ABSTRACT

The attendant unimpressive viability and general performance of the oil palm produce industry which hitherto served as the mainstay of Nigeria's economy constitute serious developmental problem. The remarkably marginal state of capital input provision to the business enterprises and low level efficiency of the key producers — the small-scale millers in the wake of rising cost of production inputs and the heightening demand for the commodity in both domestic and export trade sectors engendered this study which assessed the capitalization/financing and efficiency of small- scale palm oil processing mills in Imo State, Nigeria. The socio-economic characteristics of the small-scale oil palm produce millers were examined; the extent of capitalization and the factors affecting the capitalization of the millers' business operations were determined; the annual operating profitability was assessed. Estimation of technical efficiency, identification and quantification of the determinants of technical efficiency of the sampled millers were carried out. Primary data were collected from 30 consistently operating oil palm produce processing mills selected using multi-stage, sampling technique. Cost-route approach was used to collect data on the socio-economic characteristics, inputs and output magnitudes and values of the mills. Secondary data were obtained from journals and bulletins. The data were analyzed using descriptive statistics, financial ratios and econometric techniques. The analysis of data showed among others that capitalization was significantly and positively determined by profit, access to credit, oil palm produce processing business experience, level of education and membership of cooperative societies. Interest payment on borrowed capital and age were found to be inversely related to capitalization of the respondents' business enterprises. The average respondent made a profit of Ni 623,560.82. The financial ratio analyses results showed favourable profitability but signaled undercapitalization of the respondent's business enterprise. The level of operating capital base ranged between N50,000 to N2,500,000 with a mean of N532,866.67. Only 33.34% of the respondents borrowed to support equity capital and this is mainly from informal sources. The estimation of the production function of the respondents showed that the total variation in output of respondents' business enterprises estimated at 24 .42% was due to technical inefficiency. The technical efficiency estimates showed a mean value of 69.89%. This indicated the existence of substantial opportunities for the respondents to increase productivity and income through more efficient utilization of resources. It was also found out that the borrower and non borrower respondents had technical efficiency mean values of 69.33% and 69.11% respectively. It is therefore recommended that policies geared towards improving oil palm produce business viability in Imo State be focused on enhanced access to credit, education, cooperatives membership and oil palm plantations establishment by the core processors. More so, the three tiers of government. And other stakehoiders should strategically establish fully composite, mechanized palm oil mills with necessary utilities in place, target young and experienced category of operators as beneficiaries.