Groundnut Oil Production And Marketing In Kaduna State, Nigeria

Project and Seminar Material for Agricultural Engineering AE

Groundnut Oil Production And Marketing In Kaduna State, Nigeria


Abstract


This study examined groundnut oil production and marketing in Kaduna State, Nigeria. The specific objectives were to: examine the socio economic factors that influenced the production of groundnut oil; examine the socioeconomic factors that influenced marketing of groundnut oil; describe gender roles in the production and marketing of groundnut oil in the study area; describe the marketing channels employed in the distribution of groundnut oil; analyse margins of groundnut oil production and marketing; and identify constraints militating against the production and marketing of groundnut oil. Multi-stage random sampling technique was used to stratify the state into northern (mostly Moslems) and southern (mostly Christians) areas. A total of 100 respondents (50 producers and 50 marketers) were randomly selected.

Data were collected from producers and marketers based on the list from the extension agents using two sets of structured and pre-tested questionnaires. Multiple regression model, descriptive statistics and marketing margin analysis were used to achieve the objectives. Socioeconomic factor such as sex, education, occupation, and years of experience were significant at 1% level for production with an R- square of about 70%, while for marketing, age and education were highly significant at 1% level with an R-square of about 90%. Production of groundnut oil was dominated by females, while both sexes had almost equal percentage in the marketing of the product. More retailers (76%) bought groundnut oil directly from the producers at more frequent intervals because they had low capital base. But the wholesalers (24%) bought less frequently at larger quantities because of larger capital. The producer’s margin was 36%, with a Net Income of N43, 925.04 per annum.

The wholesaler’s margin was 28% with a Net Income of N 615, 960.00 per annum, while the retailer’s margin was 36% with a Net Income of N 201,636.00 per annum. The total marketing margin was 100. The constraints of notable importance that affected production were lack of capital (92%), high cost of groundnut (82%), poor variety (50%), and crude processing method (70%). For marketing, high cost of groundnut oil (92%), high interest rate on borrowed money (80%) and fluctuation in price of groundnut oil (70%) and competition from other vegetable oils (50%). The production and marketing of groundnut oil if given a favourable environment by reducing the problems facing the industry to its barest minimum would thrive better.

So, by way of recommendation, research institutes should be encouraged through adequate funding to produce high oil yielding varieties of groundnut. Loans should be made accessible and at reasonable and affordable interest rate to producers and marketers. The indigenous manufacturers should fabricate groundnut oil extractors and groundnut oil producers encouraged to use them so that larger quantities of oil would be produced to meet market demand at a relatively lower price. Proper market information should be disseminated so that all the market players would be in the picture and finally policies should be put in place to discourage unlawful importation of the vegetable oils into the country to avoid unnecessary competition in the market.


Chapter One


Introduction

1.1 Background Information

Groundnut (Arachis hypogaea L.) originated from South America (Wiess, 2000). It is one of the most popular and universal crops cultivated in more than 100 countries in six continents; Asia, Africa, Oceania, North and South America and Europe (Nwokolo, 1996; ICRISAT, 1999).
Major groundnut producing countries are China (40 percent), India (23 percent) and Nigeria (8.4 percent) (World Bank, 2003). Developing countries account for over 95 percent of total world groundnut area and about 94 percent of total world production. Production is concentrated in Asia and Africa, with Africa accounting for 35 percent of global area and 21 percent of total output mainly in Nigeria, Senegal and Sudan (RMRDC, 2005). In Nigeria, groundnut is cultivated mainly in the northern parts especially Kano, North Central, North West and North Eastern states (RMRDC, 2005). World production of groundnut was 35.9 million tonnes. Asia remained the largest producer with 20.5 million tonnes, India 10.9 million tonnes, and Africa, 4.5 million tonnes. According to RMRDC (2005) report, the total output of groundnut for Nigeria as at 2002 was 1,976,490.80 tonnes with a range of 47.00 – 73,000 tonness for the States. Bauchi State had the largest output (73,000 tonnes) followed by Nasarawa (70,420 tonnes) and Edo State had the least with 47.00 tonnes. The mean groundnut output from farmer’s field for all the States was 15.72 tonnes. Sokoto State had the highest mean output of 57.00 tonnes, followed by Benue with 52.0 tonnes, Jigawa 27.33 tonnes, Kano, 26.29 tonnes, Yobe, 25.70 tonnes, Zamfara, 25.55 tonnes and Kaduna, 22.67 tonnes. Abuja had the least with 2.25 tonnes. Annual average production figure for Nigeria was 456 metric tonnes of groundnut oil, 713 metric tonnes of groundnut cake and 2,652 metric tonnes of unshelled groundnut (FAO, 2002).

Groundnut oil production is actually a post-harvest operation which is referred to as processing. Processing may be regarded as a way of converting harvested agricultural produce into other forms of products that can be preserved over a long period of time. In this case it is converting groundnut seeds into groundnut oil and groundnut cake commonly called “kuli-kuli” in the North. Processing of agricultural products serves as a source of additional income to the processor as well as boost household food security especially among the rural poor. In the process of transforming this product from subsistence to commercial, socio-economic changes of the processor is vital as he occupies key position in production, processing and marketing of agricultural product (NAERLS, 2000).

The extraction of oil from groundnut constitutes an important agricultural processing activity for women in Nigeria especially in the northern States. The process involves a number of steps that include cleaning, roasting, de-skinning, kneading and frying and the extraction of oil. The oil extraction process is mainly traditional, characterized by drudgery and time consuming.

In Nigeria, groundnut oil accounts for as much as 17 percent of the total agricultural export earnings because it does not meet domestic demand. The shortfall in domestic demand is 300,000 to 400,000 metric tones (Ojowo, 2004). Its husk (shell) is used as fuel, roughage, and litter for livestock, mulch, and manure and as soil conditioner (Misari, 1980).Groundnut seed contains 40-50 percent protein and 10-20 percent carbohydrate. Groundnut seeds are nutritional sources of vitamin E, niacin, flavin, calcium, phosphorous, magnesium, zinc, iron, riboflavin, thiamine and potassium.

It is also used as animal feed, raw material for oil, cake and fertilizers. The multiple uses of groundnut plant make it an excellent cash crop for domestic markets as well as for foreign trade in several developing and developed countries (Stigter,2006).Refined groundnut oil could be used in a variety of manufactured food products such as biscuits, cakes, crisps and ready meals. The unique property of stability and long shelf life can makes it a preferred choice for frying. As stable oil, it is often used as a base for some pharmaceutical products and minor food ingredients such as colours and flavours. Groundnut oil is also used in the preparation of skin cream, for instance, eczema cream though they could be problematic to those with a history of allergy due to the presence of groundnut protein (Warner, 1997). Groundnut oil is used extensively for massaging polio patients. It is also used as a carrier in the treatment of asthma and other ailments (Asiedu, 1990).


1.2 Statement of the Problem

Groundnut has contributed immensely to the development of Nigeria. Up to 1969, Nigeria was the third largest exporter of groundnut in the world after India and China. 78 percent of the area put to groundnut production and 88 percent of the production in Nigeria is accounted for by the then Kano, North Central, North West and North Eastern states. It was the country’s most important agricultural export commodity. The total groundnut production up to1974 was 1.95 million tonnes but this dropped to about 0.40 million tonnes in 1983 (RMRDC, 2005).

This decline is attributed to the drought of 1972 and 1973, followed by the devastating rosette disease of 1975 and 1976, increased local consumption caused by increased population, improved living standards, and reduction in the number of farming families caused by the oil boom of the early 70s. This drew out a substantial number of the able labour force to urban industries, have resulted in Nigeria becoming a net importer of groundnut particularly in the form of oil. For instance, Nigeria imported about 200,000 tonnes of vegetable oils worth about N77 million in the 1980 fiscal year. Although production has improved over the years, Nigeria is still a net importer of groundnut oils.
The total amount of groundnut required by groundnut processing companies amounted to 413,784 tonnes but only 21,417 tonnes were supplied, representing only 5.2 percent of their requirement (RMRDC, 2005).This indicates that there still exists a ready market for producers. But this decline and shortage in supply of raw material led to the closure of groundnut oil mills in the country which resulted in decreased demand of the crop. Consequently, farmers were forced to take up the production of other crops such as cowpea, maize, sorghum, pearl millet and horticultural crops.

The increase in the price of agricultural inputs such as fertilizers and pest control chemicals also discouraged farmers from growing groundnuts especially since the relative turn-over from groundnut was much smaller compared to crops such as maize, sorghum, and millet. Also, the dissolution of the marketing boards and the decline in groundnut production resulted in the collapse of the marketing structure such that farmers were no more assured of a ready market for their produce.

With the coming of the SAP (structural adjustment programme) in 1986 and the concomitant devaluation of the naira, Nigerian manufacturers found it difficult to import the needed raw material and machinery needed to produce profitably. The local machines are less sophisticated and mainly used for oil extraction, expelling, decortication and shelling.

Generally, groundnut processing (oil extraction) in Nigeria and especially in the study area is usually by traditional method associated with high expenditure in energy, labour and time. For instance, during kneading operation, at least two women (one kneading and the other holding the mortar for stability) are needed, making the operation strenuous, costly and time consuming. These factors result in relatively lower output, high labour input and low income for the processors (Nalumansi and Kaul, 1992).

The distribution of groundnut oil is to a large extent sold within the local markets. This limitation in the channel of distribution reduces the extent to which the product travels to other parts of the country thus giving the product a small market share and reducing its contribution to the gross domestic product.

The over all efficiency of the marketing system is hindered by gender biases which favour accumulation and sometimes excessive profits by male-controlled, large trading concerns or support services higher up the marketing chain. Women, although often the majority of traders tend to be trapped in the vicious cycle of petty trading lower down the marketing chain. Lack of economies of scale and poor integration in agricultural markets is linked to these gender biases.

In the study area, even though groundnut oil is produced and marketed, it is done at a loss. Most of the gain comes from the by-product; groundnut cake popularly called ‘Kuli-kuli’ in the north. Also the poor financial status of the rural producers hinders them from purchasing oil extractors to facilitate production.

In conclusion therefore, because very little has been done in this area, this research is meant to bridge the gap of information on the problems militating against the production and marketing of groundnut oil in the study area.


1.3 Objectives of the Study

The broad objective of this study is to examine groundnut oil production and its marketing in Kaduna State, Nigeria. The specific objectives are to:

  1. Examine the socio-economic factors that influence the production of groundnut oil in the study area;
  2. Examine the socio-economic factors that influence the marketing of groundnut oil in the study area;
  3. Describe gender roles in the production and marketing of groundnut oil in the study area;
  4. Describe marketing channels employed in the distribution of groundnut oil;
  5. Analyse margins of groundnut oil producers and marketers;
  6. Identify constraints militating against the production and marketing of groundnut oil in the study area; and
  7. Make recommendations based on findings.

1.4 Hypotheses of the Study

The following null hypotheses guided the study;

  1. There is no significant effect of the socio-economic factors (such as age, marital status, education, household size etc) on the quantity of groundnut oil produced; and
  2. There is no significant effect of the socio-economic factors on the quantity of groundnut oil sold.

1.5 Justification

The study on groundnut oil production and marketing is apt in such a time as this bearing in mind that the groundnut pyramid of Kano in the 70s once boosted the economy of the nation before the oil boom. It is also timely at a time when Government is agitating and looking for possible ways of laying less emphasis on petroleum and diversifying the economy by encouraging the agricultural sector and other sectors like Tourism as seen in the Presidential 7-point Agenda.

Effort in the direction of this study will create employment opportunities for all those involved in the production of groundnut oil such as crushers, sorters, transporters and consequently improve the living standard of the people. Rather than import other vegetable oils, this study will encourage and create a solid base for marketers who will in turn be exporters, thus contributing to the GDP of the nation. Other subsidiary industries like the plastic industry, cosmetic and pharmaceutical industries will be encouraged.

For the researchers, this study will serve as a base on which further work will be done and ways in which groundnut oil will be produced at less cost so as to maximize profit will also be considered. Policy makers will come up with policies which will discourage the importation of other vegetable oils competing with the locally produced groundnut oil hereby encouraging the patronage/consumption of locally produced groundnut oil.

Knowing that the producer’s margin is small using the low, oil-rich variety of groundnut, producers of groundnut oil will therefore purchase the high, oil-rich variety for their production and consequently encourage farmers to cultivate more of the high, oil rich variety.


1.6 Definition of Terms

Almajiris

These are people usually, children who in most cases do not leave with their parents but under the care of an Immam. They fend for themselves through aids got from begging. They are found in the north among muslim.

Purdah

This is a practice of keeping muslim women (married) under seclusion, either partial or total seclusion.

Spread

This is the difference between the bid and offer prices quoted by a market marker. The prices at which market-makers are willing to sell are higher than those at which they are willing to buy. The spread has to cover the market makers operating costs and provide profits, and includes a premium against the risk that any particular customer has inside knowledge about. Spreads tend to be smaller on more widely traded securities.

Kuli-kuli

This is the groundnut residue from which oil has been extracted.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary

This study examined Groundnut oil production and marketing in Kaduna state, Nigeria. Groundnut which used to be Nigeria’s most important agricultural export commodity in the 70,s dropped due to the devastating rosette disease of 1975 and1976, increased local consumption, improved standard of living, and reduction in the number of farming families due to the oil boom. Although production has improved over the years, Nigeria is still a net importer of groundnut oil. Specific objectives were also examined which were to examine the socioeconomic factors that influenced the production of groundnut oil in the study area; examine the socioeconomic factors that influenced the marketing of groundnut oil in the study area; describe gender roles in the production and marketing of groundnut oil in the study area; describe marketing channels employed in the distribution of groundnut oil; analysed margins of groundnut oil production and marketing; and identified constraints militating against the production and marketing of groundnut oil in the study area.

Multi-stage random sampling technique was used to stratify the state into Northern (mostly Moslems) and Southern (mostly Christians) areas. 100 respondents were randomly selected, 50 from the North (25 producers and 25 marketers) and 50 from the South (25 producers and 25 marketers) based on the list from the extension agent in the study area. `

Data were collected from primary sources using two sets of structured and pre-tested questionnaires. Information collected was through the help of trained research assistants. Multiple regression analysis model was used to realize objectives (i) and (ii), while objectives (iii), (iv), and (vi) were realized using descriptive statistics such as frequency tables and percentages. Objective (v) was achieved using marketing and producer margin analyses.

The study revealed that some socio-economic factors such as sex, educational qualification, occupation, and years of experience greatly influenced the quantity of groundnut oil produced at 1% level of significance (R-Square is about 70%) unlike age, marital status, family size and distance to market which though were also significant but at a lower level. On the marketing side, the study also revealed that age, and education had very high significant effect on the quantity of groundnut oil sold with an R-square of about 90% at 1% level of significance.

Other factors like marital status, occupation and years of experience showed very little significance and family size showed negative significance.

The production of groundnut oil was dominated by females while in the marketing they shared almost equal percentages though the males carried out more of the tasks. About 76% of retailers buy directly from the producers while about 24% of the market players were wholesalers.

In groundnut oil production and marketing, the producer’s Net Income was N43, 925.04 per annum, with a margin of 36%. Net Income for wholesaler was N615,960.oo per annum with a margin of 28%. Net Income for retailer was N201, 636 .00 per annum with a margin of 36% . The marketing margin therefore was 100%.

Constraints to production which were of importance were lack of capital (92%), high cost of groundnut seed (82%) and poor variety of groundnut seeds (50%), traditional method of groundnut oil production (70%). For marketing, the constraints of high significance were high cost of groundnut oil (92%), high interest rate on borrowed money (80%), fluctuation in price of groundnut oil (70%) and competition from other imported vegetable in the market (50%).


5.2 Conclusion

In conclusion therefore, the study has shown that groundnut oil production and marketing is not an entirely feminine business even though the women dominated in the area of production (processing), males and females shared almost equal percentage in the marketing. Despite the numerous constraints facing the participants in this industry, production and marketing of groundnut oil would thrive if these constraints were reduced to their barest minimum.


5.3 Recommendations

  1. The Government should also encourage both public and private investors into this business so that with their high level of education and expertise, the sky will be the limit in the groundnut oil industry.
  2. The government should encourage agricultural banks, micro-finance banks and corporative societies to give out loans to investors at reasonable interest rate.
  3. Research institutes such as Institute of Agricultural Research (IAR), Zaria should be well funded and encouraged in the area of research so as to enable them produces more improved varieties of groundnuts which are disease resistant and high-oil yielding and thus make them available to the farmers.
  4. Government should enforce policies that would discourage the unlawful importation of vegetable oils into the country and also put in place penalties for defaulters. This will help in reducing competition among different varieties of oil to its barest minimum and consequent high price.
  5. Hoarding of groundnut oil should be discouraged as this would solve the problem of artificial scarcity of commodity and consequent rise in price.
  6. The industrial sector should be encouraged to produce durable oil extraction machines which would facilitate the production of groundnut oil and at a cheaper rate due to economies of scale. With this, there would be sufficient product to meet the market demand.
  7. Also, market information services should be rendered to assist both marketers and consumers in knowing the market situation.

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