ABSTRACT
The study comparatively analyzed the investment and performance of modern and traditional rice processing enterprises in North-Central Nigeria, from 1987-2016. Specifically, the study examined the features of modern and traditional rice processing enterprises; ascertained the relationship between capacity installation, utilization and un-utilized in modern and traditional rice processing; identify factors influencing capacity utilization; analyzed determinants of investment and performance in modern and traditional rice processing; examined the effect of investment on performance in modern and traditional rice processing; assess the performance of modern and traditional rice enterprises; and identified the factors militating the adoption of the modern technology of processing rice. The population size of 300 (250 traditional and 50 modern) respondents were drawn from the registration list of the National Association of Rice Processors Entrepreneurs of Nigeria. A sample size of 199 was drawn from a population of registered enterprises using Taro Yamane (1967) formula. Secondary data were used for the study. Structured questionnaire were used to collect primary data on features of rice processing enterprises. While secondary data were used on capacity installation, utilization and un-utilized in modern and traditional rice processing enterprises from 1987-2016. Data collected were analyzed with Descriptive Statistics, Correlation Analysis, Auto-regression Distributed Lagged model, Stochastic Trans-log Frontier, Ordinary Least Square (OLS) regression, Chow-Test and Z-test Statistics, Feasibility and Viability analysis as well as Performance analysis. The result showed majority (60 & 65%) of modern and traditional rice processing enterprises to have existed for 30 years. Majority (89%) of the modern rice processing entrepreneurs were males while 80% of the traditional rice processing entrepreneurs were female. The correlation result showed a positive coefficient (0.983**) implying a significant relationship between capacity installation, utilization and un-utilized in modern and traditional rice processing enterprises. The study identified inadequate supply of paddy, unavailability of paddy and poor electricity supply as factors influencing capacity utilization of enterprises. The performance of both enterprises was above 50% average, however the z-test (16.960***) showed significant at 1% difference in performance of modern and traditional rice enterprises. The chow-test (7.23) result showed a significant effect of investment on performance of modern and traditional rice enterprises. The study identified high cost of establishment; high cost of maintenance; high tax on importation of spare parts and unfavorable loan conditions as factors militating the adoption of modern technology of rice processing. The study conclude that modern and traditional rice processing enterprises were underutilized, though they performed above average of 50% which is feasible and viable for investment. The study therefore recommend that Paddy producers should increase production of paddy to ensure maximum utilization of the rice processing enterprises. Government should ensure adequate supply of electricity to power rice processing enterprises to reduce processing price. The rice processors should select an operational price at which the marginal revenue equal marginal cost (MR=MC) for sustainability of the enterprises.
TABLE OF CONTENTS
Title page i
Certification ii
Declaration iii
Dedication iv
Acknowledgement v
Table of Contents vi
List of Tables xi
List of Figures xiii
Abstract xiv
CHAPTER
1: INTRODUCTION
1.1
Background of the Study 1
1.2
Statement of the Problem 7
1.3
Objective of the Study 12
1.4
Hypotheses 13
1.5
Significance of the Study 13
1.6
Scope of the Study 18
CHAPTER
2: LITERATURE REVIEW
2.1 Conceptual
Framework 19
2.1.1 Concept
of investment 19
2.1.2 Concept
of performance 23
2.1.3 Concept
of enterprise 28
2.1.4 Concept
of entrepreneur 32
2.1.5
Capacity installation 35
2.1.6 Capacity
utilization 35
2.1.7
Capacity unutilized 36
2.2 Theoretical
framework 36
2.2.1 Theory
of economic development 36
2.2.2 Theory
of investment 41
2.2.3 Theory
of performance 44
2.3
Empirical Review 46
2.3.1
Relationship between capacity installation, capacity utilization and capacity
unutilization of modern
and traditional rice processing mills 46
2.3.2
Relationship between capacity utilization and capacity unutilization of
modern and traditional
rice processing mills 48
2.3.3 Factors
influencing capacity utilization of mills in modern and traditional
rice processing
enterprises 56
2.3.4
Determinants of investment and performance among modern and traditional
rice processing
enterprises 61
2.3.5
Feasibility and viability of investment and performance of modern and
traditional
rice processing
enterprises 63
2.3.6 Estimation
of performance of modern and traditional rice processing enterprises 66
2.3.7 Effect
of investment on performance of modern and traditional rice
processing enterprises 70
2.4
Analytical Framework 78
2.4.1
Descriptive statistics 78
2.4.2 Correlation
analysis 79
2.4.3 Factor
analysis 80
2.4.4
Auto-regression distributed lagg 80
2.4.5
Stochastic trans-log frontier production function 81
2.4.6
Feasibility and viability analysis 81
2.4.7
Performance analysis 81
2.4.8 (OLS)
regression analysis 82
2.4.9 Solvency
ratio 82 2.4.10 Break even analysis 82
2.4.11
Financial feasibility analysis 82
2.4.12 Benefit
cost ration (BCR) 83
2.4.13 Internal
rate of return 83
2.4.14 Payback
period (PBP) 84
2.4.15
Profitability index (PI) 84
2.4.16 Sensitivity
analysis 84
2.4.17 Break even analysis 84
2.4.18
Profitability analysis 85
CHAPTER
3: METHODOLOGY
3.1 Research
Design 86
3.2 Study Area 86
3.3
Sampling Procedure 87
3.4 Data
Collection Technique 89
3.5 Method
of Data Analysis 89
3.6 Model
Specification 90
3.6.2
Correlation analysis 90
3.6.3 Factor
analysis 92
3.6.4 Investment model 93
3.6.5 Feasibility and viability analyses of
modern and traditional rice processing
enterprises 96
3.6.6
Performance analysis. 98
3.6.7
Ordinary least squares (OLS) model 100
3.6.8 Factor analysis model 102
CHAPTER
4: RESULTS AND DISCUSSION
4.1
Features of Modern and Traditional Rice Processing Enterprises 103
4.1.2
Features of modern and traditional rice processing entrepreneurs 107
4.2
Relationships between Capacity installation, Capacity utilization and Capacity
unutilized of Modern and
Traditional Rice Processing Mills 113
4.2.1 Correlate between capacity installation,
capacity utilization and capacity
unutilized
of modern rice processing enterprise mills. 113
4.2.2: Trend analysis of
capacity installation, capacity utilization and capacity
unutilized of modern rice processing enterprise mills from 1987
-2016 115
4.2.3 Correlate between capacity installation,
capacity utilization and capacity
unutilized
of traditional rice processing enterprise mills. 117
4.2.4: Trend analysis of
capacity installation, capacity utilization and capacity
unutilized of traditional rice processing enterprise mills from
1987 -2016 119
4.2.5: Z-test statistics
computation of significant difference in capacity installation of
modern and traditional rice processing enterprise
mills 121
4.2.6:
Comparative analysis of the trend in capacity installation of modern and
traditional rice
processing enterprise mills from 1987 - 2016 122
4.2.7: Z-test statistics
computation of significant difference in capacity utilization of
modern and traditional rice processing enterprise
mills 125
4.2.8
Comparative analysis of the trend in capacity utilization of modern and
traditional rice
processing enterprise mills from 1987 - 2016 126
4.2.9: Z-test statistics
computation of significant difference in capacity unutilized of
modern and traditional rice processing enterprise
mills 128
4.2.10
Comparative analysis of the trend in capacity unutilized of modern and
traditional rice
processing enterprise mills from 1987 – 2016 129
4.3
Factors Influencing Capacity utilization of Modern and Traditional Rice
Processing Mills 131
4.3.1 Examination of the principal component
analysis on factors influencing
utilization
of rice processing enterprise mills 131
4.3.2
Breakdown analysis of total variance explained on factors influencing
utilization of rice
processing enterprise mills 133
4.3.3
Analysis communalities scores on factors influencing utilization of rice
processing enterprise
mills 134
4.4 Determinants
of Investment and Performance of Modern and Traditional Rice
Processing Enterprises 136
4.4.1 Unit
root test analysis of the modern rice processing enterprises 136
4.4.2 Analysis of investment determinants of
modern rice processing enterprises
137
4.4.3
Investment determinants for traditional rice processing enterprises 139
4.4.4
Estimation of determinants of investment for traditional rice processing
enterprises 140
4.4.5 Determinants of performance of modern rice
processing enterprises 142
4.4.6 Determinants
of performance of traditional rice processing enterprises 144
4.5 Feasibility and Viability of Investment
in Modern and Traditional Rice Processing enterprises 148
4.5.1 Feasibility and
viability of investment in modern rice processing enterprises 148
4.5.2 Feasibility and
viability of investment in traditional rice processing enterprises 151
4.6
Performance of Modern and Traditional Rice Processing Enterprises 154
4.6.1
Performance analysis of modern rice processing enterprises
154
4.6.2
Performance analysis of traditional rice processing enterprises 158
4.6.3 Z-test statistics of
hypotheses 162
4.6.4 Trend
in performance of modern and traditional rice processing enterprises
from 1987 – 2016 163
4.7 Effect
of Investment on Performance in Modern and Traditional Rice Processing
Enterprises 165
4.7.1 Effect
of investment on performance in modern rice processing enterprises 165
4.7.2
Regression graph of the effect of investment on performance in modern rice
processing enterprises 166
4.7.3 Effect
of investment on performance in traditional rice processing enterprises 168
4.7.4
Regression graph of the effect of investment on performance in traditional
rice processing
enterprises 170
4.7.5 Pooled
effect of investment on performance in rice processing enterprises 172
4.7.6
Chow-test statistics of effect on investment on performance in modern and
traditional rice processing
enterprises 174
4.8 Factors
Militating the Adoption of Modern Rice Processing Technology 176
4.8.1 Principal
component analysis of factors militating the adoption of modern rice processing
technology 176
4.8.2 Total
variance explained on factors militating the adoption of modern rice processing
technology 178
4.8.3
Communalities scores on factors militating the adoption of modern rice processing
technology 180
CHAPTER
5: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1
Summary 182
5.2
Conclusion 188
5.3
Recommendations 189
5.4
Contribution to Knowledge 192
References
Appendixes
LIST OF TABLES
4.1: features of modern and traditional rice
processing enterprises 104
4.2: features of modern and traditional rice
processing entrepreneurs 108
4.3: correlate between capacity installation,
capacity utilization and capacity unutilized of modern rice
processing mills 113
4.4: correlate between capacity installation,
capacity utilization and capacity unutilized of traditional
rice processing mills 117
4.5: result of z-test statistics of significant
difference in capacity installation of modern and traditional
rice processing mills 121
4.6: result of z-test statistics of significant
difference in capacity utilization of modern and traditional
rice processing mills 125
4.7: result of z-test statistics of significant
difference in capacity unutilized of modern and traditional
rice processing mills 124
4.8: principal component analysis factors
influencing capacity utilization of rice processing mills 131
4.9: total variance explained on factors
influencing capacity utilization of
rice processing mills 133
4.10: communalities scores on factors influencing
capacity utilization of mills 134
4.11: unit root-test result for modern rice
processing enterprises 136
4.12:
estimation of determinants of investment for modern rice processing enterprises 137
4.13: unit root-test result for traditional rice
processing enterprises 139
4.14:
estimation of determinants of investment for traditional rice processing enterprises 140
4.15: maximum likelihood estimates of stochastic
trans-log frontier production function for modern rice
processing enterprises 142
4.16: maximum likelihood estimates of stochastic
trans-log frontier production function for traditional
rice processing enterprises 145
4.17: feasibility and viability of investment in
modern rice processing
enterprises 148
4.18: feasibility and viability of investment in
modern rice processing
enterprises 150
4.19: feasibility and viability of investment in
traditional rice processing enterprises 151
4.20: feasibility and viability of investment in
traditional rice processing
enterprises 153
4.21: performance analysis of modern rice
processing enterprises 155
4.22: performance analysis of modern rice
processing enterprises 157
4.23: performance analysis of traditional rice
processing enterprises 159
4.24: performance analysis of traditional rice
processing enterprises 161
4.25: result of z-test of significant difference
in performance of modern and traditional rice
processing enterprises 162
4.26: effect of investment on performance of
modern rice processing enterprises165
4.27: effect of investment on performance of
traditional rice processing
enterprises 168
4.28: pooled effect of investment on performance
of rice processing enterprises 172
4.29: chow-test of statistics of effect of
investment on performance of modern and traditional rice
processing enterprises 174
4.30: principal component analysis factors
militating the adoption of modern rice processing
technology 176
4.31: total variance explained on factors
militating the adoption of modern rice processing technology 178
4.32: communalities scores on factors militating
the adoption of modern rice processing technology 180
LIST OF FIGURES
4.1:
trend analysis of capacity installation, capacity utilization and
capacity
unutilized of modern rice processing mills from 1987 - 2016 115
4.2:
trend analysis of capacity installation, capacity utilization and capacity unutilized of
traditional rice processing mills from 1987 – 2016 119
4.3:
trend analysis of capacity installation of modern and traditional rice
processing mills
from 1987 – 2016 123
4.4:
trend analysis of capacity utilization of modern and traditional rice
processing mills
from 1987 – 2016 126
4.5:
trend analysis of capacity unutilized of modern and traditional rice
processing mills
from 1987 - 2016 129
4.6:
trend analysis of performance of modern and traditional rice processing from 1987-2016 159
4.7:
regression graph of the effect of investment on performance in modern rice processing
enterprises 166
4.8:
regression graph of the effect of investment on performance in traditional rice processing
enterprises 170
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Scarcity
of local processed rice has persisted over the years, despite the rapid
investment by the Government in rice processing enterprises. International Rice
Research Institute (IRRI, 2015) and Central Bank of Nigeria (CBN,2016) reported that rice supplies 70% of total per
capita calorie consumption of Nigeria
and occupies about 1.88 million hectares of arable farm land, making it
rank second most important cereal in the world after wheat in terms of
processing and marketing. Domestic consumption of rice rose from 5
kg/person/month in 2000 to about 10kg/person/month in 2010 (Tarhavbusha, 2015).
The consumption of milled rice has moved to 25kg/person/month, the relative
ease of its preservation and cooking has influenced the growing trend in its
consumption (Terzungwe, 2016).
West
African Rice Development Agency (WARDA, 2015), stated that rice in its paddy
state is not healthy for human consumption except it is processed. According to
National Agricultural and Rural Development Agency (NARDA, 2015), there are two
basic enterprises for processing rice namely, the traditional and modern
enterprises. The traditional enterprise has a locally fabricated huller
attached to an engine through a pulley with low output performance. The
pre-milling (sorting, soaking, par-boiling and drying) operations and
post-milling (blowing, de-stoning, polishing, grading and packaging) operations
are manually done with higher level of broken grains and impurities (NARDA,
2015).
Food
Service Equipment and Supply Company (FSESC, 2016), stated that the modern rice
processing enterprise has all the pre-milling (sorting, socking, steaming,
parboiling and drying) operations and post-milling (blowing, de-stoning,
polishing, color-sorter, weighing separator, weighing and packaging) operations combined and are
automated with higher output performance and less level of broken grains.
In
the move to respond to the increased per capita consumption of rice in Nigeria,
a huge amount of foreign exchange is spent on importation of rice into the
country due to inadequate investment and poor performance of rice processing
enterprises in Nigeria which leads to scarcity of local processed rice. About
3.429 billion US dollars was spent on importation of rice between 2010 and 2014
(FAO, 2015). The truth is that Nigeria will not be able to sustain these levels
of imports, which gave rise to the need to increase local rice processing by
investing more in rice processing enterprises for better performance (FAO,
2016).
In
an effort to reduce the country’s dependence on imported rice and boost local
rice processing, the Government of North-central States through the Bank of
Industry (BOI) established the Rice Processing Enterprise Borrowers Scheme
(RPEBS). The scheme aims at providing rice processors loan in kind to boost
processing and address the problem of scarcity of local processed rice. Fisman and
Khanna (2004) opined that, North central states being one of the paddy producers
in Nigeria had over 2000 traditional rice enterprises which were usually of low
(0.1 metric ton, or 100kg/hr.) capacities in terms of processing while the modern
rice enterprises in the states process
about 1 metric ton or1000kg/hr.
Ajones
(2015) confirmed that, rice processing enterprises in Nigeria underwent
different phases of technological transformations related to Parboiling,
drying, de-husking and blowing systems. Although it lags far behind countries
like USA, UK, Germany, Japan, Taiwan, etc. there were few fully
automatic plants in Nigeria with installed color sorter machine and silky polishing machines that were
imported from Japan, USA, UK etc. The parboiled rice produced by those units
could compete in national and international markets.
According
to Okoro (2012), there were few States (Benue, Nasarawa, Niger) in the North-central
that had large concentration of modern rice enterprises, while the others
(kwara, Kogi, Plateau) had good concentration. The rice processed by those
enterprises catered for both domestic and export markets. The major products of
these enterprises were parboiled rice, although there were some rice
enterprises that produce raw rice as their principal products. Okoro (2012)
further stated that, at the same time, only a few enterprises were producing
the aromatic rice.
Regarding
the available data on the modern rice enterprises, the Statistics Department of
Federal Ministry of Agriculture (SDFMA. 2015) in Nigeria, presented North,
North-West, South-West and South-East with the highest (over 3000) number of
rice enterprises, followed by North-Central States with about 1,200 rice
processing enterprises. Considering the functional rice enterprises in Nigeria,
knight (2015) stated that only 30% of the modern rice enterprises were actually
functional. Knight (2015) further pointed that, North-Central States had the
third largest concentration of rice enterprises in Nigeria, and also accounted
for the third largest proportion of non-functional rice enterprises.
Paddy
rice could not be consumed in its raw form, it needed to be processed for human
consumption according to Benue Agricultural and Rural Development Authority
(BENARDA, 2015). Rice milling was the primary processing activity under which
the hull and the bran are removed from the paddy grain and converted to
polished white rice. The hulling and milling of paddy is also known as
processing of paddy (NARDA, 2015). As earlier mentioned, rice processing
enterprise is categorized into traditional and modern and that the traditional
rice processing enterprise was the first to be introduced in Nigeria. However,
with the advent of modern mechanical milling techniques, those traditional
enterprises became obsolete (FAO, 2015). On the other hand, the conventional
mechanical mills were again categorized into three main types Hullers;
Sheller’s and Huller-cum-Sheller (WARDA, 2015). In Nigeria, majority of the
paddy processing units were hullers followed by the Sheller’s and
huller-cum-Sheller (NARDA, 2015).
According
to (FSESC, 2016), the conventional rice huller (locally constructed) was seemingly
high in rural areas. The hullers were usually of very low capacity mills, where
both shelling and polishing operations were carried out simultaneously. Hence,
there was no control on the polishing of rice by the hullers resulting to
production of bran admixed with husk and a high level of broken grains (FSESC
2016). As compared to the huller operations, an improved modern rice enterprise
had much higher capacity with separated processing mechanism for de-husking and polishing of paddy, which made the
by-products like broken rice, bran, husk, etc. available separately (Bawa and
Kainth, 2016). According to Bawa and Kainth (2016), the by-products like paddy
husks were utilized to produce energy, furfural, etc. At the same time, they
were edible and non-edible oil from the by-products bran.
Bawa
and Kainth (2016) pointed out that, hulling ratio was treated as the ratio of
brown rice to paddy while milling ratio was the ratio of polished rice to
paddy. This was because of the fact that certain rice enterprises were of a
two-step process in which the first step involved hulling of paddy to get brown
rice and the second process included polishing of the brown rice to fine white
rice. A comparative analysis of the out-turn ratio (OTR) of modern and traditional
rice enterprise was one of the most important aspects. It was noted that,
out-turn ratio is the conversion ratio of paddy to fine rice obtained through
specific milling technique applicable. However, the variety of paddy considered
as export quality variety is processed only in modern rice enterprise in
negligible quantities (Lanning, 2015).
Indeed,
a comparative analysis of the out-turn ratio was also arrived separately for
the hullers (the traditional rice enterprises) and the modern rice enterprises
remained significant, considering a number of studies in the past indicated
that the overall supply of rice could be augmented substantially with additional conversion of paddy
processing techniques. This observation,
however, was based on the assumption that the out-turn ratio for the huller
units (processing about one fourth of the nation’s paddy output) was
comparatively lower than the modern rice enterprises. It was argued by a number
of past studies that the out-turn ratio in the hullers remained more than 5
percent lower than the modern rice enterprises, with a higher ratio of broken
rice (Lanning, 2015).
According
to the Agro-economic Research Centre (AERC 2011), among the modern rice
enterprises, there exists a huge difference in the milling technology applied
for the processing of Paddy. This also depend on the mode and nature of
technological advancement and technological up-grade of the paddy processing
units. In fact, the early 1930s traditional rice enterprises were up-graded to
keep pace with the technological advancement in the paddy processing industry.
Some of the old rice enterprises used both sun-drying system and mechanical
drying system simultaneously owing to various socio-political reasons. More
highly sophisticated and fully automated imported mills with silky polish and
color sorter machines were introduced. Such advanced paddy processing
enterprises were only traced in some of the leading rice enterprises in the
world (AERC 2011).
The
basic need for the processing of paddy remained in the fact that paddy itself
cannot be consumed in its raw form. Thus to enable the paddy grain suitable for
human consumption, it needed to be milled either in raw condition or after
parboiling (Ajones 2015). The essence of economics of paddy processing was the
fact of how paddy was processed. The processing of paddy thus forms an
industry, where paddy served to be the basic raw material, processed to form
the finished product (polished fine rice) (Ajones 2015). It was interesting to
observe that the processing of rice in Nigeria was carried out in small rice
enterprises, most of which were the traditional enterprises. At the same time,
there was a steady growth of improved modern rice enterprises with much higher
capacities. Nevertheless, it remained the fact that, at present, both types of
paddy processing enterprises co-exist. While the traditional claim a share of
about half of the paddy processed, the other half of the entire paddy output
was processed by the improved modern rice enterprises (Adeyokunu 2014).
According
to Adeyokunu (2014). The economics behind the functioning of modern and
traditional rice processing enterprises in Nigeria is by treating the paddy
processing enterprises as strict business enterprises. The processing costs of
final products to arrive at a conclusion of the economics of paddy processing
in the traditional and modern rice processing were adopted. It was noted that,
a few modern rice enterprises use methods such as sun-drying for the drying of
paddy, some use both sun-drying and mechanical driers run by diesel. While some
use electrical driers understandably, the costs of processing was not the same
for every enterprise. Again with advancement of rice processing technology, the
processing process became less labor intensive. As such, the more advanced rice
enterprises were expected to have lower labor costs as compared to the less
advanced rice enterprises, hence the need for increase in the number of modern rice
processing enterprises in North-Central States of Nigeria to address the
problem of scarcity of local processed rice (Musa, 2015).
1.2 STATEMENT OF THE
PROBLEM
Rice
quality is a concern to Nigerian consumers who show clear and strong interest
in imported rice, because of the high level of cleanliness (WARDA 2015). This
has often been viewed as reflecting the level of competition of imported rice
over local rice (WARDA, 2015). In most cases, when computing the cost and
benefit of local rice, hardly does it include the cost of processing (Luga,
2011). Luga, (2011) explained further that if this is done, it may be easy to
identify the problem of investment. Existing low availability of local
processed rice reflect low level of improved processing technology in rice
processing enterprises (Mccloskey, 2014). Mccloskey, (2014) stated further
that, this low level of improved technology is demanding high level of
investment in the enterprise to achieve progress in raising performance to meet
consumers demand. The major challenge of rice processing enterprises in Nigeria
lies on development of appropriate technology through investment to handle the
modern and traditional rice processing enterprises (Mark, 2014). Mark, (2014)
stressed further that there has been relative decline in the past on the output
of processed rice which is attributed to disinvestment in the enterprises,
partly, due to inadequate finance. However, Government reforming the rice
enterprises considering the recent financial restructuring policies has not
yielded much perceivable benefits (Onwumere and Ichie 2013).
History
has it that, rice processing according to Kali (2015) was traced in Nigeria to
the pre-independence era of 1930s when one of the first rice enterprise was
discovered in Mbayongu district of Vande-ikya Local Government Area of Benue state.
During the 1940s and 1950s, a few rice enterprises started coming up in and
around koti for the purpose of supplying paddy from Jato- akaa. All the rice processing
enterprises were using the crude (manual) method or techniques in processing rice
with low performance (Kali, 2015). Gradually, the number of modern rice
enterprises in North-central decreased from 30 enterprises in 1970, to 25
enterprises in 1980s. At the same time, the capacity utilization of the
enterprises also decreased from 45% in 1970-76 to 30% in 1980-83 (Kali, 2015).
This development showed that, the modern rice enterprises in North-central
loses its relevance and were shut-down (Ajones 2015).
According
to the findings of Mkanna (2016), one of the major threats in the declining of
the modern rice enterprises was attributed to the growth of traditional rice
enterprises that perform similar tasks performed by the modern rice
enterprises. Upton (2015) identified other factor to be the advent of petty
paddy rice traders around the traditional enterprises who supply enough paddy
to the traditional enterprises and little or none to the modern enterprises. On
his part, Mbaverluior, (2015) pointed out that, the imposition of levy on rice
processors and fixation of processing price below the required price by
government was another factor that led to the shut-down of the modern rice
processing enterprises.
Mbahar, (2014) opined that, the penetration of
traditional rice processing enterprises in the rural areas in the early 1960s
increased sharply and became competitive with the modern rice processing
enterprises. Hazra, (2015) in his findings discovered that, the number of
licensed traditional processors increased from about 130 units in 1970s to more
than 200 units in 1988. Along with this, there were a huge number of un-licensed
traditional rice enterprises, which were operating in a much wider scale in the
rural areas. The increase in traditional rice enterprises led to a significant
diversion of the marketed surplus paddy away from the normal market to the
hands of the petty traders. The Government and the modern rice processing
entrepreneurs had no control over it. Neither the market administrators could
curb this undesirable development in the paddy markets nor could the modern
rice processing enterprises adapt to changed scenario, resulting into drastic
fall in the number of modern rice enterprises and capacity utilization (Patra,
and Hazra, 2015).
The
situation changed momentum when the Government intervened in the year 2011 by
subsidizing the cost of modern rice processing equipment’s and machineries.
This development helped to maintain about 50 modern rice enterprises in North-central
States to boost rice processing through its input capacity by investing more in
the business (Patra, and Hazra, 2015). According to Osuala (2015), the capacity
of an enterprise can only grow if the entrepreneur improves the input capacity
of the enterprise by investing more on input facilities and resources. Osuala
(2015) further stated that, the improvement of the input facilities and
resources of an enterprise depend on the entrepreneur’s financial investment.
The level of financial investment determines the income of the entrepreneur
(Osuala, 2015).
It
was established in Abu (2015) findings that, traditional rice processing
enterprises were manually and rural based operations. Also that, the modern
technology of rice processing is generally considered as the easiest means of
breaking the vicious cycle of manual labor in processing rice. Abu (2015) also
stated that, inequality increase in Nigeria as a result of poor human capita
development arising from manual labor. Therefore, the linkage of investment to
performance is a determinant of sustainability in rice processing business in
the country. Nuru (2015) in his study confirmed that, there is a widespread
evidence of manual labor in rice processing in North-central Nigeria,
especially when the rural rice processors rely heavily on family labor for
their processing operations. Nuru (2015) further pointed out that, developing
economies are characterized by low level human development which not only
impedes present but also future productivity. In the light of this, Fasoranti
(2016) reported that, the reduction of human manual labor in rice processing is
a sure way of promoting large output of processed rice to eliminate scarcity of
local processed rice in North-Central, Nigeria.
It
has been argued by different researchers (Olukosi, 2015, and Isifor, 2015)
that, the scarcity of local processed
rice in North-Central is due to the absence of improved technology and the
inability of the rice processors to ascertain the cost and returns in rice processing enterprises.
Perhaps, this is why the much publicized rice processing enterprises
development projects by the North-Central States Government failed to produce
the desired impacts in rice processing business (Olukosi, et al. 2015). It is a well-known fact according to Ellis (2016)
that, the bulk of rice processed in Nigeria takes place on small-scale
processing but with tremendous potential outcome effect in the processing
enterprises, organization and techniques remaining poor. Ellis (2016) pointed
further that, the problem of inadequate supply of paddy to enterprises lead to
under- utilization of the enterprises thereby decreasing the rice enterprises
income and increasing scarcity. The Nigerian rice processors do not seem to
fully exploit opportunities for capital formation, improved resources base,
higher processing capacity, innovation and improved management techniques,
thereby compelling them to operate sub-optimally (Nuru, 2015).
Rice
processing enterprises in North-Central States are faced with the challenges of
inadequate supply of paddy as well as poor electricity supply that result to
low investment and performance of the enterprises leading to scarcity of processed
rice (Jack, 2016). Jack (2016) reported further that, the activities of
herdsmen induced environmental security problems to paddy producers which
undermine investment in the production of paddy, making it difficult for the
rice processing enterprises to access paddy. The rice enterprises in North–Central according to Musa (2015) are still
traditionally rooted with over 80% of them processing rice at subsistence
level. Musa, (2015) stressed further that, the quantity of rice processed from
each enterprise can hardly feed the States in North-Central, let alone
exporting to other parts of the country. Nuru (2015) further confirmed in his
report that, importation of rice into the country on daily basis is a sad reminder
of one fact that, the North-central States could not boast of self-sufficiency
in rice processing because of the high number of traditional rice processing
enterprises. Market surveys indicated that, at present, the bulk of rice in
North-Central States are from other parts of Nigeria and even foreign countries
(Musa, 2015).
Rice
processing is yet to command its place as a business in North-Central (Ellis,
2016). Despite the much publicized North-Central States Government support and
intervention effort. For example, out of 15.024 million metric tons of capacity
installation in the modern rice processing enterprise mills, only 14.230
million metric tons had been actually processed and out of 1,502,400 million
metric tons of capacity installation in the traditional rice processing
enterprise mills, only 1,405,500 million metric tons had been actually
processed (Ajones, 2015).
Given
the above problems, the following research questions were deemed appropriate.
i.
What are the features of
the modern and traditional rice processing enterprises?
ii.
What is the relationship
between capacity installation, capacity utilization and capacity unutilized of
the modern and traditional rice processing enterprise mills?
iii.
What are the factors that
influence the capacity utilization of the enterprise mills?
iv.
What are the determinants
of investment and performance of modern and traditional rice processing
enterprises?
v.
What is the feasibility
and viability of investment in modern and traditional rice processing
enterprises?
vi.
What is the estimated
performance of modern and traditional rice processing enterprises?
vii.
What is the effects of
investment on performance in modern and traditional rice processing
enterprises?
viii.
What are the factors
militating against the adoption of the modern technology of rice processing
enterprises?
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is
to comparatively analyze the investment and performance of modern and
traditional rice processing enterprises in North-Central Nigeria. The specific
objectives are to:
i.
examine the features of
modern and traditional rice processing enterprises;
ii.
examine the relationship
between capacity installation, capacity utilization and capacity un-utilization
of modern and traditional rice
processing enterprise mills;
iii.
examine the factors
influencing capacity utilization of modern and traditional rice processing
enterprise mills;
iv.
analyze the determinants
of investment and performance among modern and traditional rice processing
enterprises,
v.
examine the feasibility
and viability of investment in modern and traditional rice processing
enterprises;
vi.
estimate the performance
of modern and traditional rice processing enterprises
vii.
assess the effect of
investment on performance in modern and traditional rice processing enterprises
and
viii.
examine the factors
militating against the adoption of modern technology of rice processing
enterprises.
1.4 HYPOTHESES
In line with the specific objectives, the following
null hypotheses were tested;
Ho1: There is no significant difference in
capacity installation, capacity
utilization and capacity
un-utilized of modern and traditional rice processing enterprise mills.
Ho2: There is no significant difference in the
performance of modern and traditional rice processing enterprises.
Ho3 There is no significant effect of
investment on performance of modern
and
traditional
rice processing enterprises
1.5 JUSTIFICATION FOR THE STUDY
The
thrust of this study is in line with the emerging order of solving the problem
of scarcity of local processed rice in North-Central States and Nigeria in
general through an integral approach, which considers both the modern and
traditional rice processing enterprises at the center. This was basically
achieved following an assessment of the combined effects of investment and
performance. Evidence from the study of Emeka (2015) explained the meaning and
importance of investment in rice processing enterprises. In this regard,
specific consideration was given first to the role played by investment in rice
enterprises, based on performance in the processing of rice.
Secondly, the investment inequality
relationship was explored to show the quantity of rice processed. Thirdly, it
was in line with the performance employed to increase processing. The study
provide empirical underpinning to the policies that should be pursued in a
successful supply of processed rice to the market. The selection of the modern
and traditional rice processing enterprises for this research is drawn from the
structural linkage between the two enterprises. Structural change is a
transformation from reliance on the traditional method of processing rice
manually to the modern method where improved technology in processing and other
services dominate (Mccloskey, 2014).
To
account for the strong rice enterprise interdependence between traditional and
modern rice processing enterprises, balanced rice enterprise investment was
seen as a strategy for sustainable economic growth. In other words, it would be
more effective and efficient to foster policies to include all the rice
enterprises so that economy wide, investment can gain optimally from its
virtuous cycle, including the positive externalities of rice enterprises. It is
expected that empirical estimates of the determinant variables of rice enterprises
performance in both the traditional and modern rice processing as modeled in
this study will help policy makers in pursuant of input capacity other than
output capacity relied on. Jones (2014) asserted that in the long-run, supply
response at the rice enterprises level is not possible without investment.
It
is also expected that the conceptualization of this study adopted the
investment economic model into contemporary thoughts of integration modern and
traditional rice processing enterprises income inequality in investment. The
economic and development theory of Neoclassical (1954, reviewed, 2013)
indicates that, surplus labor from traditional rice enterprises is transferred
to the modern technology rice enterprises whose growth over time absorbs the surplus
labor, promotes industrialization and stimulates sustained development. In the
model, the subsistence traditional rice enterprises is typically characterized
by low wages, an abundance of labor and low productivity through labor
intensive processing process. In contrast, the modern rice processing
enterprise is defined by higher wage rates as compared to the traditional rice
enterprises, higher marginal productivity and a demand for more workers. Also,
the modern rice enterprise is assumed to use a processing process that is
capital intensive thus, investment and capital formation in the processing rice
enterprises are possible over time as modern entrepreneurs profits are
reinvested in the capital stock (Jones, 2014).
Improvement
in the marginal productivity of labor in the rice processing enterprise is
assumed to be a low priority as the hypothetical developing nations investment
is going towards the physical capital stock in the rice processing enterprises.
However, the basic relationship between the two rice enterprises is that, when
the modern rice enterprises expand, it draws labor from the traditional rice
enterprises. This causes the output per head of laborers who move from the
traditional rice enterprises to the modern rice enterprises to increase. An
understanding of the tenants of this relationship between the two rice
enterprises could partially explain the causes of scarcity of local processed
rice in the market.
Though
the role of investment in rice enterprises may not be a sufficient condition
for adequate supply of processed rice, it still remains a condition
(Schumpeter, 1954 reviewed by Kalu, 2014). To this end, the study has provided
a strategy for accelerating investment in the traditional and modern rice
processing enterprises. This has employed a framework that will identify the
sources of investment. Considering the work of Jones (2014), econometric
approach was used to decompose the sources of investment in the two rice
enterprises to changes attributable to higher capacity in rice processing
through additional inputs and other unexplained factors.
This factor could be referred as total factor
processing because it encompasses all sources of economic investment
attributable to capital and labor. The derived total factor processed can be
related to government policies and market variables that can help exchange
rate, credit policies public expenditures and infrastructural development.
Estimates from this procedure bring a clearer scenario of investment and
performance and also permits the drawing of inference whether investment is
“extensive” or intensive”, that is, whether investment has been driven by
factor input investment or by processing increases. The reason for this
distinction is to determine if observed investment in a rice enterprise or an
economy in general is “sustainable”. Iyaha, and Dranah (2015), noted if
investment is mainly propelled by rapid increase in capital, such investment
may not be sustainable in the long-run. However, if investment is driven by
increases in total processing, such investment can be sustained almost
indefinitely. It is based on this processing approach measuring investment that
makes the study different from other studies on the role of investment in rice
processing enterprises to increase supply of local rice to the market.
Extensively,
this study transcends beyond the causes of change in investment to its effect
on the quantity of rice processed given varying levels of income inequality
across the entrepreneurs. The approach of this study is geared towards
providing empirical support to the assertion that, investment in rice
enterprises is related to the quantity of rice processed (performance) by the
modern and traditional rice enterprises and not a sufficient condition to
satisfy the market demand with the supply of rice.
The
intrinsic link between the quantity of rice processed and investment by the
entrepreneur is in income inequality measured by the Gini coefficient, a
measure of income dispersion. Olukosi and Isifor (2015) failed to show a direct
linkage between investment and any core development objective. According to
Okoroafor (2014), any indirect inference drawn from the coefficient, estimates
of such a research in relation to an economic objective as poverty reduction
remains rather speculative, hence cannot provide a variable guide for policy
formulation in the specified area. Okoroafor (2014), further pointed that,
growth is meaningful only when it accentuates to development that can as well
be empirically tested. Olukosi and Isifor (2015) looked at investment without a
core development objective, but this study is looking at investment in line
with the performance of modern and traditional rice processing enterprises for
maximum output.
The
study is expected to be useful to rice processing entrepreneurs, marketers,
consumers, students and policy makers. Since rice processing is a business that
can create Jobs, generate income for the entrepreneurs and also for the
government through taxes, there is need for entrepreneurs to economically plan
before investing. Rice is noted for high incidence of price instability all
year round. This study will help marketers in planning, budgeting and making
investment decision in their marketing activities. This research will be useful
to consumers as it will enlighten them on the market performance on when to buy
rice in large quantity for storage when prices are low and supply is high.
To students, it will form a basis for further
research and reference materials. It will be useful to policy makers who need
to know whether policy targets are being achieved and how investment will
change with a given percentage of output resulting to economic policy
implementation. More so, information from this study can contribute to more
rational and sustainable investment in both modern and traditional rice
processing enterprises.
1.6 SCOPE OF THE STUDY
This
study is set to consider the modern and traditional rice processing
enterprises, in North-central Nigeria from 1987-2016. It has given a broader
view on the investment and performance of modern and traditional rice
processing enterprises, and has made recommendations on the facts about
investment and performance of modern and traditional rice processing
enterprises, for the purpose of addressing the problem of scarcity of local
processed rice in the study area.
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