ECONOMIC ANALYSIS OF CASSVA PROCESSING AND MARKETING KOGI STATE, NIGERIA.

ABSTRACT

This research work examined the economics of processed cassava products and marketing in Kogi East of Kogi State, Nigeria. Among other objectives the study sorts to: identify and describe different processing/marketing channels of selected the value added chain in cassava processing, and describe the constraints’ seriousness in cassava processing/marketing in the study area. A multistage purposive and random sampling technique was used to select 120 cassava processors/marketers who provided the relevant data for the study through a set of structured  questionnaire  administered  to  them.  Descriptive  statistics,  multiple  regression, profit function analysis and likert scale rating techniques were employed to analyse the data collected.  Results of the study  showed  that, 66% of the respondents  were of middle age between 31-50 years, predominantly females (73%). The majority (67%) of the respondents were married, 37% of the respondents had 5-10 years experience in processing/marketing, and 57%  had large  family size of about 5-10 persons.  Also 55% of the respondents  had between   4-6   persons   of   their    family   members   directly   assisting   them   in    the processing/marketing activities. The study noted that about 50% of the respondents obtained capital from their personal savings while 54% of the respondents source their fresh cassava roots from the market. Additionally, 42% of the respondents had no  formal education and 52% indicated that the initial capital they invested was between N20,000 – N39,000.  The results  also  showed  that  majority  (58%)  of  the  respondents  in  garri  processing  adopted processing channel which comprised peeling-washing-grating- dehydration-fermentation  and frying (referred to in the text as processing channel ‘1’) while majority (70%) cassava flour processors  adopted  the  processing  channel  which   comprised  peeling-washing-soaking- sifting-dewatering-molding and drying (referred to in the text as processing channel ‘1’). For fufu processors, majority (88%)  adopted the processing channel   which comprised peeling- washing- soaking-fermentation-sifting-dewatering-boiling and molding (referred to in the text as processing channel ‘1’). On marketing channels, majority (60%) and (53%) of garri and cassava   flour   marketers   adopted   marketing   channels   which   comprised   packaging- transportation-wholesaling-retailing  and final consumers (referred to in the text as marketing channel ‘1’) while majority (57%) of the fufu marketers adopted marketing channel  which comprised  packaging-retailing  and  final consumers  (referred  to  in the  text  as marketing channel ‘3’). The socio-economic factors that influenced output of cassava products were sex, level of education, amount of initial capital invested, family size, marital status and age of the respondents. The study also found out that 79.9% of total variability in the output of garri enterprise was explained by the stated socio-economic factors which influenced output of the garri product. Meanwhile, 62.7% and 81.1% of cassava flour and fufu enterprises profit were explained by the same factors respectively. Thus, the null hypothesis which stated that socio- economic factors of cassava processors/marketers do not have significant effect on the output of cassava products processed and marketed was rejected for the three enterprises at the 5% level  of  probability.  In the garri enterprises, the combined  effects of all the variables and fixed inputs in the profit function explained 78.9% of the variation in the maximum variable profit  while the combined  effect of the variable  and fixed  cost in the profit  function  in cassava  flour  and  fufu  processing/marketing   enterprises,  explained   80.1%  and  84.4% respectively of the variation in the maximum variable profit. The null hypothesis which stated that output and input prices do not significantly affect profit of garri, cassava flour and fufu enterprises was rejected at 5%  level of probability. Lack of capital for expansion, irregular power and water supply, fluctuation in prices of output and irregular shapes stood out as the most  challenging   constraints   to  the  respondents   in  the  cassava   processing/marketing activities.   The  study  among   other   things   recommmended,   provision   of  finance   and infrastructural facilities such as road and  supply of water and electricity to reduce cost of processing/marketing of the cassava products.

CHAPTER ONE

INTRODUCTION

1.1      Background of the Study

Cassava (Manihot spp) is believed to have originated from Brazil and was introduced into West Africa countries by the Portuguese (Antonio, 2002). Benue and Kogi States in the north central zone of Nigeria are the largest producers of cassava in the country (IITA, 2004). Cassava’s  comparative  advantage  compared  with  other  food  crops  lies  in  its  efficient production of cheap food energy. In addition, cassava is available all year round as well as tolerant to extreme conditions. These qualities contribute in alleviating African food crises (Nweke, Dixon, Asiedu and Folayan, 1994). This accounts for why Philip (2005) referred to cassava as the “famine security crop”.

Studies   have   shown   that   cassava   contains   substances   known   as   cyanogenic glucosides, which break down into hydrocyanic acid (HCN) after the crop must have been harvested. This acid makes raw cassava very poisonous for human consumption. Processing is  therefore  important  as a means  of removing  this  poison  by reducing  its toxicity  and increasing its palatability (Adegeye, 1999). After harvest, cassava roots are processed to stop physiological and microbial spoilage, reduce the cyanogenic glucosides content and convert the roots to other products that are more acceptable (Asiedu, 1989). Major products derived from  cassava  are  cassava  flour  (alibo),  fufu,  garri,  starch,  tapioca,  sliced  cassava  chips (abacha) and other cassava-based products.

Rural based cassava processing activities offer opportunities in terms of employment. It  is  estimated  that  60  percent  of the  labour  force  in  Sub-Saharan  Africa  are  gainfully employed in small-scale food processing enterprises and majority are women (ITDG, 2005). Cassava may in fact hold the key to fully land use intensification in Africa (Enete, 1995). This is because  population  increase  is often  accompanied  by switch  to  crops previously thought to be inferior due to protein, essential minerals and vitamins content but with higher yield as is the case with Africa where cassava has ousted the traditional yam (Griggs, 1980). The market  for cassava  can be divided  into  two  categories,  the traditional  food-oriented market and the new emerging market for industrially processed cassava. The vast majority of the cassava grown in Nigeria is processed and sold through the traditional market channels which  are  fairly  well  known.  In  2002,  cassava  suddenly  gained  national  prominence following the pronouncement of a Presidential Initiative. The intent of the Initiative was to use cassava as the engine of growth in Nigeria. To  put Nigeria in the global context for competition,   the  country  needs  to  upgrade  the   use  of  cassava  in  primary  industrial manufacturing of starch, ethanol, chips and  flour in order to provide an industrial base for further diversification  of its national  economy.  Cassava can be used to improve rural and urban income and development  in Nigeria if investments in the downstream sector or the industry are made more effective through value addition.

The value chain describes  the full range of activities  which  are required  to  bring products from conception, through different phases of processing involving a combination of physical  transformation  and  the  input  of  various  producers,  before  delivery  to  the  final consumers and final disposal after use (Kaplinsky and Moris, 2000).  Most of the processors prefer to offer the commodity to the market without bearing the cost involved in value adding because of the uncertainty in the market. The continuous fluctuation of prices of final goods in the market poses a serious problem to  processors who are interested in adding value to their products. Figure 1.1  illustrates a simple value chain.

Design and product development

processing

–  Inward logistics

–  Transforming

–  Inputs

–  Packaging

Marketing                  Consumption /

recycling

Source: (Kaplinsky and Moris 2000)

Figure  1.1 Four links in a simple value chain

Cassava remains a major source of food and income for a large population of  the people in Eastern part of   Kogi State who are   involved in its production,  processing and marketing.   It is in realization of this fact that the Federal and Kogi State Governments are partnering to establish a three billion naira multi-purpose cassava processing industry in the State (Graphics News, 2008). However, for the purpose of this research work, the cassava processors are also the marketers because that was the usual practice in the study area.

1.2      Problem Statement

The demand for cassava products is on the increase as Nigeria’s population continues to grow rapidly without control. Bridging  the rapidly increasing demand and supply gap in cassava  processing  and  marketing  calls  for  value  addition  as  the  products  are  being processed. The poor storage life of cassava has also given rise to a number of investigations which are designed to prolong the shelf life, so as to increase  the market value and hence increase the income of the processors and marketers (Alinor, 2002) and (Nweke, 2004).

Meanwhile, poor processing is one of the major factors that cause post harvest loss in the world with special emphasis on developing countries like Nigeria (FAO, 1995). Nigeria produces more cassava than any other country in the World (Nwosu 2006). Its production in

2006 was put at about 46 million metric tons a year,  grown on a total land area of about 3.85 million  hectares  with an average  yield  of about 11 tons per hectare  (FAOSTAT,  2008). Moreover,  available data revealed that Nigeria lags behind in the  world export market in cassava production as it contributes a very small proportion of about 0.001% of the world export market as against Thailand which accounts for 50%.  This variation in market share could be as a result of small  value  addition among  cassava  processors  and marketers  in Nigeria. The differences in the cost of production and processing between 104 US dollars/ton in Nigeria and 21 US dollars/ton in Thailand reflect the challenges in cassava processing and marketing in Nigeria (Oyewole and Phillip, 2006).

The state of the products  for marketing  depends on individual  consumers and  the purpose for which it is desired. Generally, there are many forms into which cassava tubers are processed before marketing them in the study area, for instance, cassava could be processed into garri,  cassava flour and fufu which are very common in the study area. There is a large opportunity  for  cassava  processors  and  marketers  to  earn  reasonable  incomes  and  live comfortably,  if enough values are added to cassava. However,  poverty still thrives among these  farmers.   The odds against maximizing  the utility of  cassava  in Nigeria  are many. Majority of the processing areas still lack good roads and communication networks. The bulk of the processors travel long distances to the nearest market either in the urban or rural areas to dispose off their produce and cost of transportation is still high, this further reduces the profit margin of processors (Oyewole and Phillip, 2006).

Although, some studies have been carried out on cassava processing and marketing such as Kaine (1995),  Alinor  (2002),  Nweke (2004),  Oyewole  and Phillip  (2006) among others, not much has been done to investigate the value added chain in cassava processing and marketing channels in the study area. Specifically, Kaine (1995) looked at the Economic Analysis  of  Alternative  Cassava  Processing  Technologies;   Alinor  (2002):  studied  the economics of cassava processing in Nsukka Agricultural zone of Enugu state; Nweke (2004); worked on the challenges in the cassava transformation in Nigeria and Ghana; and Oyewole and  Phillip  (2006)  studied  Agro-Food  chain  and  sustainable  livelihood.  This  study  is therefore aimed at  identifying and describing  different processing/marketing channels of the selected value added chains for different cassava products in the study area.

1.3      Objective of the Study

The broad objective  is to study the economic  analysis of cassava  processing  and marketing in Eastern senatorial zone of Kogi State, Nigeria. Specifically, the study will:

i)   describe the socio-economic characteristics of cassava processors/marketers in the study area.

ii)  identify and describe different processing methods and marketing channels of the selected value added chain in cassava processing in the study area.

iii) examine the socio-economic factors that influence output of the selected cassava products in the study area.

iv) identify factors that influence profitability of the selected cassava products in the  study area.

v)  describe the constraints of value chain addition and analyze   degree of the constraints’

seriousness in cassava processing/marketing in the study area.

vi)  make recommendation based on the findings that will be useful for policy formulation in cassava processing/marketing enterprises.

1.4       Hypothesis of the Study

(i) Ho: The socio-economic factors of cassava processors/marketers do not have significant effect on the     output of cassava products processed and marketed.

(ii) Ho: The output and input prices do not have significant effect on the cassava products profitability.

1.5      Justification of the Study

The study on economic of processed  cassava  products and marketing is  necessary because  it  will  bring  to  focus  problems  and  difficulties  encountered  by  these  cassava processors in the process of adding value to their cassava products.  More importantly, the study will provide information on factors that influence level of profitability in value addition which  will enhance  agricultural  productivity  and  efficiency.  The  study will also  identify constraints militating against value addition in cassava processing and marketing in the study area  with  a  view  to  making  useful  recommendations  towards  enhancing  productivity  of processors in the study area.
Also, with the proposed establishment of a multi-purpose cassava processing industry in Kogi State through a partnership agreement between the Federal and Kogi State  governments,  a study on the Economic of processed  cassava products  and marketing in part of the State is timely.   It will be available  as reference  material  for the planning  and execution  of the proposed  project.  The  findings  from  this  study  will  be  of  immense  benefit  to  other prospective  investors  in the  cassava  processing  industry,  policy makers,  researchers  and processors. A study of this nature would therefore equip the processors/marketers of cassava with the knowledge of the market efficiency and profitability of the value added activities. The study will also be a useful reference point to research scholars interested in this topic and other related topics. A study of Economic of processed   cassava products and marketing in Kogi East will definitely enhance empirical profitability decision in the enterprises.

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