Economics of Small Scale Soybean Processing Firms in Anambra State, Nigeria

Economics of Small Scale Soybean Processing Firms in Anambra State, Nigeria

ABSTRACT

The study investigated the economics of small scale soybean processing firms in Anambra State, Nigeria using primary data. It examined the technologies used for small scale soybean processing; the socioeconomic and institutional factors that influenced the choice of technologies used; the technical efficiency of small scale soybean processing firms; the value added by processing soybean; the profitability, factors that affected profitability; the constraints to small scale soybean processing firms; and the level of gender participation in small scale soybean processing. Using well-structured questionnaire, multistage random sampling technique was adopted to select 150 soymilk processing firms and 100 soyflour processing firms from three(3) agricultural zones (Aguata, Awka and Onitsha) in the state. However, only 142 and 95 respondents from soymilk and soyflour processing firms were used in the analyses. Data were analysed using descriptive and inferential statistics, such as multinomial logit model, stochastic frontier production function, gross margin and profit function analysis, analysis of variance and t-test. The study found that the locally fabricated machine was the most predominant technology used for soybean processing and accounted for about 30% in soymilk and 44% in soyflour. Other technologies used included 45TG x 160-Grain, 45TG x160-Galvanized, 45TG x160-Japan, 45TG x 160-Stainless and 60GX x 175- Galvanized. Age, income, level of education and household size of the processor, cost of processing technology, age of the processing firm, availability of spare parts, technicians, household employees and paid employees were the factors that significantly affected choice of processing technology at P<0.05. The results further showed that soybean processing into soyflour was technically efficient at 95% while that of soymilk was inefficient at 44%. Also, the value added to 1kg of soybean processed into soymilk was N680 while that of soyflour was N440. Soybean processed into soymilk and soyflour were profitable. The average gross margin per processor per annum for soymilk was N596,111.41 while that of soyflour was N450,737.76. Results further indicated that there were significant differences between the costs and returns to soybean processing into soymilk and soyflour, respectively at P<0.01. Cost of soybean seeds, cost of fuel, transportation and packaging were the factors that significantly affected the profitability of soybean processing at P<0.05. Lack of capital, lack of credit facilities, inadequate power and water supplies, high and multiple taxation and high cost of spare parts were the factors that the processors perceived to be greatly constraining soybean processing at an average rating of 3.29 for soymilk and 3.35 for soyflour on a 4-point Likert rating scale. The study found that females participated predominantly in the buying of soybean seeds (82%), washing and boiling of soybean (80%), winnowing/dehusking (90%), packaging (93%) and sales (87%); while the males played predominant role in shelling (75%) and grinding/milling (92%). Further analysis showed that there was significant difference in the participation of men and women in soybean processing into soyflour and soymilk at P<0.01. Provision of credit facilities, granting of tax incentives and provision of adequate power and water supply to soybean processors were some of the policy recommendations proffered.

CHAPTER ONE

INTRODUCTION

Background Information

Industrialization in Nigeria like most developing countries is very crucial for rapid economic and social development. The higher the level of industrialization the higher the value of Gross Domestic Product (GDP). It is the main hope of most developing countries to increase their per capita income. This can be achieved fast through the expansion of small scale industries such as soybean processing firms (Sadiq, 2004). Generally, small-scale firms form the bedrock of any nation’s industrial take-off especially in a developing country like Nigeria (CBN, 2002). According to the Federal Government Small Scale Industry Development Plan of 1980 small scale industry refers to any manufacturing process or service industry, with a capital not exceeding N150, 000 in manufacturing and equipment. Also, the Small Scale Industries Association of Nigeria in 1973, defined small scale business as those having investment (i.e. capital, land, building and equipment) of up to N60, 000 (Pre-SAP value) and employing not more than fifty persons. (Umar, 2010)

The development of small-scale industries is imperative prerequisite for sustaining a well- balanced industrial sector. In the absence of active and vital small firm sectors, the economy would decay (Elsenhans, 2008). It is needful then to develop greater interest in improving the small scale industries such as the small-scale soybean processing firms.

Small scale industries are considered engine for economic growth all over the world. They represent the largest proportion of the manufacturing sector in every country, and have always played a key role in the economies of all major industrial countries (Singh, Garg and Deshmukh, 2008). In Nigeria, the small and medium enterprises, (SMEs) account for about 70% percent of industrial employment and well over 50 percent of the Gross Domestic Product (Olutunla and Obamuyi, 2008). Among the objectives of the industrial sector stipulated by the Nigerian government is local sourcing of raw material to promote greater linkage and backward integration to raise the general level of economic activities. The local sourcing of raw material will be achieved through increased use of raw materials from agriculture (Igene, 2008). According to Federal Ministry of Commerce and Industry, the low performance of Nigeria’s industrial sector was as a result of over-reliance on large-scale capital intensive industries and inadequate attention to the development of small-scale industries (Manyong, Ikpi and Olayemi, 2005).

The major tool through which government can enhance employment generation in Nigeria is the promotion of small scale industries. In line with this, the Federal Government of Nigeria set up a coordinating organization called Small-Scale Industrial Corporation in 1971. The corporation accorded high priority to industries engaged in manufacturing basic needs including food processing and other agro industries. Furthermore, there was a renewed emphasis on the development of small-scale agribusiness activities. Agribusiness activities involve individuals and institutions engaged in the production, processing, transportation, storage, financing, marketing and regulation of the world’s food and fiber products (Ike, 1999). Agro industries which form part of agribusiness activities are generally enterprises that process agricultural raw materials ranging from clearing, grading, cooking, mixing and chemical addition (Akwaeze, 2009). It is estimated that 60% of the labour force in sub-Saharan Africa are gainfully employed in small-scale food processing enterprises and majority are women (ITDG, 2005).

Foods are processed to improve their digestibility and to enhance their appeal to the consumer. Processing also serves to extend the availability of foods beyond the area and season of production, thus stabilizing supplies and increasing food security at national and household levels (FAO, 2001). A particular important aspect of food processing is that it permits great diet diversity, giving consumers access to a wide choice of products and hence to a better range of vitamins and minerals than they would otherwise consume. The most basic level of processing is food preservation, which in a variety of forms has been practiced by families in traditional societies for generations to provide food when sources of fresh food are scarce (FAO, 2001).The soybean processing firms as well as other agro-firms contribute significantly to a nation’s economic development; also they provide the nation with nutrients critical to the well-being of an expanding population.

To attain good health in Nigeria, the importance of protein in the daily meal of every citizen cannot be overlooked. The Food and Agriculture Organization (FAO) stipulated that every individual is expected to consume 71gram of protein every day (FAO, 2009). A cheap protein source is then a step forward towards promoting good health (USDA, 2000). Animal protein sources which include fish, beef, mutton, pork, chevon etc. are very expensive and in most cases beyond the reach of average Nigerian household. The tendency is to fallback to plant protein which is relatively cheap and got from cowpea, pigeon pea, bambara groundnut, soybean and so on, with soybean having the highest percent of protein.

Soybean (Glycine max) is a legume that grows in tropical, subtropical and temperate climates. It has 40 chromosomes and is self-fertile species with less than one percent out crossing. Soybean was introduced to Africa in the 19^th century by Chinese traders along the east coast of Africa (IITA, 2007).

Soybean is an important source of high quality but inexpensive protein and oil. According to International Institute of Tropical Agriculture (IITA, 2007), it has average protein content of 40% and oil content of 20%. It is the only plant source that contains all the Essential Amino Acid (EAA) (Tiwo, 2004). The oil produced from soybean is highly digestible and contains no cholesterol. A “by-product” from the oil production (soybean cake) is used as a high protein animal feed in many countries. Soybean also improves soil fertility by adding nitrogen from the atmosphere. This is a major benefit in African farming systems, where soils have become exhausted by the need to produce more food for increasing populations and where fertilizers are hardly available and are expensive for farmers.

Soybean consumption according to IITA (2003), has increased dramatically, improving nutrition particularly among the urban, poor and middle income groups. Soybean fortified products not only have more protein and minerals than their non-fortified counterparts, they are considerably cheaper than other sources of high-protein such as fish, meats, milk and other protein-rich legumes. The cost of protein when purchased as soybeans, is only about 10-20% of the protein from fish, meat, eggs or milk. Many Nigerians now incorporate soybean into their diets and the Nigerian Government has declared its production and utilization a national priority (IITA, 2003).

Soybean is processed into various forms such as soymilk, soyflour, soy meat, soy spice, tofu and so on. The International Development Research Center (IDRC) has sponsored projects which have been instrumental to encouraging the development of more than forty soybean-based foods including soymilk, yogurt, soyflour, biscuits, baby food, condiments and breakfast cereals (IDRC, 2006). These products are highly patronized because they are inexpensive, have acceptable tastes and some are conveniently sold where people congregate. They have become major sources of the daily protein intake of children and adults (Okoli, 1998).

In Nigeria, so many households have started eating soybean foods (CGIAR, 2007). A study by IITA carried out in Nigeria showed that the nutritional status of children is significantly better in soybean producing/using households than in those households that did not use soybean. The study also provided evidence that soybean processing had a positive impact on the producer’s income (IITA, 2006).

The thinking of many concerned Nigerians today is how the generality of the poor masses can be empowered to be self-reliant. The government and some non-governmental bodies have been grappling with some strategies put in place to combat poverty, so as to reduce it to the barest minimum (Fayam, 2004).

The problems of mass poverty arising from the production and consumption pattern of Nigerians need to be addressed. National Economic Empowerment and Development Strategies (NEEDS), which is a programme of the Federal Government of Nigeria, spelt out in clear terms the need to assist farmers in provision of agricultural inputs in order to tackle poverty head on, since half of Nigerian’s poor people work in that sector (Onwualu, 2007). Onwualu (2007), reported that, there is need therefore to support small and medium-scale enterprises in the agricultural sector, to help generate employment and create wealth and by so doing alleviate poverty in the land.

Problem Statement

Soybean though still regarded as a relatively new crop, has made a successful incursion into the diet of many Nigerians, particularly children and nursing mothers. Soybean derivatives such as Soymilk, Soyflour, Soy-Ogi and so on, have been developed and found to be highly nutritious and good substitutes for more conventional food ingredients like melon, cow milk and cowpea (Osho, 2003). Despite the high nutritional value of soybean in relation to other legumes, lack of knowledge of its uses has limited its adoption, production and processing in non-traditional areas of cultivation (Osho, Akinleye and Akanni, 2009). To bridge the gap, efforts are being made by research institutes, Non-Governmental Organizations (NGOs) and industries to promote the production, processing and utilization of soybean in Nigeria (Osho, 2003).

Vast resources in Nigeria (and other developing economies) are either unutilized or underutilized. A major section of its manpower is lying idle. Capital is scarce and investment is lean. Production is traditional and the technique outdated. The output is insufficient and basic needs of people remain unfulfilled (Kalchi, 2008). Industrialization through developing small scale firms is the answer to this present state of the economy. A major challenge for small scale firms is to continuously provide innovative and customized products using the best available process technologies.

The small scale sector occupies an important position in the economy of developing nations. The sector employs the largest manpower next to agriculture. Its growth largely depend on its ability to innovate, improve operational efficiency and increase productivity. Small scale firms are generally less efficient in process and utility energy use. There is the problem of lack of technical capacity in these firms to identify, access, adapt and adopt better technologies and operating practices (Ashok, 2000). Inadequate information about the improved technologies is one of the problems in agricultural production (Fabiyi, Danladi and Mahmood, 2007). Leisinger (2000), asserts that it is not conceivable that agriculture in developing countries, can deliver the expected without modern technologies. Research emphasis has been on appropriate technology for increasing food availability. However, enough research has not been conducted to study the various technologies employed by existing processors, profitability of such technologies and how they influence quality and quantity of the processed product.

Over the past two decades, issues relating to the recognition of women’s role in economic and social development and of equality between men and women have fostered increasing interest among policy makers and development practitioners. Despite a noticeable improvement in gender awareness worldwide, data on women’s work and economic contribution have remained far from being comprehensive (Odebode, 2011). Their economic role have been undervalued, underestimated and seldom acknowledged for proper articulation in development plans and policy information (Odebode, 2011). However, the influence of gender on processing activities has not been properly analyzed to assess the involvement of men and women in soybean processing activities as it affects the study area.

Research works on soybean have been carried out on; soybean production, Egbujie (1996); Utilization, Ugwuoke (2005) and Yahaya (1991); Kokoiwen (2002), focused on soybeans as protein supplement for nursing mothers. Research on the economics of processing of soybean in the study area has been neglected. It is therefore hoped that this study will fill up the gap. The study will look at the edible forms soybean can be processed into by small-scale firms, costs involved in processing, returns made and access to financial services by the processing firms.

1.3 Objectives of the Study

The broad objective of this study was to examine the economics of small-scale soybean processing firms in Anambra State, Nigeria.

The specific objectives were to:

identify the technologies being used for small scale soybean processing;
describe the socio-economic and institutional factors that influenced the choice of technology used for small scale soybean processing;
determine the technical efficiency of small scale soybean processing firms;
examine the value added by processing soybean into soymilk and soyflour respectively;
assess the profitability of small scale soybean processing firms and the factors that affect it;
identify the constraints of small scale soybean processing firms; and

vii. assess the level of gender participation in small scale soybean processing.

Research Hypotheses

In line with the stated objectives of the study, the following null hypotheses were tested:

H0₁: Socioeconomic characteristics do not significantly affect choice of technology used for small scale soybean processing.

H0₂: There are no significant difference between the costs and returns to soybean processing.

H0₃: There is no significant difference in the level of gender participation in small scale soybean processing.

1.5 Justification of the Study

In a world influenced by globalization, diversification is strength and a resource. People have to fight poverty and to further social and financial equality (Ms Danis Association for International Co-operation, 2006). Small scale soybean processing industry is of interest as an enterprise that will increase income and employment in rural and urban areas (Bachman, 2001).

The increasing importance of soybean as food crop in Nigeria calls for effort to increase its enterprise. The study on the economics of small-scale soybean processing firms, will give insight to the reason behind the choice of processing techniques used by soybean processors, it will provide information on the returns made and costs accrued to the processors. The study will also identify the problems encountered by these processors.

The Federal Government of Nigeria will benefit from the study since increased utilization of soybeans will help to have a balance between the diet of the people and their protein intake. IDRC (2001) reported that soybean consumption has been acknowledged as the major diet for increasing the protein requirement of the urban poor and middle income group. This will reduce susceptibility to malnutrition thereby promoting good health for members of the society. Good health will in turn increase the work force or human capital of the nation for a productive economy for sustainable development.

Hopefully, findings of the study will assist both processors and government by providing information that will be used in increasing income and welfare of the populace, consequently enhancing agricultural productivity.

In the face of increased threats on agricultural sustainability and productivity as well as lack of alternative employment opportunities, there is need for policies on agricultural development, poverty alleviation and livelihood improvement. This study will help the policy makers in these areas.

The study will be of immense benefit to prospective investors in soybean processing industry, policy makers and the government, especially as a reference material in its interest in developing agro industries. As such research scholars interested in this and related topics will find the work very useful.

1.6 Limitations

Soybean is processed into different forms, but this study is limited to processing soybean into soymilk and soyflour only. The researcher found it difficult to get information on the socio economic characteristics and revenue of some respondents. With some persuasions and explanations that, they were purely for an academic exercise and she was not asking to harm them or learn their techniques; they opened up and answered the questions. However, despite these limitations, the goals for the research were achieved.

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References

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