Analysis of profitability and cost determinants of smallholder oil palm processing in Cross River State, Nigeria: A comparative study

Abstract

Oil palm processing is a source of livelihood to many people. The study analyzed cost determinants and profitability of smallholders’ oil palm processors using traditional and improved processing technologies. A multistage sampling technique was used to select respondents. Data were collected through questionnaire; analysed using budgetary technique and inferential statistics. Traditional methods’ users spent an average of ₦30 as cost of processing a kilogramme of fresh fruit, while the improved processing technologies adopters spent N36. However, average net revenue of ₦13 and ₦19 was realized by traditional and improved smallholder processors respectively. Hence, oil palm processing is a profitable enterprise; though, profit earned was significantly different at 1% level of probability. Average Rate of Return (ARR) of the smallholder processors established that on every naira invested, a profit of 41 and 54% gain were realized by traditional and improved smallholder processors respectively. The cost determinants were labour, fresh fruit, depreciation, other costs and output. Smallholder processors were cost inefficient. Cost inefficiency reducing variables include; processing experience, educational attainment and access to credit. Gain can be achieved with the present level of technology and input prices. Thus, oil palm processing enterprise can serve as a source of employment for the teeming jobless youths in the State. It is recommended that adoption of improved technologies for processing oil palm should be encouraged by government via various media channels; various tiers of government should provide adequate rural infrastructure to promote investment climate for the commercial development of oil palm processing sector.

Keywords: cost determinants, oil palm, profitability, processing, technologies, efficiency