ECONOMIC ANALYSIS OF RICE PRODUCTION AND MARKETING IN UZO-UWANI LOCAL GOVERNMENT AREA OF ENUGU STATE

ABSTRACT

The study examined the economics  of rice production  and marketing  in  Uzo- Uwani Local Government Area.  Using multi-stage random sampling technique, a total  of 120  rice producers  and marketers  were  randomly  selected.    The relevant  data  for  the  study  were  collected   through   a   set  of  structured questionnaire  administered to the selected respondents.   The study described the systems of rice production and marketing in the study area, compared the socio-economic   characteristics   of  rice  producers  and  marketers,  and  their effects on production and marketing of rice, described the rice market and its distribution  channels,  compared  costs  and  returns  of  rice  production  and marketing, identified and examined the major problems of rice production and marketing  and  made  recommendations   for  enhancing  rice  production  and marketing. The analytical tools used in this study included descriptive statistics, multiple  regressions,  enterprise  budgeting,  costs and returns,  marketing  and gross  margin  analysis.  Result  of  the  study  showed  that  more  males  than females  were  involved  in  rice  farming  and  more  females  than  males  in marketing.  Majority  of  both  producers  and  marketers  were  within  the  age bracket of 40-49 years.  Amongst all the categories of household sizes, those with 1-10 members for both the producers and marketers had more output than others.    Majority  of  the  producers  and  marketers  sourced  their  funds  from personal savings.   Most farms and markets were of short distances, therefore transport costs was affordable.  Most marketers relative to producers were new in rice business.  The major socio-economic characteristics that affected the net return from producers and marketers were number of hectares of rice cultivated for the farmers, marital status, number of household members involved in the business  and  distance from the house to the market for the marketers.   The prevalent types of rice production systems in the area were rain fed upland and rain fed lowland. Two methods of rice processing identified were hand pounding system and small mill system. The categories of marketers identified in the area were those who buy paddy  rice, store and sell later;  those who buy paddy, process and sell; and those who sell both paddy and milled rice.  Three main types  of markets  identified  in the area were  farm gate  markets,  designated markets and central markets.  The mean sales revenue realized from a 2ha rice farm was calculated using enterprise budgeting to be N240, 000.00. This gave a net profit of N44, 525.00 and return per naira of investment of N1.23.00. In line with the producers output, the wholesaler buys and realized a total amount of  N432,  000.00  with  net-income  of  N18.400.00   and  return  on  Naira  of investment as N1.45.00. Comparatively, the result showed that the wholesalers made the  highest profit in the rice business.  Lack of developed/fertile  lands, funds, inputs, pest and diseases were found to be the challenging constraints of the producers. While inefficient/high  cost of transportation,  ineffective storage, inefficient grading and standardization, shortage of labour/manpower  are found to be major constraints in the rice marketing-enterprise.   Based on the findings of the study, the following recommendations were made feeder roads should be maintained  by appropriate  government  authorities,  this  will  help to retain the affordable  transport  costs, grading and  standardization  should encouraged  in line  with  national  and  international  best  practices;  proper  training  of  both farmers  and marketers  should be  arranged  by both government  and farmer- associations  to encourage  record keeping, the financial base of both farmers and marketers should be boosted by Government and donor agencies through the facilitation of loans from financial institutions and granting of subsidies.

CHAPTER ONE

INTRODUCTION

1.1      Background

Information

Equitable  and sustainable  economic  development  cannot  ignore  basic food commodities  particularly  in developing countries such as  Nigeria. Basic food  commodities  play  important  roles  in  economic  development  as  their availability  and costs impinge on food security,  expenditures  and incomes of households, particularly among poor  segments  of the population in both rural and urban areas. Of all the basic food commodities, rice is particularly important (Akpokodje,  et al, 2001).  This is because  in Asia, rice constitutes  the staple food. In America and  Europe, it is frequently taken.   In Africa, rice is more important in the urban centres where evidence of rising level of income is more prominent (Lang, 1979; Fulani, 1980).

Nigeria is one of the largest rice producers in West Africa (WARDA, 1981).  In Nigeria, also, it is one of the important cereal grains replacing some of the grains and tuber crops.  Rice used to be the “white mans” food meant only for the elites and high class individuals in the society.  The middle class and the peasants, who constitute a higher percentage of the population, only ate rice at Christmas and other major festive periods. Many of them had the belief that rice symbolized Christmas and vice-versa (Ogbuakanne, 1998).

However,  combinations  of various factors  seem to have triggered  the structural  increase  in  rice  consumption.  According  to  Akanji  (1995),  rising demand was partly the result of increasing population growth. Also, increased income levels, following the discovery of crude oil, led to the rise in the demand for  the  commodity.    The  most  important  factor  contributing  to  the  shift  in consumer preferences  away from traditional  staples and towards rice is  rapid urbanization  and  associated  changes  in  family  occupational  structures.  As women enter the workforce,  the opportunity  cost of their  time increases  and convenience  foods  such  as  rice,  which  can  be   prepared  quickly,  rise  in importance.   Similarly, as men work at great distances from their homes in the urban setting, more meals are consumed away from home where the ease of rice preparation has given it a distinct advantage.   The average Nigerian consumes 24.8kg  of rice per year,  representing  9% of total  caloric  intake  (Rice  Web, 2002).

Olufowole and Joshua (1979) reported that, of the 25 varieties of  rice recommended  to Nigerian  farmers, only five were upland varieties  while the remaining 20 were for swamp production.  The popular variety of upland rice in the study area is FARO 1I while the most popular variety of swamp rice is IRRI 14/16.  This is considered to be the highest yielding rice variety, while FARO 25 ranked second. According  to  WARDA  (1981),  IRRI  (1990),  and  Maclean  (2002), Nigeria’s rice production made some remarkable gains from 1980 to 1989. The area under cultivation  grew from about 400,000 hectares in  1980  to 900,000 hectares in 1989.  Paddy rice production increased from about 600,000 tonnes in

1980 to about 1,422,000 tonnes in 1989 and 3.189.833 metric tonnes from 1990 -1999.

Prior to the World  Bank Rice  Project  and River  Basin  Development Authorities  in Nigeria,  domestic  rice production  depended  mainly  on natural rainfall which was very erratic in nature.  Farmers under this system (rain fed)

employed  traditional  practices  and  inputs  resulting  in  low  yields.  This  was sufficient in meeting the increasing demand for rice (Onwuchekwa, 1988).

The inability of the farmers to meet rice demand coupled with the fact that production capacity was far below the national requirements for rice, forced the Federal Government to import rice to supplement local  production and to bridge the gap between domestic demand and supply (Wudiri and Fatoba, 1992).

.  Rice imports did not decline until 1981 as a result of some policy measures put in place to check the importation of the commodity.   Even then, the  quantity imported  on  an  annual  basis  was  over  300,000  tonnes.    Imports  dropped significantly  from  1985  when  the  ban  was  placed  on  rice.  Although,  rice importation began to rise again in 1991, major importation did not begin until after lifting the ban in 1995 (Ladebo, 1999).

The  problems  of  rice  farmers  include  land  tenure  system,  inefficient labour utilization and lack of finance, capital and credit (Agara, 1979; Okorie, 1987).   Also, the rice gall midge infestation  in Abakaliki  in 1988 and  Uzo- Uwani in 1989 are examples of constraint to rice production (Emeribe, 1990).

For  efficiency  and  stability  of  rice  production  in  West  Africa,  some countries have embarked on new technological strategies to improve  land and labour productivity as well as marketing potentials of small-holder rice farmers and  middlemen  while  preserving  the  resource  base  on  which  their  future livelihoods depended (WARDA, 1988). These  strategies  included modernized rice  production  systems  through  the  provision  of machinery  and equipment, seeds  and  agro-chemicals,  improved  access  to  technologies  and  credit.  In October, about seven billion naira (US $54 million) was reported to have been distributed through the Agricultural Co-operative and Rural Development Bank

(NACRDB) to small scale farmers to expand rice production. .

Based  on  this,  Nigeria  launched  the  Presidential  Rice  Initiative  in August 2002 to improve rice production and processing by enhancing farmers access to subsidized farm inputs and suitable rice varieties coupled with border protection. Against the backdrop of the celebration of international year of rice in 2004, government also reiterated its intention to bolster the sector to reach self-  sufficiency  in  2005,  through  the  diffusion  of  Nerica  varieties  and  the launching of a “Nucleus Estate Initiative” (NEI).

Marketing, according to Dixie (1999), is the series of services involved in moving a product (or commodity) from the point of production to point of consumption. Agricultural marketing, according to Kohls and Downey (1998), is the performance of all business activities involved in the flow of agricultural goods and services from the point of initial agricultural production until they are in the hands of ultimate consumers Arene (1998) defined agricultural marketing as all those  legal,  physical  and economic  services  that make  it possible  for products from producers to get to consumers, at the place desired by consumers, and at the price agreeable to producers and consumers for effecting a change of ownership/possession.

Olukosi and Isito (1990) defined agricultural marketing from the micro and macro view points.   From the micro-perspective,  agricultural marketing is the performance of all business activities which direct the forward flow of goods and services to the consumers in order to accomplish the producer’s objective. The macro view-point of agricultural marketing,  examines the total system of

economic activities concerned with the flow of agricultural products from  the producer to the final consumer.

It is obvious  that groups  with different  interests  will view  marketing differently.  This is because consumers are interested in getting what they want at  the  lowest  possible  cost.  Farmers  are  interested  in  obtaining  the  highest possible returns from the sale of their products.   The various firms engaged in doing the various marketing functions are interested in the profitability of their particular business operations (Olukos and Isito 1990). In view of the divergent interests, conflicts of interest can and do arise among the various groups seeking these goals.   The process of  beginning and trying to solve these problems is what gives marketing its essential dynamic character.

The marketing of locally produced rice is essentially the same all over Nigeria.  This involves the performance of all business activities in the flow of paddy and milled rice, from the point of initial rice production until they are in the hands of the ultimate consumers at the right time, in the right place and as convenient as possible, at profit margin so as to keep the farmer in his farming operations (Ihere, 1996).  Aderibigbe (1997) divided the marketing of local rice into four stages with a change of produce  ownership occurring between each pair  of  stages.    The  first  stage  is  production  through  harvesting.  Stage  two includes  movement  from  the  farms  to  processing  centres  while  stage  three consists of moving the milled rice from processing areas to urban consumption centres. The fourth  stage encompasses  wholesaling  and retailing in the urban centers. The  marketing of this rice was until 1976 handled entirely by private entrepreneurs.  From  1977,  the  establishment  of  the  Nigerian  Grains  Board introduced   a   limited   form   of   governmental   participation   in   production, processing and marketing of rice and other cereals.  The Board purchased milled and paddy rice directly from farmers and provided storage such that rice could be  available  in  the  market  during  non  harvest  periods.    In  the  third  phase commencing in 1986, private individuals were in full charge of the marketing of locally   produced   rice.   (Aderibigbe,1997).    This   form    of   governmental organisation, in conjunction with the participation of local farmers, enhanced the production, marketing and distribution of rice in Uzo-Uwani Local Government Area and the country generally.

1.2      Problem Statement

Neglect  of  agricultural  activities  has  been  a  very  serious  problem affecting both producers and marketers of agricultural produce in the country. This situation appears to be aggravated by government and policy makers who have not considered production and marketing of food crops as serious problems to the economic development of the nation (Osuji, 1980; Nwokolo, 1991).

Some experts and researchers have carried out studies/research  on rice production and marketing differently, example, Okereke (1991)  compared the economics   of   rice   production   from   traditional   farmers.   Nwoye   (1997) investigated  the  economics  of  rice  production  by  small-holder  farmers  in Anambra State. Okorji and Onwuka (1994)  estimated the profitability of rice production at Uzo-uwani area of Enugu State while Ogbuakanne (1998) studied the  economics  of  rice  marketing  in   Orumba  Local  Government  Area  of Anambra  State of all these,  None  compared the profits of the producers  and marketers  (middlemen)in  the  same  study.  In  Uzo-uwani  Local  Government Area, there are two  basic enterprises  in rice business;  those  involved  in the production   of  rice  (farmers)   and  the  people  involved   in  buying   paddy, processing and selling to retailers, consumers, or even the farmers. The class of people that make up the latter enterprise are the wholesalers.

Often,  people  believe  that  middlemen  are  making  the  profit  while farmers suffer. This may or may not be correct. Studies have not tried to relate the producer’s  margin  with marketer’s  margin  in the same  environment  and season. This has led to spatially separated conclusions at different points in time. The consequence  may be poor policy formulation  due to wrong signal. This study is aimed at filling this research gap with special reference to Uzo-Uwani Local Government Area.

1.3      Objectives of the Study

The broad objective of this study is to carry out an economic analysis of rice production and marketing in Uzo-Uwani Local Government Area.

The specific objectives are to:

i.         describe the socio economic  characteristics of rice producers and marketers/processors;

ii.        analyze the effects of socioeconomic characteristics on the net income of producers and marketers;

iii.       describe the systems of rice production and marketing in the study area;

iv.       analyze rice marketing and distribution channels;

v.        compare costs and returns in rice production and marketing;

vi.       identify and describe rice production and marketing problems  in rice enterprises and

vii.       make recommendations for enhancing rice production and marketing in the study area based on the empirical findings.

1.4      Justification of the Study

There is a consensus on the assertion that the economic survival of any nation depends largely on her ability to feed the citizenry and also export the surpluses to earn foreign exchange (Nwokolo, 1991). It  is  also  hoped  that  the  findings  of  this  study  will  help  to  further highlight  the  activities  and  roles  of  producers  and  marketers  in  production, processing,  distribution  and sale of rice.   Moreover,  the study  will make the Nigerian government to appreciate the contributions of producers and marketers in the rice industry and hence seek ways of encouraging them in their various activities. It is finally hoped that information from the study will form a source of reference  to students,  institutions  and researchers  and provide  a basis for future

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