BANANA AND PLANTAIN MARKETING IN ENUGU STATE, NIGERIA
ABSTRACT:
The study was designed to analyze the marketing of banana and plantain in Enugu State. The specific objectives were to: describe the socio-economic characteristics of banana and plantain marketers; identify the marketing channels for the crops, examine the structure of the marketing system for both crops, estimate their marketing margins at both wholesale and retail levels, estimate the rate of price transmission and market integration among banana and plantain markets, and identify the constraints facing the marketing of both crops. The study adopted survey research design. Multi-stage sampling technique was employed to compose a sample of 160 respondents (30 wholesalers and 50 retailers for banana, and 30 wholesalers and 50 retailers for plantain). Data for the study were collected from both primary and secondary sources. Time series data on retail prices of banana and plantain from 2007 to 2011 were obtained from Enugu State Agricultural Development Programme (ENADEP). Primary data were collected using structured questionnaire. Data collected were analyzed using Gini coefficient, marketing margin analysis, Johansen co-integration test, Vector error correction model, and descriptive statistics. The result showed that majority of the respondents (87.50%) were females with average age of 35 years, 76.20% of them were married while 41.20% attained primary education. The mean scores for household size and marketing experience were seven and 13 years respectively. Also, 78.30% of the wholesalers obtained their products in heaps directly from producers while 21.70% bought from rural assemblers. Most of the retailers (78.00%) obtained their products in bunches from wholesalers while 28.00% bought from producers. Furthermore, the results of the Gini coefficient for banana and plantain retailers and wholesalers showed low levels of inequitable distribution of income amongst them. However, inequalities existed more at retail level than at the wholesale level. The mean marketing margin for plantain (21.62%) and banana (13.68%) retailers showed that there was a significant difference between them, while the marketing margins for plantain (11.65%) and banana (10.58%) wholesalers did not differ significantly. The analysis of price transmission and market integration showed that the Error Correction coefficient (-0.22 and -0.25) measured by the error correction mechanism (ECM) for the rural and urban prices of banana had low rate of price transmission, while the ECM result (-0.12 and -0.30) for the rural and urban prices of plantain indicated also a low rate of price transmission; though, showing the presence of market integration. Also, low capital/initial investment, finance, high cost of transportation and heavy imposition of tax/levies are significant constraints to plantain and banana marketing in the study area. The study therefore recommended that government should set up fiscal and monetary policies that will stabilize price for consumable products like banana and plantain, and that government should reduce the high inequality that exists among retailers by making available adequate credit to market participants at appropriate interest rates. Finally, government should formulate and implement policies targeted at improving infrastructures such as roads and providing market information outfit that disseminates information timely to marketers for improved marketing of banana and plantain.
TABLE OF CONTENTS
PAGE
TITLE PAGE i
CERTIFICATION ii
DEDICATION iii
ACKNOWLEDGEMENTS iv
TABLE OF CONTENT v
LIST OF TABLES vii
LIST OF FIGURES viii
ABSTRACT ix
CHAPTER ONE: INTRODUCTION 1
1.1 Background to the Study 1
1.2 Statement of the Problem 6
1.3 Objectives of the Study 7
1.4 Research Hypothesis 8
1.5 Justification for the Study 8
CHAPTER TWO: LITERATURE REVIEW 10
2.1 Concept of Agricultural Marketing 10
2.2 Marketing Channel 11
2.3 Marketing Structure and Conduct 12
2.4 Marketing Margin 14
2.5 Concept of Market Integration 17
2.6 Social, Economic and Cultural Importance of banana and plantain in Nigeria 21
2.7 Marketing of Banana and Plantain in Nigeria 22
2.8 Theoretical Framework 23
2.9 Analytical Framework 26
CHAPTER THREE: RESEARCH METHODOLOGY 32
3.1 The Study Area 32
3.2 Sampling Procedure 32
3.3 Data Collection Method 33
3.4 Data Analysis 33
3.5 Testing of Hypotheses 36
CHAPTER FOUR: RESULTS AND DISCUSSION 37
4.1 Socio-economic Characteristics of Banana and Plantain Marketers in Enugu State 37
4.2 Analysis of Banana and Plantain Marketing Channels 38
4.3 Analysis of Banana and Plantain Marketing Structure 40
4.4 Marketing Margins for Banana and Plantain Marketers 42
4.5 Price Transmission and Market Integration of Banana and Plantain 44
4.6 Vector Error Correction Model for Prices of Plantain and Banana in Rural
and Urban Markets 46
4.7 Pairwise Granger Causality Test 49
4.8 Evaluation of Hypothesis for market integration 50
4.9 Constraints on the marketing of Banana and Plantain 50
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS 53
5.1 Summary 53
5.2 Conclusion 55
5.3 Recommendations 56
REFERENCES 57
APPENDICES 67
LIST OF TABLES
4.1 Socio-economic characteristics of respondents 38
4.2 Distribution of banana retailers by monthly sales income 40
4.3 Distribution of plantain retailers by monthly sales income 41
4.4 Distribution of Banana Wholesalers by monthly sales income 41
4.5 Distribution of Plantain Wholesalers by monthly sales income 42
4.6 T-Test for Marketing Margins for Retailers 43
4.7 T-Test for Marketing Margins for Wholesalers 43
4.8 Result of Augmented Dickey-Fuller (ADF) Unit Root Test 44
4.9 normalized co-integration Results for the four equations 45
4.10 ARDL (1,1)- Dependent variable: rural banana price 46
4.11 ARDL (1,1)- Dependent variable: urban banana price 46
4.12 ARDL (1,1)- Dependent variable: rural plantain price 47
4.13 ARDL (1,1)- Dependent variable: urban plantain price 48
4.14 Pair-wise Granger Causality Tests (banana) 48
4.15 Pair-wise Granger Causality Tests (plantain) 49
4.17 Constraints on Banana and Plantain Marketing for both Retailers and
Wholesalers 50
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Three out of every four people in developing countries live in rural areas; 2.1 billion people live on less than 2 US dollars a day and 880 million on less than 1 US dollar a day (Damme, 2009). Majority of these people considered poor depend on agriculture either directly or indirectly for their livelihoods (World Bank, 2007). The 2008 World Development Report (WDR) stresses the important role agriculture can play in achieving the first Millennium Development Goal (MDG) of reducing by halve the number of people suffering from extreme poverty and hunger. The 2008 WDR further draws attention to the fact that agriculture has unique features embedded in its ability to: function with other sectors as an economic activity for livelihoods, produce faster growth, reduce poverty and sustain the environment (Godoy and Dewbre, 2010).
In agriculture-based economies, agriculture generates an average of 29% of the Gross Domestic Products (GDP) and employs 65% of the labour force (Damme, 2009). In Nigerian economy, agriculture remains one of the largest sectors, where it plays an important role as food provider, employer of labour and foreign exchange earner, contributing about 40% of the GDP, broadly defined with crops accounting for 85%, livestock 19%, fisheries 4% and forestry 1% (Federal Ministry of Finance and National Food Reserve Agency, 2008). Agriculture also employs about 77% of the working population and accounts for 70% contribution to GDP of the non-oil sector (Federal Republic of Nigeria, 2006; Mang, 2009). However, Ayinde, Adewumi and Ojehomon, (2009) noted that the increase in farm output has not led to a corresponding increase in the earnings of the vast majority of farmers. One of the factors emphasized as being responsible for the imbalance is a poorly developed agricultural marketing system for major food staples, leading to high rate of spoilage, rising farm product prices and huge importation of food by government.
Banana and plantain (Musa Spp.) are among the major staple food throughout the humid tropics of the world (Chander, 1995). They are major food crops in the humid parts of Africa and are major sources of energy for millions of people in these regions. Banana and plantain fruits have diverse uses to millions of Nigerians and they have always been important traditional staples food for both rural and urban populace in Nigeria (Philips, 1995; Baiyeri, 1996). Nutritionally, unripe banana and plantain are sources of iron, while ripped ones provide mainly energy (Achike, Okoroafor and Mkpado, 2011).
Musa spp. constitute a rich energy source with carbohydrates accounting for 22% and 32% of fruit weight for banana and plantain respectively, and rich in vitamins A, B and C, as well as minerals and dietary fibre necessary for healthy growth (Honfo, Kayode and Tenkouano, 2007). The dense caloric content coupled with nutritional quality makes Musa spp. one of the most important and regularly consumed staple foods in Nigeria and other sub Saharan African countries (Ajayi and Aneke, 2002; Lusty, Akyeampong, Davey, Ngoh and Markham, 2006). Banana and plantain provide cash income and employment to the rural populace in the producing countries like Nigeria. The crops have become a key source of revenue as they are not only traded within the region, but also exported to other countries of the world (Ortis and Vuylsteke, 1996 in Adejoro, Odubanjo and Fagbola, 2010). The status changes from food to food/cash crop and enhances its importance. They are useful in the management of common diseases such as diabetes, ulcer and tonsillitis and are also considered a major component of livestock feed (Babatunde, 1991; Food and Agricultural Organisation, 2007).
According to Ajayi and Mba (2004), banana and plantain have similar features of Musa spp. and provides an important source of carbohydrate, minerals, vitamins and revenue. Banana and plantain cultivation has become a feature of great socio-economic importance from the point of job creation and food security. These crops produce fruits throughout the year, the major harvest occurs in the dry season (December to March). During this period, many food crops are in short supply or difficult to harvest (Alves, 1987 as cited in Achike et al, 2011). Banana and plantain thus, contribute to food security, provide employment, diversification of income sources in both rural and urban areas, as well as contributing to the Gross National Product ( Nkedah and Akyeampond, 2003; Ajayi and Mba, 2007). In view of the importance of banana and plantain, marketing of the products become pertinent to meet the needs of consumers and also to increase income of the producers and the marketers in Enugu State.
Marketing of agricultural products such as banana and plantain is said to involve everything that happens between the farm gate and the consumer including processing, storage, assembling, wholesaling and retailing (Taleke, 2010). Agricultural marketing is the main driving force of economic development and has a guiding and stimulating impact on production and distribution of agricultural products (Mussema, 2006). The transformation of the production system requires the existence of efficient market system that can transfer the products from the points of production to the required market at the least possible cost (Lutez, 1994).
Efficient and good marketing system can only operate where there is fully utilized good market structure and conduct (Adegeye and Ditto, 1985). Olukosi and Isitor (1990) defined market structure as those features of the organisation of a market that change nature of competition and pricing within the market. These characteristics include the number of buyers and sellers in the market, level of product differentiation, ease or barrier of exit and entry into the markets and knowledge of cost, price and market condition among the marketers in the market.
Market structure in agricultural and food sectors has changed fundamentally and rapidly since 1950s in developed and developing countries (in the latter countries usually with a delay of three decades or more) (McCorriston, Sexton and Sheldon, 2004). Reardon and Timer (2005) stated that it is important to understand the market structure especially the producer-retailer relationship because it helps in the analysis of food chain. Another important variable in marketing structure analysis as stated by Okereke & Anthonio (1988) is concentration level which shows the nature of the market and pricing system.
The marketing channel of food crops such as banana and plantain is an important part of its cost, and its location to the market may shorten the path of distribution from producers to consumers and makes the marketing process simple and efficient (Egbuna, 2009). Farm producers may not effectively distribute their produce to all consumers who are widely separated in space and time without the services of middlemen. These middlemen no doubt, play prominent roles in the distribution of crop for consumption in, within and outside the main producing states of Nigeria (Anzaku, 2007). These specialized agents, according to Arene (2003), perform the functions of marketing more efficiently than would the farmers themselves. It is expected that in a competitive market, that middlemen who provide marketing services must charge the lowest price to cover their cost and allow for a normal profit. The profit margin must be just sufficient to reward investment at the going rate of interest, pay for risk bearing, provide incentive for new ideas and to save cost or improve service (Abbott & Makeham, 1986; Arene, 2003). Unless middlemen earn profit in excess of what they require to pay for the borrowed capital and cater for the risk they take, their morale to continue to invest will be dampened (Abbott and Makeham, 1986). The critical determinant of returns to producers and middlemen and to retail food price is the marketing margin. Marketing margins include all the costs incurred by middlemen for moving the products from the point of production to the point of consumption, of any processing which may be undertaken, handling at all levels plus profits accruing to them, if any (Kohls, 1969)
The major components of the analysis of marketing margin consist of gross marketing margin, net marketing margin and farmer’s share. The net marketing margin accrues to middlemen as profit (Anuebunwa, 2006), while the farmer’s share is the proportion of the consumer price that goes to the farmer (Majeha, Nwosu and Efenkwe, 2000). This obviously determines farm investment decision. Effective coordination of different markets is critical to increasing the opportunities for exchange and interdependence that underlie growing and expanding economies. Market integration ensures that a regional balance occurs among food deficit, surplus and non-cash crop producing regions (Goletti, Ahmed and Farid, 1995). Market integration is enhanced by the provision of transport infrastructure, provision of adequate formal marketing information and standardization of weights and measures in the marketing system (Dittoh, 1994; Oladopo, 2004). According to Barrett, (1996), studies on market integration provide information on market performance which is necessary for proper policy formulation and macroeconomic modelling. If markets are not spatially integrated it could be indicative that market inefficiencies exist as a result of, amongst others, collusion and market concentration which results in price fixing and distortions in the market. In such cases, inter temporal or cross-sectional aggregation of demand and supply loses its logical foundation (Barrett, 1996 as cited in Adeoye, Dontsop, Badmus and Amao, 2011).
Market integration is central to the assessment of market performance and a useful measure of competitiveness and interdependence between markets and middlemen. This study intends among other things to analyse the market integration of plantain and banana products by focusing on the price adjustment in the rural and urban markets in Enugu State. A critical review of the changing pattern of the prices for both products in rural and urban markets of Enugu State can be shown in the charts below:
Figure 2: Trend of prices of banana in Enugu State, from Jan 2010-Oct 2011
Source: plotted by the researcher from ENADEP data bank (2010-2011).
(PPR represent rural plantain price and PPU represent urban plantain price while PBR represent rural banana price and PBU represent urban banana price).
The charts show that the urban prices of both products are higher than the rural prices in the two years. The knowledge of the role of middlemen and consumers, who are market participants, the level of concentration and price adjustment in banana and plantain marketing in Enugu State are yet to be fully investigated and documented. In other words, the economic study of banana and plantain marketing is an important step towards a desired improvement in the marketing system for enhanced production and income for farmers and other marketing participants. In essence, research on the marketing of banana and plantain can be a potential intervention and a way of assisting the marketers in the industry in contributing to the socio-economic development of Nigeria.
1.2 Statement of the Problem
Recent discoveries by crop scientists about banana and plantain on the importance of the products to the sustainability and maintenance of a healthy body and nutritional requirement for man have resulted to increase in the level of its purchase and consumption (Honfo, et al, 2011). This has led to increase in the number of market dealers on banana and plantain. On the other hand, the marketers experience huge losses during marketing of banana and plantain which are mostly as a result of change in weather. This is currently posing a great challenge to its marketers who are constrained to offer it for sale at any price to avoid further spoilage. Banana and plantain marketing is beset with a lot of challenges and constitute a bottleneck to the free flow of the product in the market due to poor flow or movement of market information among the marketers (Akinyemi, et al, 2010). This hinders the traders from making better decisions. Damages occur and are relatively higher when farm produce such as banana and plantain are not bought due to lack of marketing information (Chukwu, 1997).
The wide gap between rural and urban prices weakens the farmers’ morale thereby reducing productivity and in some cases leads to complete stoppage of production (Care, 2004). In other words, to increase food production there is need to develop a more efficient marketing system with market information so that prices in one market can be transmitted to other markets thus synchronizing price. Hence, Market integration was measured so as to confirm the movement of price and market information within and between markets. Relative attention given to banana and plantain is focused on its production technology (Ajayi and Mba, 2004); production and marketing constraints of banana and plantain (Ajayi and Baiyeri, 2000); consumption and expenditure patterns of banana and plantain (Ajayi and Aneke, 2007); and technological capability in their innovation systems (Faturoti and Madukwe, 2009). Information provided by Ajayi (2000) centered on the marketing activities of banana and plantain by women in Nsukka Urban area of Enugu State. The study dwelt essentially on the decision making role in banana and plantain marketing, the pattern of marketing among the women and their constraints. The level of price transmission as well as the speed of price adjustment among banana and plantain markets is yet to be fully investigated and documented. Hence, assessments of marketing channel, structure, marketing margins, and level of price transmission as well as extent of integration among banana and plantain markets were the main aspects of this study. In other words, the study provided information that would assist banana and plantain marketers in effective marketing progress, and provided recommendations that answered the following research questions
(i) What are the socio-economic characteristics of banana and plantain marketers in Enugu State, Nigeria?
(ii) What are the marketing channels of banana and plantain in the study area?
(iii) What are the structure of banana and plantain marketing systems in the study area?
(iv) What are the marketing margins of the banana and plantain at both wholesale and retail levels in the study area?
(v) What are the rate of price transmission and the extent of market integration among banana and plantain markets in the study area?
(vi) What are the constraints faced by banana and plantain marketers in the study area?
1.3 Objectives of the Study
The broad objective of the study was to analyze banana and plantain marketing in Enugu State of Nigeria.
The specific objectives were to:
(i) describe the socio-economic characteristics of banana and plantain marketers in Enugu State Nigeria;
(ii) identify the marketing channels of banana and plantain in the study area;
(iii) examine the structure of banana and plantain marketing system in the study area;
(iv) estimate the marketing margins of banana and plantain at both wholesale and retail levels;
(v) estimate the rate of price transmission and the extent of market integration among banana and plantain markets in the study area
(vi) identify the constraints faced by banana and plantain marketers in the study area and
(vii) Make recommendations based on findings.
1.4 Research Hypothesis
The following hypotheses were tested based on the objectives:
Ho1: The marketing margins of banana and plantain are not different.
Ho2: Banana and Plantain markets are not integrated.
1.5 Justification for the Study
The potential economic returns from an effective combination of resources are better realized if marketing is efficient (Okeke, 1980; Odo, 2006). Efficient and good marketing system can only operate where there is fully utilized good market structure and conduct (Adegeye & Ditto, 1985). Therefore, it is important to understand the market structure especially in the producer-retailer relationship because it helps in the analysis of food chain. The analysis of market structure also shows the nature of the market and pricing system (Okereke & Anthonio, 1988).
The knowledge of marketing margin of farm produce such as banana and plantain will influence farmers and middlemen who specialize in production and distribution of the produce, respectively, to strive to operate optimally (Arene, 20003; Kotler, 2003). Marketing margin analysis is associated with several economic phenomena. Apart from components such as farmers’ share and the profit that accrue to middlemen, marketing margin reflects to some extent the various simultaneous shifts in supply and demand relations as well as changing efficiencies in input use (Ballat, Malaughlin & Lee, 1987). The solution to the oversimplified assumption that middlemen make excessive profits lies with the knowledge of marketing margin analysis. Thus, it is necessary for all those involved in the marketing of farm produce- producers, marketers, policy-makers and consumers to know what marketing margin is, how to compute, interpret and apply it from day-to-day. This study provided this information as it concerns banana and plantain marketing in Enugu State.
Again, the knowledge of the state of market integration in the domestic market system will help market intermediaries to identify the possibilities of substitution between markets and between commodities. This is particularly important for the dichotomized Nigerian economy with its increasing population of urban food deficit centre and food surplus rural areas (Okon & Egbon, 2005). Based on this, concrete decision can then be taken to improve market performance of farm produce such as banana and plantain for overall economic growth and development. There was therefore a need to conduct more market research on banana and plantain by describing and analyzing their marketing structure and conduct in the study area, identifying the marketing channels, margins, as well as the extent of market integration and the level of price transmission in banana and plantain markets in the study area.
The findings of the study would help to highlight the links between prospective banana and plantain farmers, policy makers and researcher to identify and analyze new ways and strategies of encouraging the market for mutual cooperation and integration for an effective banana and plantain marketing system. The study will suggest proper distribution of banana and plantain to both urban and rural area and assist other researchers willing to carryout studies in related field. The findings would also induce farmers to move into commercial production of banana and plantain and give room for profitable marketing of the crops in the study area. Finally, this study will complement other related studies conducted to guide appropriate policy options for improved performance of marketing of banana and plantain in Enugu State.
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