European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 20132...
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Implication of financial viability and value chain analysis of agro processing industries for development women experience in oyo state, nigeria

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Implication of financial viability and value chain analysis of agro processing industries for development women experience in oyo state, nigeria

  1. 1. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013225Implication of Financial Viability and Value Chain Analysis ofAgro-Processing Industries for Development: Women Experiencein Oyo State, NigeriaOlagunju, F.I.* E-mail of the corresponding author: olagfunk@yahoo.comAbstractThe dynamic role of Small and Medium scale Enterprises (SMEs) in developing countries has been highlyemphasised. These enterprises have been identified as the means through which the rapid industrialization andother developmental goals of these countries can be realised. This paper therefore explores the structure and extentof value addition by women in different agro-processing units in Oyo State, Nigeria. It has also examined thefinancial viability of agro-processing industries in the state. A multistage random sampling method was used toselect a sample of 160 agro-processing units of different types from each selected local government areas throughproportional allocation method. The data were analysed using descriptive (narratives), such include measures ofprofitability, use of percentages, tables and mean. The break-even analysis has shown enough leverage forprocessing units to stay in the business even at low capacity utilization. The extent of value addition has been about34 per cent in the cassava mill sector. The maximum value addition has been observed in fruits/vegetableprocessing (103 per cent), followed by cashew based units. The financial viability ratios computed from financialaccounts have revealed high current ratio but lower quick ratio (acid test) in most of the processing industries,showing that many industries have substantial unsold inventories. However, financial ratios have been foundfavourable for most of the processing units. There was under capacity utilization in almost all types ofprocessing industries in the state. It was mainly due to lack of adequate supplies of raw material as well asbottlenecks in market penetration and marketing strategies to woo the consumers. It is revealed that break-evenoutput is very low hence most of the agro industries in the state were running into loss due to low capacityutilization.Keywords: Financial viability, Value Chain, Value Addition, Women, Oyo State1. IntroductionThe dynamic role of SMEs in developing countries as engines through which the growth objectives ofdeveloping countries can be achieved has long been recognised. It is estimated that SMEs employ 22% of the adultpopulation in developing countries (Daniels & Ngwira, 1993; Robson & Gallagher, 1993). In both developed andemerging economies, promoting a favourable environment for the development of small and medium scaleenterprises (SMEs) is seen as critical. SMEs are a primary driver for job creation and GDP growth. They greatlycontribute to economic diversification and social stability and also play an important role for private sectordevelopment (Knight, 1998).Increase in volume of production, the optimal use of agricultural resources, the creation of a stable foodmarket, the achievement of greater level of productivity, increase the competitiveness of agricultural products andimplementation of integrated agricultural and rural development are some of the strategic objectives of thedevelopment. Small and medium sized enterprises in agribusiness have an important role in the realization of thesegoals. Favorable natural conditions as well as tradition in the production and processing of agricultural products, arelatively favorable geographic position, qualified and relatively cheap workforce, good transport infrastructure,as well as a relatively unpolluted environment, are just some of the stimulating factors for the development ofsmall and medium sized enterprises in Nigeria.In the last decade or two there has been a resurgence of interest in “value-added” agriculture, driven byconsumer characteristics and the desire of farmers to capture a larger share of the consumer dollar. As interest inon-farm processing (and ‘value-added’ activities more generally) has grown, governments at the national andregional levels have determined that there are benefits to supporting various types of ‘value-added’ agriculturalactivities. The main motivations of governments are enhancing or stabilizing farm-household incomes, creatingrural employment and economic development, and maintaining land in agricultural (or open) use (Streeter andBills, 2003).
  2. 2. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013226The relative importance of SMEs in advanced and developing countries has led and would continue tolead to a reconsideration of the role of SMEs in the economy of nations. The development of many countries isoften measured by such indices as the level of industrialization, modernization, urbanization, gainful andmeaningful employment for all those who are able and willing to work, income per capital, equitable distributionof income, and the welfare and quality of life enjoyed by the citizenry. There are various multiplier effects ofagro-processing industry such as spread of industrialization in rural areas leading to more livelihood options toteeming millions, nutritional supplements, stable prices of agricultural commodities and many other effects due tobackward and forward linkages. The economic prosperity of rural farmers in particular was achievable only withan effective integration and synergy between agriculture and agro-based industries (Tripathi, 2006).Nigeria’s agricultural sector is made up of many subsectors, including crops (staple and industrial), livestock,fisheries and forestry subsectors. Each of these subsectors interacts with the rest of the economy through backwardand forward linkages. These linkages add value in both the agricultural sector and other sectors of the economy.The value addition in agriculture derives from the value chain which encompasses all activities involvingagricultural input and production, processing, storage, marketing and distribution, household and industrialconsumption and export. All along the chain many problems and constraints persist. Agricultural input constraintsinclude those relating to availability and quality of supply (e.g. land, seeds, fertilizer etc.). Production problemsinclude those related to scarcity and high cost of inputs, technical production problems (low yield, pest anddiseases problems) and unstable agro-climatic conditions that aggravate farmers’ production risks. Othersinclude socio-economic problems (low level literacy, pervading poverty and aging farming population).Processing and storage problems include those of poor technology, high wastage, inadequate infrastructure (energy)and poor quality of primary products. Marketing and distribution constraints include those of poor infrastructure(access roads), inadequate market information, lack of quality control and safety standards and weak marketlinkages. The key problem of exports is mainly the un-competitiveness of many commodities in the internationalmarket (high cost of production and poor quality control). Consumption problems relate to household poverty, lowindustrial capacity utilization and inadequate quality control and safety standards. Common to all nodes of thevalue chain are financial constraints which include poor financial intermediation and high interest rates.But, it is disheartening to note that despite large and diversified agricultural base, commercial processing inNigeria is quite low (Aremu and Adeyemi, 2011). As such, agricultural development may not go very far unlessthere is development of agro-based industries not only to take up surplus labour force from agriculture but also toprovide a solid technical base to modernize agriculture. Added to this, SMEs in Nigeria suffer from very poor interand intra-sectoral linkages, and as a result lose benefits synonymous with economies of large-scale production.Hence the weak inter industry relationship badly affects to weaken the value chain thereof low value addition.Therefore, development of agriculture and agro-based industries should go hand in hand. This is perhaps the mostcritical factor that planners and policy makers have ignored in the past and that is why the burden of workforcedown the ladder in primary sector has not diminished. This clearly shows lopsided development wherein changesin sectoral output composition have not led to the proportionate changes in structure and occupation of workforce.Consequently, the disparity between per worker income in agricultural vis-à-vis non-agricultural sector haswidened over the years. Therefore, rapid growth of agro-processing industry close to agricultural productioncentres can bring about the desirable shift in employment structure without moving people from rural to urbanareas (Aremu, 2004).There is need to promote small-scale industries in other to Improve their efficiency and quality byupgrading skills, better product design, more efficient use of materials and improve marketing organizations.These are areas where state assistance can make a significant positive contribution towards development ofagro-processing. In this backdrop, it was considered pertinent to examine the performance of agro-processingindustries in Oyo State, where the Government provided loanable fund to promote industrial development in thestate. In the hindsight of promotional packages and incentives given by the local and state governments, theagro-processing sector has started making discernible progress. The specific objectives of the study were:(i) To study the structure, capital investment and extent of value addition in various types/sizes of agro-processingunits in Oyo State and(ii) To examine the financial efficiency/viability of different categories of commodity specific agro processingunits in the state.2. Value chain: Concept and IssuesThe value chain concept is introduced by Michael Porter in his book. The value chain can break downthe activity of the company into a sequence of elementary operations and identify potential sources of competitiveadvantage. According to Adetonah et al (2010), the value is the amount that customers are willing to pay for the
  3. 3. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013227product that is offered. The value chain is a concept which can be simply described as the entire range of activitiesrequired to bring a product from the initial input-supply stage, through various phases of production, to its finalmarket destination. The production stages entail a combination of physical transformation and the participation ofvarious producers and services, and the chain includes the product’s disposal after use. As opposed to thetraditional exclusive focus on production, the concept stresses the importance of value addition at each stage,thereby treating production as just one of several value-adding components of the chain. It resulted from differentactivities performed by suppliers, the firm and distribution networks. According to Giertz, et al (2008), the valuechain includes all activities undertaken by transforming raw materials into semi-finished or finished goods for saleor consumption. Value Chain describes all the activities required to bring a product or service from conceptionthrough production stages (involving a succession of physical and uses of various services), distribution to finalconsumers and its destruction after use. The overall performance of the value chain can be enhanced both bystrengthening each link and by strengthening the connections between the linksIn reality, value chains tend to be more complex, to involve numerous interlinked activities and industrieswith multiple types of firms operating in different regions of one country or in different countries around the globe.For instance, agro-food value chains encompass activities that take place at the farm as well as in rural settlementsand urban areas. They require input supplies (seeds, fertilizers, pesticides, etc.), agricultural machinery, irrigationequipment and manufacturing facilities, and continue with handling, storage, processing, packaging anddistribution activities. Other elements, such as power generation, logistics, etc., which form the chain environment,are also important factors affecting the performance of value chains.Value chain analysis is a useful analytical tool that helps understand overall trends of industrialreorganization and identify change agents and leverage points for policy and technical interventions. It isincreasingly used by donors and development assistance agencies, including UNIDO, to better target their supportand investments in various areas such as trade capacity, enterprise competitiveness, income distribution and equityamong value chain participants. Value chain analysis is the process of breaking a chain into its constituent parts inorder to better understand its structure and functioning. The analysis consists of identifying chain actors at eachstage and discerning their functions and relationships; determining the chain governance, or leadership, tofacilitate chain formation and strengthening; and identifying value adding activities in the chain and assigningcosts and added value to each of those activities. The flows of goods, information and finance through the variousstages of the chain are evaluated in order to detect problems or identify opportunities to improve the contributionof specific actors and the overall performance of the chain.In many parts of the world, agriculture continues to play a central role in economic development and to bea key contributor to poverty reduction. However, agriculture alone will not be sufficient to address the poverty andinequality that are so pervasive in today’s world. It is becoming increasingly crucial for policy makers to focusimmediate attention on agro-industries. Such industries, established along efficient value chains, canincrease significantly the rate and scope of industrial growth. Agro-industrial products offer much better prospectsof growth than primary commodities. In addition, the marked trend to break down production processes intospecific tasks opens up new opportunities for developing countries to specialize and take a more profitable part inglobal trade provided they meet increasingly stringent market requirements. (UNIDO, 2009).3. Data and MethodologyThe study was carried out in Oyo State, located in the Southwest geopolitical zone of Nigeria. The Statelies between longitude 2.5oE and 5° E and latitude 7oN and 19oN of the equator and covers an area ofapproximately 26,500 km2. The state has a total population of 5.6 million going by provisional figures of theNational Population Commission (2008). It has a land area of 27,140,000sq.km. The State enjoys a tropical humidclimate with two climatic seasons, the rainy season that prevails from April to October and the dry season that lastsfrom November to March. The Southern part of the State is dominated by the tropical rainforest while the guineasavannah belt dominates the remaining parts (Agboola, 1979). The settlement patterns show that so many peopleof different Nigeria ethnic background reside in Oyo state. However Nigerians with Yoruba ethnic backgroundconstitutes the majority of the population living in Oyo state. There are also non Nigerians who live in Oyo state.Tropical rainforest exist in the southern part of the state while the guinea savannah predominates in the northernpart (OYSADEP, 2007) which makes it possible for different cropping patterns like mono cropping, mixedcropping and intercropping.In Oyo state, there are numerous small and medium sizes of agro-processing units for processing of fruits,vegetables, cereals, oilseeds, animal products, herbal/medicinal oils/products and a variety of ancillary agriculturalcommodities. Within the State however, there are five sub-ethnic groups with distinct dialect peculiarities, they are:Ibadans, Ibarapas, Oyos, Oke-Oguns and Ogbomosos. Two stage sampling design was followed to select the
  4. 4. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013228processing units. In the first stage of sampling, two local government areas each from the groups were randomlyselected. The local government areas selected are: Lagelu-Iyana ofa , Ibadan north-Agodi, Atiba- Ofa Mefa,Afijio- Jobele, Atisbo –Tede, Saki West- Saki, Ibarapa East-Eruwa, Olorunsogo- Igbeti, Ogbomoso North –kinnira and Ogo Oluwa – Ajawa. The complete list of agro processing units in the study area were obtained fromthe state ministry of commerce and industry, local government areas and federal Ministry of commerce andindustry. These units were grouped into different categories on the basis of commodity specific agro-processingas: cereals-based (flour mills, rice mills, bakery), fruits and vegetables-based, oilseeds-based, cashew based,cassava and poultry processing units.In the second stage of sampling, a sample of 160 agro-processing units of different types for women wasselected randomly from each selected local government areas through proportional allocation method (Table 1).The primary data on different aspects of agro processing were collected from the selected processing units throughsurvey method for the year 2010-11. The primary data comprised information on size, type, location, installedcapacity and utilization, capital investments, labour employment, sources of raw material and supply mechanism,cost of processing, value addition, marketing of processed products, quality aspects, sales turnover, financialaccounts, profits, equity position and general constraints. Different sets of data were classified and tabulated forcarrying out detailed analysis. Tabular analysis was extensively used in the study to workout ratios, averages, andindices to derive different parameters of performance of agro-processing sector.Results And DiscussionsSocio-Economic Characteristics of Agro-processorsTable 2 shows the age distribution of the agro-processors. Majority of the respondents (54.3%) werewithin the age range of 30 – 39 years while 20.8% were even younger. A total of 88.1% of the respondents werethus aged below 50 years. The mean age was 38.6 years. This indicates that most of the processors were young andin their prime age in terms of productivity. Hence, given the necessary resources, these sets of respondents havehigh potentials to attain a high level of productivity. The relatively young age of the respondents should, all thingsbeing equal have positive impacts on enterprise size, earnings, the ability to take risks and adopt moderninnovations within the context of a familiar and clearly understood technological terrain.All the respondents were female. Women were always involved performing such tasks as washing,sorting, roasting, peeling, sieving and frying the products as the case may be. This confirms the view thatprocessing is predominantly a female enterprise in Nigeria and indeed, most African societies (Ajayi, 1995;Olagunju, et, al., 2012). This can thus be interpreted that agricultural research and extension as well as policyefforts aimed at enhancing food processing in Nigeria should be tailored to meet the needs and constraints ofwomen. These constraints will include the ability of women to call on investment funds required to purchase newtechnology and the compatibility of the technology to women’s physiological conditions. This is particularlyimportant if post harvest food losses must be minimized through adding value to the food crops especially at thefarm gate level (Oluwasola, 2010).Only 7.5% of the processor had a family size of between 1 and 5. About 65% of the respondents had afamily size of between 6 and 10 while the remaining had more than 10. The average family size in the study areawas 9.4, which compares with similar findings from other studies conducted in the Southwestern region of Nigeria(Olagunju and Sanusi, 2010). The large family size is typical of most rural farming communities in Nigeria wherehousehold labour is the most dependable source of farm labour.About 17.5% of the respondents did not go to school at all, 60.0% had only primary education, 20%completed secondary education while 2.5% attended tertiary institutions. Clearly, the level of education amongrespondents was very low. In traditional societies as typified by rural areas, the education of the female gender isnot a major family priority and this was clearly manifested in the study area. This has serious implications for thedevelopment of small-scale farm based enterprises in the rural areas. The low level of education among therespondents could have serious implications on their ability to access information, use new technologicalinnovations and even access or procure credit from formal financial institutions. The tendency is to operate theprocessing business using traditional methods as was done in the study area. Hence, while attempts need to bemade to access the processors to modern machines to enhance their output, it should be done within the context offamiliar, clearly understood and tested technological environment. In other words, locally fabricated technologywill serve a better purpose than imported exotic ones as a result of their scale of operation and level of education.Eight (5%) respondents were new entrants in the processing business as they had spent only between 1 and 5 yearswhile 63.8% had been in the business for between 6 and 10 years. The others have been involved in cassavaprocessing for more than 10 years. The mean experience of processors was 7.8 years. The experience of theprocessors in various fields is sufficient for a thorough understanding of the technical procedures of doing the
  5. 5. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013229business profitably. The main source of take-off capital for the business for 72.7% of the respondents was personalsavings although some of them invested these savings in an inherited enterprise or combined it with gifts fromfamily and friends. About 64% got credit from formal institutions. The Small and Medium Industries EquityInvestment Scheme was established to energize the Nigerian economy by channeling funds from banks to thesmall and medium industries.Status of Agro- Processing Sector in Oyo StateThe Small scale enterprises in Oyo State fall into categories such as “organized” and unorganized”enterprises. The organized groups have registered offices and have paid workers, whilst the unorganized ones aremainly made up of artisans. Most of these enterprises are largely made up of family groups and individual artisans.The activities in the small scale enterprise sector range from agro processing, pottery and ceramics tomanufacturing of spare parts and electronic assembly.The small scale industry is acknowledged to have huge potential for employment generation and wealthcreation in any economy. Yet in Nigeria, the sector has stagnated and remained relatively small in terms of itscontribution to GDP or to gainful employment. Activity mix in the sector is also quite limited – dominated byimport dependent processes and factors. The agro-processing development in Oyo State has been quite slow just asother state in the country. In view of this, Interest in the development of SMEs and their contribution in thedevelopment process continue to be in the forefront of policy debates in the developing countries hence, the stategovernment had extended some fiscal reliefs to its citizens in other to promote industrial development in generaland agro-processing in particular. To reap the benefits of fiscal incentives and to promote industrial development,the state government has established Ministry of Industry, Applied Science and Technology about 7 years ago. Itwas created on the 24th of August, 2005 with staff strength of 90 for the promotion of technology driven SMEs forrapid industrialization and technological transformation and to harness the available raw materials and mineralresources of the state.The classification of agro-processing units has been depicted in Table 3. It is observed that most of theprocessing units were cereal-based, followed by cassava mill, livestock-based, cashew and oilseed-based. Therewere only 25 registered fruits and vegetable based processing units. This clearly shows the slow expansion of fruitand vegetable processing industry, despite the fact Oyo state is one of the leading producers of fruits and off-seasonvegetables in the country. This therefore disproves our assertion and hypothesis that processing industriesexpanded nearer to the potential source/ supply of raw material. The cassava mill can be said to be highly favouredsince UNIDO (United Nations Industrial Development Organization) has on going projects in Oyo State, where itis helping to develop a cassava processing plant mainly focusing on the major problem in cassava processingwhich is drying - to develop a cassava flash drier and this has been a project in partnership with the Japanesegovernment. It is also working at improving the quality of Nigerian products so that they can compete favourablyin the international market.Investment PatternThe total capital investment under different types of agro-processing units has been depicted in Table 4.The total capital investment was highest in case of livestock (N 42.1m) followed by flour mills (N22.1m) followedby rice mill and fruit/ vegetable processing (N18.1m). The share of land and building structures was substantial inall the units that accounted for about 72, 78 and 74 per cent in case of cassava mill and rice mill, and in Oil seedbased units respectively. There is a different story in the case of livestock based, cashew based and fruit/ vegetableunits with just about 40, 31 and 53 % respectively.Installed Capacity, Utilization and Break-even Production under Different Agro-processing units in OyoStateThe processor’s response based on installed capacity and break-even analysis are presented in table 5.The table shows that the processors have not benefited in terms of timely availability of raw materials (72.7%),very few (12.9) only benefitted from timely availability of raw materials required for processing. The resultsfurther showed that inadequate supply of raw material was the major factor for low capacity utilization. The resultwas similar to what was obtained in Himachal Pradesh (Sharma et al., 2010) For instance some of the processingunits find it difficult to run the units from local supplies and were forced to purchase raw material from other statesat higher prices. In essence, there was under capacity utilization in almost all types of processing industries in thestate. It was mainly due to lack of adequate supplies of raw material as well as bottlenecks in market penetrationand marketing strategies to woo the consumers. Most of the processors agreed that the break-even output is verylow (66.3%) hence most of the agro industries in the state were running into loss due to low capacity utilization.
  6. 6. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013230Processing and Value AdditionFor farmers, value-added has a particular importance in that it offers a strategy for transforming anunprofitable enterprise into a profitable one. In fact, there are very few items that a small farmer can produce andsell profitably at the first level (that is, on the open wholesale market). Therefore, a value-added strategy is criticalto the long-term survival of most small farms in Oyo state. Many producers will look for ways to be economicallyviable through voluntary, incentive-based solutions. Producers’ greatest opportunities may lie in activities that addvalue to their products and move their point of first sale downstream toward consumers. Adding value to bulkraw commodities is one way for producers to keep a larger share of the margins associated with further processingand market development. Progressive producers respond to market developments, determine what factors willdrive the future of their industry, and use these results to their advantage by adapting to change. The extent of valueaddition was found to vary from industry to industry and product to product, depending upon the nature/ brand ofraw materials, technology, packaging requirement and extent & magnitude of selling and distribution expensesinvolved. It was discovered that better training on management and technical aspects should be provided withmarket information and infrastructure so that they could scale-up their production and become competitive in themarket.The extent of value addition under different types of processing industries was estimated and is shown inTable 6. It can be observed that Vegetable/ Fruit based (processing) used the total inputs worth N35,758 632and produced processed output value totaling to N 72740712 resulting in the net value addition of over 100 percent over input cost. The flour mill, on the other hand, enhanced value by about 28 per cent. In the case of rice mill,46 per cent value addition was made with rice milling. The value addition was quite high in cashew based (72%),oil seed based (56%) and moderately low in cassava processing (34%).Financial Viability RatiosThe prepared broad indicators based on the revealed data by the sampled firms can be shown on Table 7.The liquidity position of the agro-processing industries was examined by computing current ratio and quick (acidtest) ratio. The financial viability ratios computed from financial accounts revealed high current ratio but lowerquick ratio (acid test) in most of the processing industries, showing that many industries had substantial unsoldinventories rather than receivable cash holdings. The inventory turnover ratio was very low in fruits/vegetableprocessing units as well as cashew units as these units had to pile up stocks of raw material due to seasonalavailability of fruits and vegetable commodities.Many business problems can be traced back to inventory but certainly not all. The firm could be holdingobsolete inventory and not selling inventory fast enough. With regard to accounts receivable, the firms collectionperiod could be too long and credit accounts may be on the books too long. Fixed assets, such as plant andequipment, could be sitting idle instead of being used to their full capacity. All of these issues could lower the totalasset turnover ratio. The debt to equity, sales turnover and profitability ratios were quite favourable in the case ofsmall processing units. The solvency, operating and cost of goods sold ratios with respect to sales were alsofavourable. The return on total assets and total capital for average unit came out to be 26 per cent and 42 per cent,respectively. To sum up, the financial viability indicators revealed differential pattern of performance ofprocessing units.The linkages of agro processing industries with suppliers of inputs (raw material) and prospective outputselling markets hold the key for development of this sector. Backward (supply of material) and forward (productsale) linkages are of paramount importance for the expansion and growth of agro-processing units. The availabilityof bulk quantity and good quality of raw materials from agriculture and reasonable demand of processed productsfrom prospective buyers/markets determine the progress of processing sector.Overall, the agro-processing units showed satisfactory performance on account of liquidity, profitability,investment as well as leverage. There appears to be more prospects for small scale processing units. Differentfinancial ratios though differed, did testify this finding quite convincingly.3. ConclusionsThe agro processing industries face variety of constraints. Factor availability and cost are the most commonconstraints. Access to finance remains a dominant constraint to small scale enterprises in the state. Otherconstraints faced by the sector include: lack of access to appropriate technology; the existence of laws, regulationsand rules that impede the developmentof the sector; weak institutional capacity and lack of management skills and training. In an attempt to enable thesector perform its role effectively; a number of technical and financial support institutions were put in place by theOyo State government. These ranged from government institutions, parastatals, private institutions and
  7. 7. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013231non-governmental organizations.The relatively young age of the respondents should, all things being equal have positive impacts on enterprisesize, earnings, the ability to take risks and adopt modern innovations within the context of a familiar and clearlyunderstood technological terrain.The low level of education among the respondents could have serious implications on their ability toaccess information, use new technological innovations and even access or procure credit from formal financialinstitutions. The tendency is to operate the processing business using traditional methods as was done in the studyarea. Hence, while attempts need to be made to access the processors to modern machines to enhance their output,it should be done within the context of familiar, clearly understood and tested technological environment. In otherwords, locally fabricated technology will serve a better purpose than imported exotic ones as a result of their scaleof operation and level of education.There was under capacity utilization in almost all types of processing industries in the state. It was mainlydue to lack of adequate supplies of raw material as well as bottlenecks in market penetration and marketingstrategies to woo the consumers. Most of the processors agreed that the break-even output is very low hence mostof the agro industries in the state were running into loss due to low capacity utilization.In modern value chains, men are concentrated in higher status, more remunerative contract farming since theygenerally control household land and labour, while women predominate as wage labourers in agro-industries.Women workers are generally segregated in certain nodes of the chain (e.g. processing and packaging) thatrequire relatively unskilled labour, reflecting cultural stereotypes on gender roles and abilities. Rural infrastructureweaknesses (roads, transport, water, electricity, sanitation) disproportionately increase the burden of women’sunpaid domestic and caring tasks, reducing the time they can devote to paid work outside the home.4. Policy Implications• There should be more policy thrust and emphasis on developing industrial areas in raw material producingregions to strengthen backward linkages with the producers, particularly with fruits and vegetable growers.Registration of new units should be made keeping in view the potential and their financial viability, ensuringoptimum size/ number of processing units.• There should be a necessity for cost-effective and adequate supply of raw material by strengthening directlinkages through suitable contract farming models safeguarding the interests of farmers.• Liberal credit policy to modernize small-scale processing units to enable them (women) to compete withorganized industries and effective R&D support to the agro-processing sector in enterprisedevelopment/management and marketing/exports is very essential. This will afford them more access tofunds for business development.• Improvement in basic infrastructure like developing railway links, metallic roads, cool chains, adequate/uninterrupted power supply, disposal of sewage/ industrial effluents, housing, control of traffic congestion,etc.• Strengthening of database on agro-processing industries through regular surveys and creation of separateState Department of Agro Processing Industries to plan and monitor agro-processing industries and toprovide policy input to the government on a continuous basis.ReferencesAdetonah, S.; Coulibaly, O.; Sessou, E.; Padonou, S.; Dembele, U.; and Adekambli, S. (2010): Contribution ofInland Valleys Intensification to Sustainable Rice/vegetable Value Chain Development in Benin andMali: Constraints, opportunities and profitable cropping systems Poster presented at the Joint 3rdAfrican Association of Agricultural Economists (AAAE) and 48th Agricultural Economists Associationof South Africa (AEASA) Conference, Cape Town, South Africa, September 19-23, 2010Agboola, S.A (1979). An Agricultural Atlas of Nigeria, Oxford University Press, Ibadan.Ajayi, S (1995). Gender Roles in Subsistence Crop Production in Kwara State, Nigeria, Agrosearch: A.J. Agric,Food Dev. 1(2): 145 – 151.Aremu, M. A. (2004). Small Scale Enterprises: Panacea to Poverty Problem in Nigeria, Journal ofEnterprises Development, International Research and Development Institute, Uyo, Akwa Ibom,Nigeria, I(1): 1 – 8.Aremu, Mukaila Ayanda and Adeyemi, Sidikat Laraba (2011): Small and Medium Scale Enterprises as aSurvival Strategy for Employment Generation in Nigeria, Journal of Sustainable Developmentwww.ccsenet.org/jsd 4(1): 200-206Giertz, S., Steup, G., Sintondji, L., Gbaguidi, F. and S. Schönbrodt (2008): Survey of Inland Valleys in the Upper
  8. 8. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013232Catchment Ouémé. In: Judex, M. & Thamm, H.-P. (ed.) IMPETUS Atlas Benin Research Results2000-2007. Department of Geography, University of Bonn, Germany. Pp 99-100Knight, M (1998), Developing Countries and The Global Financial Markets, World Development,26(7):1165-1368.Olagunju, F.I and Sanusi, W.A (2010). Economic Recovery of Backyard Rabbitory for Self Sufficiency in Oyo –State, Nigeria”. African Journal of Agricultural Research. 5(16):2232-2236.Olagunju F.I, Babatunde, R.O and Salimonu, K.K (2012), Market Structure, Conduct and Performance ofGari Processing Industry in South Western Nigeria, European Journal of Business and Managemen, 4(2): 2012.ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Oluwasola, O (2010). “Stimulating Rrural Employment and Income for Cassava (Manihot sp.) ProcessingFarming Households in Oyo State, Nigeria through Policy Initiatives, Journal of Developmentand Agricultural Economics, 2(2):18-25, February, 2010 Available online athttp://www.academicjournals.org/jdae.Sharma K.D., M.S. Pathania and Harbans Lal (2010). Value Chain Analysis and Financial Viability ofAgro-Processing Industries in Himachal Pradesh, Agricultural Economics Research Review, 23:515-522Streeter, Deborah H. and Nelson L. Bills. (2003). Value-Added Ag-Based Economic Development: A Panacea orFalse Promise? Part One of a Two-Part Companion Series: What is Value-Added and How Should WeStudy It? [Working Paper 2003- 07], Department of Applied Economics and Management, CornellUniversity.National Population Commission (NPC) (2006). “Nigeria’s National Census” NPC, Abuja.Robson G & Gallagher C (1993). The Job Creation Effects of Small and Large Firm Interaction, InternationalSmall Business Journal, 12:23-37.Tripathy, K.K. (2006). Processed Food Industry in India — Potentials and Constraints, Kurukshetra, 54(6):12-16.UNIDO (2009): Agro-Value Chains Analysis and Development: The UNIDO Approach. A staff working paper.United Nations Industrial Development Organization ViennaTable 1: Type of Sample Agro-processing Units in Oyo StateProcessing units mpled NumberVegetable/ Fruit based 10Oil seed based 13Cereal based 41flour mill 20Cassava mill 38Livestock Based 22Cashew based 16Total160Source: Local Government Areas: Various Records, 2011
  9. 9. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013233Table 2: Socio-economic Characteristics of women Agro-processors
  10. 10. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013234Table 3: Commodity-wise Classification of Agro-processing Units in Oyo StateProcessing units Number Per centVegetable/ Fruit based 25 6.5Oil seed based 32 8.0Cereal based 102 26.5Flour mill 46 12Cassava mill 91 24Livestock Based 50 13Cashew based 38 10Total 384 100Source: LGA’s; Ministry of Commerce and Industry, Oyo State.Table 4: Capital Investment under Different Types of Agro-processing Units in Oyo StateTable 5: Distribution of Agro-processing Units by Installed Capacity and Break-even AnalysisTable 6: Extent of Value Addition in Different Agro-processing Industries in Oyo State
  11. 11. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol.5, No.12, 2013235Table 7: Financial Viability Ratios of Different Agro-processing Units in Oyo State

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