THE COMPETITIVENESS AND COMPARATIVE ADVANTAGE OF PRODUCTION SYSTEM OF PALM KERNEL PRODUCTS IN NIGERIA
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Date
2021
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Abstract
There is demand-supply gap coupled with non-attainment of self-sufficiency in domestic palm
kernel oil supply in Nigeria. Despite the various efforts of government to revive the subsector, the
poor growth and development of the industry still surface. Therefore, this study evaluates the
competitiveness, comparative advantages and effects of agricultural policies of palm kernel oil
production in Nigeria using policy analysis matrix. The study also examined and determine the
possible constraints face by the palm kernel products processors, using likert Scale and
krippendorff’s Alpha Statistics, estimate the opportunity cost of not processing palm kernel nuts
by the owners of nuts using conditional pay–off model, opportunity loss or regret value table and
optimal decision analysis. The profitability of processing palm kernel products was examined with
gross margin analysis while multinomial logistic regression was engaged to analyse the factors
influencing opportunity cost of not processing palm kernel oil in Nigeria.
Data were collected with multistage sampling procedures through the administration of
well-structured questionnaires. The results showed that processors were highly hindered with
social economic related constraint rather than production and marketing constraints, a
Krippendorff’s Alpha statistic of 0.085 showed that there was a low level of concordance amongst
respondents in the rating of constraints hampering palm kernel oil production in Nigeria. The
Policy Analysis Matrix (PAM) results showed production of palm kernel oil is competitive in
Nigeria under existing market prices why the private profits was N46,631. The competitiveness of
palm kernel oil production were further confirmed by Private Cost Benefit Ratio (PCBR) and
Private Benefit Cost Ratio (PBCR) with 0.8158 and 1.0966 respectively. The social profits was
N93,435 in the study area, which implies Nigeria has comparative advantage/efficiency of in palm
kernel oil production for export. This was also confirmed by Domestic Resources Cosr (DRC) of
0.8364.
However, the negative net transfer, implies poor protectionist policies and overall transfer
of resources away from the production systems. The opportunity cost of not processing palm kernel
nuts in the study area was estimated to be N84,892.64 per tonne if the owner of kernel nuts sells
and N268,118.61 if the owner chose not to process. The aggregate optimal decision criteria results
showed that processing palm kernel nuts is the optimal decision while leaving the nuts unprocessed
was the best alternative decision. In addition the profitability ratio of palm kernel nut owners and
investors were 1.69 and 1.34 respectively in the study areas which invariably showed that palm
kernel oil production lines were profitable for both the owner and the investors.