PERFORMANCE OF SESAME MARKETING SYSTEM IN NASARAWA STATE, NIGERIA

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Over the years in Nigeria, successive agricultural development policies and efforts have tended to tilt more in favour of food sufficiency, food security, increased food and fibre export than domestic marketing and processing. Paradoxically, this trend of development has led to increases in the production of certain farm commodities while at the same time, glut and scarcity are being experienced in some others (Ingawa, 2004). Even with the appreciable agricultural growth rate of 10.33% in 2011/ 2012, Nigeria still imported food and raw materials she could produce (CBN, 2012). Noticeably, increases in output, for instance, have not translated into increases in the earnings of farmers as the vast majority and increasing number of them still live below the poverty line (Ingawa, 2004; Adejobi, Awotide and Ayanwale, 2007). As the agricultural marketing system in Nigeria is poorly developed, there is need for an efficient and effective agricultural marketing system to engender agricultural development so that all the benefits derivable in the process can be applied to other sectors to achieve development as well (Njoku, 2000; Ingawa, 2004). Marketing of farm produce is an essential ingredient in agricultural and economic development. Marketing can contribute to economic development in Nigeria by stimulating production and consumption, facilitating specialization and capital formation and generating income to individuals and foreign exchange earnings to the nation (Nwokoye, 1987; Olukosi and Isitor, 1990). In most cases, constraints, imperfections and inefficiencies in the market structure are most often responsible for low produce income, low consumer satisfaction, high food prices, high degree of wastages and nutritional problems (Adekanye, 1988).

Agricultural marketing systems are dynamic, competitive and involve continuous change and improvement. Market performance of farm produce is viewed as the assessment of how well marketing activities are performed (Abbott and Makeham, 1986). This is necessary on a continuous basis to get the right farm commodities to the right place at the right time and price (Fabiyi, 2004). The evaluation of market performance based on market structure, marketing margin and efficiency reveals how effective, efficient, integrated, perfect and profitable or otherwise these markets are and the attention required in area of improvement.

As the engine of success in any economy, efficient marketing effectively connects producers and consumers, directs efficient resource allocation and maximum economic output and leads to integration of markets (Crawford, 1997; Chikwendu, 2003). Market integration is central to the assessment of market performance and a useful measure of pricing efficiency, competitiveness and interdependence between markets and middlemen. Spatial market integration ensures that a regional balance occurs among food-deficit, food-surplus and non-food producing areas through transmission of price signals (Chirwa, 2000). Consequently, volatility of prices is reduced, specialization is promoted, gains from trade are realized and welfare of market participants is enhanced through the normal profits they are expected to make.

The key players in the marketing system, whose activities significantly influence efficiency, are farmers and middlemen. Farmers and middlemen are indispensably interdependent and marketing margin is the critical determinant of returns to them as well as retail food prices. The major components of the analysis of marketing margin consist of gross marketing margin, net marketing margin and farmer’s share. The net marketing margin accrues to the middlemen as profit (Anuebunwa, 2006). Unless middlemen earn profit in excess of what they require to pay for the interest on borrowed capital and cater for the risk they take, their morale to continue to invest will be dampened (Abbott and Makeham, 1986). The farmer’s share is the proportion of the consumer price that goes to the farmer (Mejeha, Nwosu and Efenkwe, 2000). Farmer’s share is a measure of the farmer’s economic power (Barallat, McLaughlin and Lee, 1987) and an important determinant of farm investment decisions. A low farmer’s share will obviously be a disincentive to invest (Idem, 1999). Normal profit making by middlemen is necessary but not sufficient condition for efficiency. The use of net revenue function (pseudo-profit function) also accounts for possible imperfection in the marketing system (Foltz, 2004).

Ideally, markets of farm produce in open competitive market economy are expected to be perfectly competitive with large number of buyers and sellers, homogenous product, perfect dissemination of information and perfect factor and product mobility (Subba Reddy, Raghu Ram, Neelakanta Sastry and Bharani Devi, 2005). Markets in Nigeria are far from being perfectly competitive as they exhibit, in some cases, collusion, discriminatory pricing, monopolistic tendencies and imperfect flow of information (Adekanye, 1988). The main determinants of the nature of competition are the number of buyers and sellers and their size distribution (Branton and Livingstone, 1979). The number of sellers and buyers ranges from one to many. The size distribution is the economic power of the buyers and sellers and ranges from very small to very large. The interplay between few large firms and many small ones can be analysed in a process called concentration to determine how perfect, imperfect and monopolistic the markets are (Okereke and Anthonio, 1988; Tiku, Ahmed and Agbogo, 2004; Annuebunwa, Okoye and Achike, 2009).

Social capital, which embodies social dimensions such as social network, trust, reciprocity, social norms and collective actions, is regarded as essential as labour and physical and human capital in any productive process (Fafchamps and Minten, 1999; Beugelsdijk and Schaik, 2003; Johnson, Suarez and Lundy, 2006; Gotschi, Delve and Freyer, 2006). For traders in particular, social capital enables them deal with each other in more trustworthy manner by granting and receiving credit, exchanging price information and economizing on quality inspection, thereby ameliorating poor marketing institution, high search costs and imperfect and asymmetric information (Fafchamps and Minten, 1999). In addition, social capital is capable of sustaining capacity for collective action and supplying of public goods through collective action (Johnson et al., 2006; Sabatini, 2006). Thus, social capital has enormous potential for improving the performance of the agricultural marketing system in Nigeria beset by intractable constraints such as inadequate information and dissemination, poor and inadequate storage facilities, lack of standardization of many farm commodities and lack of access to reliable and adequate credit. The scenario of agricultural marketing and social capital in the foregoing can be applied to sesame in Nasarawa State. The study of market performance of sesame and return to social capital is an important step towards desired improvement in the marketing system for enhanced production and income to farmers and other market participants in Nasarawa State.

Sesame (Sesamun indicum L), also called beniseed, is believed to have originated from tropical Africa. Major producing areas worldwide include India, China, Malayar, Sudan, Mexico, Pakistan, Venezuela, Uganda and Nigeria. Japan, U.S.A., Italy, Israel and Venezuela are the major importers (Negedu and Habeeb, 2001). In Nigeria, the crop is widely grown in the northern and central zones of the country as one of the major export crops (Ochigbo and Idowu, 2002). Average seed yields, ranging from 500 – 800kg/ha obtained from farmers’ fields, are considered relatively low compared to average yield of 1000 kg/ha obtained from research farms (NCRI, 2002). Annual output figures increased from 56000 metric tonnes in 1994 to over 93,250.7 metric tonnes in 2007 (Negedu and Habeeb, 2001; RMRDC, 2004; NBS, 2007). Generally, sesame seed is used in food preparation such as stew and confectioneries. The oil is used in manufacturing industries as well as substitute for olive oil in salads and cooking oil. Sesame is an important commercial crop, and one of the major crops produced in different locations of Nasarawa State. With its estimated output of over 41570 metric tonnes (about 40% of the national output) from about 46710 hectares under cultivation in the state, an annual estimated foreign exchange earning of US $12.3 million can be generated (Ochigbo and Idowu, 2002; NADP, 2010). Sesame is marketed mostly in its primary form in the State. The oil extracted by traditional methods and the cakes resulting from the process are used mainly for local consumption.