LOGISTIC THEORY OF COST COMPETITIVENESS OF OIL PALM INDUSTRY IN BENIN CITY (A CASE STUDY OF PRESCO PLC NIGERIA)

LOGISTIC THEORY OF COST COMPETITIVENESS OF OIL PALM INDUSTRY IN BENIN CITY (A CASE STUDY OF PRESCO PLC NIGERIA)

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CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF STUDY

Nigeria is among the nations in Africa blessed with abundance of resources ranging from crude oil to agricultural produce. Among these agricultural produce; oil palm contributes significantly the economic growth and development in Nigeria (Kehinde, 2008).

         Oil palm (Elaeis guineensis) has been described as one of the most important economic oil crops in Nigeria (Nwauwa, 2011; Abayomi and Canedo, 2011). According to World Rain-forest Movement (2005), oil palm is indigenous to the Nigerian coastal plain though it has migrated inland as a staple crop. Palm oil is extracted from the oil palm fruit. Red palm oil gets its name from its characteristic dark red colour, which comes from carotenes such as alpha-carotene, betacarotene and lycopene the same nutrients that give tomatoes, carrots and other fruits and vegetables their characteristic red colour (Basiron and Weng, 2004).

         The economic importance of palm oil cannot be under scored as it serves several industrial purposes both in the food and non-food industries. In the food industry, it is a major component of shortenings and margarines, and is commonly used in products such as reduced fat spread, ice cream, coffee whiteners, whipping cream, filled milk, mayonnaise and salad dressings, palm-based cheese and coconut milk powder (Basiron and Weng 2004). Natural palm oil is trans-fat free and hence is often blended with other oils producing trans-fatty acid free formulations (Gee, 2007). According to Basiron and Weng (2004), the non-food application of palm oil is only about 20% but adds a high economic value. They further posited that palm oil can be used in soap and other personal care products such as cosmetics and toiletries; and is also used in lubricants and greasers, printing ink, drilling mud and as an inert ingredient in pesticide formulations. Furthermore, palm oil is used as bio fuel.

         Palm oil unlike most agricultural products is both storable and relatively homogeneous (Jeffrey and Andrew, 2009). The determinants of prices for palm oil and other agricultural commodities have always fallen predominantly in the province of microeconomics. Nevertheless, there are periods when so many commodity prices are moving so far in the same direction at the same time that it becomes difficult to ignore the influence of macroeconomic phenomena on price variation of commodity such as palm oil (Jeffrey and Andrew, 2009).

         The marketing of palm oil serves as a means of livelihood for many rural families; and indeed it is in the farming culture of millions of people in the Nigeria. Palm oil marketing is concerned with all stages of operation that aid movement of the produce from the producer to the final consumer. These include: assemblage, storage, transportation, grading and financing. According to Nwauwa (2012), marketing of palm oil in Nigeria takes place in homes, road sides, local or periodic market centres and stalls. These can be both wholesale and retail types in both rural and urban centres. However, the often referral of oil palm as a crop of multiple value underscores its economic importance; as its essential components namely, the fronds, the leaves, the trunk and the roots are used for several purposes ranging from palm oil, palm kernel oil, palm wine, broom, and palm kernel cake (Daramola, Igbokwe, Mosuro and Abdullahi, 2002). Laying credence to the economic value of oil palm, the International Potash Institute (1957) identified the principal products of oil palm to be the palm fruit, which is processed to obtain three commercial products: namely palm oil, palm kernel oil, and palm kernel cake. According to Malaysian Palm Oil Council (MPOC, 2011), palm oil is highly suitable as edible oil because of its many nutrients and vitamins. Basiron and Weng (2004) opined that about 80% of the world’s produced palm oil is used for food purposes. Since palm oil is resistant to oxidative deterioration, it is good for frying potato chips and doughnuts (Sumathi, Chai, and Mohamed, 2008).

1.2 STATEMENT OF THE PROBLEM

Edo state is one of the major oil producing area in Nigeria recently some other ones have sprang up and Edo state is noted as the largest producers of palm oil and kernels in Nigeria yet the problem of poor costing is among the clogs on the wheels of distribution and storage of oil palm; this could be as a result of lack of proper logistic measures. It is therefore they concerned of these study to examine the logistic theory of cost competitiveness of oil palm industry in Benin City and also to render useful subjections using Presco Plc. Nigeria as the case study.

1.3 AIM AND OBJECTIVES OF THE STUDY

The main aim of the research work is to examine the logistic theory of cost competitiveness of oil palm industry in Presco Plc Nigeria; Benin city. Other specific objectives of the study are:

1.  to determine the effect of logistic cost on oil palm production in Presco Plc Nigeria; Benin city

2.  to determine the relationship between oil palm cost competitiveness and oil palm production in Presco Plc Nigeria; Benin city

3.  to determine the importance of oil palm production in Presco Plc Nigeria; Benin city

1.4 RESEARCH QUESTIONS

The study came up with research questions so as to ascertain the above stated objectives of the study. The research questions for the study are:

1.  What is the effect of logistic cost on oil palm production in Presco Plc Nigeria; Benin city?

2.  What is the relationship between oil palm cost competitiveness and oil palm production in Presco Plc Nigeria; Benin city?

3.  What is the importance of oil palm production in Presco Plc Nigeria; Benin City?

1.5 STATEMENT OF RESEARCH HYPOTHESIS

H0: logistic cost has no significant effect on oil palm production in Presco Plc Nigeria; Benin City

H1: logistic cost has no significant effect on oil palm production in Presco Plc Nigeria; Benin City

1.6 SIGNIFICANCE OF STUDY

The study on the logistic theory of cost competitiveness of oil palm industry will be of immense benefit to Presco Plc Nigeria; Benin city in the sense that the study will use the logistic theory of cost competiveness to examine the performance of the oil palm industry. The study will also serve as a repository of information to other researchers that desire to carry out similar research on the above topic. Finally the study will contribute to the body of the existing literature on logistic theory of cost and oil palm production in Nigeria.

1.7 SCOPE OF STUDY

The study on the logistic theory of cost competitiveness of oil palm industry will be limited to Presco Plc Nigeria; Benin city. The study will cover the areas on the use the logistic theory of cost competiveness to examine the performance of the oil palm industry from 1998-2017.

1.8 LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work

1.9 DEFINITION OF TERMS

Oil palm: Palm oil is an edible vegetable oil derived from the mesocarp of the fruit of the oil palms

Logistics: Logistics is generally the detailed organization and implementation of a complex operation


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