Determinants of Marketing Efficiency among Small-Holder Cocoa Marketers in Oyo State, Nigeria

Transcription

1 38 Determinants of Marketing Efficiency among Small-Holder Cocoa Marketers in Oyo State, Nigeria Farayola, C. O, Agricultural Development Management Department, ARMTI, Ilorin, Kwara State, Nigeria. Akintaro, O. S., Teaching and Research Farm, Ladoke Akintola University of Technology, Ogbomoso, Oyo State, Nigeria. Yahaya, A. A., Agricultural Development Management Department, ARMTI, Ilorin, Kwara State, Nigeria. Oni O.O., Agricultural Development Management Department, ARMTI, Ilorin, Kwara State, Nigeria. ABSTRACT This study examines the factors influencing marketing efficiency among small-holder cocoa marketers in Oyo State, Nigeria. Since there is no alternative to increasing productivity of small scale agriculture if significant progress is to be made in solving problems of food scarcity and absolute poverty among the rural Nigeria than to adopt a holistic approach of ensuring growth in agricultural sector such as to create a demand for the products and services emanating from this sector. Data were collected from 100 randomly sampled farmers with the aid of well-structured questionnaire. Descriptive statistics such as frequency distribution, table and percentages, marketing efficiency and regression model were used for the data analysis. The regression result showed that semi-log was the lead equation with R 2 value of 0.67 indicating that 67% of the independent variables included in the model explained the variation in marketing efficiency of cocoa marketers. The coefficients of age, household size, cooperatives, selling price and credit were positively significantly and influenced marketing efficiency of cocoa at 1%, 5%, 10%, 5% and 5% respectively while educational level is negatively significant at 1%. The identified problems in cocoa marketing in the study area include pest and disease, inadequate storage facilities, price instability, high transportation cost, poor infrastructure, high taxation, absence of strong marketing board, low access to finance and low patronage. The opportunities which exist for mitigating these problems include: promoting commercialization of small scale cocoa marketing in the study area through linkage of the processor and marketers to financial institutions and funding, support to service providers and institutions. Government should create cocoa marketing department within the ministry of commerce, prescribe appropriate rules and regulations. They should also encourage cooperative societies and make cocoa marketing board functional to ensure greater efficiency in marketing hence aids agriculture development. Keywords: Agricultural Development, Cocoa, Efficiency, Marketing. 1. INTRODUCTION The Nigerian cocoa economy has a rich history which is well documented in literature. The contributions of cocoa to the nation s economic development are vast and have been reported by many authors (Olayide, 1969; ICCO, 1999; Folayan, Daramola and Oguntade 2006). Cocoa has been the main agricultural stake of Nigeria economy until 1970 s when the crude oil was discovered in the country in commercial quantity. It has remained a valuable crop and major foreign exchange earner among other agricultural commodity export of the country (Ajayi, and Oyejide, 1974; ICCO, 2001). In many developing countries, including Nigeria, agriculture is often referred to as the backbone of the economy apart from oil, it employed over 80% of the rural Nigerian populace, provides raw materials for the industries and export for foreign exchange earnings. Since agriculture remains the most important economic activity among the rural Nigerian who account for a large proportion of the food in the country, strengthening agriculture is critical for facing the challenges of rural poverty, food insecurity, unemployment, and sustainability of natural resources (Nwaobi, 2003). Agriculture is the science and practice of activities relating to production, processing, marketing, distribution utilization, and trade of food, Feed and fiber. This definition implies that agricultural development strategy must address not only farmers production but also those in marketing, processing, and agri-business. According to Acharya (2006), a developed agriculture bears positive relationship with employment, income distribution, population, technology, capital and credit. A developed agriculture has a more commercial outlook along with its industrial linkages paving way to greater employment generation as more hands become engaged directly or indirectly in agriculture. For agriculture to be fully developed, the level of technology needs to be developed. Enhance use of capital is a sino quo non for agriculture development. The commercialization of agriculture which is a precursor for agricultural development needs high capitalization and credit to support it. The level and extent of income distribution is enhanced with a developed

2 39 agriculture. This results from an improved marketing system which is a corollary of agricultural development. Efficient marketing in turn brings improved pricing which invariably results in better income distribution among producers of agricultural produce. Marketing is the critical link between farm production sector on the one hand and non-farm sector, industry and urban economy. The role of marketing in developing any economy including agriculture cannot be over emphasized. Marketing involves all those legal, physical and economic services which are necessary to make products from the producer available to the consumers (Olukosi and Isitor, 2004). The more efficient the marketing functions are performed, the better the marketing system for both the farmers, food marketing firms, consumers and the society at large. Marketing efficiency is the maximization of the ratio of the output to input in marketing (Olukosi and Isitor, 2004). Despite the significant roles of marketing in agriculture development, over the two decades, the world has witnessed a land slide movement towards market liberalization and this movement has affected both international and domestic markets (Onu and Iliyasu, 2008). In developed economies, liberalization has resulted in concentration and vertical integration with a small number of large corporations purchasing directly from farmers and selling to distributors (Fatchamps and Mintenn, 2001). On the other hand, market liberalization in developing countries Nigeria included has resulted in de-concentration and specialization and subsequently poor market price for producers (Onu and Iliyasu, 2008). For instance in Nigeria, since the abolition of the marketing boards in 1986 following structural changes in the Nigerian economy, farmers have being facing problems in the disposal of their produce in the world market especially such crops as Cocoa, Cotton, and rubber with the attendant of most farmers diversifying into production of food crops and other sectors of the economy (Akinwale, 2000). Although most Nigerian Governments in the past initiated a series of institutional programmes in agriculture in the development plans, very little success were recorded due to poor implementation and inconsistency in Government policies. For instance, the fourth development plan was characterized with low progress and massive food importation which tends to discourage domestic production of food by farmers. Moving agriculture forward according to Koyenikan, 2008 requires an integrated network of efficient support services such as extension service, and farmer training, input generation, distribution and sale, farm mechanization services, agricultural credit, marketing, processing and storage, rural infrastructures, land use planning and management, research and institutional support as well as stable government policies. Efficiency in agricultural industry is the most frequently used to measure market performance and marketing efficiency is a common objective of farmers, food marketing firms, consumers and the society at large (Olukosi and Isitor, 2004). The question is how has cocoa marketers being performing since the abolition of marketing boards in Nigeria. This study therefore estimated the factors influencing marketing efficiency and problems faced by cocoa marketers in Oyo State, Nigeria. 2. MATERIALS AND METHODS A. Study Area This study was carried out in the following Local Government Areas of Oyo State: Ona-Ara, Akinyele, Oluyole, Ido, Lagelu, Egbeda and Afijio Local Government Areas of Oyo state respectively. These are the major cocoa producing areas in the state (CDU Bulletin, 2007). They are considered on the basis of economic comparative advantage and soil suitability especially they are the major cocoa producing area where cocoa farmers can be found. The state lies in the equatorial rainforest belt and the rainfall around this area varies from 155mm to 1800mm per annum. There is distinct wet season from April to late October and dry season from November to March, the areas have a mean annual temperature of C, and the humidity is high between July and December and low between December and February. B. Sampling Procedure and Sample Size Multistage sampling procedure was adopted. Firstly, purposive sampling technique was employed in the selection of seven Local Government Areas (LGAs) in Oyo State (Ona-Ara, Akinyele, Oluyole, Ido, Lagelu, Egbeda and Afijio). They are considered on the basis of economic comparative advantage and soil suitability especially they are the major cocoa producing area where cocoa farmers can be found (CDU Bulletin, 2007). Secondly, thirty percent (30%) number of villages was considered from the list of registered villages in the seven selected L.G.As. Therefore, use of random number table was employed in the selection of three (3) villages from Ona Ara LGA, three (3) villages from Oluyole LGA, three (3) villages from Ido LGA, four (4) villages from Akinyele LGA, three (3) villages from Lagelu LGA, two (2) villages from Egbeda LGA and two (2) villages from Afijio LGA respectively, making a total of twenty (20) villages. Thirty percent (30%) of the registered cocoa farmers from these villages were considered, to give 100 cocoa farmers as respondents. Data were collected from the farm households with a structured and validated questionnaire. Data were collected on the socio-economic characteristics of the farmer such as educational background, age, household size as well as cost and returns were among the information gathered from the respondents.

3 40 C. Research Instrument Structured interview schedule was used to collect the information on personal and socio-economic characteristics and other flows of the objective from the respondents. The interview schedule contain both open and closed ended question for effective collection of relevant information from cashew nut marketers. D. Data Analysis Descriptive statistics such as mean, percentage and frequency distribution were used to describe the problems encountered by cocoa marketers while the factors influencing marketing efficiency of cocoa marketers were evaluated using regression model. The marketing efficiency of each cocoa marketer was computed using the marketing efficiency index model specified by Olukosi and Isitor, 2004 as: ME = value added by marketing X 100 Total marketing cost E. Regression Model Specification Four functional forms of the multiple regression models were fitted and the best was chosen using some econometric criterion. The implicit form of the regression model is written as follows: Y= f (X 1 X 2 X 3 X 4 X 5 X 6 X 7 X 8 X 9 X 10 ) Where: ME = marketing efficiency, X 1 = Age (years), X 2 = Household size (numeric), X 3 = Years of formal education (years), X 4 = Membership of cooperative (membership = 1, non- membership= 0), X 5 = Marketing experience (years), X 6 = Selling price (Naira), X 7 = Input costs (Naira), X 8 = quantity sold (kg), X 9 = Access to credit (Yes =1 No = 0), X 10 = Access to marketing agent.(access = 1, no access =) 3. RESULTS AND DISSCUSSION A. Factors Influencing Marketing Efficiency The results of the regression analysis are presented in Table1. The semi-log functional form was chosen as the lead equation. Its coefficient of multiple determination is 0.570, indicating that the explanatory variables in the model explained about 57.0% of the variation in marketing efficiency of cocoa markers in the study area. Household size, credit, age, cooperative society and selling price all had a positive and a significant effect on the efficiency of cocoa marketing. This implied that increase in these variables will lead to increase in marketing efficiency. On the other hand, educational level was highly significant (1%) but negatively related to marketing efficiency, this is contrary to a priori expectation because education should enhance the level of market information hence marketing efficiency. Age was significant at 1% and positively related to marketing efficiency. This indicates that as age of respondents increases, the level of efficiency increases. The more advance in age respondents are, the more experience they become in taking marketing decision, hence, the more greater efficient they are in the marketing of cocoa. This agrees with Anyoha et al., (2010) view that older farmers are more experience and efficient in taking decision regarding agricultural production and marketing. Household size has positive and significant effect on the marketing efficiency at 5% significance level. The implication of this is that, the larger the household size the better the marketing efficiency. The house hold members may help in providing some marketing functions at a reduce cost which is an incentive to an efficient marketing system. This agrees with Quartey (2005). According to him, household size affects efficiency since there may be synergies from larger household size in both production and consumption. Furthermore, the positive and significant effect of household size on marketing efficiency suggests multiple source of income which in turn influences welfare positively. The coefficient of cooperative societies was positive and statistically significant at 5% indicating direct relationship and is consistent with the result of Okike (2000), in Northern Nigeria and a priori expectations that cooperative members have more access to agricultural information, credit and other production inputs as well as more enhance ability to adopt innovations which increase the level of efficiency in both production and marketing agricultural produce. Selling price was significant at 5% and positively related to marketing efficiency. This implies that as selling price increases, marketing efficiency also increases. Increase in marketing efficiency could be due to the fact that respondents are motivated by favourable selling price. According to Evan (2004), an increase in the price per unit of the quantity supplied for export product will motivate both production and marketing of such commodity which can enhance efficiency. When farmers are selling more products at higher price, they are better off. Craig et al., (2006), also say that when the quantity of the commodity supplied increases and if the price increase the production becomes more efficient.

4 41 Table 1: Factors influencing marketing efficiency of cocoa marketers. Explanatory variables Linear Exponential Semi-log + Double - log Constant (-2.338)** (-0.342) (-3.859)*** (-1.683)* Age 1.13 (2.445)** (0.389) (3.503)*** (0.939) Household Size (-1.458) (-0.295) (2.541)** (-0.445) Education level (-3.933)*** (-1.381) (-4.340)*** (1.901)** Cooperative (1.673)* (1.281) (1.845)* (1.208) Experience (1.673)* (1.281) (1.596) (1.437) Selling price (4.004) 2.96E-005 (2.165)** (2.118)** (2.022)** Input cost -1.07e-005 (-0.146) -1.40E-006 (-0.478) (0.760) (-0.778) Quantity sold (1.363) (0.575) ( ) (0.439) Credit (2.590)*** (-0.163) (1.974)** (-0.279) Access to agents (0.527) (-0.084) (0.735) (0.093) R 2 R -2 F-value *** * *** * Source: Field survey, : lead equation, Figures in parenthesis is t-values. *** Significant at 1%, ** Significant at 5%, and * Significant at 10%. Credit has a positive and significant effect on marketing efficiency at 5% significant level. This implies that access to credit enhanced marketing efficiency by alleviating capital constraint on agricultural households, hence enabling them acquire crucial inputs and promote the adoption of labour-saving, higher- yielding technologies and purchases of higher goods therefore increase productivity and subsequently efficiency (Ukoha et al., 2007). B. Problems Facing Cocoa Marketers Table 2 shows that pest and disease, inadequate storage facilities, price instability, high cost of transportation respectively ranked the 1 st, 2 nd, 3 rd and 4 th major problems confronting marketers in the study area. While poor infrastructure and high taxation cost ranked 5 th problems confronting cocoa marketers and absence of strong board, high cost of preservation, low access to finance and low patronage ranked 6 th, 7 th, 8 th, and 9 th respectively. This agrees with the findings of Daniel (2009) who stated that fluctuation in market price, lack of market information as well as spoilage and low quality products, which reduce market prices, are critical constraints that adversely affect the upstream activities in cocoa marketing and processing. In addition, Anyanwu et al., (2003), stated that cocoa are perishable produce and the farmers may not have the technology to process and preserve them, the entire products are offered for marketing immediately, price are forced down and the farmer may not be adequately rewarded for his labour.

5 42 Table 2: Distribution of respondents according to problems in processing and marketing (n=100) Problems Frequenc Percentag Ranking y e Pest and disease st Inadequate storage nd facilities Price instability rd High transportation cost th Poor infrastructure th High taxation th Absence of strong board th High cost of preservation th Low access to finance th Low patronage th Source: Field Survey CONCLUSION AND RECOMMENDATION In conclusion, there is great potential for the development, efficiency and commercialization of cocoa marketing in the study area because cocoa production has remained one of the major cash crops in the area which has positively enhanced the welfare of the marketers. There is need also to encourage the re-establishment of cocoa marketing boards in Nigeria because of their roles in providing place, time, form and possession utility as well as quality and good price to both farmers and marketers both at domestic and international levels of the cocoa market. Based on the findings of this study, the following recommendations are made: 1. Cocoa marketers should be effectively linked to available financial institutions in the study area and the entire state for provision of on-lending facilities to those stakeholders in terms of loans and microcredit as well as technical support, Such as business plan development, project management, bank lending regulations and loan repayment, financial management and record keeping to these stakeholders to promote their business performance. 2. There is the need for a strong public-private partnership in order to encourage private sector participation in terms of input supply, technical and extension support as well as development of an effective marketing system, etc. for enhanced commercial cocoa marketing in the area. 3. Government should provide adequate rural infrastructure such as electricity, water supply, farm access roads to promote investment climate for the commercial development of small scale cocoa marketing. 4. Farmers and marketers should be encouraged to form cooperative societies to enable them solve some of their financial obstacle and also get subsidy and other incentive from the government. REFERENCES [1] Acharya S.S. Agricultural marketing and rural credit for strengthening Indian agriculture. Asian Development Bank. pp [2] Ajayi S.I and T. A. Oyejide. The role of cocoa in Nigeria economic development, The Economics of Cocoa Production and Marketing in Nigeria [3] Anyanwu, B.O. Agricultural Science for Schools and Colleges. Africa First Publishers, Onitsha, Nigeria. pp [4] Anyoha, N. O. Effects of environmental degradation on Agriculture in Delta central agricultural zone, delta state. International journal of agriculture and rural development (IJARD). 13(1): [5] Akinwale O. Cocoa production in Nigeria, Nigeria Agriculture volume (13) pp [6] Craig, H Peterson and W. CRIS. Managerial economics. Fourth edition by Asoke K. Ghosh prentice- hall of India private limited. pp [7] Daniel. S. Ugwu. Problems and prospects of commercial small and medium scale Cocoa and Oil palm production in Cross River State, Nigeria. Journals of applied sciences research, 5(7): [8] Evan H. and Goodwin J.W. Agricultural economics second edition by prentice= hall, Inc, upper saddle river new jersey Pp [9] Fatchamps, M. and Mintenn, B. Social Capital and Agricultural Trade. AmericanJournal of Agricultural Economics 83 (3): [10] Folayan, J. A.,Daramola, G. A. and Oguntade, A.E. Structure and performance Evaluation of Cocoa

6 43 Marketing Institutions in South Western Nigeria: An Economic Analysis. Journal of Food, Agriculture and Environmental 4(2): [11] International Cocoa Organization. Quarterly bulletin of cocoa statistics [12] International Cocoa Organization. Quarterly bulletin of cocoa statistics, June. London. pp [13] Koyenikan, M. J. Issues for Agricultural Extension Policy in Nigeria. Journal of Agricultural Extension 12(2): [14] Nwaobi, G. C. Solving the Poverty Crisis in Nigeria: An applied General Equilbrium approach. Qualitative Economic Research Bureau [15] Olayide, S. O. Some Estimates of Supply and Demand Elasticities for selected Commodities in Nigeria s Foreign Trade. Journal of Business and Social Studies, 1(19): [16] Olukosi, J.O and Isitor, S.U. Introduction to Agricultural Marketing and Prices: Principles and Applications Pg [17] Onu, J. I. and Iliyasu, H. A. An Economic Analysis of the Food Grain Market in Adamawa State, Nigeria. World Jourmal of Agricultural Science 4(5): [18] Quarty, P. The impact of migrant remittances on household welfare in Ghana, a final research report presented in AERC biannual research workshop pp [19] Ukoha, O. O, R. O. Mejaha and I. N. Nte Determinants of farmers welfare in Ebonyi State of Nigeria. Pakistan Journal of social science 4(3): [20] Okike. I. Crop, livestock interaction and economic efficiency of farmer in the savannah agricultural economics university of Ibadan pp