Economics Of Oil Palm Seedling Production

Project and Seminar Material for Agronomy Students

Economics Of Oil Palm Seedling Production


The study determined the economics of oil palm seedlings production in Edo South Senatorial district, Edo State. Oil palm seedling production can serve as a means of providing gainful employment for the youth in order to combat poverty especially in the face of the current recession in Nigeria. This study carried out a profitability analysis of oil palm seedlings production in Edo State, Nigeria.

The specific objectives were to examine the socio-economic characteristics of the oil palm seedlings producers, estimate the costs and returns in oil palm seedlings production, identify the factors affecting the level of income generated by producers and the likely problems of oil palm seedlings production. Primary data used in the study were collected through structured questionnaire administered to 90 randomly selected oil palm seedlings producers in the study area. Descriptive statistics, budgetary and multiple regression analyses were used in analysing the data. Results of the data analysis showed that majority (75.5%) of the respondents were males and were in their most active years and married (83.3%). The household size on the average was 7 persons.

The selling price per oil palm seedling was N357.22 ($1.02) with a gross margin of N156.71 ($0.45) and net profit of N106.02 ($0.30) per seedling. The result of the multiple regression analysis showed that cost of planting materials and depreciation cost were significant determinants of income derived by producers of oil palm seeding at 1% and 5% levels respectively. The major constraints faced by the producers were inadequate finance, drudgery of operation as well as high cost of transportation. It was then recommended that producers of oil palm seedlings should invest more in their production in order to meet the increasing demand in the market and to generate more profit.

Table Of Content

Preliminary Page(s)

  • Title page
  • Certification page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

1.0 Introduction

  • 1.1 Background Of The Study
  • 1.2 Statement Of Problem
  • 1.3 Objective Of The Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis

Chapter Two

2.0 Literature Review

  • 2.1 Conceptual Review
  • 2.2 Social And Economic Value Of Oil Palm
  • 2.3 Empirical Studies

Chapter Three

3.0 Research Methodology

  • 3.1 Area Of The Study
  • 3.2 Sample And Sampling Technique
  • 3.3 Research Instrument
  • 3.4 Data Analysis

Chapter Four

4.0 Results And Findings

  • 4.1 Results
  • 4.2 Discussion

Chapter Five

5.0 Summary, Conclusion And Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendations
  • References
  • Appendices

Chapter One


1.1 Background Of The Study

The African Oil Palm, Elaeis guineensi jacq (Jacquin, 1963), is placed in the Arecaceae family which contains about 225 genera with over 2600 species along with coconut and date palms cultivars. There are 3 naturally occurring forms of the oil palm fruit, termed dura, tenera and pisifera. The selection of dura female and pisifera male parents is carried out to obtain tenera offspring that produce large oil yield (Breure et al, 1986, Breure, 2003). The African oil palm is native to tropical Africa, from Sierra Leone in the West through the Democratic Republic of Congo in the East, it was domesticated in its native range, probably in Nigeria, and moved throughout tropical Africa by humans who practiced shifting agriculture at least 5,000 years ago (Hartley, 1988).

European explorers discovered the palm in the late 1400’s, and distributed it throughout the world during the slave trade period (Corner, 1966). In the early 1800’s, the slave trade ended but British began trading with West Africans in Ivory, lumber and palm oil. The oil palm was introduced to the Americans hundred years ago, where it became naturalized and associated with slave plantations, but did not become an industry of its own until the 1960s (Lereka, 1998). The first plantations were established on Sumatra in 1911, and in 1917 in Malaysia (Raymond, 1961).
Oil plantations were established in tropical America and West Africa about this time, and in 2003, palm oil production equaled that of soybean, which had been the number one oil crop for many years.

Elaeis guineeasis is characterized by its vertical trunk and feathery nature of its leaves every year 20 – 25 new leaves called β€œfrond” develop in continuous whorle at the apex of the trunk (Devendra, 1984). The fruit bunches develop between the trunk and the base on the new fronds and the plant can reach 60 – 80ft in height in nature, but is rarely more than 20 or 30ft in cultivation. Although new plantation starts to bear fruit at 3 years, generally, the first commercial crop require between five and six years and continuous to produce for 25 – 30 years, or until the palm grow too high to be harvested. Once a plantation reaches full production, a new inflorescence is produced every 15 days. It weights between 15 and 20kg and can conking up to 1500 individual palm fruit of between 8 and 10 grams each (Chavaliar, 1937). The individual fruits consist of the following four parts, a pericarp, a thin outer skin which upon ripening changes from brown to red or orange, a mesocarp, a large of fibrous material which surrounds the nut, an endocarp or hard inner shell (nut) to protect the seed or kernel and the seed (kernel) (Aighologa, 1995).

The female inflorescence contains 200 – 300 fruits, and fruit set is 50 – 70% fruit riped about 5 – 6 months after pollination (Ergo, 1977). Vegetable and edible oil producer of Nigeria (VEOPAN) claims that, it provided job opportunities for not less than 1.8 million farmer family involved in this production of oil seeds and related crops. Nigeria with a National 1.3 million tones of palm oil and a population. Of over 140 million that means each family produces less than 700kg per year, i.e. an average of less than 2kg/day (Eshalomi, 2008).

Last year, the vegetable oil sub-sector of Manufacturers Association of Nigeria reported that the market has been very unstable because of high cost of input, excessive smuggling of vegetable oil and faking. Recently, the group lamented the shortage of palm oil plantation production which is the major raw material for vegetable oil production because it condemned the Federal Government of Nigeria for signing a contract to supply palm oil to Ghana, whose local demand has not been met (Eshlomi, 2008). In Edo State, effort has been made to encourage the establishment of oil palm plantation. These has yielded some positive result such as establishment of multinational oil palm plantation companies, whose production has follow Presco Industry Limited 22,000 tonnes/year and an indigenous oil palm farm Nosakeri Farm (Vanguard, 2007).

1.2 Statement Of Problem

The production of oil palm seedling is currently the only source of planting materials for oil palm production in Edo State senatorial district. The entire seedling produced in the world is of the tenera type obtained from fertilizing dura tree with pollen form pisifera tree (Griseb, 2007). The oil palm seedling production is handled directly by organizations such as the Ministry of Agriculture and NIFOR (Wikipedia, 2008).

However, it is observe that a number of business oriented persons are not investing in oil palm seedlings production. What would be responsible for this? The equation therefore is whether investment in oil palm seedling production is not profitable or there are some other problems that are preventing investment in oil palm seedling production. It is necessary to carry out an economic analysis to determine the profitability and viability of oil palm seedling production in Edo South Senatorial district.

1.3 Objective Of The Study

The broad objective of the study is the economic analysis of oil palm seedlings production in Edo South senatorial district. The specific objectives are:

  1. To examine the soicio-economic characteristics of the producers of oil palm seedlings in the study area.
  2. To identify the methods adopted in raising the oil palm seedlings in the study area.
  3. To estimate the cost and returns in oil palm seedlings production and access its profitability and viability.
  4. To identify the factors affecting the level of income generated in the production of oil palm seedlings in the study area. To identify constraints militating/facing against oil palm seedlings production.

1.4 Research Questions

  1. What are the soicio-economic characteristics of the producers of oil palm seedlings in the study area?
  2. What are the methods adopted in raising the oil palm seedlings in the study area?
  3. What is the estimate of cost and returns in oil palm seedlings production and its profitability and viability?
  4. What are the factors affecting the level of income generated in the production of oil palm seedlings in the study area?
  5. What are constraints militating/facing against oil palm seedlings production.

1.5 Research Hypothesis

The following hypotheses were tested at .05 level of significance;

  • HO1: The resources are not efficiently being utilized.
  • HO2: Socio-economic factors do not influence resource use efficiency

Chapter Five

5.0 Conclusion And Recommendation

5.1 Summary

The study was conducted to examine the economics of oil palm seedling production in Edo State of Nigeria. The study was undertaken to reawaken the production of the much neglected oil palm industry in Nigeria, EdoState being the study area.The study revealed that the age of oil palm producers is concentrated between the ages of 41 and 60 years. This means that there are fewer active participants and perhaps more of those who are physically least able and who show interest in long term fresh investment that are involved in oil palm production.The study also found that substantial income (average of N69, 437.69 per year) is being earned from oil palm by oil palm producers. That is, an oil palm farmer could earn as much as 35 percent of his annual income from oil palm products. Majority of oil palm producers, up to 80 percent are full-time farmers. It was found that major planting of oil palm was done over 26 years ago. This means that most oil palm currently on the field are above their productive age. The study noted that the age of seedlings planted on the field does not determine the success rate of their survival but the management practices adopted. That is, the maintenance and care of seedlings after planting determine the rate of success. Those who engage in oil palm production do so mainly as a means of additional income. The implication is that no oil palm producer in the area has oil palm production as sole business.

The study also found that production has not been able to keep pace with consumption demand. Although there is evidence of increased hectarage of planted oil palm on a yearly basis, this does not show a proportionate increase of output to the extent that it will meet up local demand. Rather, there is evidence of recent importation of palm oil from other countries abroad to fill up gap for the deficit.

The study found that modern cultural practices are not being used to produce oil palm in the area. The study revealed that the optimum replacement age is 35 years. At this age, it is required that oil palm be cut down and replaced. This age could be increased if the product price is lowered. This is because lower commodity price is a disincentive. Oil palm production obeys the law of diminishing returns. It means that it has a peak yield after which it diminishes.

A major constraint apart from financial support is processing. Processing is being done by local processing methods. This has contributed to low yield of palm oil. The main problem has been that of inadequate financial support and other incentives to boost palm produce economy

5.1 Conclusion

The results of this study show that oil palm seedling production is profitable and a viable business venture. However, there are several constraints such as inadequate finance that militates against production of oil palm seedlings in the study area. Increase in the production level oil palm seedlings will generate more revenue in the future for producers and relevant stakeholders.

The study has examined extensively the issues involved in the economics of oil palm seedling production in Nigeria; the major constraints being that of finance and government policy direction. Oil palm production is a profitable venture which must be encouraged and at the same time it is capital intensive. The current laissez faire attitude by the three tiers of government toward oil palm seedling production cannot lead to the desired transformation in the oil palm industry.

5.2 Recommendations

The following recommendations were made based in the outcome of the findings;

  1. Government must be seen to be actively involved in the procurement and distribution of essential resources such as seedlings, fertilizer and also assist the farmers financially.
  2. Non-governmental Organization (NGOs) and private individuals must be equally involved if the anticipated revolution is to be achieved in the industry.
  3. Oil palm seedling producers should form cooperatives so as to solve the problems associated with inadequate finance and other major constraints they encounter.

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