DETERMINANTS OF PERFORMANCE AMONG BAKERY INDUSTRIES IN ABA METROPOLIS OF ABIA STATE, NIGERIA

ABSTRACT

The study examined the determinants of performance (profitability) an the bakery industries in Aba Metropolis of Abia State, Nigeria primary data were collected from 108 randomly selected respondents using a well structured questionnaire. The structure of the questionnaire followed an open and close-ended format. The socio-economic data of the respondents were analysed using frequency table and simple percentage while the gross margin analysis was used to analyse the cost and returns of the enterprise. A multiple regression was employed for the analysis of the determinants of profitability in the bakery industries and the exponential from of the resulted was used for the interpretation. The findings indicated that the bakery enterprise is a profitable venture given the positive difference between the estimated average of total revenue and total cost. The exponential regression result showed that the coefficients of sex, sales volume and educational level have positive relationship with profitability while the other variables in the model have negative relationship with profitability. The significance test showed that the coefficients of sex, total variable cost, sales volume, access to credit and membership of organization were the only significant variables. The R² (0.709) indicates that 70.9percent variation in profitability are accounted by variables in the model while the remaining 29.1percent which is statistically that the entire model is statistically significant at 1percent which provided the basis for accepting the alternative hypothesis. Based on the findings, it was recommended that government should provide appropriate entrepreneurship education for the bakery operators and guarantee adequate access to credit.         

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

The performance of the bakery industry is a great interest to most economics of the world (Oluntude et al., 2008). The industry has the potential to bring about social and economic development by contributing significantly employment generation and catalyzing development in urban and rural areas (Hallberg, 2000). In many of the newly industrial nations, the bakery industry as a subsector of the small and medium  scale enterprises (SME) accounts for a greater percentage of all industrial enterprises and bulk of the labour force (Sanusi, 2009). The bakery industry which has been increasing continuously in the country is among the largest food processing industries in Nigeria. The two major bakery industries in Nigeria include, bread and biscuit which are disaggregated into organized and unorganized subsectors. The organized sector consists of large, medium and small scale manufacturers, who produced package biscuits and bread while unorganized consists of small bakery units, cottage and household type manufacturing and distributing goods in their surroundings (World Bank, 1985, BFW, 2005, Warren, 2002).

According to Nwosu and Nmesirionye (2012) bakery products contain highly nutritive value and are manufactured from the combination of what or flour, sugar, baking powder, condensed milk, fat, salt, jelly, dry fruits and various essence which are classified as dry and moist. They further noted that the dry bakery products include soft biscuits, hand biscuits, cookies, crackers, fancy biscuits and cream water biscuits while moist bakery products include sweet bread, milk bread, cassava bread, garlic bread, fruit breed, various type of buns, cakes, pastries and muffins. These products are available in various sizes shape and form (Indian food industries 2006, bakery and food world, 1998). Recognizing the importance of the bakery industry in economic growth and development, the Nigeria government has set up various programmes and institutions aimed at developing the industry. However, the bakery industry has been affected by the cost of fund, price instability due to inflationary trends, inadequate infrastructure and the socio-economic characteristics of the firms in the industry the socio-economic characteristics of the firms in the industry (Hirchma et al., 2002). The dismal performance of the bakery industries in Nigeria as relates to the contribution to the cross domestic product (GDP) has been of great concern to the government, citizenry operations and the organized private sector (Ajakariye ,2001). Government policies geared toward energizing the bakery industries through special credit allocation, price stabilization, the incentives and improved infrastructure is yet to yield meaningful result. Also, despite the existence of fiscal incentives grants bilateral and multilateral agencies support and aid as well as specialized institution all geared towards, making the bakery industries vibrant and most productive, the performance is below expectation. This is evident in the frequent liquidation of firms in the industry and the associated effect on consumer satisfaction. It has been of great course of concern to investors that the vital industries had fallen short of expectation (Onugu, 2005). The Nigeria agribusiness which include, the bakery industry has enjoined much prominence in the government development agenda. Government had identified this unit as a veritable engine of growth and had continuously put in place policies and incentive packages that will promote the segment of the economy (0nwumere, 2010). Considering the expanded product set of bakery enterprises, there is need for improved technology to optimize its category management processes to help meet business goods and deliver full value to the existing and potential customers. With the population and purchasing power rising at a reward breaking pace, there is need for extended market share through immense investment (Nwosu and Nmesirionye, 2012). However, financial uncertainties and capitalization inconsistencies have played and plundered bakery enterprise investment performances in Nigeria. Bamire et al., (2000) noted that capital mobilization in absolute level of aggregate income and the nature of business capital is needed to develop market acceptable quality and other aesthetic features. The packaging of the product is closely interlinked with the production, storage, transportation, marketing and other capital variables considering importance of bakery enterprises in Nigeria economy but partly as engine of economic growth and development vehicles to achieve food security and employment creation, the study will critically examine the determinants of performance among bakery industries in Abia State, with specific reference to Aba metropolis.

1.2 Statement of Problem

The high cost of administration and management of small loans as well as high interest rate have adversely affected the performance of firms in the bakery industries (Adeniren, 2010). The high cost of fund experienced by investors in the bakery industries has limited access to credit which in turn constrained the expansion of firms in the industries (Ezegha, 2010). Also, the inflationary trends in the form of frequent changes in the prices of input especially flour, wheat and other necessary raw materials used by the firms in the bakery industries affect their performance in both short and long-run periods. This consequently increases the cost of production the operating firms which reduce or hinder the profitability of the business and the attainment of other corporate objectives. It is obvious that inflationary pressure determine the effective performance of firms in the bakery industries given the increasing cost of the intermediate products (flour, sugar and other materials) used by firms in the industry (Flippo, 2002). In addition, the absence of a harmonized and gazette tax regime, which could enable entrepreneur to build in a recognized and approved levies and taxes affect their performance in bakery industries discourage investors (Onugu, 2005). Also, inadequate infrastructural facilities which escalate the cost of operation of firms in the bakery industries as the effected firms are forced to resort to private provision of the required infrastructural facilities, especially electricity affects their effective performance. As a staple food, bread is largely imported dependent and as such prone to exchange rate fluctuation. Thus, changes in foreign exchange will exert a significant influence in the performance of the bakery industries due to the importation of essential inputs such as flour, wheat, sugar, and other materials that is import driven. Given the constraints associated with bakery activities in Nigeria and Abia State in particular, the study is specifically designed to appraise the determinants of performance among bakery industries in Aba metropolis.

1.3 Research Questions

The study attempt to answer the following questions

i. What are the socio-economic characteristics of the respondents?

ii. What are the cost and returns of the enterprise in Aba Metropolis   

iii. What are the determinants of the performance bakery industries in Aba metropolis?

iv. To what extend does the market efficiency affect their performance?

v. What are the factors militating against bakery industries in Aba metropolis?

 1.4 Objectives of the Study

The broad objective of the study is to analyse the determinants of performance among bakery industries in Aba metropolis, Abia State, Nigeria. However, the specific objectives are to:

i. Examine the socio-economic characteristics of the respondents in the bakery industry.

ii. Estimate the cost and returns of the enterprise in Aba metropolis

iii. Estimate the determinants of performance of bakery industries in Aba metropolis

iv. Estimate the marketing efficiency of the industries,

v. Describe the factors militating against the performance of bakery industries in Aba metropolis and

vi. Make recommendation based on the findings.

1.5 Research Hypothesis

The following null hypothesis are formulated to guide the study

Ho₁: There is no significant relationship between socio-economic characteristics of the respondents and their performance

H0₂: There is no significant relationship between interest rate and performance of bakery industries.

Ho₃: There is no significant relationship between marketing efficiency of the bakery industries and their performance.

1.6 Significance of the Study   

The research explored the determinants of performance among bakery industries in Aba metropolis. The study will help firms in the bakery industries in the target area to identify the major constraints to the actualization of their objective function of profit maximization. It will equally prevent the government with some of the challenges faced by firms in the bakery industries, who strive to break even. Also, potential investors in the bakery industries will be better guided by the findings and recommendations of the research to device ways of overcoming the limiting factor to effective performance especially the objective of making profit interested researchers in the field will benefit from the research through their access to the necessary literature reviewed in the study. Moreover, the recommendations of the research will provide basis for the government to establish measures aimed at improving the performing of the bakery industries and identify likely consequences of such measures in future.    

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