THE COMPETITIVENESS AND COMPARATIVE ADVANTAGE OF PRODUCTION SYSTEM OF PALM KERNEL PRODUCTS IN NIGERIA

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 0.836 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.