 632. This was followed by Benue State

with 100.5kg worth N16, 417. The least was in Niger State with 46.9kg valued at N5, 878. The

maximum and minimum quantities procured are also shown in Table 4.2. The average quantity

of groundnut procured by the traditional processors in the zone was 147kg worth N20, 889,

while the modern processors procured an average of 6, 222kg per week valued at N897, 906. The

maximum and minimum quantities procured by modern processors are also shown in the table.

Page 94: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

78

Table 4.2 Statistical summary of activities of traditional and modern processors in North

Central Nigeria

Variable Nasarawa Benue Niger NCN Modern

Major source of G/nut

Farmers 57 (81%) 22 (49%) 27 (45%) 106 (60%) 1 (6%)

Traders 13 (19%) 23 (51%) 33 (55%) 69 (40%) 16 (94%)

Ave. quantity purchased (kg)/ wk

Mean 263.68 100.25 46.9 147.33 6222.363

Max 1680 350 7 1680 60000

Min 35 16.8 7 7 560

Value of G/nut per wk (N)

Mean 36, 632.14 16, 417.67 5, 878.17 20, 889.91 897, 906

Max 240, 000 65, 000 32, 400 240, 000 10,

285,716

Min 3, 500 3, 000 750 750 64, 000

Price of G/nut/kg per wk(N)

Mean 197.6 241 160 199 15, 197

Max 265 314 180 314 17, 000

Min 140 158 150 140 8, 000

Qty of GNO obtained/wk (251)

Mean 5.02 1.73 0.67 2.94 2436.28kg

Max 3.6 4.8 3.4 36 27000kg

Min 1.5 0.3 0.06 0.06 201.6

Qty of GNC obtained (basin)

Mean 9 3.36 2.34 4.39 2756.29kg

Max 38 11 7.3 38 30000kg

Min 2 1 0.3 0.3 300kg

Filtering oil

Yes 39 (56%) 14 (33%) 18 (30%) 71 (40%) 5 (30%)

No 31 (44%) 31 (67%) 42 (70%) 104 (60%) 12 (70%)

Additives/fortification

Yes 2 (3%) 0 (00%) 10 (17%) 12 (7%) 3 (18%)

No 68 (97%) 45 (100%) 50 (83%) 163 (93%) 14 (82%)

Adequate Electricity

Yes 15 (21%) 10 (22%) 18 (30%) 43 (25%) 0 (00%)

No 55 (79%) 35 (78%) 42 (70%) 132 (75%) 17 (100%)

GSM ownership

Yes 44 (63%) 40 (88%) 54 (90%) 138 (79%) 17 (100%)

No 26 (37%) 5 (12%) 6 (10%) 37 (21%) 0 (00%)

25litre GNO = 25.2kg; 1basin of traditionally processed GNC = 22.6kg Source: Computed from field survey data, 2010/2011

Page 95: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

79

4.2.2 Traditional processing method

Pre-treatment of raw groundnut seed:-These were the activities carried out on the groundnut

itself before oil extraction took place. These involved decorticating (shelling) the groundnut, if

bought unshelled, cleaning, drying the groundnut, scorching/frying, polishing and then crushing

into paste before feeding it into the oil expelling machine. Decorticators of various throughputs

were used for shelling. Hand shelling was also done in some rural communities. The groundnut

was further cleaned to remove any leftover shell, stones and other impurities. It was further dried

to enhance scorching/roasting process.

The frying/scorching process in the traditional method was done manually. This required

the following equipment: local oven made of clay or a tripod of stones, frying pan, trays, stirrers

and pebbles to mix with the groundnut, and firewood to provide the heat. Frying was done lightly

to enhance polishing. This process brought out the desired aroma in the oil and cake which was

preferred and consumed by people, commonly referred to as the aromatic roasted peanut oil and

cake. The Institute of Agricultural Research (IAR) Ahmadu Bello University has designed some

simple manually operated roasters and expellers, that are also commonly used (IAR, undated).

Polishing is the removal of the testa (skin of the groundnut) from the scorched groundnut.

In this study, all the traditional processors used the polishing machine for this purpose, which

were just the normal hammer mills. The machines were reset not to crush or grind the groundnut,

but to loosen the testa for easy winnowing. This process was done at cost per quantity polished.

The processors paid the owner of the mill for the service an average of N67 per bag (Table 4.9).

This machine can be acquired at a cost of between N30, 000 and N50, 000; most of which were

diesel/petrol engine driven due to unavailable electricity, even though the electric motor driven

machines were more efficient and did cleaner jobs than the diesel and petrol engine driven

machines.

Page 96: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

80

Crushing/Pasting: This involved crushing the groundnut into paste to enhance oil removal. The

roasted and polished groundnut was blended in the milling machines which were similar to those

used in polishing, except for the adjustment in the grinding unit, this time to mill the groundnut

into paste.

Oil extraction: For extraction of the oil, the paste was fed into drum-like machine with a central

shaft that spun. As the machine spun, oil gathered and was collected. In some designs, there were

grooves through which the oil was collected. The oil was collected into containers while the cake

was also removed preparatory to frying.

Though electric driven machines were preferred because of more efficiency and better

jobs, diesel/petrol machines were prevalent due to inadequate and irregular electricity supply.

Most of these machines ran as contract mills providing polishing, crushing and expelling services

to processors and not getting involved in other aspects of the processing. These machines could

cost up to N70, 000 on the average. The oil obtained was normally used to fry the cake. This also

reduced the moisture content of the oil after which it was packaged for sale.

Cake moulding/frying: The cake in this method was moulded into different shapes and sizes for

frying. Additional labour was always required for moulding cake. The smaller the size of the

cake the better the fry level and this stored best. After moulding the cake, it was fried-dry in

frying pans over the oven for some minutes in the oil, after which it was cooled off and packaged

for the market.

4.2.3 Modern processing method

In this method, large capacity expellers and oil press machines were used, though the

activities were automated and large quantities of groundnut could be processed within a short

time period. The principle was similar to the traditional method except for the scale and level of

automation which also varied depending on the machine type and capacity. In this study, two

Page 97: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

81

major levels of modern processing existed. These were the single unit machines and the large

systems of machines. The single unit machines had capacities ranging from 0.5 tonnes of

groundnut (GN) per day to 10 tonnes per day. In this set up, some pre – treatment such as heating

and steaming were done before feeding the groundnut into the expeller. Groundnut was crushed

and oil expelled through a unit and the cake through the other opening in the machine. The oil

was collected into drums and the cake was also packed for sale. In some types, no frying or

steaming of the groundnut was done, hence the oil and cake came out raw. In this method, the oil

is referred to as cold press peanut oil. The cake from this unit was only used for animal feed. The

oil was further heated for 30minutes and salted before packing into 25 litre containers. The

machines and equipment required were electric motor or diesel generators, oil expeller, drums,

shovel, funnels, and plastic rubber containers. The common expeller model is the 105 Golden

Star of 5 – 10 horse power.

In the large, fully automated processing mills, all operations were mechanized. Some had

capacities to process groundnut and soya beans, and could process up to 10 tonnes or more of the

raw materials per day. In this method, the groundnut with shell or seed/shell was fried in the

cooker, moved to steamer (smaller cookers), then through the conveyors to the expellers, where

the oil was extracted. The oil dropped on another conveyor and was conveyed to the filter tank. It

was then moved to the batch refiner and finally to the storage tanks and sold. The cake was

conveyed via the cake elevator to the hopper from where it was bagged.

The GNO in this method was further checked for free fatty acid (FFA), and moisture

content (MC). If high, further refining was done to bring the MC to 0.02. If the free fatty acid

(FFA) was high it was also refined to the required level. Vitamin A and iodine were also added

to meet market standard. In this process the refined groundnut oil was gotten. The oil was then

sold to buyers who were GNO packaging firms or manufacturers or traders. The cake was also

Page 98: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

82

sold to animal feed firms or animal farms. The price per kg of the cake depended on the crude

protein content.

Equipment used in this type of processing included boilers to supply the heating, big

cookers, small cookers, expellers, conveyors, several motors, storage tanks, refiners, flakers,

softeners, crushers, and dis-stoner. Processing mills bought and stored their raw materials

(groundnut) to last till the next harvest season.

4.2.4 Marketing

Product marketing commenced immediately after processing activities. The products sold

were the groundnut oil (GNO) and groundnut cake (GNC). For traditional processors in

Nasarawa State, 57% of them sold their products both at the processing sites and the markets,

30% sold in the markets and 13% sold only at the sites, (Table 4.3). In Benue State, 33% sold at

the sites and 42% sold both in the markets and the sites while 25% sold only at the sites. In

Niger State, 30% sold in the markets and 32% at the processing sites. For the North Central zone,

47% sold at sites and the markets, 29% sold in the markets only, while 24% sold at the

processing sites. For modern processors, 76% of the firms supplied to buyers at their respective

locations, and only 12% sold at the sites.

Pertaining to unit of sales, Table 4.3 also shows that traditional processors sold their

products in small quantities probably to meet the needs of small buyers. Ninety percent in Niger

State, 66% in Nasarawa State, 34% in Benue State sold in small units. In the entire North Central

Zone 60% sold in small units. Some traditional processors also sold in larger units of 25litres

containers; 65% of them were in Nasarawa State; 44% in Benue State and only 10% in Niger

State. All the modern processors (100%) sold their products in larger quantities in 25litres cans,

drums and tankers.

Page 99: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

83

Concerning availability of markets for processed products in the study area (Table 4.3),

98% of the traditional processors in Niger State, 94% in Nasarawa State and 58% in Benue State

agreed that there was adequate market for groundnut oil. In the North central zone it was 86%.

All modern processors (100%) agreed that there was good market for GNO, and they received

bookings for products ahead of production. The problem of low market for GNO faced by

traditional processors in Benue State, particularly Makurdi, was attributed to inadequate market

information resulting in large inventory of unsold products. This resulted in alternate day

marketing of products. That is processors, sold only on market days allocated to them by the

market association; a kind of quota sales. In the market for groundnut cake, 98% in Niger State;

96% in Nasarawa State and 76% in Benue State agreed that there was good market for groundnut

cake. In the North Central Zone, 91% said the market was good. For modern processors, the

market was favourable because all their cake was sold even ahead of production. Only a few

traditional processors, 4% in Nasarawa State, 24% in Benue State and 2% in Niger State said

there was no market. Also a few, 9% for North Central Zone said there was no market.

Customers’ patronage of the products of traditional and modern processed products is

also shown in Table 4.3. It was observed that purchases of GNO by consumers, from traditional

processors were highest in Benue State with 96%; 93% in Niger State and lowest in Nasarawa

State with 27%. It was 67% in the entire zone. Only 18% of the consumers bought GNO from

modern processors. Wholesalers’ purchase of GNO produced by traditional processors in

Nasarawa State was 71%; 27% and 20% in Benue and Niger States, respectively. The result for

the central zone showed that wholesalers’ purchase was 42%. For the modern processors, 94% of

their sales were to wholesalers. Retailers were the highest (94%) customers of GNO from

traditional processors in Nasarawa State; 100% in Benue State and 95% in Niger State. In the

entire zone, it was 96%, and 88% from modern processors. Fewer manufacturers and processors

Page 100: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

84

(packaging firms) bought GNO in the study area, but usually in larger quantities, see also table

4.3. These processors included an oil processing and packaging company with a factory in Jos.

It was observed here that major buyers of GNO from traditional processors were the

retailers, consumers and followed by wholesalers (Table 4.3). The retailers bought and sold

within their communities or nearby markets; while the wholesalers came from distant markets in

the eastern and northern states to buy the products for sell in their home markets. With respect to

groundnut cake, consumers were the highest buyers of GNC produced by traditional processors.

This was seen in 66% of them in Nasarawa State; 100% in Benue State and 94% in Niger State

and 86% for the North Central Zone. No consumer bought GNC from modern processors. It is

also noted that wholesalers patronized 76% of the processors in Nasarawa State, and less in other

states. No wholesalers patronized modern processors’ cake. Ninety seven percent (97%) of the

retailers in Nasarawa State; 96% in Benue State and 95% in Niger State bought cake from

traditional processors. For the zone it was 96% of the retailers that bought GNC from traditional

processors and no retailer bought GNC from modern processors. Very few manufacturers and

processors bought GNC from traditional processors. It was noted that retailers and consumers

were the major buyers of GNC from traditional processors, followed by wholesalers. Retailers

bought and sold within their communities. Consumers bought to eat, drink with ‘gari,’ make

local salad, while manufacturers used it in food processing e.g. steak meat and/or mixed with

vegetables among others. All the cake (100%) processed by modern processors were sold to

manufacturers; animal feeds makers in farms and feed companies, who normally placed order

ahead of production. The cake from modern processors was not consumed by humans because of

the method of processing, but used for animal feeds.

Page 101: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

85

Table 4.3 Marketing activities of processors in the States and North Central Nigeria

Source: Computed from field survey data, 2010/2011

Variable Nasarawa

(70) (%)

Benue

(45) (%)

Niger

(60) (%)

NCN

(175) (%)

Modern

(17) (%)

Available market GNO

Yes 66 (94) 26 (58) 59 (98) 151 (86) 17 (100)

No 4 (6) 19 (42) 1 (2) 24 (14) 0 (00)

Available market GNC

Yes 67 (96) 34 (58) 59 (98) 160 (91) 17 (100)

No 3 (4) 11 (24) 1 (2) 15 (9) 0 (00)

Distribution of GNO customers

Consumers 19 (27) 43 (96) 56 (93) 118 (67) 3 (18)

Wholesalers 50 (71) 12 (27) 12 (20) 74 (42) 16 (94)

Retailers 67 (96) 45 (100) 57 (95) 169 (96) 15 (88)

Manufacturers 5 (7.14) 15 (33) 7 (12) 27 (15) 6 (29)

Processors 10 (14) 0 (00) 0 (00) 10 (6) 1 (3)

Distribution of GNC customers

Consumers 46 (66) 45 (100) 59 (93) 150 (86) 0 (00)

Wholesalers 53 (75) 7 (16) 11 (18) 71 (41) 0 (00)

Retailers 68 (33) 43 (96) 57 (95) 168 (96) 0 (00)

Manufacturers 6 (8.57) 31 (69) 12 (20) 49 (28) 17(100) poultry

Processors 0 (00) 0 (00) 1 (2) 1 (0.5) 0 (00)

Sales location

Processing sites 9 (13) 15 (33) 19 (32) 43 (24) 2 (12)

Markets 21 (30) 11 (25) 18 (30) 50 (29) 13 (76)

Both 40 (57) 19 (42) 23 (38) 82 (47) 2 (12)

Sales in units

Smaller units 22 (32) 30 (67) 54 (90) 106 (60) 0 (00)

Both large/small 48 (68) 15 (33) 6 (10) 69 (40) 17 (100)

Page 102: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

86

4.3. Input Use Efficiency in Traditional and Modern Groundnut Oil Processing in North

Central Nigeria

The result of the analysis of technical efficiencies of traditional and modern groundnut oil

processors is presented in this section. The parameters of maximum likelihood estimation (MLE)

of the stochastic frontier function adopted is discussed and presented in Tables 4.5, 4.6 and 4.7.

This is for traditional processors in Nasarwa, Benue and Niger States; as well as for the zone and

modern processors in the selected states. To validate the results from the stochastic frontier

analysis (SFA) models for purpose of analysis, test of hypotheses was done to show the presence

of inefficiency in the models, else the model could be analysed with the ordinary least square

(OLS) method (Coelli 1996; Saris & Kariagianis, 2006). This was achieved with the likelihood

ratio test and the result is presented in Table 4.4. The null hypothesis (H0 :) that γ=δ0=δm=0

indicating that technical inefficiency was not present in the models was rejected at various levels

of significance of alpha. This implied that there existed some level of inefficiency in the

processing activities of processors, hence the models were appropriate for analysis (Ajibefun &

Daramola, 2003; Osborne & Trueblood, 2006; Bamire, Oluwasola & Adesiyan, 2007).

Page 103: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

87

Table 4.4 Generalized log likelihood-ratio tests of the complete technical efficiency of

groundnut oil processors (γ=0) in North Central Nigeria

Processors Log likelihood

function

λ Critical value

(χ2)*

Decision

Nasarawa State -678.61 15.00 13.36 (α = .100) Reject

Benue State -441.84 38.83 20.09 (α = .010) Reject

Niger State -523.49 6.34 5.07 (α = .750) Reject

North Central -1630.49 3.97 3.49 (α = .900) Reject

Modern -116.90 13.16 NA -

* Critical values (8 degrees of freedom) obtained from table D.4 pp 988-989 in Gujarathi (2007), the

abridged table from table of percentage points χ2 (at α) by E. S. Pearson & H. O. Hartley eds. Biometrika

table for statisticians Vol. 1,3d., table 8, Cambridge University Press, New York, 1966

Source: Computed from field survey data, 2010/2011

The maximum likelihood estimates of the parameters for the models estimated for

traditional processors in the States and the zone are presented in Tables 4.5, 4.6 and 4.7. The

results from technical efficiency aspect indicated that raw groundnut (X1), was significant at 1%

level of probability in Nasarawa and Niger States, but not significant in Benue State (Tables 4.5

and 4.7). It had positive coefficient in all the States. This explains the fact that quantity or quality

of raw groundnuts for processing determined, to a very large extent the yield of groundnut oil

(GNO) and groundnut cake (GNC) obtained. Labour (X2) was also significant in Nasarawa State

at 1% level of significance (LOS), but not significant in Benue and Niger States. Labour

coefficient was negative in all the States, except in Benue State. This suggests caution in labour

use, so as not to exceed its marginal productivity. Fuel-wood (X3) was significant at 5% in Benue

State with positive coefficient. It was not significant in Nasarawa and Niger States. Salt (X4) was

significant in Nasarawa State at 1% LOS and positive.

Page 104: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

88

In the inefficiency model, age (Z1) was significant in Nasarawa and Niger States at 1%

LOS. Age coefficient was negatively signed in all the States, implying that increase in age

reduced inefficiency of the processors. This is plausible because age goes with accumulation of

experiences, knowledge and human capital development capable of reducing inefficiencies.

Level of education (Z2) was significant only in Nasarawa State at 10% LOS with negative

coefficients in all the States. This also implied that the level of education reduced inefficiencies

in traditional processing. Years of experience (Z3) was significant at 1% LOS in Benue and

Niger States, and significant at 5% LOS in Nasarawa State. The years of experience coefficient

in all the States except Niger State were negative. Gender (Z4) was significant at 1% in Niger

State, and 5% in Nasarawa State. Marital status (Z5) was only significant in Nasarawa State at

5% LOS and negative. Household size (Z6) was also significant at 5% LOS and negative only in

Nasarawa State. Cooperative participation (Z7) was significant at 1% LOS in Benue and Niger

States.

The results for the North Central Zone for both traditional and small-scale modern

processors are presented in Tables 4.6 and 4.7. In the pooled data for the zone, labour and salt

were significant at 1% level of significance. Fuel-wood was significant at 5% while raw

groundnut was significant at 10% LOS. In the inefficiency model, household size was significant

at 5% LOS while level of education and years of experience were significant at 10% level of

probability. In small-scale modern processing, raw groundnut and labour were significant at 1%

level of probability (Table 4.7). This underscores the critical nature of these variables. This is in

line with the fact that raw groundnut constitute over 80% of variable input in groundnut oil

processing. Labour marks its importance as procurement, processing and marketing of products

required labour. Maintenance and quality of groundnut were not significant but contributed

Page 105: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

89

positively to efficiency attainment in the processing. Level of education and years of experience

were significant at 1%. Gender had little or no effect in efficiency of modern groundnut

processing.

Efficiency estimates from the model in the various states for traditional processors

indicated that the gamma, γ, statistic was 0.5501 and significant at 1% level of probability in

Nasarawa State, but not significant in Benue State. In Niger State γ was 000.184 and significant

at 1%. For modern processors, the γ statistic was estimated at 0.89 and significant at 5% level of

probability. It is to be noted that γ (0, 1), therefore the closer γ is to one, and the more error

variance is attributable

to inefficiency. If γ is 0 and statistically insignificant then the ordinary least squares (OLS)

method becomes more appropriate tool for this analysis. In this study, inefficiency in the

production (processing) activities has been identified, which is akin to findings of Karagianis &

Saris (2006); Ogundele & Okuruwa (2006) and Bamire et al (2007).

4.3.1Technical efficiency estimates for groundnut oil processors in North Central Nigeria

Frequency distributions of technical efficiency scores as well as the means are reported in

Table 4.8 for traditional processors in the states and the region as well as for small-scale modern

processors. Majority of traditional processors had efficiency scores above 0.80 in all the states

and the zone, except for the modern processors whose efficiency scores were fairly distributed

from 0.56 – 1.0. The mean efficiency in Nasarawa State was 0.880; Benue State, 0.851; Niger

State, 0.979 and for the zone 0.907. For modern processors the mean efficiency was 0.741. The

minimum efficiency score for traditional processors in Benue State was 0.32 and a maximum of

one. In Nasarawa State, the minimum was 0.461and a maximum of 0.999; a minimum of 0.913

and a maximum of 0.998 for Niger State. For North Central zone, the minimum score was 0.32

Page 106: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

90

and a maximum of one; in the small-scale modern processing the minimum efficiency score was

0.473 and the maximum of 0.99 with a mean of 0.804.

The high technical efficiency recorded in this study implied that processors attained

efficiency even though some level of inefficiency was still present. That is, there existed little

chance to improve technical efficiency of the processors given their present state of technology,

if they were operating with such high efficiencies. Ogundelele & Okoruwa (2006) and Amaza et

al (2007) also reported such high efficiencies among rice farmers. Arising from this result, it is

implied that any desire to increase output required change in technology type and hence the

production function of the processors. On the structure of technical efficiency, some firms were

distributed below 0.8 (80%) implying that there was still room for some improvements based on

the technology currently practiced by the processors. Also agro-processing best approximates to

the industrial production than crop and animal production, hence the precision in measurement

and the resultant high efficiency scores.

Page 107: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

91

Table 4.5 Maximum likelihood estimates (MLE) of the stochastic frontier production

(processing) function for traditional GNO processors in Nasarawa and Benue States

Variable Nasarawa Benue

Production model Parameter Coefficient t-ratio Coefficient t-ratio

Constant βo 5427.50 557.81*** -727.22 -40.79***

(9.730) (17.83)

Raw g/nut seeds (X1) β1 258.17 52.65*** 47.64 1.02

(4.903) (46.87)

Labour (X2) β2 -12.76 -3.67*** 5.38 0.42

(3.451) (12.95)

Fuel Wood (X3) β3 -1.975 -1.27 0.310 3.70***

(1.551) (8.40)

Salt (X4) β4 33.45 2.60*** -5.656 -0.18

(12.824) (31.69)

Technical inefficiency model

Age in years (Z1) 76.73 0.350 -1.25 -4.46***

(2.19) (0.28)

Level of education (Z2) -923.25 -1.890* -62.93 -0.48

(488.46) (132.37)

Years of experience (Z3) -842.07 -2.11** -24.80 -5.99***

(399.35) (413.470)

Gender (Z4) 687.73 2.25** 50.694375 0.21

(305.36) (244.21)

Marital status (Z5) 43.29 2.11** -0.5086 -0.14

(20.55) (3.60)

Household size (Z6) -96.89 -2.14** 0.63 0.73

(46.85) (0.86)

Cooperative (Z7) 1906.79 -2.139** 7.49 7.02***

(389.44) (106.61)

Variances

σ2 2750.94E+4 2750.72E+4* 4838E+8 4838E+4***

(1.00007) (1.00000069)

γ 0.5501 4.92*** 00000.30E-4 0.047

(0.1118) (0.6423)

Log likelihood function -678.61 -441.84

***, **, * = 1%, 5% and 10% levels of significance respectively. Values in parenthesis are

standard errors

Source: Computed from field survey data 2010/2011

Page 108: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

92

Table 4.6 Maximum likelihood estimates (MLE) of the stochastic frontier production

(processing) function for GNO processing in Niger state and North Central Nigeria

Variable Niger State (60) North central Nigeria

(175)

Production model Parameter Coefficient t-ratio Coefficient t-ratio

Constant βo 20.97 20.52*** 3284.18 3047.60***

(1.02) (1.077)

Raw g/nut seeds (X1) β1 289.49 98.52*** -14.328 -1.89*

(2.93) (7.624)

Labour(X2) β2 -1.244 -0.99 -2.641 -2.641***

(1.248) (1.073)

Fuel Wood (X3) β3 -0.62 -0.39 1.352 2.11**

(1.59) (0.640)

Salt (X4) β4 -2.81 -0.600 1.335 31.53***

(4.67) (0.0423)

Technical inefficiency model

Age in years (Z1) -0.138 -4.13*** 10.262 1.48

(3.33) (6.939)

Level of education (Z2) -1.78 -1.05 -24.806 -1.88*

(1.69) (13.28)

Years of experience (Z3) 32.78 3.61*** -34.46 -1.78*

(9.06) (19.40)

Gender (Z4) -11.14 -4.57*** 1.160 0.987

(2.42) (1.176)

Marital status (Z5) 0.711 0.699 -3.82 -1.62

(1.01) (2.36)

Household size (Z6) 0.433 0.429 73.29 2.00**

(1.01) (36.56)

Cooperative (Z7) 40.60 3.81*** -1.55 -1.211

(10.64) (1.282)

Variances

σ2 2545.04E+3 2545. 04E+3*** 7658.71E+3 7658.71E+3***

(1.0000) (1.0000)

γ -000.184 5.503*** 0.0000E+3 0.001926

(000.333) (0.00000519)

Log likelihood function -523.49 -1630.49

***, **, * = 1%, 5% and 10% level of significance in that order. Values in parenthesis are

standard errors.

Source: Computed from field data, 2010 – 2011

Page 109: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

93

Table 4.7 Maximum likelihood estimation (MLE) of the stochastic frontier production

(processing) function for modern GNO processors in North Central Nigeria

Variable

Production model Coefficient Standard error t-ratio

Constant βo 522.88 1.003 550.99***

Raw G/N (X1) β1 0.587 0.147 3.991***

Labour (X2) β2 1.763 0.396 4.455***

Maintenance cost (X3) β3 0.0758 0.089 0.848

Quality of g/nut seed(N) (X4) β4 0.0023 0.0017 1.288

Technical inefficiency model

Constant δ0 0.1356 1.003 0.1351

Level of education (Z1) δ1 -14.69 7.596 -1.933*

Years of experience (Z2) δ2 42.87 22.84 1.88*

Gender (Z3) δ3 0.0033 1.000 0.0033

Variances

σ2 148628.1 1.000 148628.4***

γ 0.98 0.01125 89.17**

Log likelihood function -116.90

***, **,* = 1%, 5% and 10% levels of significance respectively. N=17

Source: Computed from field survey data, 2010/2011

Page 110: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

94

Table 4.8 Distribution of technical efficiency estimates for traditional and modern small -

scale GNO processors in the states and the North Central zone

Efficiency Estimates Nasarawa (70) Benue (45) Niger (60) North Central

(175)

Modern (17)

≤ 0.50 1(1.43%) 1(2.22%) 0(00%) 2(1.14%) 2(11.78%)

0.51 – 0.55 0(00%) 1(2.22%) 0(00%) 1(0.57%) 0(00%)

0.56 – 0.60 0(00%) 5(11.11%) 0(00%) 5(2.86%) 1(5.88%)

0.61 – 0.65 0(00%) 4(8.88%) 0(00%) 4(2.29%) 0(00%)

0.66 – 0.70 1(1.43%) 2(4.44%) 0(00%) 3(1.71%) 1(5.88%)

0.71 -0.75 1(1.43%) 0(00%) 0(00%) 1(0.57%) 0(00%)

0.76 – 0.80 6(8.57%) 1(2.22%) 0(00%) 7(3.99%) 3(17.65%)

0.81 – 0.85 21(30%) 3(6.66%) 0(00%) 24(13.71%) 2(11.78%)

0.86 – 0.90 11(15.7%) 1(2.22%) 0(00%) 12(6.86%) 3(17.65%)

0.91 – 0.95 12(17.14%) 6(13.33%) 7(11.67%) 25(14.29%) 2(11.78%)

0.96 – 1.00 17(24.28%) 21(16.66%) 53(88.33%) 91(51.99%) 3(17.65%)

Mean 0.880 0.851 0.97 0.91 0.804

Max 0.999 1 0.998 1 0.998

Min 0.461 0.320 0.913 0.320 0.473

Source: Computed from field survey data, 2010/2011

4. 4. Profitability Analysis of Traditional and Modern Processing and Marketing of GNO

and GNC

4.4.1 Gross margin results of groundnut oil processing

The gross margin associated with processing groundnut oil both in the traditional and

small-scale modern methods per week for the States and the region is presented in Table 4.9. The

procurement, processing and marketing cost items for the respective quantities of raw groundnut

processed are also shown.

Page 111: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

95

The table presents, on state basis, the costs and returns of traditional and modern GNO

processing and hence the gross margin in North Central Nigeria (NCN). For an average of

263.68kg of groundnuts processed in Nasarawa State, the total revenue obtained was N49, 105

(N186, 229/tonne) while the total variable costs (TVC) of N39, 691 (N150, 527/tonne) was

realized. A gross margin (GM) of N9, 414 or N35, 702/tonne representing 23.71% was obtained.

In Benue State, for a quantity of 100.5kg, a total revenue of N25, 659 (N255, 950/tonne) was

realized. The TVC of N21, 230 (N211, 770/tonne) and gross margin of N4, 429 (N44, 179/ton)

equal to 20.86% was obtained. For a given quantity of 46kg in Niger State, the total revenue

gotten was N9, 546 (N20, 752/tonne), its TVC was N7, 807 (N169, 717/tonne) with a gross

margin of N1, 739 (N37, 804/tonne) representing 22.27%.

For the entire North Central, TVC was N25, 314 (N172, 204/tonne) with total revenue of

N29, 513 (N200, 768/tonne) per week, and GM of N4, 199 (N28, 564/tonne) representing

16.58%. For the modern processors, the total variable expenses were N937, 966 for 6222kg

(6.222 tonnes) of groundnut processed per week with total revenue of N1, 294, 609. The gross

margin was calculated at N356, 643 that is N57, 319/tonne and 38% of the TR. The modern mills

had a high GM of 38%. This is attributable to the economies of size production enjoyed by them.

It is noted from the results that GNO processing in the States in the North Central Nigeria

was profitable, given that activities from procurement through processing to marketing were

quantifiable and monetized. Fixed cost items were not estimated in line with the proposed tools

of analysis, and because most services of the fixed cost items in traditional processing could be

accessed and paid for. This explains the adherence to GM as a measure of profitability in this

study (Arene, 2002)

Page 112: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

96

Table 4.9: Gross Margin for Traditional and modern GNO processing the States and the

Region

Operation/ States Nasarawa

263.68kg

Benue

100.25kg

Niger

46.01kg

N C N

147kg

Modern

6222kg

(A) Revenue (N)

(a) GNO 34447 16193 4817 19594 1127829

(b) Cake 14658 9466 4729 9919 166780

Total Revenue 49105 25659 9546 29513 1294609

186229/ton 255950/ton 207521/ton 200768/ton

(B)Variable cost (N)

(a) Procurement

(i) Value of raw GN 33, 632 16, 417 5, 878 20, 889.91 897, 906

(ii)Transportation 240 356 91 207 103

(i) Loading/off loading 131 146 39 118 832

(ii) Market charges 91 177 29 85 641

(iii)Commission agents 108 113 22 69 675

(iv) Other charges 70 147 95 103 1, 040

Total 34, 272 17, 356 6, 154 21, 471 918, 264

(b) Processing

(i) Decortications 504 372 00 420 maint 1970/wk

(ii) Scorching/roasting 514 300 187 350 -

(iii)Polishing 393 217 74 238 electricity 1265

(iv) Crushing / pasting 581 411 121 380 -

(v) Oil expelling 577 374 113 365 -

(vi) Cake frying 343 184 135 231 -

(vii) Fuel wood 944 710 201 631 263

(viii) Salt 91 89 45 75 -

(ix) Other cost 269 185 266 247 1145

Total 4, 216 2, 850 1, 142 2, 937 16, 169

( c) Marketing

(i) Transportation 205 206 107 193 -

(ii) Packing 41 42 52 45 -

(iii)Other marketing cost 957 776 352 668 3, 533

Total 1, 203 1, 024 511 906 3, 532

Total variable cost 39, 691 21, 230 7, 807 25, 314 937966

150,527/ton 211, 701/ton 169, 717/ton 172, 204/ton -

(C)Total GM(A-B) 9414 4429 1, 739 4, 199 356, 643

35702/ton 44179/ton 37804/ton 28564/ton 57319/ton

% GM 23.71% 20.86% 22.27% 16.58% 38%

Source: Computed from field survey data, 2010/2011

Page 113: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

97

4.4.2 Determinants of profit of groundnut oil processing in North Central Nigeria

This section discusses the results of regression analysis of selected economic variables on

the gross margin of the traditional and modern processors in the study area. The results for the

selected states are presented in Tables 4.10 and 4.11. The task here is to test the null hypothesis

that β=0 or that the β’s coefficients were not statistically different from zero.

The results for the states in the zone (Table 4.10) indicated that fuel-wood (X3) and

packaging (X4) were significant at 1% level of probability in Nasarawa, Benue and Niger States,

and all with positive coefficients. This brought to the forefront the importance of these two

variables in the gross margin of the traditional processors. Fuel wood, as a source of energy for

processing, is critical due to inadequate electricity, to enable the use of simple, locally fabricated,

and electrically operated machines for processing. The extended effect is the continuous

deforestation and environmental problems. Packaging, a convenient way of presenting a product

to a consumer, has been seen to be very critical, therefore better packaging will increase the

gross margin of processors and hence their profit. This also brings the packaging enterprises into

the value chain. Transportation (X5) was significant in Niger State at 1% LOS, and 10% level of

significance in Nasarawa State, and not significant in Benue State; but positive in all the three

States implying too that transportation contributed positively to the gross margin of processors.

The salt (X6) variable was significant at 5% level of probability in Nasarawa State and negative

in all the States. This implied that increased use would reduce the gross margin of processors. Of

course salt is a necessity with inelastic demand hence its use in GNC has to be with caution, also

given the fact that in Niger State, pepper is used instead of salt. It is not needed in GNC used in

steak meat (suya) making. Price of raw groundnut (X1) which included procurement cost and

labour (X2) were not significant. These variables had negative coefficients calling for caution in

Page 114: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

98

their use. The adjusted R2 was 0.94 for Nasarawa State, 0.96 for Benue State and 0.88 for

Niger State. This implied that the selected independent variables explained 88%, 94%, and 96%

variation in the gross margin of processors in Niger, Nasarawa and Benue States, respectively.

Table 4.11 presents the results for pooled data for traditional and small-scale modern processors

within North Central Nigeria. Fuel wood and packaging were significant for traditional

processors at 1% level of probability, while transportation was significant at 10% level. This

implied that fuel wood, packaging and transportation were the critical factors that determined

gross margin and hence profitability of GNO Processors. The coefficient of labour and salt were

however negative, calling for caution in their use. The price of groundnut was positive but not

significant, meaning it was not very critical in the level of profit of processors. The adjusted

coefficient of multiple determination (R2) was 0.944 for the traditional processors. The F values

and the standard errors are as presented in the table.

For modern processors, the independent variables were selected based on their

importance in the processing activity. The critical variables were raw groundnut (x1),

procurement cost (x2) and maintenance cost (x3) which were all significant at 1% level of

probability. Electricity, labour and fuel wood however negative implying that their increase use

could deplete the profit of modern processors. The adjusted coefficient of multiple determination

(R2) was 0.97. The F value, Durbin-Watson (DW) and the standard errors were also as

presented in the table 4.11

Page 115: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

99

Table 4.10 Regression results of the determinants of profitability of traditional GNO

processing in Nasrawa, Benue and Niger states

Nasarawa (70) Benue (45) Niger (60)

Variables Coefficients t-value Coefficients t-value Coefficients t-value

Constant -2110.84 -0.627 922.58 1.22 -519.83 -0.66

(3368.47) (753.73) (785.73)

Price of raw GN (N) (X1) 0.018 0.597 -0.045 -1.588 -6.34 -1.36

(16.76) (3.17) (4.67)

Labour (N) (X2) -0.072 -1.488 -0.034 -0.92 -0.892 -1.23

(2.205) (1.31) (0.724)

Fuel wood (N) (X3) 0.491 4.48 *** 0.363 5.04*** 6.36 4.81***

(1.480) (0.65) (1.32)

Packaging (N) (X4) 0.533 5.25 *** 0.596 8.94*** 53.23 5.66***

(10.27) (7.19) (9.41)

Transport (N) (X5) 0.100 1.77* 0.076 1.64 8.95 3.06***

(1.85) (1.16) (2.93)

Salt (N) (X6) -0.107 -2.231** 0.023 0.66 -3.33 -0.96

(9.49) (2.60) (3.478)

R2= 0.94 R2

= 0.96 R2 = 0.88

DW = 1.54 DW = 1.705 DW = 1.73

F = 180.61 F = 205.45 F = 75.35

***, **,* = 1%, 5% and 10% levels of significance respectively.

Source: Computed from field survey data, 2010/2011

Page 116: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

100

Table 4.11: Regression results of the profit function of determinants of profitability of

traditional and small-Scale modern GNO processing in North Central Nigeria

Traditional (175) Modern (17)

Variables Coefficients t-value variable coefficients t-value

Constant -1293.65 -1.42 Constant 19063.48 1.53

(910.21) (25000.29)

Price of raw g/nut (N) (X1) 2.806 0.640 Price of raw g/nut (X1) 18.02 3.497***

(4.383) (5.155)

Labour (N) (X2) -1.290 -1.35 Procure ment (N) (X2) -33.19 -4.002***

(0.954) (8.288)

Fuel wood (N) (X3) 5.040 7.53 *** Maintenance (N) (X3) 10.381 2.806***

(0.670) (3.699)

Packaging (N) (X4) 59.881 11.64 *** Labour (N) (X4) -1.031 -.289

(5.15) (3.564)

Transport (N) (X5) 1.80 1.71* Fuel wood (N) (X5) -.583 -.094

(1.050) (6.232)

Salt (N) (X6) -5.74 -1.49 Electricity/diesel (N) (X6) -10.70 0.78

(3.85) (13.67)

R2 = 0.94 R2

= 0.97

DW = 1.53 DW = 2.02

F = 484.53 F = 126.41

***, **,* = 1%, 5% and 10% levels of significance respectively.

Source: Computed from field survey data, 2010/2011

4.5 Value Added by Processing Groundnut into GNO and GNC in North Central Nigeria

Processors and manufacturers are described as those who undertake some activities on

the farm products to change their form (Olukosi & Isitor, 1990). This change in form implies

increase in quality and value – form utility. The value added to a tonne of raw groundnut is

simply the change in its value before and after processing (Gittinger, 1972; Brown, 86; Brown et

al, 94). For this study, value added to groundnut per week is shown in Table 4. 12.

On state basis, the highest quantity of 263kg processed per week was in Nasarawa State worth

N33, 632 with final market value of products (GNO and GNC) at N49, 105. This was with added

Page 117: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

101

value of N15, 473 (N58, 680 per tonne) which equaled 46% value added. In Benue State, 100kg

of groundnuts worth N16, 417 yielded products valued at N25, 659. The value added was N9,

242 (N92, 420 per tonne) representing 56%. The least quantity was in Niger State at 46.9kg per

week worth (N5, 878) yielding products worth (N9, 546) with the highest value added of N3,

668 (N92, 420 per tonne) of groundnut processed amounting to 62.40% value addition.

For the North Central Zone, an average of 147kg of groundnuts was processed per week

valued at N20, 889. The value of GNO obtained was N19, 594 and GNC N9, 919 all valued at

N29, 513, with added value of N8, 624 or N58, 666 per tonne representing 41.28% value

addition. Table 4.12 also shows the value addition for modern processing in which the quantity

processed was 6, 222kg per week on the average valued at N897, 906. The GNO obtained was

valued at N1, 127, 829, and cake N166780, totaling N1, 294, 609. The valued added in modern

processing was calculated at N396, 703 (44.15%) or N63, 758 per tonne.

Table 4.12: Value added by processing groundnut into oil and cake in North Central

Nigeria

Source: Computed from field survey data, 2010/2011

Location/Quantity Value of

raw g/nut

(N)

Value of product Value added Naira per

tone GNO

(N)

GNC

(N)

Total Value

(N)

(GNO+GN

C)

Nasarawa (263.68kg) 33632 34447 14658 49105 15473 (46%) 58680

Benue (100kg) 16417 16193 9466 25659 9242 (56.30%) 92420

Niger (46.9kg) 5878 4817 4729 9546 3668 (62.40%) 78208

North Central

(147kg)

20889 19594 9919 29513 8624 (41.28%) 58666

Modern (6222kg) 897906 1127829 166780 1294609 396703 (44.2%) 63758

Page 118: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

102

4.5.1 Test of significance of value added

The result of test comparing the means of value added through processing in the selected

States and the zone, for traditional and modern processing is presented in Table 4.13. The

student’s t- statistic was used to compare the mean value of raw groundnut seeds before

processing and its value after processing both in traditional and modern processing. The result

shows that there was significant difference in means of value of groundnut before processing and

its value after processing at 5% LOS in Nasarawa, Benue and Niger States. The result for the

modern processors in the zone was not significant. Therefore, the null hypothesis (H0: µ=0) that

there was no significant difference between the value of groundnut before and after processing

was rejected at 5% level of probability for traditional processors. This was however not rejected

for modern processors. This implied that traditional processors were more efficient and added

more value to raw groundnut than modern processors. This could be due to inadequate

infrastructural facilities such as electricity, and good roads that enhance large scale processing

activities

Page 119: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

103

Table 4.13: Result of test of differences in value of groundnut seed before and after

processing

Location Mean X Stand.dev Stand. Error tα.05 Sig

Nasarawa Before 36632.14 70 42802.29 5115.85 -9.118 .000

After 49105.88 70 53964.94 6450.04

Benue Before 16417.67 45 12883 1920.55 -11.45 .000

After 25660.11 45 17975.56 2679.64

Niger Before 5878.16 60 5297.53 683.91 -7.76 .000

After 9559.13 60 8788.93 1134.65

NCN Before 20889.91 175 30992.95 2342.85 -12.89 .000

After 29518.09 175 39475.49 2984.07

Modern Before 897906.71 17 2.42569E6 5.8817E5 -1.329 .202

After 1.2946E6 17 3.6554E6 8.8657E5

Source: Computed from field survey data, 2010/2011

4.6 Level of Integration of Markets of Groundnut Oil (GNO) and Groundnut Cake (GNC)

The procedure started with a test for non – stationarity of the series. This was then

followed by the Johansen multivariate and bivariate tests for co - integration carried out on the

price series obtained in Wuse, Bida, Minna, Nasarawa Eggon, Lafia and Makurdi markets within

the North Central Nigeria.

Page 120: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

104

4.6.1 Result of the unit root test

To examine the time series properties of the price series, the augmented Dickey – Fuller

(ADF) unit root test approach was used. At the level form of each series, the null hypothesis was

that each data series was non stationary. If the hypothesis was not rejected, the test was repeated

using the first difference of each price series. The results of the ADF test for individual price

series (GNO & GNC) in each of the markets are reported both for the prices at levels and for the

prices in the first difference in Table 4. 14. For GNO prices in Lafia, Wuse and Nasarawa Eggon,

the null hypothesis was not rejected at level but rejected for the other three markets. However, at

first difference the null hypothesis for prices in all the markets for GNO and GNC were rejected

at 5% LOS, and the series were I (0). That is, all the respective price series for GNO and GNC in

all the locations were integrated of the same other. Therefore, they were set for the conduct of

the Johansen test for co-integration.

Table 4.14: Augmented Dickey -Fuller (ADF) Unit root test for price series at level and at

first difference

Markets/price series Level First difference

GNO GNC GNO GNC

Lafia (ser 01) -5.221041 -2.976499 -7.387304 -6.508664

Wuse (ser 02) -5.929753 -3.127987 -8.063058 -5.913575

Nasarawa Eggon (ser 03) -4.933190 -2.132298 -7.668375 -7.890013

Minna (ser 04) -2.707102 -2.531061 -6.875167 -6.329373

Bida (ser 05) -2.421234 -2.7487 -5.107408 -5.815462

Makurdi (ser 06) -2.254686 -1.667922 -7.242875 -4.301228

Mackinnon critical values for ADF test at 1% LOS = -3.5682; 5% =-2.9215; 10%=-2.5983

Source: Computed from field survey data, 2010/2011

Page 121: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

105

4.6.2 Result of the Johansen test for co-integration

The Johansen multivariate and bi-variate tests were conducted for groundnut oil (GNO)

and groundnut cake (GNC) price series that were integrated of the same order. The result of the

Johansen multivariate test is presented in Tables 4.15 for GNO and 4.16 for GNC. For GNO

(Table 4.15), there were five co-integration vectors at 5% significance level, and accordingly one

common stochastic trend in the system. Hence, their locations seemed to be within the same

market, the North Central Zone of Nigeria. All the bi-variate tests showed at least one co -

integration vector and hence one common stochastic trend which also aligned with the result

from multivariate test. The result shows that the markets were integrated as the relative prices

were stable signifying long run equilibrium relationship over time and the law of one price

(LOP) held. This implied that the commodity was a tradable item within the zone, though there

was room for improvement in integration of the markets given the Eigen values.

Table 4.16 presents the multivariate results for GNC. The result showed two co-integrating

vectors at 5% significance level. This implied that the market for groundnut cake was not highly

integrated. This was attributable to the fact that bulk of the GNC processed was consumed within

markets of the processors. GNC was also treated as a by-product from processing so that price

for GNC was not of paramount trade importance.

Page 122: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

106

Table 4.15: Result of the multivariate Johansen test for Co-integration for GNO price

series

Eigen value Likelihood ratio 5 percent

critical level

1 percent critical

level

Hypothesized No

of CE(S)

0.636192 142.7042 94.15 103.18 None**

0.453109 92.14776 68.52 76.07 At most 1**

0.401933 61.97245 47.21 54.46 At most 2**

0.328333 36.26979 29.68 35.65 At most 3**

0.231063 16.37017 15.41 20.04 At most 4*

0.062612 3.232881 3.76 6.65 At most 5

*(**) denotes rejection of the hypothesis at 5% (1%) significance level.

L.R. test indicates 5 co – integrating equations at 5% significance level.

Source: Computed from field survey data, 2010/2011

Table 4.16: Result of the multivariate Johansen test for Co-integration for GNC price

series (GNC)

Eigen Value Likelihood ratio 5 percent 1 percent Hypothesized No

of CE(S)

0.528014 111.2450 94.15 103.18 None**

0.489100 80.70469 68.52 76.07 At most 1**

0.371874 47.12563 47.21 54.46 At most 2

0.251224 23.87487 29.68 35.65 At most 3

0.141876 9.409106 15.41 20.04 At most 4

0.034564 1.758793 3.76 6.65 At most 5

*(**) denotes rejection of the hypothesis at 5% (1%) significance level.

LR test indicates 2 co – integrating equations at 5% significance level.

Source: Computed from field survey data, 2010/2011

Page 123: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

107

4.6.3 Determinants of market integration

The regression results of the factors that influenced the level of market integration for

groundnut oil (GNO) and groundnut cake GNC) are presented in Tables 4.17 and 4.18. For the

factors that affect the integration of GNO markets (Table 4.17), the coefficient of multiple

determination, adjusted R2 was 0.82, implying that 82% of variation in the market integration of

GNO market was explained by the independent variables. In the result, the number of processing

facilities and administrative regulations in the markets significantly influenced the integration of

the markets at 1% significance level. This also meant that more administrative regulations stifled

or reduced market integration. This agrees with Chirwa (2000) in his findings in the integration

of markets for maize in Malawi where government still maintained some restrictions. The

shortest distance between the markets and membership of co-operatives were positively signed.

Telephone (GSM) ownership was negatively signed. This meant that the phones were not

necessarily used for marketing activities and, for reasons not identified reduced market

integration for GNO.

Table 4.18 presents the regression results for groundnut cake (GNC). The number of processing

facilities in paired markets was significant at 1%level of significance, meaning that the higher

the number of processing facilities in the locations where the markets were, the more the

marketing activities and hence integration of the GNC markets. Shortest distance between the

markets and membership of co-operative had positive effects, while GSM ownership and

administrative regulations had negative effects but were not significant. The adjusted R2 was

0.513. This meant that some factors that influenced the integration of GNC market might not

have been identified.

Page 124: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

108

4.17: Result of factors that determined the level of integration of groundnut oil markets in

North Central Nigeria (NCN)

Variable Coefficient Standard error t-value LOS

Constant - 21.209 12.782 -1.659 .131

Shortest distance (X1) 0.012 0.010 -1.263 0.238

No of GSM (X2) - .289 0.238 -1.213 0.256

No of processing facilities (X3) 1.188 0.198 6.004*** 0.000

Membership of co-operative (X4) 2.243 2.881 0.779 0.456

Administrative regulations (X5) 9.463 2.903 -3.260*** 0.01

R2 = 0.82, F = 13.656, *** = sig at 1%, ** = sig at 5%, *=sig at 10%

Source: Computed from field survey data, 2010/2011

4.18: Result of factors that determined the level of integration of groundnut cake market in

NCN

Variable Coefficient Standard error t-value LOS

Constant - 3.06 9.63 -0.318 0.758

Shortest distance (X1) 0.10 0.007 1.282 0.232

No of GSM (X2) -0 .186 0.179 -1.041 0.325

No of processing facilities (X3) 0.431 0.149 2.890*** 0.018

Membership of co- operative (X4) 0.082 2.170 0.038 0.971

Administrative regulations (X5) -1.66 2.187 0.759 0.467

R2= 0.213, SE: 3.04 F = 1.898 ***=sig at1%, **= sig at 5%,*=sig at 10%

Source: Computed from field survey data, 2010/2011

Page 125: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

109

4. 7 Constraints Facing Groundnut Oil Processing Industry in North Central Nigeria.

Groundnut oil processing industry in the North Central Nigeria is fraught with some problems as

revealed in this study.

4.7.1 Identified constraints

The identified constraints as presented in Tables 4.19 include:

i) Inadequate finance: The responses from the states indicated that 86%, 75% and 50% in

Benue, Niger and Nasarawa States respectively responded that inadequate finance

was a major problem that hampered progress in the processing business.

Comparatively, 68% of traditional processors for zone and 94% of modern processors

believed the inadequacy of finance was a major constraint to their processing

activities. Their inability to acquire crushing and expelling machines, which could be

locally fabricated, was due to inadequate finance. More so that majority of the

traditional processors were women who are traditionally known to control little

capital;

ii) Machine breakdown: Fewer respondents had problem of incessant machine breakdown.

The results for the states showed Nasarawa State with the highest percentage (28%)

of this problem and 8% each for Benue and Niger States. For the North Central Zone,

it was 16%. However, 100% of the modern processors agreed that regular breakdown

of machines affected their production, though maintenance service and spare parts

were available;

iii) Inadequate processing technology: This constraint was emphasized by 73% of the

processors in Benue State, 55% in Nasarawa State, and 36% in Niger state. The

Page 126: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

110

result for the North Central Zone showed 53% of traditional processors with this

problem. Only 23% of the modern processors complained of the problem. The feeling

among traditional processors was that the state of the processing technology was very

low and needed improvement. There was need for frying machine, cake moulding

machines and improved expellers.

iv) Inadequate electricity: Most labour/energy saving processing machines were

electrically operated. Their being put to use was hampered by unavailable electricity.

The result for the states showed 76% of traditional processors in Benue state

complaining of this problem; Nasarawa State, 85%; Niger State, 83% and the North

Central Zone, 82%. All (100%) of the modern processors had this problem. It was

also noted that inadequate electricity increased operation cost in diesel and petrol and

also led to capacity underutilization of machines. Electric operated machines did

more jobs and cleaner products than diesel operated machines;

v) Inadequate quantity/high cost of groundnut: This has to do with seasonal harvest of

groundnut. The raw groundnut becomes scarce and costly during the off season, so

that processors could not maintain processing activities throughout the year. In

Nasarawa State, 84% of traditional processors, 88% in Benue State and 20% in Niger

State shared this constraint. They comprised 80% in the North Central Zone, while

88% of modern processors had this problem. Some of the modern processors made

adequate arrangement to procure groundnut for all year round processing. The largest

among them had stores and procured enough for all season processing;

vi) Poor sales: This was more critical in Nasarawa State, 58%, Benue State, 55% and Niger

State, 38%. For the pooled data for the zone, 50% of traditional processors had this

Page 127: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

111

constraint. This was an issue in Makurdi, Benue State where it was attributed to

inadequate market information on products’ availability, place and price for buyers.

This was so critical that the market adopted a kind of quota system sales, that is,

alternative day sales. For modern processors, it was only 29%. This was because their

products were easily sold. Orders were placed from feed mills for cake and oil even

before processing;

vii) Inadequate transport facilities: This constraint constituted a major problem in Niger

State with 75% of the processors, 85% in Nasarawa and 77% Benue States. North

Central Zone had 80%, while in modern processing it was 76%. In the areas with

fewer processors, the farmers and traders brought their groundnuts to the markets

where the processors went to buy. Some even brought theirs to the processing sites;

viii) No work shade/Stores: In the States, 57% of processors in Nasarawa State, 45% in

Niger State and 13% in Benue State complained of this problem. This problem was

critical especially during the raining season when processors could not fry, polish

groundnut or run expelling machines outside. In those areas where this was not much

a problem, most of the processing activities were done indoors. For the North Central

Zone, 41% of the traditional processors faced this problem. None of the modern

processors complained of this problem because they all operated within established

buildings.

Page 128: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

112

Table 4.19 Constraints to groundnut oil processing in the selected states in North Central

Zone

Constraints*/

Frequency

Nasarawa

70 (%)

Benue

45 (%)

Niger

60 (%)

North Central

175 (%)

Modern

17 (%)

Inadequate finance 35 (50) 39 (86.66) 45 (75.00) 119 (68) 16 (94.11)

Machine breakdown 20 (28.57) 4 (8.88) 05 (8.33) 29 (16.57) 17 (100)

No improved tech 39 (55.71) 33 (73.33) 22 (36.67) 94 (53.71) 4 (23.52)

Inadequate electricity 60 (85.71) 34 (76.55) 50 (83) 144 (82.29) 17 (100)

Lack/high cost of G/nut 59 (84) 40 (88.89) 41 (63.55) 140 (80.00) 15 (88.24)

Poor sales 41 (58.57) 25 (55.55) 23 (38.33) 89 (50.86) 5 (29.41)

Inadequate transportation 60 (85.71) 35(77.78) 45 (75.00) 140 (80.00) 13 (76.47)

No work shade 40 (57.14) 6 (13.33) 27 (45.00) 73 (41.71) 0 (00)

*= Multiple responses were recorded

Source: Computed from field survey data, 2010/2011

Page 129: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

113

CHAPTER FIVE

5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary

The study examined the traditional and modern groundnut oil processing (production)

and marketing in North Central Nigeria. Special attention was paid to the socio-economic

characteristics of the processors, traditional and modern groundnut oil processing and marketing

systems, input use efficiency in traditional and modern groundnut oil processing, and factors that

determine efficiency, profitability of processing of groundnut oil (GNO) and groundnut cake

(GNC), factors affecting profitability; value added by processing; level of integration of the

products (GNC and GNO) markets, and the problems of the industry in the study area.

For this study, three states were randomly selected while six LGAs were purposively

sampled based on groundnut production and processing activities. Random sampling was used to

select the required samples of traditional processors from the selected LGAs. Seventy

respondents were taken proportionately from Nasarawa State, 45 from Benue State and 60 from

Niger State. All modern processors in the selected states were covered. A total of 175 traditional

processors and 17 small-scale modern processors were selected, bringing the number of

processors studied to192. Data were collected using structured questionnaire and observations.

Data collected included those on socio-economic characteristics of the respondents, groundnut

procurement, and processing and marketing information. Price series data were obtained on

weekly basis for groundnut oil and groundnut cake from strategic markets in the purposively

selected states and the FCT. The selected markets were Lafia, Nasarawa Eggon, Makurdi,

Minna, Bida and Wuse (Abuja) markets all in North Central Nigeria.

Page 130: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

114

Data were analysed using descriptive and inferential statistics, stochastic frontier

production function analysis, gross processing margin, and profit function, test of difference in

means and Johansen test for co-integration. Hypotheses were tested appropriately

The results on socio-economic characteristics indicated that majority (56%) of the

traditional processors were between the ages of 31 and 40 years and found in Niger State. They

were 45% in Nasarawa State and 20% in Niger State. This was also the highest group in the

North Central Zone with 42%, and 47% for modern processors. The average age for traditional

processors in the North Central Zone was 38 years and 41 years for modern processors. Almost

all the traditional processors (94%) were female and only 6% were male. Likewise 88% of small-

scale modern processors were male and only12% were female. Ninety-six percent of the

traditional processors and 100% of modern processors were married. Household size of 6-10

persons was the highest in all the states, with 70% in Niger State and lowest, 54%, in Nasarawa

state. This household size made up 61% for traditional processors in North Central Zone and

58% for modern processors. This was followed by household size ranging from 1-5 persons

(25%) in Nasarawa State. The average household size was eight persons per household for

traditional and modern processors in the North Central Zone.

Seventy – two percent of the traditional processors had less than three years of formal

education in Nasarawa State, 53% in Benue State and 49% for North Central Zone. Modern

processors had 88% with over 10 years of formal education. The average years of education for

traditional processors were four years and 13 years for modern processors. Eighty four percent of

traditional processors in Nasarawa State; 100% in Benue State and 94% in Niger State did not

participate in co-operative associations. For the zone, 91% of the traditional processors and

100% of modern processors did not participate in co-operative activities. Traditional processors

Page 131: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

115

with 1 – 10 years of experience were 55% in Benue and 40% for the zone. Those with 11-20

years of experience were 60% in Niger State and 45% in Nasarawa State, as well as for the zone;

while modern processors in the same range of years of experience were 88%. The processing set

up began with procurement of raw groundnut from farmers or traders, transporting it to the

processing sites where the processing activities of cleaning, roasting, polishing and crushing, and

then expelling the oil via expellers took place. The groundnut oil (GNO) and groundnut cake

(GNC) were then prepared for market. The cake in traditional processing was moulded into

different sizes and shapes, fried and also marketed.

On the state basis 81% of groundnut procured for processing from Nasarawa state came

from farmers and 19% from traders. In Benue state 51% came from farmers and 49% from

traders. In Niger State, it was 55% from farmers and 45% from traders. For the zone, 60% was

obtained from farmers and 40% from traders. For the modern mills 94% of their groundnut

processed came from traders. The highest quantity traditionally processed, 263kg/week was in

Nasarawa State valued at N36, 632, and lowest in Niger State, 46.9kg valued at N5, 878; while

modern processors processed 6, 222kg per week. For the traditional processors, their GNO and

GNC were patronized by retailers and consumers. Modern processors sold more of their GNO to

wholesalers and retailers, and all their cake was sold to livestock feeds manufacturing companies

and animal farms.

The major activities carried out in GNO processing were pre- treatment, which include

decortications for unshelled groundnut, cleaning, drying, frying/roasting, polishing and crushing

the groundnut into paste. The next activity was feeding the paste into the oil expelling machine

where the oil was expelled. The principle was similar for both traditional and modern small-scale

modern processing, except for some differences in automation and application of certain

Page 132: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

116

techniques. The cake processed in the traditional method was consumed by humans but that from

modern processing was only used for animal feeds.

The result for input use efficiency from the maximum likelihood estimation (MLE)

rejected the null hypothesis that γ = δm = 0 indicating the absence of technical inefficiencies of

the processors in all the locations at various significance levels. Hence the model was used to

analyze efficiency of traditional and modern GNO processing in the states, and the zone. In the

results for the states, raw groundnut was significant at 1% in Nasarawa and Niger States, labour

was significant in Nasarawa state also at 1% level of probability but negative. Fuel wood and salt

were both significant at 1% level of significance in Nasarawa and Benue States. In the

inefficiency aspects age and years of experience were significant at 1% level of probability in all

the States, while gender, marital status, household size and co-operative participation were

significant in Nasarawa State at 5% LOS. In the zone, raw groundnut was significant at 1% LOS

for traditional processors and modern processors. Salt and fuel wood were also significant at 1%

and 5% level of significance in that order. In the inefficiency model, household size was

significant at 5%, level of education and years of experience were significant at 10% LOS, but

negative. In modern processing only groundnut seed and labour were significant at 1% in the

technical efficiency, while level of experience and years of experience were significant at 10%.

The γ statistic was estimated at 0.5501 and significant at 1% in Nasarawa State, in Niger State

the γ was 0.184 and significant at 1%. For the North Central Nigeria γ was 0.0003 and not

significant. For modern processors the γ statistic was significant at 5% LOS.

In the technical efficiency distribution, majority of the traditional processors had their

efficiency scores above 0.80 in all the states and the region. The mean efficiencies scores were

Page 133: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

117

0.851 for Benue State, 0.889 for Nasarawa State and 0.979 for Niger State. It was 0.907 and

0.804 for the region and modern processors in that order.

The gross processing margin (GM) for the States showed that Nasarawa State had 23%

gross margin, Benue State 20% and Niger State 22%. The regional results showed that the total

variable cost (TVC) was N172, 204/tonne of groundnut with Total revenue (TR) of N200,

768/tonne with a GM of N28, 564/tonne representing 16.58% GM in traditional processing. In

modern processing the TVC was N937, 966 for 6222kg per week with gross revenue of N1,

294,609. The gross margin was put at N356, 643 that is N57, 319/tonne or 38% GM.

The regression results of the factors that determined the profitability of traditional

processors indicated that fuel wood and packaging variables were significant at 1% level of

probability in all the States. While transportation was significant at 1% level of significance

(LOS) in Niger State and 10% LOS in Nasarawa State. Salt was also significant at 1% LOS in

Nasarawa State. For the zone, fuel-wood and packaging were significant at 1% while

transportation was significant at 10%. In the modern processing price of groundnut, procurement

and maintenance were significant at 1%. The adjusted R2 for traditional processors in the zone

was 0.944 and 0.97 for modern processors.

On the State basis, the highest value added was in Niger State with 62.40%. For the

North Central zone the value added was 41.28%. For modern processors the value added was put

at 44.15%. For differences in means of value of groundnut before and after processing, the result

of the student t-test indicated that the null hypothesis of no significant difference between the

means was rejected at 5% LOS for all the states and the region. This was not rejected for small-

scale modern processors. This means there were significant differences between the means of

value of groundnut traditionally processed before and after processing.

Page 134: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

118

The result of the unit root tests on the price series showed that all the series were

stationary at first difference, hence integrated of the same order at 5% level of significance,

given the Augmented Dickey Fuller (ADF) test. The result of the Johansen Multivariate test for

co-integration indicated 5 co-integrating vectors at 5% significance level. All series were in the

same market and the law of one price (LOP) held for groundnut oil in North Central Nigeria. For

the GNC series, the result of the Johansen multivariate test indicated 2 co-integrating equations

given the 6 price series, which implied that the market for GNC was poorly integrated in the

region. The result of analysis of determinants of the co-integration in these markets indicated an

Adjusted R2 = 0.82 for GNO. The number of processing facilities and administrative regulations

variables were significant at 5% level of significance. The number of processing facilities was

positively signed but administrative regulations coefficient was negative indicating its negative

effects on market integration. In the groundnut cake market, the adjusted R2 was 0.213, and the

hypothesized variables accounted for 21% of the variation in the integration of the GNC market.

Several constraints were identified which included inadequate finance, machine breakdown

inadequate processing technology for traditional processors, inadequate electricity and

transportation.

5.2 Conclusion

Majority of the traditional groundnut oil processors were women processing GNO to

increase family income, alongside modern processors. Processing value chain offers opportunity

for farm products diversification and preservation as well as business opportunities particularly

in groundnut oil and cake. Processors in the GNO value chain operated efficiently despite some

identified challenges. They also added significant value to raw groundnut and in doing so made

profit for themselves. Improved transportation and packaging would enhance the profit of the

Page 135: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

119

processors. The markets for the processed products (GNO and GNC) were integrated to a certain

level and price transmission within the region enhanced marketing activities. Major concerns of

processors included inadequate credit, work shade, electricity, improved processing technologies

and co-operative participation, and if addressed will enhance performance in the industry in the

study area.

5.3 Recommendations

The following recommendations were drawn from this study:

(i) Processing value chain still remains the major point to diversify primary products as

shown by positive gross margin and value addition attained. Consequently heavy and

sustained investment in the agricultural processing sector is recommended if

agriculture is to become a business in Nigeria, away from its present subsistence

state;

(ii) High efficiency scores recorded from this study indicates the resilience of processors in

processing groundnut oil despite challenges; therefore they need to be supported with

energy saving equipment and technologies for increased productivity.

(iii)Modern processors are have recorded more value added in groundnut processing

therefore, should to be encouraged by the provision of infrastructure such as

electricity, credit, good transportation among others;

(iv) The significance of fuel-wood use signals negative environmental impact, therefore it is

recommended that alternative sources of energy for processing need be provided

instead of fuel-wood, for sustainable environment;

Page 136: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

120

(v) Packaging significantly increased profit, therefore packaging firms should explore the

opportunities of providing special packaging for oil to meet the needs of spectrum of

oil consumers/buyers;

(vi) Scarcity of raw groundnut for processing means that the sustenance and growth of the

value chain is in jeopardy, therefore production of the crop must be encouraged

beyond the present subsistence level. Improved seeds, and harvesting methods need

be taught to producers as an extension service agenda;

(vii) Finance inadequacy was felt by processors; hence an enabling environment for

functional credit facilities provision that can be accessed by the processors is needed.

This arrangement should also be attractive to private players and NGOs to support the

processing industry; and

(viii) Co-operative participation was very low among processors, therefore co-operatives

formation by the processors is recommended. This will create opportunity for shared

experiences and information on prices of both input and output, processing and

marketing information among the processors for better business.

5.4 Addition to Knowledge

(1) This study has approached research both in basic and adaptive perspective, academic and

business orientation. This is shown in the models and simple tools applied in the analysis

which has added information for both research and business in the study area, which

hitherto have not been available.

(2) The application of technical efficiency has been concentrated on the farm level

production and but very rare in agro-industrial production (agro-processing). This

research has applied the stochastic production function approach to agro-processing

Page 137: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

121

scenario in North Central Nigeria. With the technical efficiency scores of individual firms

shown, processors can be advised individually.

(3) Having applied the Johasen test for market integration, which is a new approach to

measuring market integration particularly in the study area, a new frontier has been

reached.

(4) The study has revealed that GNO processing could be used by government and

development agencies to reduce poverty and redundancy among women especially

women in Purdah in the study area.

(5) This research has also brought to the forefront agricultural processing, not only as a tool

for product diversification, and preservation of farm produce but also a profit making

business activity.

5.5 Areas Needing Further Research

(i) There is need to do research on the two ends of the value chain, that is, upstream

(groundnut production) and downstream (groundnut oil and groundnut cake

consumption) to have a complete view of the value chain.

(ii) Studies in participatory technology development (PTD) to find appropriate and affordable

processing technologies for the processors are needed to improve productivity. This is

necessary given the fact that many of these small-scale processing technologies can

be fabricated locally hence can easily be accessible and affordable.

(iii)A study on improved packaging of processed products is needed, because packaging

provides a convenient way to present a product to a consumer. The research will help

determine the appropriate packaging for the products, considering the attendant cost

and returns connected to it.

Page 138: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

122

(iv) Price still remains the central factor in allocating resources in production, distribution and

consumption of goods and services. Further research in price movement of groundnut

and its processed products and indeed similar products within the same market will

enhance pricing efficiency, as informed economic decisions will be made. The end

result will be increased efficiency in the entire marketing system.

Page 139: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

123

REFERENCES

Abdulai, A. & Aubert, D. (2004). A Cross- Section Analysis of Household Demand for Food and

Nutrients in Tanzania, Agricultural Economics, Journal of International Association of

Agricultural Economists, 31 67-79 USA: Blackwell Malden Publisher

Aboki, P. M. & Saingbe, N. D. (2007). A Profitability Analysis of Small- scale Rice Processing

Activity in Lafia LGA of Nasarawa State, Nigeria. Proceedings of the 9th

Annual

Conference of the Nigeria Association of Agricultural Economists, Abubakar Tafawa

Balewa University, Bauchi

Adeyeye, V.A. (1986). Planning Marketing for Agricultural Produce in Nigeria. A Pre-policy

statement: Nigerian Agricultural Outlook- Nigerian Association of Agricultural

Economists, Enugu: Bena Printing Co. pp 48-52.

Agboola, S. A. (1979). An Agricultural Atlas of Nigeria. Great Britain: Oxford University Press.

pp 125-131

Alamu, J. F. & Olukosi, J.O. (2008). Simplified Research Methodology: Principles and Practice.

Zaria: Great Glory Publishers.

Alamu, J. F., Aboki, P. M. & Ahmed, B. (2005). Cost and Returns of Small- Scale Rice

Processing among Women in Lafia Local Government Area, Nasarawa State Nigeria.

Nasara Scientifique. Journal of Applied Sciences Vol 1 No.2 Keffi: Nasarawa State

University

Aigner, D. J.; Lovell, C. A. K. & Schmidt, P. (1977). Formulation and Estimation of Stochastic

Frontier Production Function Model Journal of Econometrics 6, 21-37

Ali, A. & Rahaman, S.A. (2009). Co-integration and market integration; An Application to

selected Sorghum and Maize markets in Nigeria; Proceedings of Agricultural Society of

Nigeria(ASN) conference held at RMRDC /NUC. Abuja 20th

to 23rd

October

Alvarez, A. & Carlos, A. (2004). Technical efficiency and farm size: a conditional

analysis Agricultural Economics, Journal of International Association of Agricultural

Economists, 30(2004) 241-250 USA: Blackwell Malden Publ. co

Amefula, A., Onyenweaku, C.E & Asumugha, G.N. (2009). Technical Efficiency of Fish

Farmers in Delta state, Nigeria: A Translog Stochastic Frontier Production Function

Approach. Proceedings of the 43rd

Annual Conference of the Agricultural Society of

Nigeria National University Commission (NUC) and Raw Material Research and

Development Council (RMRDC), Abuja, 20th

-23rd

October

Page 140: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

124

Acquah, H. D & Owusu, R.(2012) Spatial Market Integration and Price Transmission of Selected

Plantain Markets in Ghana Journal of sustainable development in Africa Vol. 14 No. 5

ISSN: 1520-5509 Pennsylvania: Clarion University of Pennsyvania Pp 208-217

Amaza, P.S. Bila, Y & Iheanacho (2006). Identification of factors that influence technical

efficiency of food crop production in West Africa: empirical evidence from Borno State

Nigeria. Journal of Agriculture and Rural Development in the Tropics and Subtropics,

107(2) 139-142

Arene, C. J., Nwagbo, E.C. & Okoye, C.U. (2004). Biotechnology in Agro-based Industries:

Implications for the sustainability of Agricultural Tradable in Nigeria. A paper

presented at the Annual Conference of the Nigeria Association of Agricultural

Economists (NAAE), IAR/Ahmadu Bello University, Zaria.

Arene, C.J. (2002). Profit Function Analysis of small Ruminant enterprise in Nsukka Local

Government Area of Enugu State, Nigeria. Economic Affairs, Quarterly Journal of

Economics, Vol. 47 Qtr. 4 pp 209 -214

Asche, F., Bremmes H. & Wesells (1999), Product aggregation, market integration, and

relationship between prices, An Application to World Salmon markets; American Journal

of Agricultural Economics, 81 pp 568 – 581.

Asche, F., Guttermsen, Atle, G., Sebulonsen, T., & Sissener, E. H. (2005). Competition

between farmed and wild salmon, the Japanese salmon Market; Agricultural Economics

Journal of International Association of Agricultural Economists, 33(2005)333 – 340.

USA: Blackwell Malden Publ. co

Asiedu, J.J. (1989). Processing Tropical Crops: A Technological Approach London: Macmillan

Education Ltd.

Austin, J. E. (1992). Agro-industrial Projects Analysis Critical Design Factors published for

World Bank EDI. Baltimore, John Hopkins University Press.

Bamire, A.S., Oluwasola, O. & Adesanya, A.T. (2007). Land Use and Socio-Economic

Determinants of Technical Efficiency of Rice Farms in Osun State, Nigeria Nigerian

Association of Agricultural Economists Proceedings of 9th

Annual Conference Abubakar

Tafawa Balewa, University, Bauchi

Barau, A.E. (1979). The Economics of Rice Processing: A Case Study of the Small-scale Rice

Processing Industry in Wukari LGA of Gongola State. An unpublished M.Sc. Thesis

Ahmadu Bello University, Zaria

Page 141: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

125

Battese, G.E. & T.J. Coelli (1988) Prediction of Firm-level Technical Efficiencies with

Generalized Frontier Production Function and Panel Data Journal of Econometrics.38, 3

& 7-399.

Battese, G.E. & Coelli, T.J. (1989). Estimation of Frontier Production Functions and the

Efficiencies of Indian Farmers Using Panel Data from ICRISAT’s village Level

Studies, Journal of Quantitative Economics 5. 327-348

Battese, G.E. & Coelli, T.J. (1992). “Frontier Production Functions, Technical Efficiency and

Panel Data with Application to Paddy Farmers in India” Journal of Productivity

Analysis 3, 153-169.

Battese, G.E. & Coelli, T.J. (1995). “A Model for Technical Inefficiency Effects in a

Stochastic Frontier Production Function for Panel Data” Empirical Economics, 20.

Baur, P.W. (1990). “Recent Developments in the Econometric Estimation of Frontiers “Journal

of Economics. 46.

Black, J. (2002). Oxford Dictionary of Economics Oxford: Oxford University Press.

Boland, M.(2009) What is value addedg Agriculture? Agricultural Marketing Resource Centre.

Washington D C www.agmrc.org retrieved 02-02-2014

Bressler, R. (Jr.). & Richard A. K. (1970). Markets, Prices and Inter Regional Trade. New

York: John Wiley & Sons, Inc. pp 402-414.

Brown, J G. Deloitte & Touche. (1994). Agro – Industrial Investment and Operations EDI

Development Studies Washington DC: The World Bank

Brown, J.G. (1986) Improving Agro-industries in Developing Countries: Lessons from World

Bank Projects. Finance and Development Vol. 23 No. 2 Washington DC: IMF/IBRD

Bruinsma, D. (1999). Adding Value to Cereals, Roots and Tubers. London: Technical Centre for

Agricultural and Rural Cooperation.

Bruinsma, W. D. & Nout, R. (1991). Choice of Technology in Food Processing for Rural

Development. In Rural Households in emerging societies: Technology and change in

Sub-Saharan Africa, Berg, Oxford UK

CBN (1998). Annual Report and Statement of Accounts: For the year ended 31st December, 1997

Lagos: Central Bank of Nigeria

Page 142: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

126

Chirwa, E. W. (2000). Liberalization and Food Crop Marketing and Market ntegration in

Malawi. The AERC Bi-annual Economic Research workshop, Nairobi, 21st May – 1st

June.

Clarke, B. (1987). Post-harvest Crop processing: some tools for agricultural Development,

UK: Intermediate Technology Publications.

Coelli, T.J., Rao, D.S. & Battese, G.E. (1998). An Introduction to Efficiency and Productivity

Analysis Kluhor Academic Press, Norwell MC

Coelli, T.J. (1992). “A Computer Programme for Frontier Production Function Estimation:

FRONTIER, Version 2.0” Economics Letters 39

Coelli, T. J. (1995). “Estimators and Hypothesis Tests for a Stochastic: A Monte-Carlo Analysis”

Journal of Productivity Analysis, 6

Coelli, T.J. (1996). A guide to DEAP version 2.1: A Data Envelopment Analysis. Computer

Programme CEPA Working Paper 96/08, Dept. of Econometrics, University of New

England Armidale Australia

Coelli, T.J. (1996). A Guide to FRONTIER version 4.1: A Computer Programme for Stochastic

Frontier Production and Cost Function Estimation. Centre for Efficiency and Productivity

Analysis, University of New England Australia.

Coltrain, D., Barton, D & Boland, M (2000).Value Added: Opportunities and Strategies. Arthur

Capper Cooperative Centre, Department of Agricultural Economics Cooperative

Extension Service, Kansa State University

Conroy, C., Gordon, A. & Marter, A. (1995). Development and Dissemination of Agro-

processing technologies NRI Socio-economic Series 8 NRI, Chatham UK

Cooper, R.& Kalpan. R. (1991) Profit from activity based costing Harvard Business Review.

Harvard University.

Dadi, L., Negassa, A. & Franzel, S. (1992) ‘Marketing Maize and Tef in Western Ethiopia:

Implications for policies following Market Liberalization, Food policy, 17 (3), 201-213

Damisa, M.A. & Rahama,S.A. (2004). A Lead – Lag Price Analysis of some Agricultural

commodities in selected markets in Kano State; Nigeria . A conference paper presented at

the Nigeria Association of Agric. Economists conference held at IARI ABU, Zaria

Nigeria 3-5th

November.

Page 143: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

127

Dittoh, S. (1994). Market integration: The case of dry season vegetables in Nigeria; Issues in

African Rural Development, 2: 89-101

Downey, W.D. & Trocke, J. K. (1991). Agribusiness Management New York: McGraw-Hill

Inc.

Erickson, S. P., Akridge, J. T., Bernard, F. L. & Downey, W. D. (2002). Agribusiness

Management, Third Edition: New York: McGraw- Hill Higher Education.

Erickson, S. P., Akridge, J. T., Bernard, F. L. & Downey, W. D. (2004). Agribusiness

Management, Third Edition: New York: McGraw- Hill Higher Education.

Ezedinma, C. (2000) Farm Resource Allocation and Profitability of Arable Crop Enterprises in

Humid Forest Inland Valley Ecosystem: A case of Ozu abam in Southern Nigeria

UNISWA Journal of Agriculture, vol 9 pp 48-56

F.A.O. (1967) Small-scale Food Processing A Guide Rome: FAO.

FAO (1982) Rice processing in Java A Guide Rome: FAO

F.A.O. (2011) Processing and Preservation Junior Farmer Field and Life School-Facilitators’

guide No. 8 Rome: FAO p 15

F.A.O. (2012) Food for the Cities FAO Rural Infrastructure and Agro-Industrial Division, Rome:

FAO www.fao.org/ag/ags/home/en/agst.html

Farrell, M. J. (1957). The measurement of productive efficiency Journal of the Royal Statistical

Society A120 253-290

Fefchamps, M. & Gavian, S. (1996). The spatial integration of livestock markets in Niger

Journal of African Economics, 53,366 -405.

Fellows, P. & Hampton, A.(1997). Small Scale Food Processing- A Guide to Appropriate

Equipment UK: Intermediate Technology Publications and CTA

Ferris, R.S.B (1999). Implementing market oriented Research with crop processing techniques.

Food Security and Crop Diversification in SADC countries: The role of cassava and

Sweet Potatoes. Ibadan: IITA

Forsund, F.R.., Lovell C.A.K. & Schmidt, P. (1980). “A survey of Frontier Production Functions

and of their Relationship to Efficiency Measurement” Journal of Economics 13

Page 144: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

128

Fousekis, P. & Lazaradis, P. (2005). Agricultural Economics Journal of International Association

of Agricultural Economists 32(2005) 267-279 USA: Blackwell Malden Publ. co

Frank, R. & Bernanke, B. (2001). Principles of Economics New York McGraw-Hill Higher

Education, McGraw-Hill/Irwin

Ganewatta, G., Waschik, R., Jayasuriya, S., & Edwards, G. (2005) Moving up the Processing

Ladder in Primary Products Export: Sri Lanka’s ‘Value-added’ tea industry

Agricultural Economics, Journal of International Association of Agricultural

Economists. 33(2005) 341-350 USA: Blackwell Malden Publ. co

Gibbons, R.W. (1980). In Proceedings of the Workshop on Groundnut Patancheru India,

ICRISAT Pp 12-16

Gittinger, P.J. (1972). Economic Analysis of Agricultural Projects The Economic Development

Institute. Baltimore: The John Hopkins University Press P-93.

Goletti; F., Ahmed, R. & Farid, W. (1995), Structural Determinant of Market Integration; the

case of Rice markets in Bangladesh, Developing Economics, 23(2), 185 – 202

Gonzalez- Rivera, G., & Helfand, S.M. (2001). The Extent, Pattern and Degree of Market

Integration: a Multivariate Approach for the Brazilian rice market. American Journal of

Agricultural Economics 83, 576-592

Gould, B. W. & Villarreal, H. J. (2006). An Assessment of Current Structure of Food

Demand in urban China. Agricultural Economics Journal of International Association of

Agricultural Economists 34(2006) 1-16 USA: Blackwell Malden Publ. co

Greene, W.H. (1993). “The Economic Approach to Efficiency Analysis” in Fred, H.O.; Lovell,

CAK and S.S. Schmidt (Eds) The Measurement of Productive Efficiency. New York:

Oxford University Press. P68-119

Gujarathi, D. N. & Sangetha (2007). Basic Econometrics- Fourth Edition New Delhi: Tata-

McGraw Hill Edition.

Hagelaar, G. (1994). Management Studies and the Agri-business: Management of Agri-Chain.

Proceedings of First International Congress on Agric-Chains Management Dept. of

Management Studies Wageningen Agric. University Netherlands Wageningen

Agricultural University

Hjalmarrson, E & Osterholm, P. (2007) Testing for co-integration using the Johasen

Methodology when variables are near integrated. IMF working Paper WP/07/141.

International Monetary Bank.

Page 145: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

129

Hogendorn, J. S. (1978). Nigeria Groundnut Export: Origins and Early Development. Zaria:

Ahmadu Bello University Press and Oxford University Press.

Iloeje, N. P. (1985). Geography of West Africa London: Longman Group. P-32

Ingawa, S. (2004). Agricultural Inputs and Output Marketing and Commercialization a Paper

presented at the Annual Conference of the Nigerian Association of Agricultural

Economists at IAR/ABU Zaria 3-5th

November

Institute for Agricultural Research (IAR). (Undated). Technology for Women. Institute for

Agricultural Research, Ahmadu Bello University (ABU) Zaria, Nigeria

Johansen, S. & Juselius, K. (1990). Maximum likelihood estimation and inference on co-

integration with application to the demand for money Oxford Bulletin of Economics and

Statistics, 52: 169 – 210.

Jones, W. O. (1972). Marketing Staple Food Crops in Tropical Africa, Ithaca and London:

Cornell University Press.

Kadurumba, C., Kadurumba, C., & Umeh, S.I. (2009) Allocative Efficiency of Traditional Palm

Oil Processing in Imo State. Proceedings of Agricultural Society of Nigeria (ASN)

conference held at RMRDC /NUC. Abuja 20th

to 23rd

October

Karagiannis, G. & Sarris, A. (2005). Measuring and Explaining Scale Efficiency with Parametric

approach: The case of Greek Tobacco Growers. Agricultural Economics, Journal of

International Association of Agricultural Economists 31(2004) 67-79 USA: Blackwell

Malden Publ. co 33 pp 441 – 451.

Kay, R. & Edwards (2000). Farm Management New York: McGraw-Hill Inc.

Khan, L.M. & Hanna, N.A. (1983). Expression of Oil from Oil Seeds, Journal of Agric

Engineering Res 28 495-503

Kindie, G., Verbeke, W. & Viaene, J. (2005). Modeling Spatial Price Transmission in the Grain

Markets of Ethiopia with an application of ARDC approach to White teff. Agricultural

Economics, Journal of International Association of Agricultural Economists. 31(2004)

67-79 USA: Blackwell Malden Publ. co

Kohls, R..L. & Uhl, J.N. (2002). Marketing of Agricultural Products, 5th

Edition New York:

Macmillan Publishing Company Inc

Kotler, P. & Keller, K. L. (2006). Marketing Management Twelfth Edition. New Delhi: Prentice-

Hall of India Private Ltd.

Page 146: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

130

Kotler, P. & Armstrong, G. (2008). Principles of Marketing USA: Prentice-Hall Ltd.

Kumar N. (2004). Marketing As Strategy: The CEO’s Agenda for Driving Growth and

Innovation. Boston: Harvard Business School Press.

Kumbhakar, S.C. & Heshmati, A. (1995) “Efficiency measurement in Swedish Dairy Farms: An

application of rotating panel data1976-1988”. American Journal of Agricultural

Economics, 77(3):660-74

Kutsoyianis, A. (1983). Modern Microeconomics: Second Edition London: The Macmillan Press

Limited. Pp 13-66.

Latruffe, L., Balcombe, K., Davidora, S. & Zawalinska, K. (2005). Technical and Scale

Efficiency of Crop and Livestock Production Farms in Poland: Does Specialization

Matter? Agricultural Economics Journal of International Association of Agricultural

Economists USA: Blackwell Malden Publ. co 20(1), 23-35

Mendoza, M.S & Rosegrant, M.W. (1995), Price Conduct of spatially differentiated markets

Price, product and People Analysing Agricultural and Developing Countries.Boston:

Lynne Pienner Publishing, inc. USA.

Lissita, A & Odening, M. (2005) Efficiency and total factor productivity in Ukrainian agriculture

in transistion Agricultural Economics Journal of International Association of

Agricultural Economists USA: Blackwell Malden Publ. co 32 (2005),311-325

Meusen W. & Van den Broeck, J. (1977). “Efficiency Estimation from Cobb-Douglas

Production Functions with composed error” International Economic Review, 18, 435-444

Minot N. & Goletti, F. (2001). Rice Market Liberalization and Poverty in Vietnam Research

Report of International Food Policy Research Institute, Washington D.C

NADP (2009) Nasarawa State Rain Fed crop production figures for 1997 - 2008. NADP News

letter A House Journal of Nasarawa ADP, Nasarawa Agricultural Development

Programme (NADP), Lafia Vol. 4 Number 1 Pp 44.

NARELS (2006) Crop Processing Technology Guide. Samaru: NAERLS/ABU Zaria

Nellis, Joseph G. & Parker, D. (1997). The Essence of Business Economics London:

Prentice Hall.New York: McGraw-Hill inc. P-163.

Nwachukwu, I.N., Agwu, N.M., Onyewaku, C.E. & Egeonu, E.N. (2009). Relative

response of demand for tropical root and tuber crops in Nigeria Proceedings of the 43rd

Annual Conference of the Agricultural Society of Nigeria held at National University

Page 147: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

131

Commission (NUC) and Raw Material Research and Development Council (RMRDC),

Abuja. 20th

-23rd

October.

Ogundele, O. O. & Okoruwa, V. O. (2006). Technical Efficiency Differentials in Rice

Production Technologies in Nigeria; AERC Research Paper 154 African Economic

Research Consortium, Nairobi

Ojowu, O. (2004). Presidential Initiative and Agricultural Competiveness, issues, Progress and

Challenges; In NESG (ed) Nigeria Agriculture: Transiting to large Scale commercial

Farming competitiveness. Lagos: Reports on the 3rd NESG-Agricultural submit. Pp 49-

53

Ojowu, O. (2006). In support of Market- led Development Approach of the MARKETS and

PrOpCom Projects. A paper presented at the 5th

National Economic summit Group

(NESG) – Agric Summit Held on the 9th

-10th

Nov, at Le Meridian hotel Abuja.

Okoh, R. & Egbon, P.C. (2005). The integration of Nigeria’s rural and urban foodstuffs

markets. AERC Research Paper 151, African Economic Research Consortium, Nairobi,

November.

Okoh, R. N. & Akintola, J. O (1999) Pricing conduct of spatially differentiated markets. The

case of cassava roots in Nigeria. African journal of Root and Tuber crops 4(2): 77-81

Okoye, F. U. & Anuebunwa F.O. (2003) Farm Level Profitability Analysis of selected Rice

Enterprises in Ayamelum LGA of Anambara State, Nigeria. Proceedings of the 43rd

Annual Conference of the Agricultural Society of Nigeria held at National University

Commission (NUC) and Raw Material Research and Development Council (RMRDC),

Abuja. 20th

-23rd

October.

OLAM (2006). Nucleus Estate Initiatives; A Paper presented at th National Economic Summit

Group (NESG), Agric Summit by OLAM Nig Ltd. Abuja, November 9th

to 10th

Olayide, S.O., & Heady, E.O. (1985) Introduction to Agricultural Production Economics Ibadan

Nigeria: University Press

Olayide S.O. & Olatubosun, D. (1972). Trends and Prospects of Nigeria’s Agricultural

Exports Ibadan: NISER. PP120 - 124

Olukosi, J. O. & Erhabor, P. O. (1990) Introduction to Farm Management Economics Zaria:

AGITAB Publishers, P77

Onuoha, C., Okereke,C.O. & Asumugha, G.N.(2009). Profitability of Feed-mill Enterprise in

NRCRI Umudike. Proceedings of the 43rd

Annual Conference of the Agricultural Society

Page 148: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

132

of Nigeria held at National University Commission (NUC) and Raw Material

Research and Development Council (RMRDC), Abuja. 20th

-23rd

October.

Orewa, S.I. (1978). The Economics of Dry Season Tomato Production under the Cadbury

Tomato Scheme in Zaria Area Unpublished M.Sc. Thesis, Dept. of Agric. Economics and

Rural Sociology, Ahmadu Bello University, Zaria.

Osborne, S. & Trueblood, M. A. (2006). An Examination of Economic Efficiency of

Russian Crop Production in the Reform period. Agricultural Economics, Journal of

International Association of Agricultural Economists. 34(2006) 25-38 USA: Blackwell

Malden Publ. co

Otitoju M. A. & Arene, C. J. (2010). Constraints and determinants of technical efficiency in

medium scale Soya bean production in Benue state Nigeria. African Journal of

Agricultural Research 5(17) 2276-2282 Online

Paris, T R (1988). Fillipino Women in Rice Farming System, Phillipines Int. Rice Research Inst

and Phillipines Inst for Dev Studies p 67

Phillips P. (1999) Africa Atlas Longman Group

Porter, M. E. (1985). Competitive advantage: Creating and Sustaining Superior Performance.

pp 71- 87

Ravalion, M. (1986), Testing market integration: American Journal of Agricultural Economics.

Res, L & Niesten, M. J. (1995). Women and Selected Postharvest Technology Experience

in West Africa: Lessons learnt from grain processing interventions. A paper prepared for

the International seminar on Women in Agriculture and their participation in

Development of Agricultural Technology 17-20, January. CECAT, Beijing, China

RMRDC (2004) GROUNDNUT A report on Survey of Agro Raw Materials in Nigeria

Sabates, R., Gould B. W. & Villarreal, H. J. (2001). Household competition and food

expenditure: a cross country comparisons. Food policy 26

Samuelson, P.A. (1952). Spatial Price Equilibrium and Linear Programming; American

Economic Review; (42), 283 – 303.

Sankhaya, P. L. (1981). Introduction to the Economics of Agricultural Production, Prentice-Hall

India.

Sharma, J. L. & Carralli S. (2004). A Dictionary of Food and Nutrition New Delhi: Satish

Kumar Jaun for CBS Publishers and Distributors.

Page 149: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

133

Sharma, K.R., Leung P.S. & Zaleski, H.M. (1999). Technical, Allocation and Economic

Efficient in Swine Production in Hawaii: A Comparison of Parametric and Non-

parametric Approach. Agricultural Economics Journal of International Association of

Agricultural Economists USA: Blackwell Malden Publ. co 20(1) 23-35.

Shephard, G.S. & Futrell, G.A. (1970). Marketing Farm Products: Economic Analysis. Iowa:

Iowa University Press.

Takayama, T. & Judge, G.A. (1964). Spatial Equilibrium and Quadratic Programming Journal of

Farm Economics, 46 (17), 67 -93 18

Timmer, P. C., Walter, P. F., & Scott R. P. (1983). Food Policy Analysis Baltimore, Md: John

Hopkins University Press.

Torok, S.J., Menkhaus, D.J., Colombel, V. & Bradley, E.B. (1990). Journal of Agribusiness

Vol. 8 Fall No.2 Georgia: Agric. Econ Assoc. and the Dept of Agric Economics,

University of Georgia

Truett, L. J. & Truett, D. B. (1987). Economics Missouri: Times Mirror/Mosby College

Publishing.

USDA (2009) Peanut “htt://en.wikipedia.org/wiki/peanut” USA: Wikipedia Foundation Inc.

Webster Jr., F. E. (1997). The Future Role of Marketing in the Organization in Reflections on the

futures of marketing, edited by Donald R. Lehman and Kenthrine JOCZ (Cambridge

M.A.: Marketing Science Institute.

Wikipedia (2010). Peanut “htt://en.wikipedia.org/wiki/peanut” USA: Wikipedia Foundation Inc.

Woodroof, J.G. & Lerahy, J.F. (1940). Microscopic Studies of Peanuts Georgia Agric Expt

Station Bull.205

Yao, S. & Liu, Z.(1998). “Determinant of grain production and technical efficiency in China”

Agricultural Economics Journal of International Association of Agricultural Economists

USA: Blackwell Malden Publ. co 49(2): 171-84

Zommers, A. (1995). Supporting small-scale enterprises: case studies in SME interventions. KIT

Bulletin 338. KIT. Amsterdam, Netherlands.

Zuurbier, P.J.P. (1991). Besturing van Ago-industiele Ketens, In Heck, E. van and Zuurbier,

P.J.P. Bedrijfkunde en Agribusiness: Agro-nidustriele ontwikkelingen in de jaren

negentig. Dept. of Management Studies, Wageningen Agricultural University,

Wageningen, Netherlands

Page 150: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

134

APPENDIX A

University of Nigeria, Nsukka

Faculty of Agriculture

Department of Agricultural Economics

Questionnaire

Dear respondent,

I am a PhD research student of the University of Nigeria Nsukka. I am doing a research titled

‘Economics of groundnut processing and marketing in north central Nigeria’. Please kindly assist

in the completion of this interview schedule. Your responses will be of immense importance in

the achievement of the objectives of this research. The information thus given will be used for

the research only and shall be treated with utmost confidentiality. Your identity will not be

disclosed to anybody for any reason which shall be detrimental to you.

Thank you very much.

Yours faithfully

Aboki, Peter Maisaje

Page 151: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

135

PROCESSORS’ QUESTIONNAIRE

Section A: Socio-Economic characteristics of respondents.

State………………LGA…………………… Location……………………..

1. (i)Name………………………………. (ii)Age……………….. (ii) Gender:

Male…………… female………….

2. Marital status: married………………single…………………….divorced.

3. Household size: No of

wives…………………Children……………..dependants………………..

4. Years of experience in groundnut processing (oil and cake)…………………

5. Occupation: (i) major………………..minor………………………

6. Education: Years of formal schooling…………….

7. Membership of Groundnut processing association (yes or no)…………. Any other ether

co-operative yes……….. No………….

Section B: Groundnut oil processing activities.

1 (a) what quantity of groundnut do you process in a week? ………………………..

(b)

Price/quantity…………………………………………………………………………………

…………………………….

(mudus, basins, bags or kg).

2. The quantity of oil obtained from the quantity (bottle, 4litre, 10litre,

25litre)………………….. and, cake (mudus, basin, bag)…………………

3. Method of processing you are involved in (tick): traditional

processing…………………modern processing……………....

4 Sources of groundnut for processing: Farmers……………….. Traders……………….

5 Procurement of groundnut for processing per bag

Activity Price/unit Total cost

I Raw groundnut seed

Ii Transportation

iii Loading/off-loading

Page 152: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

136

Iv Market charges

V Commission agents

vi Others(specify)

6 For various activities in GNO processing cost items per qty (mudus, basin or bag) of groundnut

Activity Equipment Labour

cost

Equipment

cost

Quantity of

G/nut

Shelling, decortications, drying &

storage

Scorching/roasting

Polishing

Grinding, pasting or crushing

Oil expelling or extraction

Oil refining/treatment

Cake molding/frying

Oil/Cake packaging

Marketing

Others(Specify)

8. Equipment ownership/ maintenance

equipment Own(1)/hire(2) Maint cost/wk Age

7. Do you have any training in the operations of the equipment/ machine?

Yes……..No……….

8. If no to 8 give reasons ……………………………………

Page 153: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

137

………………………………………………………………………………………………

………………

………………………………………………………………………………………………

…………………..

………………………………………………………………………………………………

…………………….

9. Do the operators (if hired) have technical training in the machines? Yes…….. No………

12 (a) Do you get spare parts: yes………no………. (b) Do you get Maintenance/technician:

yes………..No………..

13 Labour use

Equipt/activity Family labour

(no of person)

Hrs spent Hired labour

No of persons

Time spent (hrs) Cost

14 Material inputs (additives)

Material/additives qty Cost Material/additives qty Cost

Fuel/wood Fortification

Electricity Water

Diesel/petrol Salt

Packaging Others(specify)

15 Do you sell at (i) processing site ………(ii) markets ………………(iii) through co-

operatives

16 If in markets complete the followings (i)

market qty Transportation +self Total cost

Page 154: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

138

Makt1

Mkt2

(ii) Revenue obtained from groundnut oil

Unit Unit price Qty/mkt Total/ sales

Cup( peak milk tin)

Bottle

5litres

10ltres

25ltres

Others (specify)

(iii) Revenue obtained from groundnut cake

Unit Unit/price kg

Counting

Mudu

Bag

Others(specify)

17. Do you package into units? Yes…………No………..

18. If yes tick appropriately (a) less than 1/2 litre (b) 1/2litre or more (c) 1litre or more (d)2litre

or more (e) 4litres or more(f) 10litres or more(g)25 litres (h) others (specify)………...

19. Do you Clean (filter) the oil before sale? Yes………… No…………..

20. Do you add any additives? Yes…………No………..

21. If yes tick (i) vitamin A (b) iodine (c) others

(specify)…………………………………………………….

22. What qty of the products do you sell per week? (a)Oil ………………………… (b)

Cake………………………

23. Do you package your cake? Yes……………..No………………..

Page 155: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

139

24. If yes, give example………………….price………………

25. Fill in the table qty of cake from given groundnut.

Qty Qty(oil) Qty(cake)

1 mudu

1 basin

1 bag

26. Distribution of oil and cake produced

Qty Groundnut oil Groundnut Cake

Obtained

Consumed

Gift

Stored

Sold

Others(specify)

27. Utilities used

Utilities Quantity used Charge/month

Water

Electricity

Telephone

Others (specify)

28. (a) Do you have extension visits? Yes…………..No…………. (b) If yes, from which

organization(s) ………………………………….

29. What do they tell you?

............................................................................................................................................................

............................................................................................................................................................

................

Page 156: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

140

30. Did you have any business training before starting?

Yes……………………No…………………………

31. If yes, state

type…………………………………………………………………………………………………

……………………………, and from which organization

………………………………………………………………………………………………………

……………………………….

32. Do you have ready markets for your product? (i)Cake (a) yes ……….. (b) No……….. (ii)

Oil (a) Yes………… (b) No……...

33. If no state reasons

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

…………………………………………………………….

34. Who are your customers: (a) Oil- (i) consumers (ii) wholesalers (iii) retailers (iv)

manufacturers (v) processors. (b) cake-consumers (ii) wholesalers (iii) retailers (iv)

manufacturers (v) processors

35. What are the constraints to your processing business?

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………

36. What are the possible solutions to these constraints?

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

…………

Page 157: TRADITIONAL AND MODERN GROUNDNUT … PETER MAISAJE.pdfii traditional and modern groundnut processing and marketing in north central nigeria by aboki, peter maisaje pg/ph.d./06/42156

141

APPENDIX B

University of Nigeria, Nsukka

Faculty of Agriculture/Department of Agricultural Economics

Weekly Price Data chart

State--------------------LGA-------------Market location----------------District-------------------

Category (rural/urban) ---------------- supervisor----------------------------------

Weekly price chart for groundnut oil and groundnut cake/wholesale and retail

S/No Date Processors’

price

oil/unit

Wholesale

price oil

/unit

Retail

Price

oil/unit

Processors’

price

cake/unit

Wholesale

price

cake/unit

Retail

Price

cake/unit

Remark

G/oil units: cups, beer-bottle, 1litre, 2litre, 4litre, 10litre &25litre

Cake units: units (counting), mudus and bags, kg