Aboki, peter maisaje

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
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.

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

R̄² = 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

R̄²= 0.213, SE: 3.04 F = 1.898 ***=sig at1%, **= sig at 5%,*=sig at 10%

Source: Computed from field survey data, 2010/2011

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:

1. 
   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;
   
2. 
   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;
   
3. 
   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 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.
   
4. 
   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;
   
5. 
   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;
   
6. 
   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 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;
   
7. 
   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;
   
8. 
   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.
   

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

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.

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 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 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 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.

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 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.