The Impact Of The Distribution And Utilization Of Oil Palm On The Socio Economic Development

Project and Seminar Material for Agricultural Engineering AE

The Impact Of The Distribution And Utilization Of Oil Palm On The Socio Economic Development


Palm oil is one of the commodities produced in rural Nigeria whose consumption daily in the human diet and use as an industrial raw material have increased its potentials for income generation and poverty alleviation. This study examined the contribution of palm oil production to income generation among 200 small-scale farmers selected from the farming communities in AkwaIbom State, Nigeria. Responses to a structured questionnaire schedule were analyzed using frequency counts and percentages while profitability was determined with data provided on costs and revenue. Palm oil producers were mainly middle-aged married females with low literacy level and operated on small-scale farms.

Chapter One


1.1 Background of the Study

Nigeria ranked sixth among the poorest countries in the world with over 70% of the population living below poverty line in 2007 (Central Intelligence Agency, 2012) while 46% lived below $1.25 daily in 2010 (World Bank, 2014). Okonjo-Iweala (2014) noted that Nigeria is one of the five countries in which two-thirds of the world’s extreme poor are concentrated; the others are India, China, Bangladesh, and the Democratic Republic of Congo. The poverty in Nigeria is largely rural (, 2013) where the effects of macro-economic shocks in terms of fiscal adjustment and monetary policy reforms are felt much more. Thus, whereas poverty is expected to decline by 40% in the urban centers, it would increase by 7% in rural areas which inhabit almost 80% of the population living below the poverty line and depend on agriculture for food and income (International Fund for Agricultural Development, IFAD, 2009). Consistent economic growth and prosperity are central to poverty alleviation and the oil palm industry has been identified as one effective avenue for rural income generation, especially among the women who process and sell palm oil in local and national markets, food security and economic stability (Partnership Initiatives in the Niger Delta, PIND, 2011).

A huge percentage of farmers in Nigeria are small scale farmers. Small-scale farming involves growing crops, at least in part, to be used by an individual family, with farming being a significant source of their livelihoods (Lininger, nd.)Small Scale farming is usually characterized by intensive labour and in most cases, animal traction, limited use of agrochemicals and supply to the local or surrounding markets. Unlike large-scale commercial agriculture, it plays a dual role of being a source of household food security as well as income from sale of surplus. Although some claim small-scale agriculture is less efficient in output as compared to commercial agriculture (Kirsten & Van Zyl, 1998), it is ecologically friendly in that less land is cleared for cultivation, there are less emissions due to less use of fuel-driven machinery and the market is usually local implying less carbon miles (Kutya, 2012).

The oil palm (Elaeisguineensis) is the dominant source of vegetable oil consumed in the world (USDA, 2006), in the form of palmoil (mesocarp oil) and kernel oil (seed oil). Palm oil is the main edible vegetable oil produced and consumed in Nigeria where the oil palm tree features regularly in the natural vegetation of the lowland humid to sub-humid areas in a belt that covers almost 24 million hectares (ha) (Opeke, 2003). Dispersed smallholders harvest fruits from the wild/semi-wild palms and process them to produce 80% of the palm oil output and through which Nigeria accounted for 43% of global palm oil production up till the mid-1960s. The performance has declined such that the annual output at 850,000 metric tonnes (MT) leaves an overall supply gap of 0.5 million MT currently met through imports (Omoti, 2001).

Palm oil production starts with the oil palm trees whose cultivation has formed the farming culture and a means of livelihood for millions of families in the rural landscape. Palm oil production is a major vocation which has played significant roles in poverty alleviation in some countries, especially in Malaysia and Indonesia (BusinessDay, 2013). The huge potentials for generating rural income and providing employment have enabled the poor to be part of the solution to the scourge of widespread poverty.AkwaIbom State which has been listed among civil service state in Nigeria is also one of the 24 palm oil-producing states. This implies that the potentials in palm oil production to transform the lives of the small-scale farmers in the rural sector of AkwaIbomState need to be harnessed. This study was carried out to evaluate the impact of the distribution and utilization of oil palm industry to the socio-economic development of the rural inhabitants of Oruk Anam LGA.

1.2 Statement of the Problem

Price of palm oil is largely affected by production or output of the palm oil within the year and general inflation (Fly, 2003). Past policies have aimed at increasing agricultural productivity through increased investment in agronomic and production system research. The discovery of petroleum in the late 50’s and its exploitation and export in the early 70’s changed the economic scenario in favour of oil as the chief revenue earner for the nation. The global economic recession of the mid-80’s however exposed the inherent structural weakness of import substitution as a strategy for industrialization.

With the coming of the Structural Adjustment Programme (SAP) in 1986 and the concomitant devaluation of the naira, Nigeria manufacturers found it’s difficult to import the needed raw materials and machinery to produced profitable policy formulation has failed to take cognizance of the fact that production and marking constitute a continuum and that the absence of the development in one retards progress in the other (Olayemi, 1972).It in view of this that the researcher intends to investigate the impact of the distribution and utilization of oil palm on the socio-economic development in Oruk Anam LGA.

1.3 Objective of the Study

The main objective of the study is to investigate the impact of distribution and utilization of oil palm on the socio-economic development of Oruk Anam LGA ofAkwaIbom State. But to aid the completion of the study, specific objective includes:

  1. To investigate the impact of oil palm distribution on the socio-economic development of Oruk Anam
  2. To ascertain the role of oil palm distribution on the socio-economic development of Nigeria.
  3. To evaluate the benefit of oil palm production on the economic development of Nigeria
  4. To ascertain the role of government in aiding effective production and distribution of oil palm in Oruk Anam LGA

1.4 Research Hypotheses

To aid the completion of the study, the following research hypotheses were formulated by the researcher

  1. H0: oil palm distribution does not play any significant role on the socio-economic development of Nigeria.
    H1: oil palm distribution does play a significant role on the socio-economic development of Nigeria.
  2. H02: government does not play any role in aiding effective production and distribution of oil palm in Oruk Anam LGA.
    H2: government does play a significant role in aiding effective production and distribution of oil palm in Oruk Anam LGA

1.5 Significance of the Study

It is believed that at the completion of the study, the findings will be of great importance to the rural farmers as the study seek to help them explore the benefit of oil palm production and distribution to the farmers, government, consumers and the general public. The study will also be of great importance to the government as the study seek to explore tha untapped potentials of oil palm production in Oruk Anam LGA and its contribution to economic growth. The study will also be of great importance to researcher who wants to embark on research on similar topic as the findings will serve as a reference point to them. Finally the study will be of great importance to the academia and the general public as the study will add to the pool of knowledge.

1.6 Scope and Limitation of the Study

The scope of the study covers the impact of the distribution and utilization of oil palm on the socio-economic development of Oruk Anam LGA of AkwaIbom state. In the cause of the study, there were some factors which limited the scope of the study

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities

1.7 Definition of Terms

Oil Palm

Palm oil is naturally reddish in color because of a high beta-carotene content. It is not to be confused with palm kernel oil derived from the kernel of the same fruit, or coconut oil derived from the kernel of the coconut palm

Economic Development

Economic development is the process by which a nation improves the economic, political, and social well-being of its people. Whereas economic development is a policy intervention endeavor with aims of economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GDP


Distribution (or place) is one of the four elements of the marketing mix. Distribution is the process of making a product or service available for the consumer or business user that needs it. This can be done directly by the producer or service provider, or using indirect channels with intermediaries.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
  • Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to investigate the impact of the distribution and utilization of oil palm on the socio-economic development in Oruk Anam LGA of AkwaIbom state.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of oil palm distribution and utilization in Oruk Anam LGA.

5.2 Summary

The present investigation was under taken with a view to analyzing the critical issues relating to economics of palm oil utilization and distribution in Oruk Anam LGA of AkwaIbom State, Nigeria. Among the palm oil distribution techniques about 9% of the distributions used the traditional marketing techniques, while very few take advantage of the digital marketing technique. The results of the profitability analysis in palm oil processing in the area showed a level of profitability while factors such as high rentage of palm plantation, extraction and transport costs were the most critical factors inhibiting profitability and distribution of the oil palm business.

5.3 Conclusion

The only opportunity opened to bridge the challenges of development and economic growth is to bridge the gap of unemployment by the inhabitant of Oruk Anam is by exploiting its natural forest reserves in the reestablishment of oil palm commercial estates. The State has thus generated about $400 million or N6.4 billion in the sale of the oil palm estates. The challenge is that of managing these proceeds for development. Secondly, the challenge of customary land tenure where land is considered a community property. Though, the Governor has excessive powers to take an absolute and pecuniary interest in dealing with all the legal challenges that will be capable of derailing the process of development and growth.

5.4 Recommendation

The AkwaIbom State Government in order to achieve the desired impact of the foreign direct investment will have to manage a combination of factors: Fiscal discipline in managing the revenues generated from the sale of estates in the short-term;farmers should be encouraged to increase their scale of production through the adoption of modern processing techniques. The use of large oil mills with modern and advanced technology in which the production process is automated should be by the Government agencies, NGOs and private interventions. This should be accompanied by training programmes on its effective utilization.Poverty alleviation strategies designed for rural women farmers by Government, NGO or Private Organizations should focus more on improving palm oil processing among women farmers

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