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An economic assessment of rural based agro-industry in Ogoni land is a research conducted to ascertain the economic viability of the rural agro industry at ogoniland in Rivers State, especially the micro, small and medium scale agro based industries. Thirty industries were randomly selected from a population of 150 micro small and medium scale enterprises obtained from the Ministry of Commerce and Industries, the data for this research was analyzed using cost and revenue model. Only variable cost was considered, this is because if a business can cover its variable cost then it has good leverage. The net farm income revealed that return on investment was higher than variable expenses, that is, the total net income was higher than Total Variable Cost (TVC) in all the rural industries. Inferentially, this is a sign of economic viability and so it means that the rural agro- based industry was economically viable. The study recommended that government should assist the rural Agro-based industries with necessary infrastructural facilities such as electricity to power their equipment so as to reduce the cost of fuel. Road should also be provided to reduce cost of transportation, this will drastically reduce variable cost and increase net profit.
Article Citation:
Okidim IA and Albert CO.
An economic assessment of rural based agro-industries in Ogoni land Rivers State, Nigeria.
Journal of Research in Agriculture (2013) 2(2): 180-186.
Full Text:
http://jagri.info/documents/AG0041.pdf
Titre original
An Economic Assessment of Rural Based Agro-Industries in Ogoni land Rivers State, Nigeria
An economic assessment of rural based agro-industry in Ogoni land is a research conducted to ascertain the economic viability of the rural agro industry at ogoniland in Rivers State, especially the micro, small and medium scale agro based industries. Thirty industries were randomly selected from a population of 150 micro small and medium scale enterprises obtained from the Ministry of Commerce and Industries, the data for this research was analyzed using cost and revenue model. Only variable cost was considered, this is because if a business can cover its variable cost then it has good leverage. The net farm income revealed that return on investment was higher than variable expenses, that is, the total net income was higher than Total Variable Cost (TVC) in all the rural industries. Inferentially, this is a sign of economic viability and so it means that the rural agro- based industry was economically viable. The study recommended that government should assist the rural Agro-based industries with necessary infrastructural facilities such as electricity to power their equipment so as to reduce the cost of fuel. Road should also be provided to reduce cost of transportation, this will drastically reduce variable cost and increase net profit.
Article Citation:
Okidim IA and Albert CO.
An economic assessment of rural based agro-industries in Ogoni land Rivers State, Nigeria.
Journal of Research in Agriculture (2013) 2(2): 180-186.
Full Text:
http://jagri.info/documents/AG0041.pdf
An economic assessment of rural based agro-industry in Ogoni land is a research conducted to ascertain the economic viability of the rural agro industry at ogoniland in Rivers State, especially the micro, small and medium scale agro based industries. Thirty industries were randomly selected from a population of 150 micro small and medium scale enterprises obtained from the Ministry of Commerce and Industries, the data for this research was analyzed using cost and revenue model. Only variable cost was considered, this is because if a business can cover its variable cost then it has good leverage. The net farm income revealed that return on investment was higher than variable expenses, that is, the total net income was higher than Total Variable Cost (TVC) in all the rural industries. Inferentially, this is a sign of economic viability and so it means that the rural agro- based industry was economically viable. The study recommended that government should assist the rural Agro-based industries with necessary infrastructural facilities such as electricity to power their equipment so as to reduce the cost of fuel. Road should also be provided to reduce cost of transportation, this will drastically reduce variable cost and increase net profit.
Article Citation:
Okidim IA and Albert CO.
An economic assessment of rural based agro-industries in Ogoni land Rivers State, Nigeria.
Journal of Research in Agriculture (2013) 2(2): 180-186.
Full Text:
http://jagri.info/documents/AG0041.pdf
An economic assessment of rural based agro-industries in
Ogoni land Rivers State, Nigeria
ABSTRACT: An economic assessment of rural based agro-industry in Ogoni land is a research conducted to ascertain the economic viability of the rural agro industry at ogoniland in Rivers State, especially the micro, small and medium scale agro based industries. Thirty industries were randomly selected from a population of 150 micro small and medium scale enterprises obtained from the Ministry of Commerce and Industries, the data for this research was analyzed using cost and revenue model. Only variable cost was considered, this is because if a business can cover its variable cost then it has good leverage. The net farm income revealed that return on investment was higher than variable expenses, that is, the total net income was higher than Total Variable Cost (TVC) in all the rural industries. Inferentially, this is a sign of economic viability and so it means that the rural agro- based industry was economically viable. The study recommended that government should assist the rural Agro-based industries with necessary infrastructural facilities such as electricity to power their equipment so as to reduce the cost of fuel. Road should also be provided to reduce cost of transportation, this will drastically reduce variable cost and increase net profit. 180-186 | JRA | 2013 | Vol 2 | No 2
This article is governed by the Creative Commons Attribution License (http://creativecommons.org/ licenses/by/2.0), which gives permission for unrestricted use, non-commercial, distribution and reproduction in all medium, provided the original work is properly cited. www.jagri.info Journal of Research in Agriculture An International Scientific Research Journal Authors: Okidim IA and Albert CO.
Institution: Department of Agric and Applied Economics/ Ext. Rivers state University of Science and Technology, Port Harcourt, Rivers State, Nigeria. PMB 5080.
Corresponding author: Albert CO.
Email:
Web Address: http://www.jagri.info/ documents/AG0041.pdf.
Dates: Received: 18 Mar 2013 Accepted: 02 May 2013 Published: 27 Aug 2013 Article Citation: Okidim IA and Albert CO. An economic assessment of rural based agro-industries in Ogoni land Rivers State, Nigeria. Journal of Research in Agriculture (2013) 2(2): 180-186 Original Research Journal of Research in Agriculture J o u r n a l
o f
R e s e a r c h
i n
A g r i c u l t u r e
An International Scientific Research Journal Keywords: Economic Assessment, Rural Based Agro-Industries.
INTRODUCTION Before crude oil and gas were discovered in Ogoni land, the predominant occupation of the people was farming. Industrialization was not a part of the economic activities in Ogoni-land. The rural economy was predominantly dependent on production of primary raw materials. Soon after the discovery of oil in Ogoni- Land, there was a gradual decline in agricultural activities which also affected the rural base industries. The rural based industries have obviously contributed to the development of Ogoni-land in particular and Rivers State in general, it has proven to be one of the most viable sectors with enormous employment and economic growth potentials. The small scale farmer or farm family who resides in the rural area produce over 80% of the food consumed in Nigeria (Ikesiofor, 2012). The rural based industries have contributed immensely to industrial and economic development through effective use of local raw materials from agriculture for the production of intermediate goods and transformation of rural technology. Agro-based industries depend on agricultural input, which are mainly raw materials from farm. Rural agro-based industries also depend on electricity for efficient operation, but often times, electricity is not always available which makes these industries to depend on small generators and thereby increasing the cost of operation (Chima, 1994) Rural based industries face problem of poor record keeping and inadequate working capital because of poor accessibility to bank credit facilities. Problem statement Ogoni-land is highly devastated because of oil exploration and exploitation. This devastation has grossly affected the hitherto vibrant rural based industries which were agro-based, not minding that a nation cannot grow without small and medium agro industries, in other to bring back the vibrant agro base industries, it is necessary to conduct survey for ascertaining the economic viability of these rural agro based industries so as to find out whether or not they still meet up the very purpose for which they were set up before the advent of oil exploration and exploitation in Ogoni. Objectives of the study The general objective of this study is to examine the economic viability of rural agro-base industries in Ogoni-Land, while the specific objectives were: To identify all the agro-based rural industries To analyze or examine their level of economic viability; and To investigate their problem and prospect if any. Literature Review Rural based industry is an industry that depends on agricultural product for its support and sustainability (Maisamari, 2002). The rural base industries depend on farm products such as cassava, cocoyam, groundnut, honey, olives, palm kernel, palm oil, palm wine, timber and other agricultural raw materials (Koleshore,1984). The rural based agro industries are usually involved in the production, processing and manufacturing of agricultural products. They manufacture local gin through palm wine, process cassava into garri and fofo, processing oil palm into palm oil, processing of hide and skin into leather, roofing woods, plywood etc. On bases of size, Teal (2002) define small scale agro-based industries as an industry that employ up to 5-29 employees. Nicholas (1996) defined small scale agro-based industry as industry with employees between 9-29. Teal, (2002) also maintained that medium scale agro based industries employ between 30-99 staff, while micro agro based enterprise has between 1-5 employees. On the basis of finance, the rural micro and medium scale enterprises have financial investment not more than, but between 150 - 200 million naira excluding land (just working capital) in Nigeria. In Ghana, it is not more than 10 million Ghanian Cedis, in Malawi, it is two million dollars. Rural based agro allied industries, mobilize funds which otherwise would have 181 Journal of Research in Agriculture (2013) 2(2): 180-186 Okidim and Albert, 2013 been ideal. They promote indigenous technology and employee ideal labour (Peter, 2002). Rural micro and medium agro-based industries source their money through loans from friends and relatives (Chima, 1994).They also source funds through personal savings the most common source of equity finance. (Olashore, 1985). Retain earning (Plough back) is also another method of equity financing. Retained earnings are earnings or profit set aside after dividend is paid (Ernest, 1985) Rural agro-based industries also source finance from commercial banks and Isuzu cooperatives among others.
METHODOLOGY Ogoni is one of the ethnic groups or tribes of the Niger Delta region, southern Nigeria. It is an ethnic group in Rivers State of Nigeria which spread through four local government councils of Tai, Gokana Eleme and Khana. It covers an area of 1,212sq km and has a population of 740,744 (NPC, 2005). Even though there is a huge present of hydro-carbon (oil and gas) available, the main occupation of the people is fishing and farming. The data for this study were mainly collected through well structured questionnaire and personal interview as well as secondary data. The population of this study was 150 micro small and medium scale industry workers, obtained from Ministry of Commerce and Industry workers. Sample size was 30% of the population which was randomly selected in each of the categories of industries (micro, small and medium) as follows: Ten palm oil processing industries Eight local gin production industries Five timber production/logging enterprises Four cassava processing enterprises Three breed production enterprises Method of Data Analysis The data for this study were analyzed using descriptive statistics such as simple percentage, averages, frequency table, cost and revenue analysis (cost -revenue model).
RESULTS AND DISCUSSION Table 1, is in line with objective one of this study, which is to identify the rural agro-based industries. The following agro-based industries were identified- oil palm processing industry, local gin production, Timber (logging) cassava processing industries, bread production. Table 1 shows the distribution of the number of industries, the table shows a total of 38 industries, Out of the 38 industries surveyed 18 (33.33%) were palm oil processing. 8 (26.67%) were local gin producing 5 (16.67%) were Timber/logging, while 4 (13.33) were cassava processing, and 3 (11.00.) were bread industries. Majority of the agro-based rural industries were palm processing industries. Bread industries were the least, with only three industries; this was due to the high cost of building bakery. Table 2 revealed that amongst the variable cost, fresh fruit bunch (ffb) had the highest cost with two hundred and fifty thousand naira. It was also revealed that in palm oil production land and electricity were also costs intensive. Another cost intensive item was labour. For the purpose of this study, labour was classified as variable cost since labour cost only increased with increase in the quantity of FFB. The amount spent on Journal of Research in Agriculture (2013) 2(2): 180-186 182 Okidim and Albert, 2013 Type of industry Number of industry Percentage Oil palm processing 18 33.33 Local gin production 8 26.67 Timber/logging 5 16.67 Cassava processing 4 13.33 Bread production 3 11.00 Total 38 101.00 Table 1: Types of Agro-based industries in Area Field survey 2012
labour was one hundred and twenty eight thousand (128000) naira. The study also revealed that with increase in mechanization, the quantity of labour employed as well as labour cost will reduce drastically. Furthermore, the study shows the cost and returns on oil palm production. The finding shows that the total variable cost (Tvc) of producing 150 jerry cans of processed oil palm was 406, 150 It was earlier said that this work will be based on variable cost only in the short run The table showed that, the gross revenue was 600,000 while the net farm income was 193,850 naira; it means that there was a return above variable cost, confirming the viability of the industry with generating set and land taking the highest cost. This is in agreement with Okidim and Albert (2012) work on determinant of growth in the oil palm industry, the capital recovery was above 12.8% indicating that the business was profitable. Average monthly income/returns from local gin production
Variable cost Raffia stems 6,280 Fire wood/kerosene 8,500 Hired labour 16,250 Miscellaneous 6,000 Total variable cost (TVC) = 37,030 Total revenue = 25 cans of 20 litres at 2800 per 20 litre = 70,000 =TR-TVC= 70,000-37,030 = 32,970 per month 183 Journal of Research in Agriculture (2013) 2(2): 180-186 Okidim and Albert, 2013 Item Quantity Fixed cost () Variable Cost () Revenue Land 3 plot 200,000 - Generator 1 150,000 Digesting machine 1 60,000 Shalker 1 40,000 Factory building 1 50,000 drums 7 21,000 pipes 2 5,000 Jerry cans 10 5,000 Miscellaneous - 5,000 50 tons of fresh fruit bunch 251,000 - Labour 128,000 per month Firewood 24,000 per month Kerosine 3,150 per month Total 536,000 406,150 Gross Revenue 150 Jerry cans (20 litres) processed oil 4000 naira per 1 (4000x150)= 600,000 Net Farm Revenue 600,000-406,150 =193,850 Table 2: Average monthly Cost, and Returns on oil Palm Production Source 2012 Items Fixed Cost () Revenue Local Condenser 1 plot of land
10,000 30,000
- - Drum preservation 7,200 - Factory building 25,000 - Taping knives 1,500 - I cooking drum 3,500 - Pipe 200 - Jerry cans 20 litres (20) 10,500 - Miscellaneous 3,000 - Total 32,970 Table 3: Cost and returns on local Gin production Source 2012 Table 3 shows the monthly cost and return on local gin production. The monthly total variable cost stood at 37, 30 while total monthly revenue stood at 70,000. The net monthly income was 32,970. Since the monthly total revenue was above the monthly total variable cost, it means the business was economically viable. Again, we are only considering short run profit, which is why the fixed cost is not considered. If in the short run, we can cover the variable cost then the business is considered economically viable. Again, like the palm oil production, local gin production had labour as its highest variable expense. The study also revealed that the demand for local gin was lesser than the demand for palm oil this because not everybody in the study area consume local gin for health and religious reasons. Although, local gin apart from directly consuming it, could be used as raw materials for the manufacture of other products. Table 4 shows the monthly cost and returns on timber/logging. The study revealed that transportation cost was one of the biggest variable costs with about eighty four thousand eight hundred (84,800) naira per lorry load of timber. The processed timber is always transported to the city from the forest. The cost of diesel and labour were also high with 75,000 and 64,000 respectively. Also, multiple taxations made tax paid to rose up to 7,420. The total monthly variable cost was eight hundred and thirty one thousand two hundred and twenty naira ( 831,220.00), while the gross monthly revenue was nine hundred and sixty thousand naira ( 960,000). The net revenue income was one hundred and twenty eight thousand seven hundred and eighty naira ( 128, 780.00). This net profit is economically viable to keep the timber/logging business. The result confirms Journal of Research in Agriculture (2013) 2(2): 180-186 184 Okidim and Albert, 2013 Items (variable) Cost () Revenue 200, pieces of 4x12x12 @ 1,500 per piece 300,000.00 200, pieces of 9x12x12 @ 1,500 per piece 300,000.00 Diesel 75,000.00 Labour 64,000.00 Tax 7,420.00 Transport 84,800.00 Total variable cost 831,220.00 Gross revenue 800 pieces (1x12x12 at 1,200 = 960,000.00 831,220.00= 128,780.00 Table 4: Cost and Return on Timber/logging industries Field survey 2012 Items (variable) Cost () Revenue 2, 800kg of cassava at 500/35kg 40,000 Diesel/oil 5,400 Labour (frying, feeling 16,000 Transport 2,000 Total variable cost 63,400 Gross Revenue 1, 200kg of garri per month /8kg 125 per kg. 1200 x 125 = 150,000 Net monthly return 150,000- 66,400 = 83,600 Field survey 2012 Table 5: Cost and Return on Cassava Processing
Timber Organization Company (TOC) (1999) that timber production has a high economic value. Table 5 shows the cost and Return on cassava processing to garri. The study shows that cassava demand is high in the study area even though the supply is high. Labour also constitutes one of the highest variable costs like other industries studied. This shows that in all the industries, labour cost is high. The table shows that 66, 400 was spent as total variable cost (TVC) to process 1,200 kilogram of cassava monthly. The table also shows that the sum of 150, 000 was realized from cassava processing as gross returns while N83, 600 was realized as net monthly income from cassava processing. This margin indicates that the business has some financial leverage. The result is in line with Agundu and Okidim, (2004) who observed that cassava production is a money spinner due to high net income from foreign export. Table 6 shows the monthly cost and gross as well as net returns on bread production in Ogoni-land. The table shows that the total variable cost (TVC) was one million seven hundred and four thousand, six hundred Naria ( 1, 704,600) the gross revenue earning was two million and five hundred thousand. While the net revenue earnings was six hundred and seventy four thousand four hundred naira ( 674, 400). This was the highest in terms of net revenue of the six rural based industries surveyed. Murray and Dey (2008) indicated gross operating surplus as one of the factors in bread production. This survey did not include fixed cost but only based on total variable cost on monthly basis. The study shows that bread had the highest variable cost of all the six local industries studied with one million seven hundred and four thousand six hundred (1704, 600) naira with labour taking 300,000 naira. The study also showed that as variable cost increases, gross revenue and profit also increase, the table also revealed that of all the six local industries studied, bread industries had the highest gross earnings.
CONCLUSION The rural base agro industry with respect to income generation was observed that bread production had highest income; this means that if bread making industries are located in rural areas profit could be made. 185 Journal of Research in Agriculture (2013) 2(2): 180-186 Okidim and Albert, 2013 Items Cost () Revenue Raw materials 168 bags of flour at 5, 400 per bag Variable cost 907,200 - 21 bags of sugar at 10,000/bag 210,000 - 42 packet of yeast at N600/per packet 25,200 - Salt 8,400 - Preservatives 12,000 80 packets of butter 28,000 - 180 litres of groundnut oil 34,800 - Hired labour 300,000 - Diesel and water 34,000 - Fire wood 100,000 - Taxes 15,000 - Miscellaneous 30,000 - Total variable cost (TVC) 1,704,600 Gross earning Gross Revenue 12,500 loaves of bread at 250/ loave = 2,500,000 Net earnings 2,500,000-1,704,600 = 674,400 Table 6: Cost and Returns on Bread Production (Monthly) Field survey 2012 The research also showed that all the agro- based rural industries were economically viable; at least they covered their variable cost in the short run. It is therefore recommended that government should assist the rural agro-based industries with necessary infrastructural facilities such as electricity to power their equipment so as to reduce the cost of fuel. Road should also be provided to reduce cost of transportation, this will drastically reduce variable cost and increase net profit.
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Olashore AO. 1985. Financing SME in Nigeria Business Times, Vol.5, No 4, pp887
Teal F. 2002. Background information use of data set region project on enterprise development (RPED) Ghana Manufacturing sector survey.
Timber Organization Company (TOC). 1999. Economic principles of timber production. www.forgov.oc.c9/hpp/post/00083/sdu-31-htm Okidim and Albert, 2013 Journal of Research in Agriculture (2013) 2(2): 180-186 186 Submit your articles online at www.jagri.info
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