Resource Use Efficiency and Profitability in Small Scale Palm Oil Production in Delta State Nigeria

H A Obokare, P O Emaziye and G E Oyita

Nigerian Agricultural Policy Research Journal (NAPReJ), 2024, vol. 11, issue 01

Abstract: This study investigated the efficiency and profitability of palm oil processing in Delta State. A sample of 240 palm oil processors was used. Socio-economic findings revealed a male-dominated industry with an average age of 53 and an average household size of 7. Modern processing methods dominated (96.7%), with an average monthly processing of 869 litters. Profitability analysis showed a monthly gross margin of ₦930,852.48 and a return on investment of ₦3.14k, indicating a profitable venture. Stochastic frontier production estimates highlighted the significance of family and hired labour, emphasizing the role of well-maintained equipment. Marital status influenced inefficiency, and 66.7% of variability in efficiency was attributed to inefficiency. Technical efficiency ranged from 0.86 to 1.0, with a mean of 0.95, suggesting room for improvement among some processors. Production elasticity indicated increasing returns to scale. Resource-use efficiency revealed underutilization of fresh fruit bunches (ratio of 12.12) and excessive labour inputs (ratio of 2.2). Major constraints include high rent costs (82.1%) and expensive acquisition of fresh fruit bunches (67.1%). This study suggested the need for targeted interventions and technology adoption, to enhance efficiency and sustainability in the palm oil processing sector in Delta State.

Keywords: Crop Production/Industries; Production Economics (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ags:naprej:343429

DOI: 10.22004/ag.econ.343429

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