International Journal of Agricultural Science and Research (IJASR) ISSN 2250-0057 Vol.

3, Issue 1, Mar 2013, 25-34 TJPRC Pvt. Ltd.

PALM OIL MILL TECHNOLOGY: PANACEA FOR ALLEVIATING RURAL POVERTY IN SOUTHWESTERN NIGERIA
OLAGUNJU F. I1, KOLAPO A. J2, BABATUNDE R. O2, OGUNNIYI L. T1 & FAKAYODE S. B2
1

Department of Agricultural Economics and Extension Services, Ladoke Akintola University of Technology, Ogbomosho, Oyo State, Nigeria
2

Department of Agricultural Economics and Farm Management, University of Ilorin, Kwara State, Nigeria

ABSTRACT
The study reveals how palm oil mill technology alleviates poverty level of modern users better than the traditional users. This study is based on Primary data collected from a sample of 144 modern users of palm oil mill technology and traditional users using multi-stage random sampling. This research work used descriptive statistics to obtain socioeconomic characteristics of the respondents .Regression analysis was used to examine the factors that affect their palm oil production. Foster-Greer Thorbecke (FGT) was used to analyse the extent and level of poverty among palm oil processors (modern and traditional users). The result of the analysis showed that the mean age of the modern and traditional users is 52.5 and 54.8 respectively and the respondents were mostly women. The regression analysis shows that farm size, level of farm income, adoption of technology and experience in processing are the significant factors affecting the production of palm oil in the study area. The FGT analysis revealed that poverty incidence was most noticed among traditional users of processing palm oil. As a whole, the incidence of poverty in the study area was 0.458 implying that 45.8% of the sampled farm households were actually poor (10.4% modern users were poor and 35.4% traditional users were poor).

KEYWORDS: INTRODUCTION
Poverty can be described as a plague and virus that can affect any Homo-sapiens in every continent of the world. It is a social problem as it has social root. Poverty is a complex phenomenon. It is both rural and urban, and respects no country or region. However, most people live in rural areas and most rural dwellers are poor (Olatunbosun, 1976). Poverty emasculates individuals and groups from realizing their potentials. It has manifest and latent consequences for people especially rural dwellers. It is dehumanizing and paradoxically human engendered. Consequently, the reduction of poverty globally has been a major agenda since September, 2000 when the United Nations member countries signed the millennium declaration and set their commitments to achieve the millennium development goals (MDGS). The first of the eight MDGS is to eradicate extreme poverty and hunger with a target to have the number of people living on less than one dollar a day. Consequently, the poverty strategic paper was developed by most country to facilitate poverty reduction. However as revealed by the new poverty estimate published by world bank, poverty in developing countries has declined from the 52% of the global population in 1981-25% in 2005. Yet at this rate, about 1 billion people out of the 6 billion people in the world still live on < $ 1.25 a day in 2015 and about three quarters of them live in rural areas. Many reasons have been attributed to the rise in absolute numbers of poor people and the proportion of people living in extreme poverty in Nigeria. These reasons range from inequality due to the trend of globalization, to violent civil conflict, governance failure and institutional gaps. It is now generally believed that investment in agricultural technology

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Olagunju F. I, Kolapo A. J, Babatunde R. O, Ogunniyi L. T & Fakayode S. B

must be prioritized in Nigeria in order to achieve the core MDG of having the proportion of people living in extreme poverty and hunger by 2015. This is because the massive investments in agricultural technology in some of the Asian economics in the 1960s and 1970s have been successful in feeding growing population, achieving rapid economic growth and boosting employment generation (Lipton and Longhurst 1989; Rosegrant and Svendsen 1993, Saleth 2002). Indeed, the past five decades, have witnessed serious promotion of agricultural technology in Nigeria with broad objectives of achieving food self-sufficiency, agricultural and rural development, and poverty and hunger reduction. There are two channels through which technological change in agriculture can act on poverty. First, it can help reduce poverty directly by raising the welfare of the poor farmers who adopt the technological innovation. Potential benefits from them can derive from increased production for home consumption, higher gross revenues from sales and lower production costs. Second, technological change can help reduce poverty indirectly through the effect which adoption by both poor and non-poor farmers can have on the real income of others through; the price of food for consumers; employment and wage effects in agriculture, and employment wage and income effects in other sector of economic activity through production, consumption, and saving linkages with agriculture, lower cost of agricultural raw materials, lower nominal wages for employer and foreign exchange contribution of agriculture to overall economic growth (Adelman 1975;Haggblade,et al1991). Although the translation of the effect of agricultural technology into poverty reduction in Asia has received huge attention in the literature, it remains under researched in Sub-Saharan African with Nigeria in perspective. Even those studies explicitly concerned with the measurement of poverty reduction impacts of agricultural technology have tended to focus primarily on the direct users of such technologies. Scholar, development practitioner and policy makers have consistently overlooked the differential poverty reduction of new agricultural technology between modern users and traditional users inhabiting the rural communities where such agricultural technologies are introduced. To make the decision that investments in agricultural technology (Palm oil mill in focus) in Osun state, Nigeria alleviate poverty, then poverty reduction impact need to be evaluated within the context of the differences between their modern users and traditional users. The general objective of this study is to assess how palm oil mill technology has alleviated poverty level among oil palm processors in Osun State, Nigeria. Specifically, the objectives of the study are to: Identify the socio-economic characteristics of the respondents in the study area; Determine the factors that affect the production of palm oil in the study area; Determine the level of poverty among rural farming households in the study area

METHODOLOGY
Study Area The study was conducted in Osun State Nigeria. Osun State is an inland State in South-Western Nigeria. Its capital is Oshogbo and is home to one of the major ethnic groups (i.e. the Yorubas). The major sub-ethnic groups in Osun State are Ife, Ijesha, Oyo, Ibolo and Igbomina of the Yoruba people. It is bounded in the north by Kwara State, in the east partly by Ekiti State and partly by Ondo State, in the South by Ogun State and in the west by Oyo state. Situated within the tropics, it is located at longitude 4-30oE and Latitude 7-30oN.

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According to the 2006 population census, the state has a population of 4, 137,627. It has 30 Local Government Areas. It occupies are area of land which is about 9,251 square Kilometres. The climate is lowland tropical forest type with distinct wet and dry seasons. As indicated under the climate, the expected vegetation is the evergreen high forest. In the geographical map of Nigeria, Osun State is situated in the tropical humid region where rainfall is abundant and thereby favours agricultural practices within the area. This has also drawn other people from different rural areas in Nigeria to the state. As such, the study area is an agriculture based economy with the production of food and cash crops providing employment and income for majority of the population. The men are predominantly farmers while the women are farmers and also engage in trading. Even for the many educated indigenes in the formal sector employment, farming remains a major secondary occupation. In the past, Osun State was well known for the production of cash crops especially cocoa and oil palm and this help to alleviate poverty. The study area is chosen particularly because it ranks high among the palm oil producing state in Nigeria and predominantly agrarian since agriculture is the primary occupation of the dwellers in the state. Sampling Procedure and Sample Size The target population for this study is the modern users of palm oil mill for processing palm oil and traditional users in the study area. A three-stage simple random sampling technique was used to select the sample for the study. The first stage involved the random selection of four Local Government Areas in the state. The second stage involved the random selection of 3 villages from each of the four Local Government areas chosen. In each village, 6 modern users of palm oil mill technology was randomly selected from those processor of oil palm fruit that engaged in the use of technology and also, 6 traditional users was randomly selected from the pool of processors that does not employ the technology that is those that use traditional method to make up a sample size of 144. Analytical Techniques To achieve the stated objectives, the following analytical tools was employed to analyze the data: Descriptive and inferential statistics to obtain the socio-economic characteristics of the respondents, the Foster-Greer Thorbecke (FGT) was used to know the extent and level of poverty among the respondents and Multiple regression analysis was employed to determine the factor affecting the production of palm oil in the study area.. Multiple Regression Analysis Regression has been defined as the amount of change in (the value of) one variable associated with a unit change in (the value of) another variable. The Multiple Regression Analysis therefore helps to determine the effect of changes in the explanatory variables on the dependent variable. Model Specification The implicit function is given as: Q=f(x1........................xn,u) Q=output of palm oil( in gallon) X1............................................xn=explanatory variables U=error term

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Olagunju F. I, Kolapo A. J, Babatunde R. O, Ogunniyi L. T & Fakayode S. B

Four functional forms were tried on the regression model analysis in order to get the one that best fits the data. These functional forms are linear, semi-logarithmic double-logarithmic and exponential functions. The general forms of this function are specified below: Linear function: Semi-log function: Q=b0 + b1X1 + b2X2 +b3X3 +b4X4 +b5X5 +b6X6 + t Q=Inb0 +b1InX1 + b2InX2 + b3InX3 +b4InX4 +b5InX5 +b6InX6 + t Double-log function: Ln Q=Inb0 +b1InX1 +b2InX2 +b3InX3 +b4InX4 +b5InX5 +b6InX6 +t Exponential function: Ln Q=b0 +b1X1 +b2X2 +b3X3 +b4X4 +b5X5 +b6X6 +t

X1=Marital status(Dummy:1=single,0=married) X2=Household size X3=Farm size (ha) X4 =Income (Naira) X5=technology (dummy: 1=improved,0=local) X6=Experience in processing activities (years). The Foster-Greer Thorbecke (FGT) Measure Following Greely(1994),FodayLamin(1996), Gibson (2001), Mukherjee and Benson (2003), de Janvry et al (2005), Adewumi Idowu et al (2011), FGT poverty index developed by Foster et al (1984) was adopted to measure the extent of poverty among rural farming household (objective 1). The (FGT) poverty index is given by: -----------------Where n = total number of household in population. q = The number of poor households z = The poverty line for the household yi = Household income = poverty aversion parameters and takes on value 0, 1, 2 = proportion shortfall in income below the poverty line. takes on value 0,1,2, to determine the type of poverty index. When =0 in FGT, the expression reduces to.. ------------------------------------(2) (1)

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This is called the incidence of poverty, describing the proportion of the population that falls below the poverty line. When =1 in FGT, the expression reduce to. ----------- ----------------and this is called the poverty depth. When = 2 in FGT, the expression becomes (3)

-----------------------------

(4)

This is called poverty severity index. This index weighs the poverty of the poorest household more heavily than those just slightly below the poverty line. It adds to the poverty depth and element of unequal distribution of the poorest households income below the poverty line.

RESULTS AND DISCUSSIONS

Socio-Economic Characteristics of Respondents Table 1 Shows that the respondents were mostly women as indicated by their gender distribution (100%). The result implies that oil palm processing is a female dominated endeavour in the study area. From Table 1, a higher percentage of the respondents 63.2% were married, 25.7% widowed, 6.9% divorced and 4.2% are single. The result shows that there are more married oil palm processors than single, widowed and divorced oil palm processors in the study area. Table 1 presents a basic summary on age of respondents. The overall average age of all the modern users sampled is very similar to the overall age of all the traditional users sampled that is, 52.5 and 54.8 respectively. This reflects the point highlighted earlier that both the selected modern users and traditional users resemble one another in all respects, including age. It also shows that the respondents interviewed are still active and old enough to have accumulated enough experience before and after technology adoption. As indicated in Table 1, the average family size was 8. The polygamous nature of the people probably explains the large family size recorded in the area. Family size is used as a proxy for labour because individual in the household is a potential source of labour. Their availability reduces labour constraints faced during the peak of oil palm processing activities. Differentials in the educational levels of respondents interviewed are large. The prevalence of No formal education is higher among the traditional users than the modern users in the study area. Based on Table 1, there are significant differences between the modern users and traditional users in the frequencies of their levels of education. This implies that the level of education between the treatment and control groups are not equivalent prior to technology adoption and this might influence their adoptions of palm oil mill technology. Table 1 revealed that 69% of the oil palm processors cultivate between 1-2 ha while 29% cultivate between 3-4ha. Also, 2% of the oil palm processors cultivate over 5ha. It means that, the small scale oil palm processors constitute about 98% in the lot of oil palm extractors in Osun State and this also account for low production of palm oil.

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Olagunju F. I, Kolapo A. J, Babatunde R. O, Ogunniyi L. T & Fakayode S. B

As indicated in Table 1, respondents experience in palm oil extraction which was proxied as their years of involvement in the extraction activity was also investigated and the results revealed that about 42% of the respondents have been involved in palm oil extracting activities 21-30 years and less than 7% of the respondents have ten years processing experience. The mean years of respondents involvement in palm oil extraction is 24years. This indicates that most of the processors have been processing for long and this experience is expected to have a considerable effect on their productive efficiency. From Table 1, majority of the respondents (63.2%) have their farm land through inheritances while the remaining got their oil palm farm through purchase, rented and community land. Table 1 revealed that 87.5% of the sampled respondents have farming as their primary source of income while 9.7% are traders. Table 2 further revealed that most of the respondents 60% were involved in petty trading as additional source of income to their palm oil extraction activities; while others are involved in food sale/processing (19.4%), Artisan (11.8%) and remittance (9.1%). According to respondents, the seasonal natures of palm oil extraction activities in the study area make them undertake other jobs during off season period. However, respondents reported that they cherished the palm oil extraction occupation, regardless of their involvement in other occupations. The result confirms the fact that women from the Yoruba tribe in Nigeria as obtained in the study area are traders. This is consistent with the position of Ekong (2003) that Yoruba Women are traders, and such sex role had given them more autonomy economically and a higher degree of mobility to and from distant markets than Women of other ethnic groups. As shown in Table 1, 49.3% of the respondents belonged to any cooperative society while 50.7% did not join any cooperative society. Those who do not join any cooperative are probably those who are not educated at all among the respondents and see no reason why they should joined any cooperative society Table 1: Socio-Economic Variables of the Respondents in the Study Area Variables i)Gender of the Respondents Male Female Total ii)Marital Status of the Respondents Single Married Widowed Divorced Total iii)Age of the Respondents 25-34 35-44 45-54 55-64 65-74 Mean Age Total iv)Household size of the Respondents 4 5-8 9 Mean Frequency 0(0) 144(100) 144(100) 6(4.2) 91(63.2) 37(25.7) 10(6.9) 144(100) Modern Users 1(1.3) 10(13.9) 29(40.3) 30(41.7) 2(2.8) 52.5 72(100) Traditional Users 6(8.3) 6(8.3) 16(22.2) 28(39.0) 16(22.2) 54.8 72(100)

16(11.1) 88(61.1) 40(27.8) 8

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Total 144(100) v)Educational Status of Modern Traditional Users Users Respondents 22(30.6) 52(72.2) No formal 31(43.1) 14(19.4) Primary 17(23.6) 6(8.3) Secondary 2(2.8) 0(0) Tertiary Total 72(100) 72(100) vi)Farm Size of the Respondents 1-2ha 100(69.4) 41(28.5) 3-4ha 3(2.1) 5ha Total 144(100) vii)Processing Experience 1-10 10(6.9) 47(32.6) 11-20 21-30 60(41.8) 23(15.9) 31-40 4(2.8) 41-50 24 Mean 144(100) Total viii)Farm Land Acquisition Inherited Land 91(63.2) 15(10.4) Purchase Land 28(19.4) Rented Land 10(6.9) Community Land 144(100) Total ix)Source of Income of Respondents Primary Sources Farming 126(87.5) Trading 14(9.7) Artisan 1(0.7) Others 3(2.1) Others Source of Income Petty Trading 86(59.7) Food sale/processing 28(19.4) Artisan 17(11.8) Remittance 13(9.1) Total 144(100) x)Membership of Cooperative Society No 73(50.7) Yes 71(49.3) Total 144(100) Sources: Field survey data, 2012 Figures in parenthesis are percentages Factors Affecting the Production of Palm Oil Table 2 Shows the regression result from the four functional forms regressed. They are linear function, semi-log function, double-log function and Exponential function which were compared so as to identify lead equation. Following the basis of overall production function, judged by the magnitude of the coefficient of multiple determination (R2) the number of variables that are significant, F-value and the number of variables that meet the a priori expectation; the linear function was selected. The Linear function had value of (R2) which is 0. 672, F-value of 46.733 five significant variables (four positive and one negative) conforming with a priori expectation. The coefficient of multiple determination (R2) of the lead equation (linear) is 0.672 means that about 67.2% of the regressor explained dependent variable. However, the significant factors affecting the production of palm oil among oil palm processors (modern users and traditional users) in

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Olagunju F. I, Kolapo A. J, Babatunde R. O, Ogunniyi L. T & Fakayode S. B

Osun State are farm size, level of farm income, adoption of technology and experience in processing activities. The coefficient of farm size is positive and statistically significant at 1% level. The positive coefficient of farm size implies that the higher the farm size, the greater the level of output of oil palm processors. The positive sign of the coefficient of farm size is in accordance with the a priori expectation. Also, the coefficient of income and technology are positive and statistically significant at 5% and 1% respectively. The positive coefficient of income and adoption of technology implies that the higher the level of income the greater the output of palm oil and adoption of technology increases the output of palm oil. On the other hand, the coefficient of year involved in processing is negative and is significant at 1%. Table 2: Regression Result on Factors Affecting Production of Palm Oil in the Study Area Linear Semi-Log Double-Log Exponential 0.745*** -3.072 -0.706 0.042 (2.614) (-1.127) (-1.328) (0.743) Marital Status 0.201 0.023 0.006 0.053 (0.674) (0.054) (0.069) (0.895) Household 0.016 0.302 0.076 0.004 Size (0.665) (0.751) (0.972) 0.849 Farm Size 0.358*** 1.689*** 0.324*** 0.067*** (5.131) (4.535) (4.459) (4.796) Income 1.88E-006** 0.906* 0.181* 3.36E-007** (2.215) (1.730) (1.773) (1.984) Technology 1.015*** 1.069*** 0.206*** 0.196*** (9.557) (9.805) (9.676) (9.285) Experience in -0.017*** -0.521** -0.143*** -0.004*** processing (-2.773) (-2.050) (-2.878) (-3.680) R2 0.672 0.653 0.655 0.661 F-Value 46.733 43.003 43.392 44.593 *** Coefficient significant at 1%** Coefficient significant at 5%* Coefficient significant at 10% Sources: Field Survey Data, 2012 Income Distribution of Respondents Table 3 shows the distribution of income of both the modern users and traditional users of palm oil mill technology. It becomes evident that modern users received more farm income from adoption of palm oil mill technology than the traditional users and consequently it shows the differential level of their incomes. Table 3: Distribution of Modern and Traditional Users Income Modern Traditional Users Users 300,000 1 6 300,001-600,000 31 43 600,001-900,000 35 23 900,001 5 0 Total 72 72 Sources: Field Survey Data, 2012 Income (Naira) Poverty Line The poverty line is that level of welfare which distinguishes poor households from non-poor households (Mukherjee and Benson 2003). As there is no clear consensus in the literature about when a household or an individual should be defined poor, the poverty line set for this study follows income poverty line measures. The relative poverty line was thus defined based on total income for the households. For the households sampled, the value of the poverty line is #107,920.83 per annum and consequently, the farm households that earned less than half the average income or that earn Variable Constant

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incomes which fall below 50% of the mean income were considered to be poor (Olubanjo 1998).Out of the one hundred and forty four sampled, 54.2% were non poor.10.4% modern users were poor and 35.4% traditional users were poor Extent and Level of Poverty among Rural Farming Households The result of FGT analysis showing the poverty status across socio-economic characteristics of the sampled farm households is presented in Table 4. Table 4 revealed that poverty incidence was most noticed among traditional users of processing palm oil, oil palm processors with no formal education, married households and household with farm size of between 1-2 hr. As a whole, the incidence of poverty in the study area was 0.458 implying that 45.8% of the sampled farm households were actually poor. This proportion invariably agreed with the earlier estimation of the proportion of poor farm households (i.e 45.8%) in the sample based on the poverty line definition. The value P1(poverty depth) across economic characteristics of the respondents was O.120 implying that the poor farm households require 12.0% of the poverty line to get out of poverty. Rural farm households with no formal education and farm size (1-2ha) require 8% and 9% respectively to get out of poverty. The P2 (poverty severity) across all sampled rural farm households was 0.044, thus poverty severity among poor rural farm household is 4%. The severity was more expressed by traditional users, processors with no formal education, married respondents and respondents with farm size of between 1-2ha. Furthermore, as it has been presented in Table 4 which presents the poverty level calculated for the modern users and traditional users using the Foster Greer and Thorbecke poverty indexes, it is apparent that the incidence of poverty, poverty depth and severity of poverty are higher among the traditional users than the modern users of palm oil mill technology. This follows that the adoption of palm oil mill technology helps to alleviate the poverty level of the users than the traditional users. Table 4: Poverty Levels among the Rural Farming Households Poverty Level and Extent Across SocioEconomic Correlates Po P1 P2 Incidence of Poverty Poverty Poverty Depth Severity 0.458 0.120 0.044 0.104 0.028 0.010 0.354 0.092 0.034 0.458 0.120 0.044 0.082 0.034 0.004 0.120 0.062 0.035 0.023 0.120 0.091 0.029 0.120 0.032 0.011 0.001 0.044 0.021 0.013 0.010 0.044 0.035 0.009 0.044

Household Characteristics All households Modern users Traditional users Total Educational Status

No formal 0.292 Primary 0.139 Secondary 0.027 Total 0.458 Marital Status Married 0.256 Widowed 0.139 Divorced 0.063 Total 0.458 Farm Size 1-2ha 0.319 3-4ha 0.139 Total 0.458 Sources: Field Survey Data, 2012

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Olagunju F. I, Kolapo A. J, Babatunde R. O, Ogunniyi L. T & Fakayode S. B

RECOMMENDATIONS
At the policy level, major attention should be given to education as poverty alleviation strategies in rural setting as it is one of the factor that influence the adoption of the technology. As it has been indicated from the findings that new palm oil mill technology have a potential to lead to poverty reduction, the study recommend that government and all stakeholders should invest more in such technologies and also consolidate the technical improvement of farmers where necessary. An effort toward introducing new palm oil mill technology in Osun State Nigeria should go hand in hand with increasing access of specific technology users to markets, education and oil palm farm land.

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