ECONOMIC ANALYSIS OF GROUNDNUT PRODUCTION IN NIGER STATE BY ANIMASAHUN OLUW ASESAN ADESINA 2003/14379AE

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1 r I 1 ECONOMIC ANALYSIS OF GROUNDNUT PRODUCTION IN NIGER STATE BY ANIMASAHUN OLUW ASESAN ADESINA 2003/14379AE A PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT AWARD OF DEGREE OF AGRICULTURE, (B. TECH) IN THE DEPARTMENT OF AGRICULTURAL ECONOMIC AND EXTENSION TECHNOLOGY, SCHOOL OF AGRICULTURE AND AGRICULTURAL TECHNOLOGY, FEDERAL UNIVERSITY OF TECHNOLOGY, MINNA, NIGERIA NOVEMBER, r I

2 DECLARATION I Animasahun Oluwasesan Adesina with Matric No. 2003/14379AE hereby declare that this project work was done by me under the supervision of Mr. Michael Akindele Ojo and that to the best of my knowledge, this has not been presented any where else before. Animasahun Oluwasesan Adesina 2003/14379 AE 1 l 1 I J t I! I 11

3 DEDICATION It is an honour to dedicate this project work to God almighty the author and the finisher of my faith and to my dearest mother Mrs. A.S. Animasahun. j I ~ I IV

4 ACKNOWLEDGEMENTS Glory be to God almighty the author and the Finisher in who I live and have my being, the source of all knowledge and the author of success for His steadfastness and mercy never cease nor come to an end. Hiss guidance and protection saw me to the end of this work. I am highly indebted to my supervisor, Mr. Ojo Michael Akindele, for his wonderful guidance and constructive criticisms, which went a long way in producing this work. I thank all my lecturers in the department for their efforts over the years to educate me in the field of Agricultural economics and extension. My profound gratitude goes to my parents Mr. and Mrs. A.B. Animasahun especially my dearest mother for her love, moral financial and spiritual support, may your labour never be in vam. I must appreciate those who put their resources together to ensure the completion of this project. My big brother Omobayo A. Animasahun and my sisters. Afusat and Ganiyat for their supports and encouragement. I can't forget your contributions Mr. A.A. Semiu and Mr. Idris o. Sodiya, may the good Lord reward you abundantly. I also appreciate my friends course mates "Oyawoye, Ayodele (A V), David, Ismail, Man sholey and Alhassan, cousins numerous too numerous to mention for their affectionate, lovely and friendly companionship. Finally, my regards to everyone who has supported me in one way or another. God bless you all. v

5 TABLE OF CONTENTS Title Page Declaration Certification Dedication Abstract Acknowledgements Table of contents List of tables 11 III iv v VI Vll x CHAPTER ONE 1.0 Background to the study 1.1 Introduction 1.2 General overview 1.3 Groundnut production in Nigeria 1.4 Problem statements 1.5 Objectives of the study 1.6 Justification of the study ,.) CHAPTER TWO 2.0 Literature review 2.1 The commodity of groundnut production 2.2 Nutritive value of groundnut 2.3 Nutritive qualities of groundnut 2..4 Utilization and economic importance 2.5 Groundnut supply & demand 2.6 Marketing of groundnut 2.7 Export of groundnut 2.8 Groundnut climate requirement 2.9 Diseases that affect groundnut VI

6 CHAPTER THREE 3.0 Methodology 3.1 Area of study 3.2 Sampling procedure 3.3 Method of data collection 3.4 Analytical technique 3.5 Limitation of study ] CHAPTER FOUR 4.0 Result and discussion 4.1 Socio economic characteristic of sample farmers 4.2 Gross margin analysis 4.3 Production function analysis 4.4 Resources use efficiencies ! CHAPTER FIVE Summary, Conclusion and Recommendation,I \ 5.1 summary ) Conclusion Recommendation References Vll

7 LIST OF TABLES Table 2.1 Word major sources of vegetable oil and oil seed protein meal 12 Table 2.2 Word leading exporters 14 Table 4.lAge of respondents 21 Table 4.2 Sex of respondents 22 Table 4.3 Marital status 22 Table 4.4 Education level of respondents 23 Table 4.5 Household size of respondents 23 Table 4.6 Years of experience in groundnut production 24 Table 4.7 Land acquisitions 25 Table 4.8 Farm size 25 Table 4.9 Gross margin analysis of sampled farmer 26 Table 4.10 Estimated double-log production function 27 Table 4.11 Estimated efficiency ratio (r) 28 Table 4.12 Estimated elasticity of factors input and return to scale 28 Table 4.13 Production problem encountered by sampled farmer 29 Vlll

8 ABSTRACT The study examined the economic analysis of groundnut production in Niger State, Bosso and Chanchaga local government as a case study. The objectives of this research work are to determine the socio-economic characteristics of groundnut producers, to evaluate the profitability of groundnut production, Constraints associated with groundnut production were identified and necessary recommendations were made. A total of 100 farmers were randomly selected and questionnaires were administered to them in 10 villages. The primary data collected were analysed using simple descriptive statistics. Double log regression analysis of which four problems functional forms were tried and the Cobb-Douglas function was chosen as the lead equation. The profitability was determined using gross margin analysis. It was found that about 95% of the respondents were between the productive age group of years and about 50 percent had at least secondary education while land acquisition was mainly through family; the major source of capital was from personal savings while implement used by the respondents were mainly hand tools. The gross margin was N275, per hectare. The result of the regression analysis revealed that farm size (xd quantity of fertilizer (X2) and quantity of Agricultural (X4) input were statistically significant in determining efficiency of resources use, while the labour was not significant. Since farmers' constraints centred on lack of capital as well as pest and disease infestation, it was recommended that government should grant farmers loan with minimum collateral for them to be able to buy more capital inputs and increase farm size. IX

9 CHAPTER ONE 1.0 BACKGROUND TO THE STUDY 1.1 INTRODUCTION Agriculture was the main stay of the nation's economy in Nigeria prior to the oil-boom. The government of Nigeria earned foreign exchange for national development from the export of major crops such as cocoa, coffee, groundnut, rubber, oil palm and beniseed, (Ogunwale, 2004). However, the emergence of the oil-boom changed the situation, (Ogunwale, 2004) further stated that the government whose institutions and parastal constitute the public sector in Nigeria, encouraged by increased, proceed from oil started importation of food on massive scale at the expense of locally produced ones. This discouraged the farmers from producing much because they no longer realized the needed profit from their efforts. Nigeria government in attempt to revamp the above situation at one time or the other has put in place various agricultural development programmes in order to achieve the objectives of promoting agricultural development in the nation. Among the programme embarked upon are: operation feed the nation (OFN) launched in 1976, was aimed at creating awareness among Nigerians of different socio-economic strata of the need to produce at least part of their own food and at mobilizing the nation's resources. Green Revolution in 1979, like the past programmes aimed at increasing agricultural production in the country. However, it did not increased food supply. Nigeria is blessed with 993,773 square kilometers of highly productive arable land for agricultural purpose and other 80% of people living in rural areas (Nweze, 1997). It is the 1

10 world and indeed, it remains till date one in which the largest number of people are engaged. The vast majority of the population of the world depends upon agriculture and it related activities for their livelihood. This is so because, agriculture is basically concerned with the production of food which the basic necessity of life, (Ojo and Edorehji, 1981). Its intrinsic position as a source of raw materials for key industries and a major foreign exchange earner has further added to its preeminence among all known human occupations with a population of about 11Omillion and GDP/capital of 260 (Nweze, 1997). Nigeria has about two-thirds of its population depending on micro and small scale farming for their livelihood. The share of agricultural exports from Nigeria fell from 8% in 1960 to 15% in 1990 due to poor performance of the agricultural sector (CBN, 1998b). 2

11 1.2 General Overview Groundnut production in Nigeria. Nigerian groundnut farmers like other farmers from developing countries, enjoyed an era of protected and subsidized agricultural production system from the post secondary world era up to the mid-eighties. At that time, government set prices, purchases and export agricultural produce through the commodity marketing boards. Government provided subsidized inputs such as fertilizer and pesticides and also produced agricultural research and extension services. However, by mid-eighties, when most developing countries could not pay their debt, the World Bank and International Monetary Fund (IMF) promoted the Structural Adjustment Programme (SAP), as one of the reform process was adopted in 1986 in Nigeria. The adoption of the reform measures meant that government withdrew from direct participation from agricultural markets and production. Governments role was restricted to regulation and policy formation while demand and supply laws control the conduct of market operation. The groundnut marketing board was disbanded in 1986 and the private sector took over the function of the marketing board, as well as, the provision of inputs. The other feature of SAP was the devaluation of the naira, which was considered over-valued. In addition to that government funding of public research and extension activities were drastically reduced. The devaluation of the naira lead to liking of agricultural inputs prices, such as, fertilizer and agro chemical, most which were imported. Although these measures are in line with the global interest of trade liberalization, it caught the Nigeria small holder groundnut farmer unprepared. Apart from contending with lower returns, they have to compete not only with neighbors but also with farmers from other 3

12 producing countries (china, India, Argentina, and Vietnam) who are more sophisticated and have capital, machineries and better institutional arrangements, GSP news (2004). Groundnut or peanut as they are sometimes called originated in Brazil. They are one of the most valuable legumes crops of the tropical and subtropical countries with 25%protein and more than 40% oil. "There are two parts of the plant that are edible, including roots and the seeds. The roots can be cooked in a variety of ways, like roasting, baking, boiling, frying or drying for flour. The small seeds can be substituted for beans or lentil in soups and stew". (Brian, 2005). Africa accounts for 38%of global groundnut area and 25% of production. Nigeria is a major producer of groundnuts accounting for 25% of world exports (IFPRI, 1994). In 2004 the country had 3500 hectares cultivated and production of 2750 tonnes (nweze,1997) Groundnuts accounted for 70% of total Nigeria export prior to petroleum oil boom. (World Geography of peanut, 2003). Groundnut is widely consumed in Nigeria as roasted or boiled nuts in the Western and Southern parts of the country (Adebesin et ai., 2001). 1.3 Problem Statements The small holder groundnut farmers in Nigeria are faced with numerous challenges amid a network of complicated complexities, Apart from assuming the full risk of their business undertakings, they have very little capital to invest in modern production inputs whose price have more than doubled. The price received for their produce is lower than the prices paid by consumers. Yields are low and the opportunities for increasing them are bleak as the research and extension institutions are under-funded. They face higher transaction cost due to high cost transportation which is heightened by limited number of transport facilities and or lack of or bad condition of access roads. This coupled with limited knowledge and 4