PRODUCTION CAPABILITY AND INNOVATIONS IN PALM KERNEL PROCESSING INDUSTRY IN SOUTHWESTERN NIGERIA

Abstract

The study examined the existing production capabilities and innovations in small and medium scaled palm kernel processing firms in Southwestern Nigeria. It also assessed the impact of production and innovation capability on performance of the processors. The study covered Ogun, Ondo, Osun and Oyo, States in Southwestern Nigeria. The sample size of 265 palm kernel processors was obtained through respondent driven sampling techniques. The research tools used were questionnaire, personal observations, interviews and secondary data collection approach. The questionnaire was administered to the processor and elicited information on socio- economic characteristics of the respondents, their production capabilities, profile of the firms and innovations available in the firms. Both descriptive and inferential statistical techniques were employed for data analysis. The study showed that majority (75.8%) of palm kernel processing firms invested above N500,000 for setting up their firms and 15.1% invested between N401,000 – N500,000. The sources of capital for the investments were from personal savings (77.7%), friends (34.0%), family members (15.5%) and cooperative society (34.0%) only very few of them sourced for investment capital from bank (4.3%), and government institution/agencies (1.1%). The investment capability rating on a 4-point Likert scale showed that palm kernel processors were able to carry out feasibility study (3.98), purchase raw materials (3.99), procure processing equipment (3.99), generate enough capital (3.55) and enough working capital (3.37) for production. The processors had very strong linkage with, government, their association, customers and suppliers, but had very weak linkage with financial and knowledge institutions. The study further showed that at each unit operation in the processing and marketing, there were at least 1 – 2 innovations available. The technologies employed by the processors in each unit operations were mainly indigenous technologies that were fabricated locally in Nigeria. Very few operators made use of imported technologies. About 89.8% of the firms produced more than 4,000 litres of PKO per month and 4.9% produced between 3,001 – 4,000 litres per month. The sales turnover in year 2011-2013 was high for most of the firms. Size of the employees (β=1.882, p≤0.01), source of information for raw materials (β=1.146, p≤0.05), price competitiveness (β=0.079, p≤0.10), investment in quality control (β=0.417, p≤0.01) and maintenance of machines (β=0.172, p≤0.05) had significant impact on the profitability of the firm. The coefficient of determination R2= 0.724 indicated that 5 independent variables contributed between 72.4% and 87.3% to production and innovative capability in palm kernel processing firms. The study therefore concluded that though the firms used indigenous technology, their production capability was high and innovation capability was low. Strong linkage with knowledge institution, government’s financial and technical supports are recommended for the improvement of the performance of firms in the study area.