ECONOMICS OF SMALL-SCALE OIL PALM PRODUCTION IN KOGI STATE NIGERIA

ABSTRACT

The study was conducted to examine the Economics of Small-scale Oil Palm Production in  Kogi  State  of  Nigeria.  The  objectives  of  the  study  are  to:  determine  the  factors affecting resource use efficiency by Oil Palm Producers in the study area and determine the optimum replacement age of oil palm. The tools of analysis used are:- simple descriptive statistics, multiple regression analysis, optimum replacement model and gross margin analysis. From the estimate of oil palm in the state,40,30,20 and 30 oil palm farmers were proportionally and purposively sampled from the four (4) Agricultural Zones, A,B,C and D with their headquarters at Ayetoro-Gbede, Anyigba, Koton-Karfe and Alloma respectively, to give a sample size of 120 oil palm producers. The oil palm producers were interviewed with structured questionnaire to obtain information on oil palm production. Data for optimum replacement age were obtained from NIFOR oil palm plantation, Acharu substation. The data collected were analysed using the tools of analysis as specified. The  t-values and F-statistics are significant up to 5 percent level of significance. The oil palm currently on the fields were planted over 26 years ago, most of which  are  over  45  years,  already  having  impaired  productivity.  The  gross  margin analysis shows a margin of N2,046,844.00. The benefit-cost analysis shows a ratio of

1:1.56, indicating that one naira invested in oil palm production will yield N1.56. The production has not been able to keep pace with consumption demand, hence Nigeria has to import palm oil to fill the deficit gap. The highest output recorded in research station was 13.50tonnes of fresh fruit bunch (ffb) per hectare. The study shows that optimum replacement age of oil palm is 35 years for the production to enjoy a flow of output. The major constraint being lack of good policy direction and inadequate financial support and other incentives to boost oil palm produce economy. It is recommended that there should be conscious desire to implement research findings. The need to commission agency(ies) to undertake the establishment of oil palm farms by government and after tending it to certain age shall hand them over to private individuals on charge is imperative. There is a need for credit policy to offer credit assistance to oil palm producers. Oil palm producers should be encouraged to cut down their oil palm at the age of 35 years.

CHAPTER ONE

1.0       INTRODUCTION

1.1       Background Information

The production of oil palm is as old as the history of the inhabitants of Kogi State. Few wild trees are of as much economic and social value to Nigerian farmers and the country as the oil palm tree, (Usoro, 1974). The oil palm (Elaeis guineensis Jacq) no doubt is believed to have originated in the tropical rain-forest region of West Africa, (Zeven, 1965; Agboola, 1979; Hartley, 1988; CTA, 1998).

Oil palm is a monocotyledonous tree belonging to the family, palmae and the subfamily, cocoideae. The normal (diploid) chromosome number is 2n = 32. The adult plant possesses an impressive crown of 30 to 45 green leaves, each 5-9m long at the top of a trunk bearing old leaf bases arranged spirally, (Kochhar, 1976; Opeke, 1992; CTA, 2000). The stem may be 30 to 38cm in diameter, with progressive thickening towards the base. On older palms, the stem is punctuated with conspicuous and regularly arranged leaf scars and the stem terminates in a handsome growth of leaves (fronds). The palm leaf is compound and is known as the frond. The leaf is paripinnate with a prominent petiole (0.9 to 1.5m long). The petiole often broadens at the base to form a clasper round the stem. Each palm frond bears, 20 to over 150 pairs of leaflets arranged in more or less two rows along each side of the flattened rachis with the longest pinnate varying up to 120 cm. The pinnae are parallel-veined.

The plant is monoecious with separate male and female flowers (inflorescences) on the same plant. Cross-fertilization is achieved through successive cycles of male and female flower production. It produces bunches of fleshy fruits, the pulp (mesocarp) of

which yields a solid, edible, orange-red oil called palm oil. The endosperm or kernel yields a clear, yellowish oil, that is also edible and solid, and is called palm kernel oil. These two products are important in world trade.

Oil palm adapts well to most textures from medium loams to clays. Extremely coarse or fine textures may not always be suitable, especially if they affect water supply to the roots. The climatic and soil requirements constitute the physical factors that are responsible for the growth of oil palm. They include availability of water supply, soil conditions in terms of fertility and topography that is suitable for the growth of oil palm. It is recommended that rainfall of 1600mm to 5000mm per year evenly distributed will enhance the growth of oil palm, (Keu, 2001; Khera, 1976). The oil palm has a wide

adaptability range of soils to low pH  but sensitive to high pH  (above 7.5) and stagnant water. Neutral pH soils are most favoured.

The temperature requirement varies between 180C and 340C. Opeke (1992), observed that oil palm would tolerate even higher temperature provided there is adequate moisture. It requires plenty of sunshine; productivity is reduced in areas with excessive sky overcast. It thrives under conditions of high relative humidity; yields are adversely influenced when the crop is exposed to dry harmattan winds (CTA, 2000).

Oil palm is a lowland crop although it can grow well up to altitude of 900m. It has fibrous root system and benefits from deep soils which are fertile, free from iron deposits and well-drained.

Oil palm is affected by pests and diseases attack. The pests and diseases attack both seedlings in the nursery and mature plants on the field. Some notable pests of oil palm are snails, crickets and mammals especially rodents (rats and mice). Others include

leaf-minners, weevils, caterpillars, birds and squirrels. The oil palm diseases include Anthracnose, Freckle, Blast, Ganoderma trunk rot, Vascular wilt disease, Basal rot and crown diseases. These pests and diseases pose serious problems to the production of oil palm. They attack the plants at various stages of growth and development (Uguru, 1996; CTA, 1998).

In the 1950s and 1960s, Kogi State was a major producer and exporter of palm oil and palm kernels  (about 12,000 tons or 2.40% of national palm kernel output)(Idachaba, 2005). At that time, he noted, there were pyramids of palm kernels in John Holt Warehouses at Idah. Also, there was annual loading of palm kernels at Idah River port for export through Delta Inland port of Burutu to Europe. Until after the First World War, palm oil and kernels were supplied entirely from groves of Africa and to a much lesser degree of Brazil. It was not until after the Second World War that the West African groves were studied with thoroughness.

Hartley (1988), postulated that in areas where the palm was already part of the natural vegetation, the factors of greatest importance in the development of a grove was the growth of a dense population. The cutting down of forest areas for annual crop cultivation removed dense shade and created conditions suitable for rapid establishment of the palm.

Because of economic importance of oil palm as high yielding source of edible and technical oils, the oil palm is now grown as a plantation in most countries with high rainfall (minimum 1600mm/year) in tropical climates within 100  north and south of equator, (USDA, 2000). Raymond (1961); McCall (2003), compared the potential oil yield from various crops and placed the oil palm at the head of the list.

The extensive development of oil palm industries in many countries in the tropics has been motivated by its extremely high potential productivity. The oil palm gives the highest yield of oil per unit area compared to any other oil crop and produces two distinct oils – palm oil and palm kernel oil – both of which are important in World Trade, (USDA, 2000). Oil palm seems to be part of the traditional agriculture of Kogi State. The climatic condition and soil type of Kogi State appear favourable for the growth of oil palm. The production and development is in the hands of small-scale holders. They have all been dependent on rainfed cultivation and a large proportion of the palm produced are on wild groves. Apart from the wild groves, three economically important varieties are grown in the study area. These are the Dura, the Pisifera and the Tenera. The Tenera is a cross between Dura and Pisifera (Nigerian Institute for Oil Palm Research, NIFOR, 1985).

Oil palm requires the application of fertilizer particularly nitrogenous fertilizers such as sulphate of ammonia, muriate of potash, etc. for growth of young seedlings. Government established plantations at Acharu, Alade, Alloma and Kabba to boost oil palm   production.   Apart   from   government   established   plantations,   the   deliberate cultivation or establishment by small holders has been little. They have, however, relied on  nurturing  the  wild  oil  palm  groves.  Rehabilitation  of  the  wild  groves  has  been difficult. In some parts much of this economically important tree crop has been neglected, while in some cases the wild groves have been vandalized without rehabilitation.

McCall (2003), classified farmers having 7.50 hectares as small-scale farmers. Olayide (1980), classified small-scale farms as those that range from under 0.10 ha holdings to 5.99 ha holdings. Saliu et al (2006), classified small-scale holders as those

having 50 to 100 stands of oil palm. In this study, a small-scale holder is one who uses hand tools and has oil palm stands of between 50 and 200 stands either cultivated or nurtured.

Oil palm is rich in palm oil, having higher yield of oil than any other seeds. The processing of oil palm fruits for edible oil has been practiced in Africa for thousand of years, and the oil produced, highly coloured and flavoured is essential ingredient in much of the traditional West African Cuisine, (USDA, 2000). The traditional processing is simple but tedious and inefficient.

Oil Palm Production, the Historical Perspective, Njoku, (2001), reported that oil palm was the most important of the crops and is indigenous. It grew in abundance in the forest belt, but especially profusely in the South-Eastern parts. Most oil palm, he noted, grew on farm lands through human protection. There was hardly any deliberate attempt to cultivate them before 19th century, except perhaps around homesteads. He noted too, that there was hardly any part of oil palm that was not put to domestic use. Among southern Nigerians, no main food was fully prepared without palm oil as an essential ingredient. The production was basically for family consumption and mostly women’s affair.

The industrial revolution in Europe created unprecedented demand for palm oil in the 19th  century. It was needed for the manufacture of soap, candle, margarine and tin plate. When Germany discovered that palm kernel could be made into very good feeding cake for cattle, a market was created for it. The industrial revolution changed all this and turned the oil palm from a subsistence crop to a cash crop. It became the single most important crop from the 19th  century when cocoa and groundnut began to challenge its dominance.

Certain transformations in the oil palm industry followed. First, some people started to establish  oil palm  plantations.  The  plantation  work  was facilitated  by the existence of slaves who were used to work on these plantations. Second, attempts were made by individual citizens to appropriate oil palms owned by the community. This trend became a source of communal tension and court litigation during colonial era. Third, men began to take interest in the production of oil palm, an affair which used to be left largely to their wives. Men cut the palm fruits and pounded them while women did the rest of the processing.  Fourthly,  innovations  were  introduced  in  the  organization  of  production which economized time and man-power, thus raising the productivity level of the people. Men formed reciprocal work groups for the purpose of cutting and processing the palm bunches and pounding the fruits. Among the Isoko and Urhobo, large dug–out canoes replaced small mortars hitherto used in processing palm fruits. In Ohafia, large round holes (ikwe akwu) about eight feet in diameter and four feet deep, paved all round with stone slabs, replaced wooden mortars. These innovations permitted more palm fruits to be processed in a unit time than was possible with wooden mortars.

The end result of all this was that from very humble beginnings, Nigeria soon attained world leadership in the production of palm oil and palm kernels. Early export figures are incoherent; nevertheless, they show rapid growth. Thus, palm oil export from Niger Delta ports rose from 4,700 tons in 1827 to 13,945 tons in 1834. In 1945, export reached 25,000 tons, and by the end of the century the volume had more than trebled, even in spite of trade fluctuations.

Where the oil palm flourished, its commercial exploitation could be constrained by two major problems. First, oil palm production was labour intensive, unlike raiding

and kidnapping in slave trade. It involved the risky job of climbing the oil palm to cut the bunches, the gruesome tasks of head-loading the bunches home and then rigorous processing to procure the oil. Second, transportation of produce posed a major difficulty. While slaves were self-transporting, palm oil and palm kernel were not. They were bulky, only water transportation was most profitable.

Palm oil and Palm kernel have been very important commodities in International trade in Nigeria. Below is the summary of Oil palm production (Palm oil and palm kernel) between 1850 – 1985 in Nigeria.

Table 1.1: Pre-Colonial, Colonial and Post-Colonial Production of Palm Oil and Palm Kernel Output in Nigeria. 1850 – 1885; 1931 – 1954; and 1960 – 1985. (Metric tons)

			1850	1855	1860	1865	1870	1875	1880	1885
Pre	–	Palm	21,650	47,113	45,786	51,192	58,775	72,744	89,550	90,196
Colonial		Oil
		Palm	22,000	22,100	153,000	128,000	126,000	160,000	130,000	161,000
		Kernel
			1931	1935	1940	1945	1950	1954
		Palm	118,133	142,628	154,195	116,324	167,124	216,587
Colonial		Oil
		Palm	254,454	312,746	296,632	299,039	380,929	464,940
		Kernel
		–	1961	1965	1970	1975	1980	1985
Post	–	Palm	423,000	517,900	525,900	664,500	889,000	1,125,600
Colonial		Oil
		Palm	429,000	400,100	389,500	398,600	432,200	394,400

                      Kernel                                   

Source: CBN Annual Report, 1992; Lynn, 1989; Usoro, 1974; FAO, 1980

Table  1.1 shows  that  there  had  been  steady progress  in  the production  of  oil palm products – pre-colonial, colonial and post-colonial era. The production, however, suffered

some fluctuations. This is to be expected because the production had solely been dependent on natural rainfall and weather conditions. For example, in 1885, total production was 90,196 metric tons, this in 1890 fell to about 89,841 metric tons. In 1940, palm oil production was about 154,000 metric tons, this fell to about 116,000 metric tons by 1945 and by 1954,  palm oil output rose to about 217,000 metric tons. The increases in production as witnessed in post-colonial era, not withstanding, it has not been able to keep pace with the consumption demand for palm oil particularly.

Also,  palm  oil  and  palm  kernel  from  oil  palm  form  the  bulk  of  exportable products of oil palm up to late 1960s. Its neglect in 1970s was as a result of the discovery of crude oil (Petroleum). It has earned substantial foreign exchange for Nigeria. Today, Nigeria has become a net importer of palm oil. The summary of production, imports, exports and consumption of some selected countries is presented in Table 1.2 below.

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