Analysis of the profitability of oil palm processing techniques in Kogi State, Nigeria

Abstract

The processing of palm fruit is one of the most prominent agricultural processing activities carried out in Nigeria. This paper ascertained the extent of oil palm processing profitability across the different categories of processors in Kogi State, Nigeria. The study estimate cost and returns of the processing enterprises; determined the profitability of the processing enterprises; and examined the determinants of the returns from the processing activities in the study area. A multistage sampling technique was used to select 80 oil palm processors comprising of 15 manual processors, 55 semi-mechanized and 10 mechanized processors in Kogi State, Nigeria. Descriptive statistics, gross margin analysis, Ordinary least square regression model was used in the data analysis. The result of the study revealed that the gross marginal value of N80,093.70, N231,482.24 and N506,365.00 for manual, semi-mechanized and Mechanized processors with returns of N52,187.70, N142,078.61 and N365,965.00 per processor for manual, semi-mechanized and mechanized systems. The result revealed oil palm processing is a profitable enterprise irrespective of the processing technique, however, with the mechanized more profitable. The result of the regression estimates showed the F-ratio value statistically significant at (p<0.01), indicating that the model is fit for use in the analysis. The estimate showed a coefficient of determination (R2) value 68%. The regression output showed that the oil palm fruit cost, transportation cost and the cost of depreciation were statistically significant with inverse relationship with the processors net return. However, extraction cost and use of processing machines or technology were statistically significant with direct relationship with net returns from oil palm processing in the study area. The study concluded that oil palm processing is a profitable venture in the study area with great potential for poverty alleviation if the potential is harnessed. The study recommended that machines or technologies for processing should be subsidized to make it affordable to small-scale processors. Also, the capacity of the small-scale processors should be enhanced to enable use such machines.