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Journal of Research in Agriculture An International Scientific Research Journal

Original Research

An economic assessment of rural based agro-industries in


Ogoni land Rivers State, Nigeria
Journal of Research in Agriculture

Authors: ABSTRACT:
Okidim IA and An economic assessment of rural based agro-industry in Ogoni land is a
Albert CO. 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.
Institution: Only variable cost was considered, this is because if a business can cover its variable
Department of Agric and cost then it has good leverage. The net farm income revealed that return on
Applied Economics/ Ext. investment was higher than variable expenses, that is, the total net income was
Rivers state University of higher than Total Variable Cost (TVC) in all the rural industries. Inferentially, this is a
Science and Technology, sign of economic viability and so it means that the rural agro- based industry was
Port Harcourt, Rivers State, economically viable. The study recommended that government should assist the rural
Nigeria. PMB 5080. 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.

Corresponding author: Keywords:


Albert CO. Economic Assessment, Rural Based Agro-Industries.

Email: 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

Web Address: Dates:


http://www.jagri.info/ Received: 18 Mar 2013 Accepted: 02 May 2013 Published: 27 Aug 2013
documents/AG0041.pdf.

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
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Journal of Research in
Agriculture 180-186 | JRA | 2013 | Vol 2 | No 2
An International Scientific
Research Journal www.jagri.info
Okidim and Albert, 2013

INTRODUCTION based industries so as to find out whether or not they still


Before crude oil and gas were discovered in meet up the very purpose for which they were set up
Ogoni land, the predominant occupation of the people before the advent of oil exploration and exploitation in
was farming. Industrialization was not a part of the Ogoni.
economic activities in Ogoni-land. The rural economy Objectives of the study
was predominantly dependent on production of primary The general objective of this study is to examine
raw materials. Soon after the discovery of oil in Ogoni- the economic viability of rural agro-base industries in
Land, there was a gradual decline in agricultural Ogoni-Land, while the specific objectives were:
activities which also affected the rural base industries. To identify all the agro-based rural industries
The rural based industries have obviously contributed to To analyze or examine their level of economic
the development of Ogoni-land in particular and Rivers viability; and
State in general, it has proven to be one of the most To investigate their problem and prospect if any.
viable sectors with enormous employment and economic Literature Review
growth potentials. The small scale farmer or farm family Rural based industry is an industry that depends
who resides in the rural area produce over 80% of the on agricultural product for its support and sustainability
food consumed in Nigeria (Ikesiofor, 2012). (Maisamari, 2002). The rural base industries depend on
The rural based industries have contributed farm products such as cassava, cocoyam, groundnut,
immensely to industrial and economic development honey, olives, palm kernel, palm oil, palm wine, timber
through effective use of local raw materials from and other agricultural raw materials (Koleshore,1984).
agriculture for the production of intermediate goods and The rural based agro industries are usually involved in
transformation of rural technology. Agro-based the production, processing and manufacturing of
industries depend on agricultural input, which are mainly agricultural products. They manufacture local gin
raw materials from farm. Rural agro-based industries through palm wine, process cassava into garri and
also depend on electricity for efficient operation, but “fofo”, processing oil palm into palm oil, processing of
often times, electricity is not always available which hide and skin into leather, roofing woods, plywood etc.
makes these industries to depend on small generators and On bases of size, Teal (2002) define small scale
thereby increasing the cost of operation (Chima, 1994) agro-based industries as an industry that employ up to
Rural based industries face problem of poor record 5-29 employees. Nicholas (1996) defined small scale
keeping and inadequate working capital because of poor agro-based industry as industry with employees between
accessibility to bank credit facilities. 9-29. Teal, (2002) also maintained that medium scale
Problem statement agro based industries employ between 30-99 staff, while
Ogoni-land is highly devastated because of oil micro agro based enterprise has between 1-5 employees.
exploration and exploitation. This devastation has On the basis of finance, the rural micro and
grossly affected the hitherto vibrant rural based medium scale enterprises have financial investment not
industries which were agro-based, not minding that a more than, but between ₦ 150 - ₦ 200 million naira
nation cannot grow without small and medium agro excluding land (just working capital) in Nigeria. In
industries, in other to bring back the vibrant agro base Ghana, it is not more than 10 million Ghanian Cedis, in
industries, it is necessary to conduct survey for Malawi, it is two million dollars. Rural based agro allied
ascertaining the economic viability of these rural agro 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 frequency table, cost and revenue analysis (cost -revenue
employee ideal labour (Peter, 2002). Rural micro and model).
medium agro-based industries source their money
through loans from friends and relatives (Chima, RESULTS AND DISCUSSION
1994).They also source funds through personal savings – Table 1, is in line with objective one of this
the most common source of equity finance. (Olashore, study, which is to identify the rural agro-based
1985). Retain earning (Plough back) is also another industries. The following agro-based industries were
method of equity financing. Retained earnings are identified- oil palm processing industry, local gin
earnings or profit set aside after dividend is paid (Ernest, production, Timber (logging) cassava processing
1985) Rural agro-based industries also source finance industries, bread production.
from commercial banks and Isuzu cooperatives among
Table 1: Types of Agro-based industries in Area
others.
Number of
Type of industry Percentage
industry
METHODOLOGY Oil palm processing 18 33.33
Ogoni is one of the ethnic groups or tribes of the Local gin production 8 26.67
Niger Delta region, southern Nigeria. It is an ethnic Timber/logging 5 16.67
group in Rivers State of Nigeria which spread through Cassava processing 4 13.33
four local government councils of Tai, Gokana Eleme Bread production 3 11.00
and Khana. It covers an area of 1,212sq km and has a Total 38 101.00
population of 740,744 (NPC, 2005). Even though there is
Field survey 2012
a huge present of hydro-carbon (oil and gas) available,
the main occupation of the people is fishing and farming. Table 1 shows the distribution of the number of
The data for this study were mainly collected through industries, the table shows a total of 38 industries, Out of
well structured questionnaire and personal interview as the 38 industries surveyed 18 (33.33%) were palm oil
well as secondary data. The population of this study was processing. 8 (26.67%) were local gin producing
150 micro small and medium scale industry workers, 5 (16.67%) were Timber/logging, while 4 (13.33) were
obtained from Ministry of Commerce and Industry cassava processing, and 3 (11.00.) were bread industries.
workers. Sample size was 30% of the population which Majority of the agro-based rural industries were palm
was randomly selected in each of the categories of processing industries. Bread industries were the least,
industries (micro, small and medium) as follows: with only three industries; this was due to the high cost
Ten palm oil processing industries of building bakery.
Eight local gin production industries Table 2 revealed that amongst the variable cost,
Five timber production/logging enterprises fresh fruit bunch (ffb) had the highest cost with two
Four cassava processing enterprises hundred and fifty thousand naira. It was also revealed

Three breed production enterprises that in palm oil production land and electricity were also

Method of Data Analysis costs intensive. Another cost intensive item was labour.

The data for this study were analyzed using For the purpose of this study, labour was classified as

descriptive statistics such as simple percentage, averages, 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

Table 2: Average monthly Cost, and Returns on oil Palm Production


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 251,000 -
fresh fruit bunch
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 600,000-406,150
Revenue =193,850
Source 2012

labour was one hundred and twenty eight thousand Variable cost
(128000) naira. The study also revealed that with Raffia stems 6,280
increase in mechanization, the quantity of labour Fire wood/kerosene 8,500
employed as well as labour cost will reduce drastically. Hired labour 16,250
Furthermore, the study shows the cost and returns on oil Miscellaneous 6,000
palm production. The finding shows that the total Total variable cost (TVC) = 37,030
variable cost (Tvc) of producing 150 jerry cans of Total revenue = 25 cans of 20 litres at ₦ 2800 per
processed oil palm was ₦ 406, 150 It was earlier said 20 litre = 70,000
that this work will be based on variable cost only in the π=TR-TVC= 70,000-37,030 = 32,970 per month
short run The table showed that, the gross revenue was
600,000 while the net farm income was 193,850 naira; it Table 3: Cost and returns on local Gin production
means that there was a return above variable cost, Items Fixed Cost (₦) Revenue
confirming the viability of the industry with generating Local
Condenser 10,000 -
set and land taking the highest cost. This is in agreement 1 plot of land 30,000 -
with Okidim and Albert (2012) work on determinant of Drum preservation 7,200 -
Factory building 25,000 -
growth in the oil palm industry, the capital recovery was Taping knives 1,500 -
above 12.8% indicating that the business was profitable. I cooking drum 3,500 -
Pipe 200 -
Average monthly income/returns from local gin Jerry cans
10,500 -
production 20 litres (20)
Miscellaneous 3,000 -
Total ₦ 32,970
Source 2012
183 Journal of Research in Agriculture (2013) 2(2): 180-186
Okidim and Albert, 2013

Table 4: Cost and Return on Timber/logging industries


(variable)
Items Revenue
Cost (₦)
200, pieces of 4x12x12 @ ₦
300,000.00
1,500 per piece
200, pieces of 9x12x12 @ ₦
300,000.00
1,500 per piece
Diesel 75,000.00
Labour 64,000.00
Tax 7,420.00
Transport 84,800.00
Gross revenue 800 pieces (1x12x12 at ₦
Total variable cost ₦ 831,220.00 1,200 = 960,000.00 – ₦ 831,220.00= ₦
128,780.00
Field survey 2012
Table 3 shows the monthly cost and return on Table 4 shows the monthly cost and returns on
local gin production. The monthly total variable cost timber/logging. The study revealed that transportation
stood at ₦ 37, 30 while total monthly revenue stood at cost was one of the biggest variable costs with about
70,000. The net monthly income was 32,970. Since the eighty four thousand eight hundred (84,800) naira per
monthly total revenue was above the monthly total lorry load of timber. The processed timber is always
variable cost, it means the business was economically transported to the city from the forest. The cost of diesel
viable. Again, we are only considering short run profit, and labour were also high with 75,000 and 64,000
which is why the fixed cost is not considered. If in the respectively. Also, multiple taxations made tax paid to
short run, we can cover the variable cost then the rose up to 7,420.
business is considered economically viable. Again, like The total monthly variable cost was eight
the palm oil production, local gin production had labour hundred and thirty one thousand two hundred and twenty
as its highest variable expense. The study also revealed naira (₦ 831,220.00), while the gross monthly revenue
that the demand for local gin was lesser than the demand was nine hundred and sixty thousand naira (₦ 960,000).
for palm oil this because not everybody in the study area The net revenue income was one hundred and twenty
consume local gin for health and religious reasons. eight thousand seven hundred and eighty naira
Although, local gin apart from directly consuming it, (₦ 128, 780.00). This net profit is economically viable to
could be used as raw materials for the manufacture of keep the timber/logging business. The result confirms
other products.

Table 5: Cost and Return on Cassava Processing


Items (variable) Cost (₦) Revenue
2, 800kg of cassava at
40,000
500/35kg
Diesel/oil 5,400
Labour (frying, feeling 16,000
Transport 2,000
Total variable cost 63,400
1, 200kg of garri per month /8kg ₦ 125 per kg. 1200 x ₦
Gross Revenue 125 = ₦ 150,000
Net monthly return ₦ 150,000- ₦ 66,400 = ₦ 83,600
Field survey 2012

Journal of Research in Agriculture (2013) 2(2): 180-186 184


Okidim and Albert, 2013

Table 6: Cost and Returns on Bread Production (Monthly)


Items Cost (₦) Revenue
Raw materials 168 bags of flour Variable cost
-
at 5, 400 per bag 907,200
21 bags of sugar at 10,000/bag 210,000 -
42 packet of yeast at N600/per
25,200 -
packet
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 Revenue 12,500 loaves of bread at ₦ 250/ loave
Gross earning
= ₦ 2,500,000
Net earnings ₦ 2,500,000-₦1,704,600 =₦ 674,400
Field survey 2012

Timber Organization Company (TOC) (1999) that timber million and five hundred thousand. While the net
production has a high economic value. revenue earnings was six hundred and seventy four
Table 5 shows the cost and Return on cassava thousand four hundred naira (₦ 674, 400). This was the
processing to garri. The study shows that cassava highest in terms of net revenue of the six rural based
demand is high in the study area even though the supply industries surveyed. Murray and Dey (2008) indicated
is high. Labour also constitutes one of the highest gross operating surplus as one of the factors in bread
variable costs like other industries studied. This shows production.
that in all the industries, labour cost is high. This survey did not include fixed cost but only
The table shows that ₦ 66, 400 was spent as total based on total variable cost on monthly basis. The study
variable cost (TVC) to process 1,200 kilogram of cassava shows that bread had the highest variable cost of all the
monthly. The table also shows that the sum of six local industries studied with one million seven
₦ 150, 000 was realized from cassava processing as hundred and four thousand six hundred (1704, 600) naira
gross returns while N83, 600 was realized as net monthly with labour taking 300,000 naira. The study also showed
income from cassava processing. This margin indicates that as variable cost increases, gross revenue and profit
that the business has some financial leverage. The result also increase, the table also revealed that of all the six
is in line with Agundu and Okidim, (2004) who observed local industries studied, bread industries had the highest
that cassava production is a money spinner due to high gross earnings.
net income from foreign export.
Table 6 shows the monthly cost and gross as well CONCLUSION
as net returns on bread production in Ogoni-land. The The rural base agro industry with respect to
table shows that the total variable cost (TVC) was one income generation was observed that bread production
million seven hundred and four thousand, six hundred had highest income; this means that if bread making
Naria (₦ 1, 704,600) the gross revenue earning was two 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
The research also showed that all the agro- based rural Nigeria. Journal of Economic and Sustainable
industries were economically viable; at least they Development, 3(9), 25-29.
covered their variable cost in the short run. It is therefore
Olashore AO. 1985. Financing SME in Nigeria
recommended that government should assist the rural
Business Times, Vol.5, No 4, pp887
agro-based industries with necessary infrastructural
facilities such as electricity to power their equipment so Teal F. 2002. Background information use of data set
as to reduce the cost of fuel. Road should also be region project on enterprise development (RPED) Ghana
provided to reduce cost of transportation, this will Manufacturing sector survey.
drastically reduce variable cost and increase net profit.
Timber Organization Company (TOC). 1999.
Economic principles of timber production.
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Reporting at Federal Inland Revenue Service.
Advantages
Murray J and Dey C 2008. Assessing the impact of a Easy online submission
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loaf of bread. Australia: University of Sydry.
Affordable Charges
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