A REPORT SUBMITTED TO ADENI PROJECT/NAERLS …hubrural.org/IMG/pdf/nigeria_groundnut_report.pdf ·...
Transcript of A REPORT SUBMITTED TO ADENI PROJECT/NAERLS …hubrural.org/IMG/pdf/nigeria_groundnut_report.pdf ·...
1
COMMODITY CHAIN ANALYSIS OF GROUNDNUT
SECTOR IN NIGERIA
A REPORT SUBMITTED TO ADENI
PROJECT/NAERLS ZARIA
2
GROUNDNUT COMMODITY CHAIN ANALYSIS
1.0 INTRODUCTION
The major objective of the study is to use the commodity chain analysis method
as a tool to assist Agricultural Development in Nigeria (ADENI) Project stakeholders in:
Identifying constraints affecting marketing of groundnut and assessing the viability of the
proposed solutions. This is in line with the overall objective of the ADENI project of
improving food security and income of small scale farmers through improvement in
agricultural productivity and access to market.
The strategy employed by the ADENI project, is informed by its philosophy of
farmer empowerment, which emphasized the value of self-help and autonomous decision-
making by farmers in pursuance of a common goal. In this regards farmer organizations
are the focal point of the project’s activities. A great deal of emphasis is placed on
providing information and training that would enable farmer organization to develop the
tools and capacity required to manage their own development. Demand-driven research
and studies based on field problems or constraints encountered by farmers is one of the
strategies used by the project to provide farmer with information for decision-making. The
groundnut commodity chain analysis is one, out of four such studies. The other three
studies are concerned with the following commodities; cattle, cotton and tomatoes.
The issues addressed by groundnut commodity chain analysis include, but not
restricted to;
- Groundnut/folder trade off
- Folder marketing chain and demand from other
- Groundnut marketing chain
- Performance and constraints of industrial oil crushers
- Performance and constraints of traditional oil crushers
- Performance and impact of quality of groundnut on home industry
3
2.0 BACKGROUND AND ISSUES
2.1 General Overview
Nigerian groundnut farmers like other farmers from developing countries, enjoyed
an era of protected and subsidized agricultural production system from the post second
world era up to the mid-eighties. At that time government set prices, purchase and export
agricultural produce through the commodity marketing boards. Government provided
subsidized inputs such as fertilizer and pesticides and also provided 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 measures to alleviate the
problem. This reform process was adopted in 1986 in Nigeria. The adoption of the reform
measures meant that government withdrew from direct participation in agricultural markets
and production. Government’s role was restricted to regulation and policy formulation
while demand and supply laws control the conduct of market operations. The groundnut
marketing board was disbanded in 1986 and the private sector took over the functions 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 hiking 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 Nigerian small holder groundnut farmer unprepared. Apart from contending
with lower returns, they have to compete not only with neighbours but also with farmers
from other producing countries (China, India, Argentina, Vietnam etc.) who are more
sophisticated and have capital, machineries and better institutional arrangements.
The smallholder 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 prices have more then 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
4
transaction cost due to high cost of 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 information of other market outlets complicate the matter. In
addition to that, lack of adequate and proper storage facilities and arrangements force
farmers to sell out at a time when prices are lowest. The nature of their produce (small
quantities) and their shear numerical size (millions) reduce their bargaining power as
individual sellers.
2.2 The Commodity Marketing Chain
There are two approaches to the study of commodity marketing. The Anglophone
Global commodity chain (GCC) and the francophone filiere. Both approaches cover the
same general field but they are however separated not only by geography and language but
also in their political and theoretical grounding. GCC analysis has been developed
primarily for industrial commodity chains. In contrast, the filiere approach has its origin in
technocratic agricultural research while the filiere approach is seen to belong to a neutral
and purely empirical category. The application of the filiere approach to agriculture in
developing countries was heavily influenced by the needs of the colonial and post colonial
French State that has an agricultural development policy that was commodity centered and
literature thus required a matching analytical framework. The filiere analysis is therefore
applied to agricultural commodities and without any specific time frame.
The filiere unlike the GCC is not built on any unities theoretical framework. It is
rather built on various schools of thought that differ in theory and research questions.
Filiere approach is built on different theories and methodologies that include system
analysis, industrial organization, industrial economics, management, Marxist economics,
as well as, various accounting techniques, which all have roots in neo-classical welfare
analysis (Kydd, et al, 1996). Filiere studies were initially applied to local production
systems and consumption, thereby overlooking processing and international trade, until the
1980s. In the filiere approach, neo classical analysis was generally avoided except a few
incorporated quantitative techniques. The filiere analysis has recently begun to deal more
directly with issues of trade and marketing in order to discuss the workings of commodity
chains with an increasing liberalized context. A striking feature of the filiere approach is
that it has been used extensively to justify the maintenance of intervention structures (e.g
5
Commodity/Boards) at a time the World Bank and GCC advocate for the dismantling of
equivalent structures. An empirical justification of the filiere stand comes from the
perceived negative consequences (among French research and academic circles) of market
liberalization in developing countries.
The filiere approach is considered the most appropriate approach for the study of
the groundnut commodity chain in view of the nature of the groundnut industry. The
disbanding of the groundnut marketing board had mixed result to the industry. There is no
doubt that a number of merchants had entered the market. But this has not improved the
price received by farmers. At the same time the oil millers are complaining bitterly of the
cost of groundnut. The oil millers, whose capital is tied to machinery and other
infrastructure, lack the required funds to purchase and stock groundnut during high
season. They have to sell their produce before they can buy raw materials. In addition to
that the processors also face steep competition from imported vegetable oil, which is
cheaper than groundnut oil. The ban on vegetable oil importation (FMAERD, 2004) was
intended to reduce this competition.
2.3 The Commodity; Groundnt
Groundnut (Arachis hypogaea L) also known as peanut, is one of the world’s
principal oil seed crops. Groundnut originated from South America, but is now widely
cultivated throughout the tropical, sub-tropical and the warm temperate areas. Groundnut is
put to many uses. It is an economic crop. The haulms are important folder for livestock,
especially, sheep and goat and in particular ram. The plant, through its biological activities
nitrogen fixation, is an important soil fertility conserver. The nuts are consumed roasted,
boiled or as confectionary, snack nuts, peanut butter or in cookies. The nut is crushed to
produce oil which is principally used for cooking. But is also used for other industrial
purposes such as; pharmaceuticals as carrier, cosmetics. It is also used for the production
of margarine. The by-product, meal (cake) is used for both human and livestock
consumption.
Groundnut in Nigeria, as in other major producing areas, is largely a smallholder
crop, grown under rainfall conditions in semi-arid areas. Although it is grown in
commercial farms in America and Europe, the developing countries, with their small scale
production, account for over 95 and 94 percent of world groundnut area and production
6
respectively (H. A. Nigam et-al, 1999). Production is concentrated in Asia and Africa.
Asia accounts for 60 and 70 percent of world area and product respectively. India (35%
area 28% production) and China (17% area, 34% production) are the major producers in
Asia. Africa accounts for 35 percent of the global area but only 21 percent of the
production. The major producers in Africa are Senegal, Nigeria and Sudan. The other
major world producers are USA and Argentina (Table 1).
7
Table 1: Groundnut (in-shell) area, yield and production by region1
Area ('000ha) Yield (t ha.1) Production ('000t 1979-81 1989--91 1994-96 1979-81 1989-91 1994-96 1979-81 1989-91 1994-96 Developing Countries 17,793 19,410 21,763 0.9 1.1 1.3 16,523 21,124 28,078 Africa 6,087 5,684 7,923 0.7 0.8 0.8 4,233 4,523 6,401 East and Southern Africa 2,134 1,481 2,011 0.7 0.6 0.7 1,447 824 1,350 Mozambique 350 342 256 0.4 0.3 0.4 131 113 98 Sudan 960 332 972 0.8 0.6 0.8 760 173 756 Tanzania 91 110 113 0.6 0.6 0.6 54 62 72 Uganda 109 185 192 0.7 0.8 0.7 80 149 137 Zimbabwe 183 192 148 0.6 0.6 0.4 101 108 66 West and Central Africa 3,905 4,159 5,748 0.7 0.9 0.8 2,710 3,613 4,717 Burkina Faso 129 181 261 0.4 0.3 0.8 70 121 215 Chad 168 186 305 0.7 1.1 0.8 93 164 233 Congo, Dem, Rep. 477 628 739 0.7 0.8 0.8 334 520 594 Mali 166 188 204 0.9 1.0 0.9 141 163 180 Nigeria 572 920 1,868 0.9 1.2 0.9 503 1,083 1,770 Senegal 1,053 857 863 0.7 0.9 0.9 690 757 686 North Africa 48 44 70 1.6 1.4 2.30 74 64 161 Egypt 12 13 43 2.1 2.2 2.9 26 27 124 Morocco 28 22 17 1.2 0.9 1.4 34 20 21 Asia 10,887 13,226 13,374 1.0 1.2 1.6 11,134 15,828 20,871 East Asia 2,358 2,960 3,777 1.5 2.10 2.7 3,513 6,104 10,117 China 2,293 2,911 3,770 1.5 2.10 2.7 3,416 6,011 10,103 South Asia 7,707 9,217 8,437 0.8 0.9 1.1 6,483 8,162 9,025 India 7,132 8,562 7,797 0.8 0.9 1.1 5,999 7,570 8,359 Myanmar 489 523 493 0.8 0.9 1.0 390 456 508 Pakistan 49 84 101 1.2 1.1 1.1 60 89 112 S. E. Asia and Pacific 783 1,009 1,109 1.4 1.5 1.4 1,060 1,466 1,605 Indonesia 496 628 691 1.5 1.7 1.6 754 1,039 1,073 Thailand 103 116 100 1.2 1.4 1.5 128 160 148 Vietnam 106 207 257 0.9 1.1 1.3 94 218 329 West Asia 39 40 51 2.0 2.4 2.4 78 96 124 Syria 10 11 14 1.8 2.0 2.1 18 22 30 Turkey 23 23 31 2.2 2.5 2.4 52 58 73 L. A. and the Caribbean 819 500 466 1.4 1.5 1.7 1,156 773 806 Argentina 289 166 176 1.6 2.1 2.5 451 345 432 Brazil 282 85 89 1.5 1.7 1.8 433 142 162 Mexico 66 87 71 1.1 1.3 0.9 13 110 61 Paraguay 29 36 33 1.1 1.1 1.1 28 39 34 Developed countries 920 913 925 2.2 2.3 2.1 2,011 2,145 1,979 Australia 32 20 20 1.5 1.6 1.7 48 31 33 Bulgaria 4 12 11 1.3 1 0.9 6 12 10 Greece 4 2 1 2.8 3.9 3.6 11 7 3 Israel 5 3 4 4.4 6.6 5.9 22 20 24 Japan 33 18 14 1.9 2 2.2 61 36 30 South Africa 245 120 118 1.2 1.1 1.3 291 131 158 USA 595 738 609 2.6 2.6 2.8 1,550 1,893 1,719 World 18,713 20,323 22,688 1.0 1.1 1.3 18,534 23,269 30,057 1. each figure is a 3-year average for the respective period, e.g. 1979-81 . Source: H.A., Nigam et-al,(1999)
8
2.4 MAJOR TRENDS
2.4.1 PRODUCTION
The production of groundnut in Nigeria started around 1912. This was in response
to the high world prices. Since then, Nigeria was prominent among world producers. In
the fifties and fifties, Nigeria was among the leading exporters of groundnut. It took the
lead as the largest producer and exporter of groundnut in the sixties with a production of
500,000 metric tons a year (Purseglove, 1968). Nigeria reached a peak production of 1.6
million metric tons in 1973. But production fell by almost half the 1973 figure, in less than
a decade, due to a combination of two important factors. First, the drought of 1974/75
growing season, which brought with it aphid infestation, wiped more than 750,000 hectares
of groundnut fields. This brought tremendous loss to both farmers and merchants. Second
is the coincidence of oil boom in Nigeria about the same time (Ntare et-al, 2005). The loss
from groundnut and the availability of oil money transformed groundnut merchants to
government contractors. Government on its part equally shifted its attention from
agriculture, as a whole, to the oil industry.
The crushing down of oil prices in the eighties reduced government revenue from
oil and forced to adopt stringent measures. One the prominent measures was the Structural
Adjustment Programme which lead to the dismantling of commodity marketing boards
including groundnut.. Since the liberalization, groundnut marketing structures have been
dismantled and the private sector has taken over. This left farmers without assured and
ready markets and or prices. Farmers adopted different strategies to cope with the
situation. One of the strategies was shifting from groundnut to other crops. This had major
effect on the production of the crop. But recent evidence (figure 1 and 2) showed that
groundnut production in Nigeria is picking up again.
9
Figure 1: The World Major Groundnut Producers
0
2
4
6
8
10
12
China
india
Nigeria
USA
Seneg
al
Sudan
Argenti
na
Annu
al P
rodu
ctio
n (m
illio
n to
ns0
79-8194-96Yield
Figure 2: Production Trend of Groundnut in shell 1995-2004
Production trend of Groundnut in shell 1995-2004
0
0.5
1
1.5
2
2.5
3
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Prod
uctio
n
Area (million Ha)Production (million tons)Yield (tons/Ha)
10
2.4.2 EXPORT
Nigeria was at one time, the leading exporter of groundnut in the world. However due to
production and marketing problems, Nigeria lost out and is currently not listed among the
world major exporters (table 2). Nigeria’s groundnut is exported only the neighbouring
West African countries. The trend in export for 1992 to 2002 is shown in figure 3.
Table 2: World Leading Exporters 200
No Country Share of World Export (%)
1 China 26.00 2 USA 19.80 3 Argentina 16.00 4 India 9.10 5 Vietnam 8.20 6 South Africa 2.20
Figure 3: Nigeria Groundnut Export Shelled and total
0
2000
4000
6000
8000
10000
12000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Quantity (Mt)
Total
groundnut shelled
11
2.4.3 UTILIZATION
The demand for groundnut has increased in Europe but with a major shift from
oilseed to edible groundnut. About 80 percent of the edible groundnuts are roasted for
further processing into snack foods and peanut butter (GSP News, 2004). This shift, from
oil to edible groundnut, must have influenced the stringent quality control measures
enforced by the EU, which set the maximum permitted level of Aflatoxin B1 at 2μg/kg (or
parts per billion (ppb)) and the limits for the total aflatoxin (B1 + B2 + G1 + G2 ) at 4 ppb
in groundnut intended for consumption (European Commission Regulation EC
No.1525/9). In addition to change in taste, groundnut is also affected by serious
competition from other oil seed crops such as rapeseed, sunflower, soybean as sources of
edible oil. The combination of these factors changed the position of groundnut as source of
oil in the world to the fifth position (Table 3). For example the demand for groundnut oil in
the EU dropped from 200,000 MT per year in 1983 to a mere 5,000 MT per year now.
The changes in Europe also affected the utilization of the crop in the West African
sub-region which was producing for the European markets. The utilization of groundnut
also experienced dramatic change in the West African sub-region. Groundnut was the
major oil seed crop in the region in the seventies but has now more of a food crop. Its
utilization has increased significantly towards edible applications. From the late eighties,
it has become primarily a food crop rather than an oil seed crop. It has been estimated that
between 1972 and 2000, the proportion of West African groundnut consumed as food grew
by 209% (GSP News 2004)
Table 3: World major sources of vegetable oil and oilseed protein meal (1994-1996)
World Position
Vegetable oil World Share (%)
World Position
Oil Protein Meal World Share (%)
1. Soybean 31 1 Soybean 65 2. Palm oil 26 2 Rapeseed 12 3. Rapeseed oil 16 3 Cotton seed 9 4. Sunflower 14 4 Sunflower 8 5. Groundnut 7 5 G/nut 4 Total 94 Total 96
(Source; H.A. Nigaram et-al, 1999)
12
2.4.4 PRICES
Price of shelled groundnut for some producer and consumer states for the period
2002 – 2003 and 2004 are shown in figure 4. Enugu, Kaduna and Lagos States are none
producer States while Niger, Kano and Yobe are producer States. The trend showed that
prices were highest during the lean period, May to September in both years. Prices were
higher in 2003 in all in the months, except in March and April.
There is an obvious difference in price between the producer states and none
producer states (figure 5). Prices in the none-producer states were between the ranges of
N75 to N 90 per Kg. The range in producer states was between N 45 to N 65 for 2002 and
2003 seasons. Kano and Yobe had the lowest price in 2003. Niger stated recorded the
lowest price in 2002 of about N 45/kg.
Figure 4: Groundnut Price trend 2002 &2003
0
20
40
60
80
100
Jan Feb. Mar Apr MayJuneJuly Aug Sept Oct Nov Dec
20022003
Pric
e (N
/Kg)
13
Figure 5: Spatial Distribution of Groundnut Prices (2002 & 2003)
0
10
20
30
40
50
60
70
80
90
100
Enugu Zaria Kaduna Lagos Niger Kano Yobe
Pric
es (N
/Kg)
2002
2003
14
3.0 INFORMATION COLLECTION
3.1 DATA COLLECTION
The starting point was the farmer who produces groundnut. From there the demand
channel was followed. There are two major products, the nut and the haulms. The nut is
mainly used for the production of oil and cake. Thus, channel was followed and merchants
at various markets were interviewed. The markets were Gaya and Labaran Zango in Gaya
Local Government and the major regional groundnut market in Kano, Dawanau grains
market. Industrial, cottage and home processors were also interviewed. Two industrial
processors ‘Salmat’ and Sharada in Kano were interviewed. Two women groups involved
in cottage processing in ‘Danbatta’ and ‘Dawakin Tofa’ towns were interviewed. One
group, using the traditional method of processing, in Gaya Local Government area was
also interviewed.
Consumers of groundnut oil were interviewed in Gaya, Sabon Gari and Kasuwar
Rimi both in Kano. Merchants involved in sales of groundnut haulms were interviewed in
different markets, Gaya in Gaya Local Government. Tarauni, Mandawari, kofar kudu,
Kano abattoir and kofar naisa all within Kano municipality and the Kano international
cattle market, along Kano–Zaria expressway.
Data from farmers were collected through focus groups discussion with all farmers
both small and large scale in attendance. After that individual interviews were conducted
using structured questionnaire. The processors were identified through the collective
efforts of Kano Agricultural and Rural Development Agency (KNARDA) and the oil seeds
processors association of Nigeria (OSPAN). Out of the five identified, two were
interviewed using structured questionnaires. These are Salmat and Shareada Oil Mills
Limited. One groundnut merchant was interviewed in Dawanau and three were interviewed
in Laraban Zango market respectively. The data collected include both primary and
secondary data. Secondary data was obtained from KNARDA and NAERLS, I.A.R., PCU
and ADENI. Information collected included prices and production figures on groundnut in
Kano State. Primary data were collected through oral interview and the administration
of structured questionnaire to all the sampled market participants i.e the producers
(farmers), processors, traders and the consumers. The information obtained from them
includes:
15
Producers
- Whether large, medium or small scale.
- Type and costs of farming operations
- Type of crops planted and cost of production
- Farming techniques
- Use of organic and /or inorganic fertilizers and at what cost.
- Output in the previous cropping season
- Constraints in production
- Suggestions of possible solution to constraints
Processors
- Procedures in groundnut processing
- Preference, if any, for a particular variety, availability and reason for preference
- Source of raw materials procurement
- Mode of product distribution
- Equipments used in terms of brand and capacity of production (in hours)
- Cost of maintenance of equipment used and how often
- Estimate of building investment in terms of rent.
- Labour cost in terms of skilled and unskilled workers.
- Other raw materials used if any
- Constraints and suggestions of possible solutions.
Marketers
- Source of produce
- Form of purchase
- Type of customers
- Whether any groundnut variety is preferred
- Accessibility of the variety
- Constraint of the marketing of groundnut and possible solutions.
Consumers
- Reference of oil type and reasons
- Accessibility of the purchase of groundnut oil and possible solutions
16
3.3 Method Of Analysis
The method of analysis employed in analyzing the data is the Commodity Chain
Analysis (CCA). It is a systematic approach based upon a disaggregated analysis of
supply-demand relation. It looks at multiple agents (individuals and/or institutions)
interactions of inputs and prices coordinated along a sequence of operation to produce the
final output. The analytical framework is based on the combination of three approaches;
Functional, Organizational and Economic analysis.
The functional analysis is an input/output approach which is focused on the
commodity flow with a view to identifying the different functions played by CC agents
from the point of production through processing to the point of consumption. The
organizational analysis centers on the CC agents. The agents are characterized by the type
of function they perform. It is possible, based on this criterion, for any agent to perform
multiple functions and for a given function to be performed by different agents. The
economic analysis centers on the budget development. The budget is developed for each
individual agent and in the aggregation process, double counting is avoided as much as
possible. The sum of intermediary consumption, production factors and benefit gives the
revenue. The value added is determined by subtracting intermediate consumption from
revenue.
17
4. DATA ANALYSIS
4.1 SYSTEMS FLAW CHARTS
4.1.1 Commodity in Process
Groundnut seeds are sown by farmers and transformed into groundnut. The nuts are
the main products and haulms are the byproducts. Nuts are then shelled and processed into
oil. The byproduct is groundnut cake which is used for both human, but mainly as
livestock feeds. There three different techniques of processing groundnut into oil. These
are the traditional method, using pestle and mortar, cottage and the industrial technique.
The basic difference between cottage and industrial is in the scale of operation. But both
used machines for the processing. As a result the cake obtained from the two techniques is
mainly used for livestock feeding. But the cake obtained from the traditional method is
used for human consumption.
Figure 6: Commodity in Process
Shelled Groundnut
Groundnut Seeds
Groundnut Haulms
Groundnut in shell
Groundnut shells
Groundnut Cake
Groundnut Oil
18
4.1.2 Groundnut and Haulms Chain
The structure of groundnut marketing chain is shown in figure 7. The expanded
chain for nut and haulms is shown in figure 8. Since the disbanding of the Groundnut
Marketing boards, the licensed buying station (LBS) and the Licensed buying agents
(LBA) have disappeared. Farmers take their produce to rural markets on specified markets
days. The prominent markets around the area are’Laraban Zango’ which operates on
Wednesdays ‘Darki’ market on Thursdays and Gaya on Fridays. In addition to selling at
the rural markets, farmers have the option of selling to rural collectors. The collectors act
as agents for middlemen and for oil milling industry.
The collector assemble groundnut to the wholesale market in Kano. The wholesale
market is supplied by other rural markets, as well as, by other producer states such as,
Jigawa, Yobe, Borno, Niger, Taraba, Adamawa, Sokoto and Zamfara states. The
wholesale market supplies rural markets, as well as, exports to neighboring countries such
as Niger, Cameroon and Tchad. The major source of groundnut to the oil milling industry
is the wholesale market through the middlemen. Although the large oil millers appoint
agents to supply them, the Kano market and the middlemen remain the most important
sources of supply. There is no linkage between farmers and milling industry. Farmers sell
their produce at the local market and there is no evidence of any collective or bulk
marketing of groundnut by the farmers.
Another important source of income to groundnut farmers is sales of Groundnut
haulms, which constitutes about one third and one fourth of the total income realized by
small and large scale farmers respectively. Even though almost half of the haulms is used
for feeding small ruminants kept by the farmers, the remaining half is sold to generate cash
to finance next seasons farming operations. Local haulms collectors purchase from
farmers in small bundles, crush and repack them in large bags. The big bags are
transported to Kano or Potuskum. There are numerous markets in Kano that serve the
local livestock rearers. Two of the markets in Kano, the Kano abattoir market and the
international cattle market along Kano – Zaria way, were identified as places were large
consignment of groundnut haulms are taken to Lagos and Port Harcourt
19
Kano market
Producers
Oil home industry
Roasted nuts cot.
Ind.
HaulmsCollector Rural Groundnut
market
Other sources of supply
Local Consumer
Wholesale market
Oil miller industry
Middlemen
Urban/Rural Consumer
Roasted nuts cot. Ind.
Wholesaler
Retailers
Lagos Kano end-user
Oil cottage industry
Figure 7: Groundnut and Haulms Chain
Potuskum
Export
KanoMarket
20
Figure8; Groundnut Commodity Marketing Chain
National Market
Middlemen
Oil Millers
Feed Millers
Olil Merchants
Consumers
National Producer
Local Processors
Roasted and boiled Groundnut
Local Market
Local Producer
21
4.2: BUDGETS 4.2.1 Farmer Two categories of farmers, small and large scale were interviewed. Both small and
large scale farmers produce groundnut in mixtures, rather than as sole crop. To allow for
comparison, secondary data on sole groundnut cropping was obtained from Sasakawa
Global Nigeria project (SG 2000). Budget (table 4) shows the small scale producers had
the lowest net revenue and return to management despite their lower cost production. The
large and sole crop had almost the same total cost. But the yield obtained under the
improved sole cropping techniques was more than double what was obtained by the large
scale farmers
The yield obtained are 11, 19 and 40 bags (100 kg) by small, large and sole crop
farmers respectively. The difference in yield can be explained by use of improved seed,
type and rate of fertilizer usage and plant population per unit area. Large scale farmers did
not purchase any seed. Although small scale farmers expended about N1, 411 on seeds,
most of the seed purchased was still the same local variety used in the area. The sole crop
farmer expended about N 6,000 on improved seeds. Both small and large scale farmers
used a lot of manure and very little inorganic fertilizer. None of the large and small scale
farmers used super phosphate fertilizer, which is essential for the cultivation of groundnut.
The sole crop farmer used two bags of NPK (15:15:15) and 1 bag of super phosphate
(SSP).
4.2.2 Local Processor
The local processor was a group of women in Gaya local government area. They
use the traditional method of producing groundnut oil. The process involved purchasing
shelled groundnut, which is partially roasted to remove the seed cost. The roasted cleaned
nut is then crushed into paste. The paste is then placed in a mortar and stirred with a
pestle. Hot water is added to facilitate the separation of oil from the paste. The oil is
drained and the cake is further pressed and roasted for human consumption.
The budget was developed for one bag (100kg) of shelled groundnut which takes
the women about five days to process. From 100kg they obtained 49.50 liters of oil and
33kg of cake (table 5). The fixed cost is infinitesimal. The major cost item was the cost of
22
raw materials. The total cost was about six thousand naira and the total revenue of about
nine thousand naira is realized. The net return is about three thousand naira per bag.
4.2.3 Industrial Processor
Budget for Sharada oil mills is shown in table 6. The installed capacity is 120 tons
per day. But the industry is operating at less than fifty percent capacity, not because of
lack of raw materials, but due to cash-flow constraints which imposed a limit on the
quantity of raw materials that can be purchased. The cash-flow constraint operates like a
double edged-sword. First, the capital is tied to machinery and building, depreciation on
machinery and buildings amounted to about N12,150,000 and other fixed cost about N
653,800 per annum. The demand on the meager working capital is always increasing due
to rising cost of operations such as, petrol, diesel, black oil and lubricants. Secondly their
main product groundnut oil is facing increasing competition from imported vegetable oil.
As a result of which most sales are made on credit. Raw materials are purchased after
products are sold and payment is collected. Bank loans are not solicited for due to the high
interest rate on borrowed capital (between 20-30%). This was considered too high by the
industrialist, in view of the low profit margin being realized from the processing activities.
4.2.4 Aggregate Budget
The aggregate budget was developed for the local processor, the industrial
processor and the farmer (Table 7 and figure 9). The average farm budget for the site is
used in developing the aggregate budget. The average farm budget is used in developing
both industrial processor’s and local processor’s budget. The farmer appeared to have
taken a larger share of the revenue of about 40 % in both cases. The revenue component
for the local processor (15%) is slightly lower than that of the industrial processor (16%).
23
Table 4: Farm Budget
Type of Cost/ Revenue Item Small Scale
(less than 1Ha) Large-Scale
(I ha and above) Average
For the Site Sole Crop
Groundnut* Intermediate consumption Seeds 1,411 0 706 6,000Fertilizers 915 9,166 5,041 8,000Manure 1,300 14,407 7,854 0Empty Sacks 550 800 675 2,500Sub-Total 4,176 23,573 13,875 16,500Hired Labour Land Clearing 500 1,000 750 0harrowing 1,709 1,417 1,563 3,000Ridging 2,292 4,115 3,204 3,000Planting 1,742 750 1,246 3,000Manure Application 0 888 444 0Fertilizer Application 0 500 250 2,000Weeding 3,442 5,907 4,675 5,000Harvesting 5,247 6,375 5,811 10,000Transportation 810 1,764 1,287 2,500Harvesting Fodder 650 1,125 888 500Transportation 500 2,292 1,396 2,500Sub-Total 16,892 26,133 21,512 31,500Depreciation on Tools and Equipment 1,230 2,156 1,693 2,780Total Cost 22,298 51,862 37,080 50,780Revenue Nut Average Yield (bags/ha) 11 19 15 40Price (N/bag) 4,000 4,000 4,000 4,000Income from Nuts 44,000 76,000 60,000 160,000Groundnut Haulms (bundles) 87 168 128 90Price (N/bundle) 120 120 120 120Income from Haulms 10,440 20,160 15,300 10,800Total Revenue 54,440 96,160 75,300 170,800Net Revenue 32,142 44,298 38,220 120,020Added Value Revenue 54,440 96,160 75,300 170,800Intermediate consumption 4,176 23,573 13,875 16,500Total Added Value 50,264 72,587 61,425 154,300Added Value Distribution Added Value 54,440 72,587 63,514 154,300Labour 16,892 26,133 21,513 31,500Depreciation on tools and Equipment 1,230 2,156 1,693 2,780Return to Management 36,318 44,298 40,308 120,020
* Source; SG 2000 Nigeria Project
24
Table 5: Agent Local Processor Groundnut Coefficients
From raw input to output
from output to raw input
from main output to
by-product
Input raw G/nut 100.00 kg
main output oil 49.50 lit by-product cake 33.00 kg Total volume of actvity 100 kg Groudnut per week Fixed cost
Value Year of dep
Depreciated value per
year
% used for main
commodity
For volume of raw input
Cost per unit of raw
input
Cost per lit of main
output
Infrastructure and equipment Pan 500 5 100 1 1.79 56 0.0389 Long Spoon 200 5 40 1 0.71 56 0.0156 tray 200 5 40 1 0.71 0.0156 motar 2,000 20 100 1 1.79 0.0389 Pestle 120 2 60 1 1.07 56 0.0233 Sub-total 6.07 0.1323 Variable costs
Unit price
unit refrence
raw or out Quantity Total value Per quantity of raw input
in bag
Cost per unit of raw
input
Cost per lit of main
output Raw material purchase Groundnut 5,280 100kg raw 1 5,280 1 5,280 107
25
Other inputs labour grinding 198 1 198 198 198 4 labor Stiring 330 raw 1 330 330 330 7 wood 150 1 150 1 150 3 water 25 1 25 1 25 1 calabash spoon 20 1 20 1 20 0 Sub-total 723 723 122Total Cost 6,009 Revenue Groundnut oil 160 N/lit output 49.5 7,920 cake 40 33 1,320 Total revenue 9,240 Net revenue 3,231 Added value Revenue 9,240 Raw commodity 5,280 Intermediate consumption 195 Added value 3,765 Added value distribution Labor 528 Depreciation 6.07 Return to management 3,231 Tax 0 Net return to management 3,231
26
Table 6: Agent Sharada Oil Mills Coefficients
From raw input to output
from output to raw input
from main output to by
product
Input G/Nut 1.00 t main output G/Nut Oil 0.40 t 2.50 by-product G/Nut Cake 0.57 t 1.75 1.43 Total volume of activity 7,680 t seed per year hourly capacity 1.6 t seed per hour Days of operation 5 days per week Monthly Capacity 768 t seed per moth Fixed cost
Value Year of dep Depreciated value
% used for main
commodity
For volume of raw input
Per Quantity of
raw input in ton
Cost per unit of raw
input
Cost per ton of main output
Infrastructure and equipment Building 225,000,000 50 4,500,000 0.5 9,000,000 293 732 Machines 25,000,000 20 1,250,000 1 1,250,000 163 407 Generator 10,000,000 20 500,000 0.5 1,000,000 33 57 Pick- up van 1,500,000 10 150,000 1 150,000 20 50 Trucks/lift fork 5,000,000 10 500,000 1 500,000 65 163 Scale 2,500,000 10 250,000 1 250,000 33 81 Sub-total 12,150,000 605 1491 Other fixed costs Permanent staff 690,000 month 0.5 345,000 449 1,123 Communication 15,000 month 0.5 7500 10 25 Tax 44,600 year 0.5 22300 3 1 Sub-total 749,600 374,800 462 1,149 General maintenance Fuel 10,000 month 0.5 5000 7 16 Electricity 182,000 month 0.5 91000 118 296
27
Spare parts 300,000 year 0.5 150000 20 49 Black oil 66,000 month 0.5 33000 43 107 Sub-total 279,000 188 469
Variable costs
Unit price unit refrence
raw or out Quantity Total value Per quantity of
raw input in ton
Cost per unit of raw
input
Cost per ton of main output
Raw material purchase Groundnut 60,000 t raw 7,680 460,800,000 60,000 150,000 Other input Casual labor 1 per month 639,228 639,228 832 2,081 Packaging material 1 per month 1 1 1 0 water 1 per month 35,000 35,000 46 114 Chemicals 1 per month 228,000 228,000 297 742 Petrol and diesel 1 per month 43,000 43,000 56 140 Lubricants 1 per month 235,000 235,000 306 765 461,980,229 61,537 153,842 Total cost 474,409,229 62,330 155,801 Revenue Oil 160,000 t out 0.4 64000 64,000 160,000 Cake 16,000 t out 0.57 9120 9,120 12,996 Total revenue 73,120 172,996 Net revenue 10,790 17,195 Added value Distribution
Per quantity of raw input
Per ton of main Output
Revenue 73,120 172,996 Raw commodity 60,000 150,000 Intermediate consumption 1,730 4325
28
Added value 11,390 28,475 Added value distribution Labor 449 1,123 Depreciation 605 1,513 Return to management 10,336 25,840 Tax 3 8 Net return to management 10,333 25,833
29
Table 7a: Aggregate Local Processor and Farmer Budget
Agent Budget Items Raw
Groundnut Groundnut
Oil Equivalent
Groundnut Oil
Selected Budget
items Share of Total
Revenue (%) Farmer Fixed Cost 1,129 2,823 2,823 1.78
Inter. Inputs and Services 9,250 23,125 23,125 14.60 Hired Labour 14,341 35,853 35,853 22.64 Other Costs 0 0 Taxes 0 0 Revenue 50,200 125,500 Net Revenue 25,480 63,700 63,700 40.22
Fixed Cost 1,513 1,513 0.96Industrial Processor Commodity in process 150,000
Inter. Inputs and Services 4,325 4,325 2.73 Hired Labour 1,123 1,123 0.71 Other Costs 0 0 Taxes 80 80 0.05 Revenue 172,996 Net Revenue 25,833 25,833 16.31 Total 158,375 100%Table 7b: Aggregate Industrial Processor and Farmer budget
Agent Budget Items Raw
Groundnut Groundnut
Oil Equivalent
Groundnut Oil
Selected Budget
items Share of Total
Revenue (%) Farmer Fixed Cost 1,129 2,823 2,823 1.71
Inter. Inputs and Services 9,250 23,125 23,125 14.01 Hired Labour 14,341 35,853 35,853 21.72 Other Costs 0 0 Taxes 0 0 Revenue 50,200 125,500 Net Revenue 25,480 63,700 63,700 38.58
Fixed Cost 121 121 0.07Local Processor Commodity in Process 52,800
Intermediate Inputs and Services 3,900 3,900 2.36 Hired Labour 10,560 10,560 6.40 Other Costs 0 Taxes 0 Revenue 92,400 Net Revenue 25,019 25,019 15.15Total 165,101 100.00%
30
Figure 9: Aggregate Budget of Local and Industrial Processors
0%
20%
40%
60%
80%
100%
local Processor Industrial Processor
15.2 Net Revenue15.2 taxes6.4 Labour2.4 Intermediate consumption0.1 Processor Fixed Cost39 Net Revenue22 Hired Labour14 Intermediate consumption1.7 Fixed Cost
31
4.3 ANALYSIS OF CONSTRAINTS AND POSSIBLE SOLUTION
The constraints as perceived by different actors and their suggested solution are
shown in table 7. Different actors see the constraint differently. But the problem appears
to be more of demand problem rather than a supply one. The production of groundnut in
Nigeria started in the early nineties in response to attractive world price. At that time the
production was increased through increase in area under cultivation. The collapse of
organize marketing through the marketing boards left the farmers without assured
markets outlets and prices. Thus the international markets were lost. Since production
was organized export and no alternative outlet was provided, the domestic market was
not big enough to observe the supply. Thus there was no market both domestically and
internationally since the eighties and thus situation remains the same.
Farmers’ perception of high producer price and high cost of production appeared
to be misplaced. This is shown by the budget of improved techniques of production by
the SG 2000 farmers. Despite the low producer price and high cost of inputs, the SG
2000 farmer was able to make about N140,000 per hectare. Therefore association should
be encouraged to teach their member to adopt modern production techniques. The
marketers, both local and national reported not having any problems. It was gathered that
there is no differential prices on groundnut varieties. But there was different price
between old and newly harvested groundnut due to difference in content. The drier ones
attract higher price than the newly harvested one.
The constraint of the local processors is related to the choice of groundnut variety.
The local processors preferred the verities with high and oil content, which are easier to
process. But there are not easily found in the locality because farmers did not grow this
type. The industrial processors appeared not to share the concern of the local processors.
They did not make any distinction between groundnut types. Any type is okay, so long
as, moisture content is right. Their constraints are: High cost of raw materials, Low
producer price and acute competition from imported vegetable oil which is pushing prices
further down, High cost of operations and Low working capital
Consumers preferred groundnut oil to others, but due to high prices of groundnut oil
(table 8, 9 and 10) they were compelled to purchase vegetable oils.
32
Table 7: Constraint Analysis AGENT PRACTISE CONSTRAINTS PERCEIVED SOLUTION REMAINING
ISSUES NO
TECHNOLOGY LOCATION 1. FARMER - Low input usage
- G/nut grown mixtures - Manure used instead of fertilizer - Late planting to protect haulms - Food type preferred to the oil type groundnut - Very low usage of pesticide - Produce marketed at local markets
Gaya
- Low producer price - High cost of inputs - Lack of market outlets - Limited knowledge of modern prodution produce
- Linkages to industries - Extension activities to on modern production practices
2. MARKETERS a. Local
- Receive local supply and sells to local producers - Depending on quality varieties are not sorted - He also source for nut
Laraban Zango
None
b. National - He receives supplies from other states and from local sources - He gives credit to his suppliers - He sells mainly to middlemen and oil millers
Kano
None - He sells what he receives and has no problem with any
3. LOCAL PROCESSOR
Technology - Local method of processing using pestle and mortals - Source nut from local markets
- Preference for national seeds instead of local
4. OIL MILLERS - Use modern machine and processing techniques
- High cost of raw materials - Low working capital - Low producer prices due to competition from imported vegetable oil - High cost of power as a result of use of Generators
- Improve power supplier in industrial area - Provide working loan at consessional rate - Enforce the ban on importation of vegetable oil
5. OIL CONSUMER
Gaya Kano
- High cost of groundnut oil
33
Table 8: Type and Purpose for Oil demand in High and Low Seasons
Household Restaurant Selling Purpose
Type High Low High Low High Low
Groundnut Oil 61 61 21 20 6 6
Palm Oil 29 24 3 3 12 11
Vegetable Oil 8 7 3 3 2 2
Table 9: First Preference for Oil
Preference Location Groundnut Palm Oil Vegetable Total
Galadima 29 0 0 29
Gaya 37 0 0 37
Groundnut
Oil Sabon Gari 22 2 0 24
Sub-total 88 2 0 90
Galadima 3 8 1 13
Gaya Gari 7 4 0 11
Palm Oil
Sabon 3 12 1 16
Sub-total 13 24 2 40
Galadima 0 0 9 9
Gaya Gari 1 0 0 1
Vegetable
Oil
Sabon 1 0 3 4
Sub-total 2 0 12 14
Grand Total 103 26 12 144
34
Table 10: Reasons for not wanting Groundnut
Reasons Count Percentage
Availability 1 0.72
Taste 37 26.81
Price 57 41.30
Total 138 68.83
35
5.0 CONCLUSION AND RECOMMENDATIONS The problem of the groundnut industry is that of demand. Farmers are not
organized enough to provide the marketing services that were hitherto provided by the
defunct groundnut marketing board. As such there are no standards and the yields
farmers obtained remained low compared with the potential yield. There were linkages
between farmers with the industrialists.
Recommendation
a. Farmers need to get organized through farmers association,
b. ADENI should facilitate the strengthening of farmers capacity to
Get organized and provide needed services to their members
c. The associations should start talking the farmers organized enough
To purchase quality inputs and train farmers on modern production
Techniques.
d. Contractual agreements should be arranged between association and
industrial processors
36
REFERENCES
B.R. Nfare, F Waliyar, M. Ramouch, E. Masters and J. Ndejunga eds. (2005). Markets Prospects
for Groundnut in West Africa. Common funds for Mommodities Standhouderskade 55, 1077 AB Amsterdam, The Netherlands.
Freeman, H.A., Nigam S.N, Kelly, T.G., Ntare, B.R., Subrahmanyam, P and Boughton, D.
(1999). The World Groundnut Economy, Facts, Trends and Outlook. Patancheru 502324, Andra Pradesh, India: Information Crops Research Institute for the Semi Arid Tropics 52pp. ISBN 92-9066-404-5
Gsp News (2004). Sustainable Seeds System for West Africa - ICROSAT