INCOME, SAVINGS AND INVESTMENT PATTERNS OF SMALL-SCALE AGRO-BASED
ENTREPRENEURS IN ANAMBRA STATE, NIGERIA
BY
NSIONU, CHIDIMMA PERPETUAPG/M.Sc/11/58314
DEPARTMENT OF AGRICULTURAL ECONOMICS
FACULTY OF AGRICULTURE
UNIVERSITY OF NIGERIA, NSUKKA
JANUARY, 2015.
1
TITLE PAGE
INCOME, SAVINGS AND INVESTMENT PATTERNS OF SMALL-SCALE AGRO-BASED ENTREPRENEURS IN ANAMBRA STATE, NIGERIA
A DISSERTATION SUBMITTED TO THE DEPARTMENT OF AGRICULTURAL ECONOMICS, UNIVERSITY OF NIGERIA, NSUKKA
IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF MASTER OF SCIENCE (M.Sc) DEGREE IN AGRICULTURAL ECONOMICS
BY
NSIONU, CHIDIMMA PERPETUAPG/M.SC/11/58314
SUPERVISOR: PROF. NOBLE J. NWEZE (KSP).
i
CERTIFICATION
NSIONU, Chidimma Perpetua a postgraduate student in the Department of
Agricultural Economics with registration number PG/M.Sc/11/58314 has satisfactorily
completed the requirements for course and research work for the award of the degree
of Master of Science (M.Sc) in Agricultural Economics. The work embodied in this
dissertation, except where duly acknowledged, is the product of my original work and
has not been previously published in part or full for any other diploma or degree of this
or any other university.
______________________________ ________________________NSIONU, CHIDIMMA PERPETUA DATE(STUDENT)
______________________________ ________________________PROF. NOBLE J. NWEZE (KSP) DATE(SUPERVISOR)
______________________________ ________________________PROF. S. A. N. D. CHIDEBELU DATE(HEAD, DEPT. OF AGRIC. ECONOMICS)
______________________________ ________________________ (EXTERNAL EXAMINER) DATE
ii
ACKNOWLEDEMENT
I appreciate the wonderful effort of my supervisor Prof. Noble J. Nweze (KSP) for
his commitment, effort and endless patience to see that this research work was a success.
Notwithstanding his tight schedule he still had time to read my work, I pray that Almighty
God in His infinite mercy bless him in Jesus Name Amen.
My appreciation goes to my lecturers who laid the theoretical foundation upon
which this work was carried out. They are Professors S. A. N. D. Chidebelu (Head of
Department Agricultural Economics), N. J. Nweze (KSP), E. O. Arua (HRH), C. J.
Arene, C. U. Okoye, E. C. Okorji, A. I. Achike, E. C. Eboh and E. C. Nwagbo (Late).
Others were Doctors A. A. Enete, N. A. Chukwuone, B. C. Okpukpara, F. U. Agbo, E. C.
Amaechina, and Mrs. P. I. Opata. Other lecturers include Mr P. B. I. Njepuome, Mrs. C.
S. Onyenekwe, Mrs. R. N. Arua, Mrs. C. U. Ike, Mr. T. U. Okpara, Mr K. P. Adeosun,
Miss S. N. Chude, Miss O. A. Eze, Miss. A. P. Nnaji, Mr J. E. Ihemezie, Mr I. C.
Ukwuaba. Miss M. C. Ifiorah and Miss T. G. Mbari . The non-academic staff of the
Department of Agricultural Economics includes Comrade Goodluck Emeahara, Mrs.
Romain, Mrs. Ifeanyi Ukwu and Aunty Blessing Onyishi who is so kind and
accommodating.
My words may not be enough to appreciate my wonderful and unique parents, Mr.
and Mrs. Charles Nsionu, my brothers, Chukwudubem, Mmesomachukwu and my lovely
sister Kosisochukwu, for their support towards the completion of this work, I love you all.
I thank immensely my dear cousin Nwokolo Chukwudi .C.
With deep sense of gratitude I appreciate my roommates, Chieloka Ewuru, Mrs.
Chinelo Okoye, Miriam Egbuche, Juliet Ugwuekpe, Ezenwanne Jane, Irene Ozodimma
and Lady Anne Osuorji. Am also grateful to my friends and colleagues, Oti, Godwin
Okpani for his support, love and care towards me, Dr. Chuka Okoye, Desmond Nnamani,
Ezika Chidomebube, Offorjama Pascal Obinna, Benedict Nwachukwu, Dr. Lady Grace
Ijeoma Uwaoma, Umoinyang Mfon, Lucy Onyenakazi, Ifeoma Ozoka, Eucharia
Okonkwo, Amaka Obi, Anthonia Awasia, Okpara Sunday, Adaobi Nwokeabia, Dr. Chris
Ogbanje, Mr Onyishi, Oyibo and Ali Maliki. My special thanks to Catholic Association
of Postgraduate Students (CAPS), who through their prayers sustained me throughout this
programme.
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ABSTRACT
The study examined income, savings and investment patterns of small-scale agro-based entrepreneurs in Anambra State. The study utilized primary data to achieve this objective. The data were collected through multi-stage random sampling technique from 160 respondents. These data were analyzed with descriptive statistics including 4-point Likert rating scale, and multiple regressions. Tests of significant effects and differences were carried out with t-test and analysis of variance (ANOVA) techniques. Research results indicated that the average age of the small-scale agro-based entrepreneurs were 40years, while majority (33.8%) of them fell within the age range of 31-40 years. Also, majority (57.5%) of the small-scale agro-based entrepreneurs were males, while 43.8% of them were married. Household size of six to ten persons was the highest at 41.3% with an average of 9 persons per household, while twenty five percent of the agro-based entrepreneurs had completed their primary school education. Furthermore, majority (26.9%) of the entrepreneurs were engaged in groundnut processing, while the average experience of the entrepreneurs was 9 years and majority (38.1%) of them had 6 – 10 years of experience. Further results showed that the average monthly income of the small-scale agro-based entrepreneurs was N12,031.25 while their average monthly savings was N4,550.00. Majority (58.3%) of the small-scale agro-based entrepreneurs saved with esusu. Further results showed that majority (46.3%) of the entrepreneurs invested within N21,000 - N30,000 in their businesses while 46.3% of them also sourced their investment capital through personal savings with only 2.5% of them receiving loans from bank to finance their investments. There were no significant (p>0.1) differences in investment pattern of the agro-based entrepreneurs across the agricultural zones. Furthermore, the results showed that the socio-economic characteristics were significant (p<0.1) in explaining the changes in income, savings and investment patterns of the agro-based entrepreneurs. Age, educational level, savings level, asset level and level of skill acquired were positive and significant (p<0.05) in affecting the income pattern of the agro-based entrepreneurs. Also, the savings level of the entrepreneurs were positively and significantly (p<0.01) affected by their income and asset levels, and level of skill acquired, while the effects of household size and educational level were negative and significant (p<0.05). Furthermore, educational level, level of skill acquired, savings level and amount of money borrowed by the entrepreneurs had positive and significant (p<0.05) relationship with their investment pattern while the effects of household size and amount of interest paid on borrowed money were negative and significant (p<0.05). Further results showed that the challenges facing small-scale agro-industry were at an average of 2.85 on a 4-point Likert rating scale. These challenges included erratic power supply, lack of accessibility to their business areas, multiple government taxation and low patronage. The study recommended policies that will enhance the income, savings and investment levels of small-scale agro-based entrepreneurs in Anambra State.
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TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
Table of Contents vi
List of Tables x
List of Figures xi
Chapter One: Introduction
1.1 Background of the Study 1
1.2 Problem Statement 4
1.3 Objectives of the Study 6
1.4 Hypotheses of the Study 7
1.5 Justification of the Study 7
Chapter Two: Review of Related Literature
2.1 Concept of Small-Scale Agro Based Entrepreneurs 9
2.1.1 Meaning of Small Scale Industries/Enterprises 11
2.1.2 Roles of Small-Scale Agro-Based Entrepreneurs in Economic Development 12
2.2 Socio-Economic Characteristics of Small-Scale Agro-Based Entrepreneurs 13
2.2.1 Gender of Small-Scale Agro-Based Entrepreneurs 14
2.2.2 Age of Small-Scale Agro-Based Entrepreneurs 14
2.2.3 Education Level of Small-Scale Agro-Based Entrepreneurs 14
vi
2.2.4 Marital Status of Small-Scale Agro-Based Entrepreneurs 15
2.2.5 Occupational Categories of Small-Scale Agro-Based Entrepreneurs 15
2.2.5 Income Level of Small-Scale Agro-Based Entrepreneurs 16
2.3 Sources of Capital/Funds for Investment by Small-Scale Agro-Based
Entrepreneurs 16
2.4 Patterns of Investment and Savings of Small-Scale Agro-Based Entrepreneurs18
2.4.1 Patterns of Investment of Small-Scale Agro-Based Entrepreneurs 18
2.4.2 Patterns of Savings of Small-Scale Agro-Based Entrepreneurs 19
2.5 Factors Affecting Income, Savings and Investment Patterns of
Agro-Based Entrepreneurs 20
2.6 Factors Affecting the Income of Small-Scale Agro-Based Industry 22
2.7 Theoretical Framework 27
2.7.1 Life Cycle Hypothesis 27
2.7.2 Permanent Income Hypothesis 28
2.7.3 Keynesian and Accelerator Theories 30
2.8 Analytical Framework 30
2.8.1 Likert Scale 31
2.8.2 Multiple Regression 31
2.8.3 Analysis of Variance (ANOVA) 32
2.8.4 T- Test 32
Chapter Three: Research Methodology
3.1 Area of Study 33
3.2 Sampling Technique 34
vii
3.3 Data Collection 34
3.4 Analytical Technique 35
Chapter Four: Results and Discussions
4.1 Socio-Economic Characteristics of Small Scale Agro Based Entrepreneurs 39
4.1.1 Age of Small-Scale Agro-Based Entrepreneurs 39
4.1.2 Sex of Small-Scale Agro-Based Entrepreneurs 40
4.1.3 Marital Status of Small-Scale Agro-Based Entrepreneurs 40
4.1.4 Household Size of Small-Scale Agro-Based Entrepreneurs 41
4.1.5 Educational Level of Small-Scale Agro-Based Entrepreneurs 42
4.1.6 Type of Agro-Based Activity Engaged by Small-Scale
Agro-Based Entrepreneurs 43
4.1.7 Nature of Business of Small-Scale Agro-Based Entrepreneurs 44
4.1.8 Years of Experience of Small-Scale Agro-Based Entrepreneurs 44
4.1.9 Possession of Requisite Skills by Small-Scale Agro-Based Entrepreneurs 45
4.2 Income and Savings Status and Patterns of Small-Scale
Agro-Based Entrepreneurs 46
4.2.1 Income Status of Agro Based Entrepreneurs 46
4.2.2 Income Sources of Small-Scale Agro-Based Entrepreneurs 47
4.2.3 Savings Status of Small-Scale Agro-Based Entrepreneurs 48
4.2.4 Savings Patterns of Small-Scale Agro-Based Entrepreneurs 49
4.3 Investment Patterns of Small-Scale Agro-Based Entrepreneurs 50
4.4 Sources of Capital for Investment by Small-Scale Agro-Based entrepreneurs51
4.4.1 Sources of Capital 51
viii
4.5 Factors Affecting Income, Savings and Investment Patterns of Small-Scale
Agro-Based Entrepreneurs in Anambra State 52
4.5.1 Factors Affecting Income Pattern of Small-Scale Agro-Based Entrepreneurs52
4.5.2 Factors Affecting Savings Pattern of Small-Scale Agro-Based Entrepreneurs54
4.5.3 Factors Affecting Investment Pattern of Small-Scale Agro-Based Entrepreneurs55
4.6 Factors Affecting the Income of Small-Scale Agro-Based Industry 57
Chapter Five: Summary, Conclusion and Recommendations
5.1 Summary 60
5.2 Conclusion 62
5.3 Recommendations 63
References 65
Appendices 72
LIST OF TABLES
ix
Table
1: Age distribution of small-scale agro-based entrepreneurs in Anambra State39
2: Distribution of small-scale Agro-based Entrepreneurs according to marital
status41
3: Frequency distribution of small-scale agro-based entrepreneurs according to
Household size 41
4: Frequency distribution of small-scale agro-based entrepreneurs according to
level of education 42
5: Frequency distribution of small-scale entrepreneurs according to their type of
agro-based activities 43
6: Frequency distribution of small-scale agro-based entrepreneurs according to
their level of experience 45
7: Frequency distribution of small-scale agro-based entrepreneurs according to
Their level of income 46
8: Distribution of small-scale agro-based entrepreneurs according to their
sources of income 48
9: Frequency distribution of small-scale agro-based entrepreneurs according to
their monthly savings 48
10: Pattern of Investment of agro-based entrepreneurs 51
11: Regression result on the factors affecting the income of small-scale
agro-based entrepreneurs 53
12: Regression result on the factors affecting the savings of small-scale
agro-based entrepreneurs 55
13: Regression result on the factors affecting the investment pattern of small-scale
agro-based entrepreneurs 57
14: Likert rating scale of factors affecting income of small-scale
agro-based industry 58
LIST OF FIGURES
x
Figure
1: Sex distribution of small-scale agro-based entrepreneurs in Anambra State 40
2: Nature of business of small-scale agro-based entrepreneurs 44
3: Possession of requisite skills by small-scale agro-based entrepreneurs 46
4: Distribution of small-scale agro-based entrepreneurs according to their
pattern of savings 49
5: Sources of capital for agro-based entrepreneurs 52
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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The role of agriculture and agro-based industries in Nigeria cannot be over
emphasized. Agriculture is a source of food for consumption by man, feeds for animals
and raw material for the agro-based industries (Edoumiekumo&Audu, 2009). Agriculture
contributes to the growth of the economy and also provides employment opportunities for
the teeming population and eradicates poverty in the economy, serves as means of income
and livelihood, helps in wealth creation and generation of foreign exchange earnings for
the country (Nigerian Investment Promotion Commission, 2004). This dominance of
agriculture places great premium on the activities of agro-based industries and
entrepreneurs in the growth and development of such economies. According to
KarandMishra (2004), agro-based enterprises are involved in the production, processing,
preservation, manufacturing of agricultural inputs and marketing of agricultural
products,and the individuals involved in these activities are the entrepreneurs. An
entrepreneur, according to Amuseghan (2008), recognizes opportunities and utilizes them.
The entrepreneur starts a business, arranges business ideas and takes risks in order to
make profit.
In Nigeria, just like other developing economies the activities of agro-based
entrepreneurs are on small-scale bases not exceeding annual turnover of N500,000 (CBN,
2005). Onyebinama (2004) reported that agriculture and agro-based activities in Nigeria
are largely on small-scale involving land holding between one (1) and five (5) hectares. In
this context therefore, small-scale agro-based entrepreneurs refers to entrepreneurs that
are involved in the processing of agricultural products and whose annual turnover are less
than N500, 000. As such, this study will concentrate on entrepreneurs that are involved in
1
the processing of agricultural products on small-scale level. Therefore, entrepreneurs
involved in the processing of agricultural products add value to them by elongating their
shelf life, reducing their bulkiness and creating different varieties and forms. Such
agricultural products include cassava, palm nuts, palm kernel, groundnut, plantain, rice,
soybean and maize. This has become very imperative in view of the high post-harvest
losses associated with agricultural products due to their ease of perishability (Mehta,
2012).
Income, savings and investment are very important parameters that define the
wellbeing and performance of small-scale agro-based entrepreneurs. This is because
Nigeria, like other developing economiesfaces the herculean task of finding sufficient
capital to pursue her developmental efforts (CBN, 2005). As such, the activities of the
dominant sector in the economy (i.e. small-scale agro-based entrepreneurs) are affected
by their income, savings and investment patterns. Several surveys have shown that
Nigerians are trapped in the vicious circle of poverty−low income, low savings and low
investments (Obayelu, 2012). The country, therefore, needs very high rates of savings and
investments to make a leap forward in her efforts of attaining high levels of growth
(CBN, 2005).
Successive administrations in the country have placed emphasis on savings and
capital formation as the primary instruments of economic growth in order to increase
national income (CBN, 2005).In other words, capital formation plays a vital role in
continuous increased production of goods and services, and as such, capital formation has
to be supported by appropriate volume of savings. A growth in economic activities
stimulates investment, and increased investment in turn enhances economic growth,
income and savings levels (Mishra, Das & Mishra, 2010). As noted by Obayelu (2012),
increase in savings, use of increased savings for increased capital formation, use of
2
increased capital formation for increased savings for a further increase in capital
formation constituted the strategy behind economic growth. This process of increased
capital formation leading to increased savings and increased savings leading to increased
capital formation will continue till savings, capital formation and income reach desired
levels after which savings and capital formation gets stabilized and there would be a
steady and self-sustaining increase in national income (Obayelu, 2012).
According to The Macmillan English dictionary (2007), income refers to money
that someone gets from working or from investing money. The investment of money is
the pre-occupation of entrepreneurs. In the view of Keynes (1936) the income of the agro-
based entrepreneurs is the excess of the value of entrepreneurs’ finished output over his
prime cost.In other words, it is taken as being equal to the quantity of the output,
depending on his scale of production which he endeavors to maximize.The level of
income of small-scale agro-based entrepreneurs is central to their savings and investment
patterns as almost all models of economic development incorporate a critical role for
savings and capital formulation (Morokolo, 2001). Morokolo (2001) reported the view of
Gersovitz (1995) that several theorists of the low-level-equilibrium trap adopt the
simplification that all income is consumed until a critical level is reached, while a fixed
proportion of income above this level is saved. The level of income of the small-scale
agro-based entrepreneurs depends upon certain independent factors like family size,
number of earners, age, educational level, asset level, savings and investment (Adetunji,
2002). Yusuf and Peters (1984) had argued that Keynesian economists regard the level of
current income as the very first rung in a theory of savings. How much an individual, a
family, a region and a nation might save depends, quite appropriately on total earnings.
Savings according to Amu and Amu (2012) refers to an amount of money put
aside for future use. It is the sacrifice of current consumption to allow for capital
3
accumulation, and is very imperative for supporting and developing rural industries
(Obayelu, 2012). Savings provide numerous benefits to small-scale agro-based
entrepreneurs directly for investment and indirectly as indication for repayment ability,
increase in credit rating and as collateral in a credit market (Brata, 1999).
Investment on its part is the process of injecting capital into a business with the
view to generate further capital (Arene, 2008). It leads to increased production which
later enhances more consumption and income. The income-expenditure model holds that
it is at the point where investment equals savings that the economy attains equilibrium.
Adam and Agba (2006) view savings as an important macroeconomic variable that
impact significantly on the rate of capital accumulation, productivity, and the
independence of a nation in terms of capital and ownership of domestic assets. Alade
(2006) succinctly hints that a farmer who consumes the seedlings meant for the next
planting season does not expect any harvest. It follows therefore, that high level of
domestic savings will facilitate investment, increase in productivity and finally growth in
the economy.
1.2 Problem Statement
The rate of economic growth and development in developing economies like
Nigeria is driven mainly by the activities of small-scale entrepreneurs (CBN, 2005). For
economies like that of Nigeria that is primarily agrarian, small-scale agro-based
entrepreneurs become the active drivers. The performance and productivity of these
small-scale agro-based entrepreneurs are affected by their level of income, savings and
investment(Obayelu, 2012). The trio of income, savings and investment are so webbed
together that they are causes and effects of one another. Akingunola (2011) reported that
a business with low level of investment will yield low income for the entrepreneur and
this low income will further result to low savings. Furthermore, the income level of an
4
entrepreneur will determine the level of his investment. In other words, an entrepreneur
with low income level has low investment and savings levels.
Some studies have been carried out on either the income, savings or investment
levels of small-scale agro-based entrepreneurs. Olashore (1998), Yusuf (2000) and
Obayelu (2012) reported that small-scale agro-based entrepreneurs are characterized by
low income, poor access to credit, poor saving rate, risk and uncertainty, poor weather
condition, and low level of investment. Also, Albu and Scott (2001) reported that the
inability of agro-based entrepreneurs to access credit facilities has restricted their
potential to expand their enterprises and as such end up with low income, poor savings
and low investment. However, most of these studies did not examine the trio (income,
savings and investment) together in order to identify their levels, patterns and inter-
relationship. This has created a gap in literature especially in Anambra state that is highly
reputed for commerce and industry.
Furthermore, earlier studies have shown that small-scale agro-based industry is
faced by a mirage of problems which undermine their productivity (Shehrawat, 2006;
Edoumiekumo & Audu, 2009; Ayozie, 2011; Mehta, 2012). Such problems identified
include lack of power supply, lack of accessibility to their business areas, low technical
know-how, low patronage, poor educational background and multiple taxation by
government. Others are irregularity in the supplyof agricultural inputs, inadequate
procurement of raw materials, lack of portable water supply, lack of access to land and
the challenge of environmental degradation. However, these problems vary from one
agro-based firm to another, and also, from one location to another. Empirical studies have
not been sufficiently conducted to localize these problems particularly in Anambra state
as a prima facie to addressing them. These result to low level of investment, low income
and savings levels, and a vicious cycle of poverty that has encapsulated the Nigerian
5
economy. This has created the following research questions which this study will aim at
providing answers to:
i. what are the socio-economic characteristics of small-scale agro-based
entrepreneurs?
ii. what are their levels of income, savings and investment?
iii. what are their sources of capital for investment?
iv. what factors influence their income, savings and investment levels?
v. what factors affect the income of small-scale agro-based industries?
1.3 Objectives of the Study
The broad objective of this study was to examine the income, savings and
investment patterns of small-scale agro-based entrepreneurs in Anambra State.
The specific objectives are to:
i. describe the socio-economic characteristics of small-scale agro-based
entrepreneurs;
ii. determine the income and savings statusof small-scale agro-based
entrepreneurs;
iii. analyze the investment pattern of small-scale agro-based entrepreneurs;
iv. analyze the sources of capital for investment by small-scale agro-based
entrepreneurs;
v. ascertain the factors that affect the income, savings and investment patterns of
small-scale agro-based entrepreneurs;
vi. identify the factors that affect the income of small-scale agro-based industry;
6
1.4 Hypotheses of the Study
The following null hypotheses were tested:
i. H01:socio-economic factors do not affect the income, savings and investment
patterns of small-scale agro-based entrepreneurs;
ii. H02: there is no significant difference in the pattern of investment among the
agricultural zones in the state.
1.5 Justification of the Study
The economy of Nigeria remains undeveloped and is driven mainly by economic
activities of small-scale agro-based entrepreneurs with low income, savings and
investment portfolios. As important as these things are to the growth of the Nigerian
economy, the income, savings and investment patterns of agro-based entrepreneurs have
not been adequately studied to determine their peculiarities and characteristics. Shitu
(2012) reported that increased income, savings and investment patterns have become vital
means by which human race can be sustained for a viable development in Nigeria.
However, few studies have examined the relationships between small-scale agro-
based entrepreneurs and each of income, savings and investment, but none of these
studies have been able to look at all these variables together (Adeyemo&Bamire, 2005;
Obayelu, 2012; Mkpado&Arene, 2010). This is very important, bearing in mind that these
variables are so interrelated and interwoven that they cannot be treated in isolation. In
addition, these studies have not been able to capture every relevant information
concerning the income, savings and investment patterns of agro-based entrepreneurs
either individually or collectively across the country and particularly, in Anambra State.
This study therefore will provide empirical parameters on the income, savings and
investment patterns of small-scale agro-based entrepreneurs.It will also provide useful
information on other factors that are affecting the productivity of small-scale agro-based
7
entrepreneurs besides income, savings and investment levels. Results of the study will
provide a base for formulating policies that will benefit not only the agro-based
entrepreneurs but also entrepreneurs as a whole and the country at large. Students and
researchers will find the results very informative and good source of literature materials.
In the final analysis, the implementation of the recommendations based on the findings of
this work will lead to a robust rural economy, improved productivity and poverty
reduction. These effects will permeate into the entire economy which will witness
increased in income, savings and investment patterns of small-scale agro-based
entrepreneurs.
8
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Existing literature were reviewed under the following headings:
i. Concept of agro-based entrepreneurs.
ii. Socio-economic characteristics of small-scale agro-based entrepreneurs.
iii. Sources of capital for investment by small-scale agro-basedentrepreneurs.
iv. Patterns of investment and savings of small-scale agro-basedentrepreneurs.
v. Factors affecting income, savingsand investment patterns of small-scale agro-
basedentrepreneurs.
vi. Factors affecting the income of small-scale agro-based industry.
2.1 Concept of Agro-Based Entrepreneurs
The term “entrepreneur” is defined in a variety of ways yet no consensus has been
arrived at on the precise abilities that make a person a successful entrepreneur. In other
words, entrepreneur was derived from the French word “entre” meaning between and
“prendre” meaning to take, which means the one who takes the risk in the economy
between the supplier and customer (Hassan &Olaniran, 2011). The concept of
entrepreneur varies from country to country as well as from period to period and the level
of economic thoughts and perceptions (Egbuogu, 2003). According to Jhingan (1996) as
cited in Shahadatand Mohammed (2006), entrepreneur is an economic leader who
possesses the ability to recognize opportunities for successful introduction of new
commodities, new techniques and new sources of supply which will be able to assemble
the necessary plant and equipment, management, labour force and organize them into a
running concern. Entrepreneurs who apply these skills in the field of agriculture and
agricultural related areas/enterprises are agro-based entrepreneurs. From economics
perspective, entrepreneurs bring resources, labour, materials and other assets into
9
combinations that make their value greater than before (Hisrich, Peters & Shepherd,
2008). An entrepreneur is rarely a master of the management skills, and yet is usually
directly responsible for all aspects of businesses. Often, an entrepreneur has to be the
general manager, production manager, purchasing manager, personnel manager,
controller and researcher for the business all rolled into one person at least during its early
years. The entrepreneurs, therefore, do have an understanding of marketing, quality
control, finance, banking, commercial law, government regulations and procedures and
also human relations as each of them has a vital bearing on the health of the enterprises
(Nimalathasan, 2005).
Agro-based entrepreneurs have either direct or indirect links with agriculture and
also depend on agricultural products as raw materials.The activities of agro-based
entrepreneurs cut across production, manufacturing, processing, marketing and
preservation of agricultural products and inputs. Enterprises that process primary
agricultural raw materials are categorized as agro-processing industries. These include
key commodities such as cereals, legumes, oilseed, fruits and vegetables, root crops, meat
and meat products, dairy and fish products, etc. (Edoumiekumo&Audu, 2009). Thus,
agro-processing refers to those activities that transform agricultural commodities into
different forms that add value to the product (Mehta, 2012). The scope of agro-processing
encompasses all operations from the stage of harvest till the material reaches the end
users in the desired form, packaging, quantity, quality and price (Mehta, 2012).
Agro-processing according to Igene (2008) is the process or actions taken by
manufacturers, entrepreneurs, farmers, individuals or groups to convert primary (raw)
agricultural products into consumable and stable commodities for the market. In other
words, agro-processing activities comprise two major categories namely primary and
secondary operations. Primary processing operations involve activities such as crop
10
drying, shelling/threshing, cleaning, grading and packaging. These activities are carried
out in the farm and also help to transform the commodity slightly. Secondary processing
operations entail increasing nutritional or market value of the commodity.The physical
form or appearance of the commodity is also often changed totally from the original.
Examples of secondary processing are milling grain into flour, grinding groundnut into
peanut butter, pressing oil out of vegetable seeds, pressing juice out of fruit, making
cheese out of milk and manufacturing of mince-meat (Mhazo, Mvumi, Nazare &
Nyakudya, 2002). Agro-processing aim to increase income and access to food for the
poor through establishment of small-scale appropriate and sustainable processing firms
that are flexible, require little capital investment and can be carried out in the home
without the need for sophisticated or expensive equipment (Igene, 2008).
2.1.1 Meaning of Small-Scale Industries/Enterprises
An enterprise, whether small or big, simple or complex, private or public, etc. is
established to provide goods and services at competitive prices. In Nigeria,
industries/enterprises have been classified as small, medium or large scale (Ayozie, 2011;
Akingunola, 2011). Small-scale industry can be defined by the criteria of project cost,
invested capital, value of annual turnover by the employees (Ayozie, 2011).
In Nigeria and worldwide, there seem to beno specific definition of small-scale
industry. Different authors, scholars, organizations and countries have different ideas as
to the differences in capital outlay, number of employees, sales turnover, fixed capital
investment, available plant and machinery, market share and level of development
(Aworemi, Abdul-Azeez & Opoola, 2010; Ayozie, 2011).
The Federal Government Small-Scale Industry Development Plan of 1980 defined
a small-scale industry in Nigeria as any manufacturing process or service industry, with a
capital not exceeding ₦150,000 in manufacturing and equipment (Federal Government of
11
Nigeria, 1982). The Small-Scale Industry Association of Nigeria, 1973defined small-scale
businesses as those having investment (i.e. capital, land, building and equipment) of up to
₦60,000 (Pre-SAP value) and employing not more than fifty persons (FGN, 1982).
Small and medium scale enterprises (SMEs) as defined by the National Council of
industries as cited in Akingunola(2011) refer to business enterprise whose total costs
excluding land is not more than two hundred million naira (₦200,000,000) only.
The Centre for Management Development (CMD) in the policy proposal
submitted to the federal government in 1982 defined small-scale industry as a
manufacturing process or servicing industry involved in a factory of production type of
operation, employing up to 50 full-time workers.
The third National Development Plan of Nigeria 1975-1980, defined a small-scale
firm as a manufacturing establishment employing less than ten people, or whose
investment in machinery and equipment does not exceed six hundred thousand naira
(₦600,000) only (Ayozie, 2011). The Federal Ministry of Industries (1988) defined it as
those enterprises that cost not more than ₦500,000 including working capital. This will
serve as the operational definition of small-scale agro-based entrepreneurs for the study.
2.1.2 Roles of Small-Scale Agro-based Entrepreneurs in Economic Development
Small-scale agro-based entrepreneurs play a vital role in overall economic
development of the country through their ability to scan, analyze and identify
opportunities in the environment, which will enable the entrepreneurs to transform the
skills into business proposition through creation of economic entities. Small-scale agro-
based entrepreneurs also create wealth to the economy through channelizing the resources
from less productive to more productive use (Sandeep, 2012).
Ayozie (2011) summarized the role of small-scale agro enterprises to an economy
as greater utilization of raw materials, employment generation, encouragement of rural
12
development, development of entrepreneurship, mobilization of local savings, linkages
with bigger industries, provision of regional balance by spreading investments more
evenly, provision of avenue for self-employment and provision of opportunity for training
managers and semi-skilled workers. The agro-based entrepreneurs play an important role
in driving local and national economies. The structure of rural economies is essentially
composed of small agro enterprises which are responsible for most of the job growth and
the innovation (Kalpana, 2011). The growth and development of
agro-industries/enterprises facilitates self-employment, results in wider dispersal of
economic and industrial activities and helps in the maximum utilization of locally
available raw materials and labour (Kumar, 2012). Agro-industries/enterprises help in the
proper utilization of local resources like raw materials and labour for productive purposes
and thus increase productivity. They can also mobilize rural savings which help in
increase of rural funds. Agro-industries/enterprises play an important role in increasing
the foreign exchange earnings of the country through export of their produce and also
their products are used to carter for the needs of different consumers according to their
taste, design and choice (Kumar, 2012). Agro-industry provides capital and services to
farmers (e.g. seeds and equipment, training, production and market information),
promotes entrepreneurship, raises demand for agricultural products and connects farmers
with markets through the handling, processing, marketing and distribution of agricultural
products (FAO, 2008).
2.2 Socio-Economic Characteristics of Small-Scale Agro-Based Entrepreneurs
Socio-economic characteristics of small-scale agro-based entrepreneurs are
analyzed in terms of their gender, age, educational background, marital status,
occupational categories and income level.
13
2.2.1 Gender of Small-Scale Agro-Based Entrepreneurs
The report of a study conducted in Osun state showed that 65.7% of the agro-
based entrepreneurs were males while 34.3% were female (Aworemi et al., 2010).
However, another study conducted in North-eastern Adamawa state showed that 60% of
the small-scale agro-basedentrepreneurs were males while 40% were females (Ja’afar-
Furo, Bello &Sulaiman, 2011). In Oyo state, Ajagbe (2012) reported that 64.9% were
males while 35.1% were females. This trend suggests a male dominance of agro-based
entrepreneurs probably due to laborious nature of agricultural activities.
2.2.2 Age of Small-Scale Agro-Based Entrepreneurs
According to Adepoju, AjagbeandFashina (2012) there are variations in the age
distribution of small-scale agro-based entrepreneurs in Osun state.The age range of 18-
25years was 10.1%, while those at the age range of 26-30years had 41.1%; the age range
of 31-35years had 30.1%, while those at the age range of 36-45years had 10.6% and those
above 46years were 2.1%. In another study conducted in Imo state, the age distribution of
small-scale agro-based entrepreneurs were 31-40years and 41-50years at 41.82% and
29.10% respectively (Okoli, Anyaegbunam, Etuk, Uchegbu&Udedibie, 2004).A study
conducted by Olawepo (2010) showed that the age range of 26-45years was 64.54%
while the age range of 16-25years had 8.95% and those that were 55years and above had
6.71%. Furthermore, in the assessment of the prospects of value addition among small-
scale agro-based enterprises in Nigeria, the age distribution of the respondents that were
less than 18years was 3.33%, while those at the age range of 18-40yearswas 56.67% and
those above 40yearswas 40.00% (Ja’afar –Furoet al.,2011).
2.2.3 EducationalLevel of Small-Scale Agro-Based Entrepreneurs
14
A study on impact of socio-economic factors on the performance of small-scale
enterprises in Osun state reported that 47% of the small-scale agro-based
entrepreneurshad tertiary education, while 33.8% of them had secondary education. The
study further showed that the agro-based entrepreneurs with primary education were 8.9%
while 10.3% of them had no formal education (Aworemi, et al, 2010). Another study
conducted in Adamawa state reported that small-scale agro-based entrepreneurs with no
formal education was 40%, while those with primary education was 30%, 23.33% of
them had secondary education while 6.67% had tertiary education (Ja’afar –Furo, et al,
2011). Furthermore, Afolabi (2010) reported that majority of the small-scale agro-based
entrepreneurs had primary education at 57.63%, 15.80% had secondary education and
26.57% had no formal education. Ajagbe (2012) reported that in Nigeria, 20% of the
agro-based entrepreneurs had primary education, while 56.3% had post primary
education; 17.4% of them had vocational/technical education while 6.3% of them had
tertiary education.
2.2.4 Marital Status of Small-Scale Agro-Based Entrepreneurs
Marital status is an important feature of small-scale agro-based entrepreneurs. The
report of Adepoju et al(2012) show that 80% of agro-based entrepreneurs are married
while 5% of them were single and 15% widowed.The dominance of married agro-based
entrepreneurs were corroborated by Afolabi (2010) who reported that 89.16% of the
entrepreneurs were married, 3.15% of them widowed while 7.69% were divorced.
2.2.5 Occupational Categories of Small-Scale Agro-Based Entrepreneurs
The influence of socio-economic characteristics on small-scale enterprises in
Ogbomoso Oyo state, reviewed that the preoccupation of the respondents in the study
area were company employee, civil servant, teaching, young school leavers, self-
15
employed and unemployed were at the percentage of 20.60, 10.00, 8.30, 24.00, 21.30 and
15.80 respectively (Adepoju, et al, 2012).
2.2.6 Income Level of Small-Scale Agro-Based Entrepreneurs
There are variations in the level of income of agro-based entrepreneurs which may
arise from the differences in business line. According to Aworemiet al (2010)
andAdepoju et al (2012), 42.5% of agro-based entrepreneurs earned up to ₦6,000 per
month, while 24.7% of them earned ₦6,100-9000; 15.3% of them earned ₦9,100-12,000,
while 10% earned ₦12,000-15,000 and only about 7.5% of them earned over ₦35,000.
Another study conducted by Olawepo (2010) reported that 11.94% of the agro-based
entrepreneurs earned ₦4,000-10,000 per month, while 14.17% of them earned ₦10,000-
20,000; 12.68% of them earned ₦21,000-30,000, while 20.89% earned ₦31,000-
40,000.Furthermore, 26.49% of the entrepreneurs earned ₦40,000-50,000 while 13.80%
earned above ₦50,000.
2.3 Sourcesof Capital/Fundsfor Investment by Small-Scale Agro-Based
Entrepreneurs
The Nigerian economy, like other countries, comprises the public and private
sectors, with both sectors engaging in investment expenditures. Both sectors have to save
and/or borrow in other to meet their investment requirements (Nwachukwu&Odigie,
2009). There are three major ways in which small-scale agro-based entrepreneurs can
source funds to finance their industries. Firstly, small-scale agro-based entrepreneurs can
source capital from formal financial institutions such as commercial banks, merchant
banks, savings banks, insurance companies and development banks (Ekpenyong&Nyong,
1992). According to Ojo (1998), the formal credit sources comprises of banks, non-
governmental associations which include commercial banks, cooperative banks,
16
community (microfinance) banks and other bodies such as the Agricultural Credit
Guarantee Scheme operating under the guidelines of the Central Bank of Nigeria. These
banks actively engaged in providing credit to farmers and agro-based entrepreneurs(Von
Pischke, 1991; Olatunde, 2003). Olatunbode (1990) and Famoriyo (1980) pointed out that
formal financial institutions are better structured in meeting the needs of the farmers and
agro entrepreneurs because they have large volume of credit.
Secondly, small-scale agro-based entrepreneurs can also source capital from
informal financial institutionssuch as groups, town unions, occupational groups, religious
association, credit and savings associations (co-operative societies), esusu, friends and
relations (Ekpenyong&Nyong, 1992; Nwachukwu&Odigie, 2009). In addition, CBN
(2005); Nweze (1990) andAdenuga and Akpan (2007) noted that the informal institutions
include mainly the informal self-help groups (SHGs) or Rotating Savings and Credit
Associations (ROSCAs) types. According to Adenuga and Akpan (2007) the informal
financial sector is poorly developed, limited in reach, and not integrated into the formal
financial systems. Eluhaiwe (2006) noted that the informal financial sectors provide
financial services targeted at specifics and often shy away from providing credit for such
activities as agriculture, services, mortgage developments and cottage. The informal
financial institutions operate outside the structure of government regulations(i.e.
monetary authorities and supervision) asit lacks legality and are also outside any statutory
control (Nweze, 1995). The informal credit sources finance the bulk of the informal
activities, which constitutes a sizeable proportion of the domestic economy, and plays an
important role in the development of the rural areas.
Finally, small-scale agro-based entrepreneurs sourced capital/funds through their
personal savings that is own savings which is the immediate source of funds for
investment (Ekpenyong&Nyong, 1992; Nwachukwu&Odigie, 2009). According to a
17
study by Shahadat and Uddin (2006) on problems in financing and managing small-scale
enterprises in Bangladesh, about 30% of the entrepreneurs take loan from their parents,
20% from their personal savings, 17% from individual money lenders followed by 15%
each from their friends and relatives and from traditional interest based banks and other
financial institutions and only 3% from Non-Governmental Organizations (NGOs). The
study showed that majority of the entrepreneurs take funds from non-institutional
organizations at high cost.
2.4 Patterns of Investment and Savings of Small-Scale Agro-Based
Entrepreneurs
2.4.1 Patternof Investment of Small-Scale Agro-Based Entrepreneurs
The pattern of investment varies widely across the different players in the
economy especially among small-scale agro-basedentrepreneurs. According to Handjiski
(2010), investment pattern refers to the various methods through which funds are utilized
in otherto grow capital and preserve income. Small-scale agro-based entrepreneurs are
characteristically limited by funding and capital, and this affects their level and volume of
investment as well as the choices available to them for investment. The volume of
investment has been found to depend on income, cost of procuring investible fund and
entrepreneurs’ expectations on the trend of the industry in future (Shitu, 2012).
Attempts have been made to classify the investment patterns of agro-
basedentrepreneurs into two broad categories: physical (real) investment and financial
(non-real) investment, and the summation of the two provide the aggregate investment
(Elangbam, 2011; Okpara, 2006).The physical form of investment consists of major
elements as:
i. building and industry premises
ii. lands
18
iii. land improvements
iv. farm equipment
v. irrigation
vi. transport
vii. consumer durables
viii. livestock and agricultural inputs
ix. business assets and inventories.
In the same vein, financial forms of investment comprise:
i. currency
ii. bank deposits
iii. shares and debentures
iv. life insurance premia
v. gold and silver
In a comparative study between rural and urban areas conducted by (Okpara,
2006), the share of real investment of the rural households (69.3%) dominated over that
of the urban households (33.9%). Where, the proportion of non-real investment of the
urban households (66.1%) was greater than that of the rural households (53.6%). The
study further reported that the share of real investment on buildings and business
premises, lands and its improvement in rural households are 1.6 times and 6.0 times
respectively greater than that of the urban areas. Also, among the non-real investment, the
proportion of currency holdings, bank deposits including shares of the urban households
are 3 times and 4.5 times respectively greater when compared to that of the agro-based
households. In addition, the study found that the share of life-insurance premia, gold and
silver among the urban households are significantly higher over that of the agro-based
households.
19
2.4.2 Pattern of Savingsof Small-scale Agro-Based Entrepreneurs
According to Amu and Amu (2012), savings simply means putting something
aside for future use or what they described as deferred expenditure. Savings has also been
described as foregone consumption (Miller &VanHoose, 2001). This implies that one
does not spend all the income that is earned within a given period. They maintained that
once part of what is earned today is left for future use, there is savings. In the view of
Ahmed (2002), savings involves “putting money aside for future use,” which arises
mainly from careful management of income and expenditure, so that there is something
left for future use.
The savings pattern of small-scale agro-based entrepreneurs is very important to
the growth and development of rural communities and the macro society at large. This
stems from the pivotal role they play in socio-economic development both in terms of
employment creation, wealth and income generation and poverty reduction (Shitu, 2012).
The savingspattern of agro-based entrepreneurs over time is characterized by their
involvement in different saving practices which could be formal or informal institutions,
these include commercial banks, microfinance banks, Bank of Agriculture (BOA) and
Bank of Industry (BOI), Rotating Savings and Credit Associations (ROSCAS), Non
Rotating Savings and Credit Associations (Non-ROSCAS), Daily Savings Enterprise or
Mobile Bankers, Cooperative Societies and Credit Union associations and self or Home
Savings (Shitu, 2012).
2.5 Factors Affecting Income, Savings and Investment Patterns of Agro-
BasedEntrepreneurs
The level of income, savings and investment of agro-based entrepreneurs depends
upon certain factors such as household size, age, educational level/skills acquired,
occupation, asset level and rate of interest. These are discussed as follows:
20
Household size–Household size is an important determinant of the income, savings and
investment levels of small-scale agro-based entrepreneurs. Economic activities in rural
areas are more labour intensive than capital intensive; as such entrepreneurs with larger
household sizes have more hands to work with either in their farms or industries which
help to increase their productivity and income at little or no cost (Adepoju et al., 2012).
Age of entrepreneurs – Earlier studies have shown that there are some relationships
between age of entrepreneurs and their levels of income, savings and investment
(Adeyemo&Bamire, 2005; Akperan&Akomaye, 2006; Adepoju et al.,2012). According to
Okoli et al. (2004),agro-based entrepreneurs within the middle age (35 – 50 years) are
much more productive than younger or older ones, and as such earn more income, save
and invest more. At this stage, they are very strong and energetic, and can work for longer
hours considering that their activities are mostly labourious which the older ones cannot
do.
Educational level/skills acquired – The level of education and/or type of skills acquired
determines the choice of business/occupation engaged in by the agro-basedentrepreneurs
and this ultimately affect their income, savings and investment levels.Aworemi et al.
(2010) reported that most entrepreneurs in Adamawa state (40%) had no formal education
and their income, savings and investment levels are much lower compared to those with
some formal education. Also, entrepreneurs with some trained-skills earned more than
untrained ones as customers tend to pay more for their services (Afolabi, 2010).
Occupation – The choice and line of businessis a very important factor in the
determination of the income, savings and investment levels of agro-based entrepreneurs
as all businesses do not have the same rate and level of returns. Skilled occupations have
higher demands than unskilled ones and there are also lesser people in the business than
21
unskilled ones. This naturally raises the cost of those services which translates into
increased income and revenue to the entrepreneurs (Afolabi, 2010).
Asset level – The asset level of the agro-based entrepreneurs affects in no small measure
their income level. Agro-based entrepreneurs with higher asset level have more money
and capital to invest in their businesses and this translates to higher returns unlike agro-
based entrepreneurs with lesser or no asset base whose activities are mostly labour-
oriented (Adepoju et al., 2012).
Rate of interest – Interest rate is an important factor affecting savings and investment.
Higher interest rate promotes savings as people are ready to part their cash so as to earn
more interest. Investment has negative relationship with rate of interest. With a high
interest rate in the economy agro-based entrepreneurs hesitate in taking loans to invest in
productive asset and as such, investment is discouraged (Isshaku, 2011).
2.6 Factors Affecting the Income of Small-Scale Agro-BasedIndustry
The growth and development of small-scale agro-based industry remains the
spring board for development in developing economies like Nigeria. A growth in
productivity of the sector spurs up more investment, more income and more savings in
the economy and this ultimately leads to improved and increased welfare conditions
(Issahaku, 2011). However, the business environment is infested with lots of factors
which retard the growth and productivity of small-scale agro-based industry (Sandeep,
2012). These factors include:
i. Paucity of Funds
The paucity of funds is a major constraint to small-scale agro-based industry and
businesses. Finance contributes to only about 25% of the success of small-scale and
medium-scale agro enterprises (Ogujiuiba, Ohuche & Adenuga, 2004). In Nigeria most
small-scale and medium-scale agro enterprises are folding up or lack competitiveness due
22
to lack of financial capacity to prosecute their manufacturing concern. Most of these
enterprises cannot access loan on a long and short term basis. World Bank (2001) opines
that the implication of small-scale and medium-scale agro enterprises not accessing loan
on long and short term basis is because they cannot access funds at the credit market. In
addition to this, the conditions attached to loan and credit also discourage
industries/enterprises from accessing credit from the bank. This factor has largely
undermined the capacity of small and medium-scale agro enterprises in Nigeria. Even
where small and medium-scale agro enterprises can access the loan, it is usually a short-
term loan and what small and medium-scale agro enterprises required in building capacity
is a long-term loan which can be rolled on investment overtime.
Most of the small-scale agro-based entrepreneurs fail to get external funds due to
absence of tangible security and credit in the market (Sandeep, 2012). The procedure to
avail the loan facility is time-consuming that its delay often disappoints the agro-based
entrepreneurs. Lack of finance available to small-scale agro-based entrepreneurs is one of
the biggest problems which small-scale agro-based entrepreneurs are bearing nowadays
due to global recession. Major difficulties faced by small-scale agro-based entrepreneurs
include low level of purchasing power of rural consumers in which the sales volume is
insufficient, lack of finance to start business, reduction profits due to competition, pricing
of goods and services, financial statements are difficult to be maintained by small-scale
agro-based entrepreneurs, stringent tax laws, lack of guarantees for raising up of loans,
difficulty in raising capital through equity, dependence on small money lenders for loans
for which they charge discriminating interest rates and huge rent and property cost
(Sandeep, 2012).
ii. Lack of Infrastructural Facilities
23
The performance and productivity of small-scale agro-based industry has also
been hindered by the lack of infrastructural facilities. Inadequate facilities like power
supply, telecommunication, access road network and water supply constitutes one of the
major constraints challenging small-scale agro-based entrepreneurs in Nigeria (Ogujiuba,
et al., 2004). World Bank (2011) estimates showed that the loss suffered by small and
medium-scale agro enterprises due to absence of infrastructural facilities is about 15-20%
of the cost of establishing manufacturing and processing industries in Nigeria. Omotola
(2008) contends that the percentage has since increased to 30-35percent of the cost of
establishing manufacturing and processing concern in Nigeria, and adequate power
supply is the most challenging problem facing infrastructural development in the country.
The erratic power supply has hindered the business environment. In Nigeria most
businesses and industries have folded-up or cannot operate as a result of irregular and
epileptic power supply. The problem of power in Nigeria is so bad to the extent that the
large industries are now relocating to Ghana and other neighboring countries, while
majority of the small and medium-scale industries had since gone into extinction. The
implication of this has led to the reduction in production and processing activities. The
cost of fueling of generator, machines and equipment’s has led to cut in employees and
running cost of the small and medium-scale industries. This has eventually led to the
folding up of most of these industries in Nigeria, since they cannot compete in the market
any more. Entrepreneurs are also facing the problem of costly transportation cost due to the
availability of ware houses in far flung and remote location from the cities. It has also been
observed that due to this reason agro-based industries have to pay more for raw materials and
sending the finished products in the open market (Dhiman & Rani, 2011).
iii. Marketing Problems
24
One of the major marketing problems facing small-scale agro-based industries in
Nigeria is lack of understanding and the application of marketing concept (Ayozie, 2011).
In the small-scale agro-industry, there is a debt of knowledge and skills for basic
marketing like marketing research, market segmentation and marketing planning and
control. The outcome of this is poor quality products, unawareness of competition, poor
promotion, poor distribution, and poor pricing methods.
Furthermore, the agro-based industry faces severe competition from large scaled
organizations.It incurs high cost of production due to high input cost. The sector is
plagued with the challenge of standardization and competition from large scale units. It
faces the problem of fixing the standards and sticking to them.
iv. Deteriorating Economic and Social Conditions
Africa's economic crisis is further exacerbated by natural and man-made
calamities, including cyclical droughts and internal conflicts. These are, indeed, major
inhibiting factors running counter to the continent's efforts to attract foreign direct
investment (Shahadat &Mohammed, 2006).
v. Lack of Political Stability
Another related and equally unfavourable force is political instability. Africa
today is not only facing an economic crisis characterized by famine, malnutrition, high
rates of unemployment, refugees, and severe poverty, but is also burdened by serious
political problems, including one-person rule, violation of human rights, inter-ethnic and
interregional conflict, and the lack of tolerance for minority groups(World Bank, 2011;
UNDP, 2000). All these problems have projected an image that Africa is a region riddled
by crises and not conducive to investment. As a result of the political crisis that engulfed
Africa in the 1980s and the 1990s, many investors have developed a perception that
investing in Africa is “unsafe”(Morokolo, 2001).
25
Besides political instability, the likelihood of expropriation contributes to the lack
of investor confidence. Predictability of conditions and lack of arbitrariness may be the
most important assurance that can be offered to investors, who seem able to adapt to
practically any conditions as long as the rules are clearly established in advance and
followed subsequently (Shahadat & Mohammed, 2006).
vi. Low Rates of Return on Investment
The rate of return on investment in Africa has declined significantly over the years
and more precipitously during the past decade. According to the World Bank, rates of
return in sub-Saharan Africa have dropped from around 30.7 per cent in 1961-1973 to
around 2.5 per cent in 1980-1987. On the other hand, during that period the rate of return
in South Asia, for instance, grew from 21.3 to 22.4 per cent (World Bank, 2001).
vii. Chronic Shortage of Foreign Exchange
The chronic and persistent shortage of foreign exchange and restrictions on
foreign currency transfers is also considered as a serious constraint facing investors in
Africa(World Bank, 2001). The problem of foreign exchange shortages means that spare
parts cannot be imported which, in turn, means that existing plants have to operate well
below capacity. In addition, infrastructural facilities cannot be properly maintained, nor
can the imports of the necessary consumer goods be made. Investment is not encouraged
when such conditions prevail, and instead, disinvestment takes place (Srivastava, 1989).
According to Dhiman and Rani (2011) states that apart from the major problems
small-scale agro-based entrepreneurs are facing in Nigeria, there are other problems they
encounter such as:-
i. Higher cost of production of the agro-based products: Absence of cheap and
easy transport services increases the cost of production of industrial products,
26
which in turn reduces the competitiveness of the product in the international
market;
ii. Increasing loss of perishable products: The lack of quick and easy transport
facilities increases the magnitude of the loss of products and in turn increases
the cost of agro-based products. Consequently, this affects the competitiveness
of the product in the international market. At the same time it increases
environmental hazards;
iii. Delay in the delivery of goods: Agro-based industrial products are special
consumption goods and have special characteristics. They must be available
when consumers need them. In other words postponement of consumption of
food is not possible. Therefore, any delay in delivery reduces the confidence
of consumers. Delay in delivery also damages the products, especially fruits
and vegetables, and fish and fish products;
iv. Urban concentration of agro-based industries: The lack of proper transport
services in the rural areas forces industries to locate in the urban areas where
transport services are easily available. This defeats the concept of rural
poverty alleviation through industrialization.
2.7 Theoretical Framework
The Theoretical framework for this study is hinged on the life cycle hypothesis,
permanent income hypothesis, Keynesian theory and accelerator theory of
investment.These are hypothesis that addresses the concepts of income, consumption and
savings, and these constitute a major guide to investment.
2.7.1 Life Cycle Hypothesis
The life cycle hypothesis (LCH) was developed by Franco Modigliani (Modigliani
&Brumberg, 1954; Modigliani & Ando, 1957; Ando & Modigliani, 1963). The theory
27
states that the motivation for savings is for a smoothing lifetime. It maintains that
individuals save to prepare for their retirement when they are no longer earning income
but have to continue consuming. Individuals’ savings will peak in his or her prime
earnings years and fall as the savings are drawn down to finance consumption during
retirement years (Obayelu, 2012).
The LCH observes that the consumption needs and income are often unequal at
various points in the life cycle. Younger people tend to have consumption needs that
exceed their income. Their needs tend to be mainly for housing and education, and
therefore they have little savings and also little or no money for investment. In middle
age, earnings generally rise, enabling debts accumulated earlier in life to be paid off and
savings to be accumulated. The accumulation of savings will also boast the level of
investment. As such, in retirement, when income would ordinarily have declined,
individuals will consume not only from previously accumulated savings but also from
returns on their investment. The Life Cycle hypothesis views individuals, as planning
their consumption and savings behavior over long periods with the intention of allocating
their consumption in the best possible way over their lifetimes (Dornbusch& Fischer,
1990). The life cycle hypothesis thus views savings as resulting mainly from individuals’
desire to provide for consumption in old age.
Empirical studies of the life-cycle hypothesis have generated a large literature.
Studies that have focused on the savings behavior of older persons, however, have been
inconclusive regarding the correspondence between observed savings behavior and the
pattern of saving and dis-saving predicted by the life-cycle hypothesis. Many studies
seemingly in conflict with the life-cycle hypothesis, have found that older persons
continue to save in retirement. Several explanations have been offered for this. King
(1985), for example, notes that saving in retirement is not necessarily inconsistent with
28
the life-cycle hypothesis, if one accounts for the aversion of individuals to uncertainty
about the future (e.g., how long they will live and future inflation).
2.7.2 Permanent Income Hypothesis
The Permanent Income Hypothesis was pioneered by Milton in 1957 (Parker,
2010) and shares the same view with the life cycle hypothesis in that both models
emphasize consumption smoothing but vary in the approach. The theory differentiates
between permanent income and transitory income and also between permanent
consumption and transitory consumption. The permanent income hypothesis focused on
the general problems faced by households when their income fluctuates over time,
whether due to life-cycle effects, business cycles, or other factors (Parker, 2010).
Friedman defined permanent income as the amount a household could consume
“without reducing its wealth,” while deviations from such he described as transitory
income. Since the household lives forever, this means intuitively that the household can
in each period consume only the “interest” on its human and financial wealth and can
never consume the principal. Thus, permanent income can be thought of as the annual
return on households’ stocks of human and non-human wealth.On the other hand,
permanent consumption refers to the part of consumption that is planned and steady, and
protected from unexpected or irregular spending, while transitory consumption is
unplanned and unsteady.He further assumed that both permanent and transitory
consumption are independentof transitory income and that transitory consumption in any
period is independentof permanent income. Thus, consumption consists of a planned part
that depends onpermanent income and an unplanned part that is totally independent of
income.
In other words, permanent income is the income that determines the steady rate of
consumption a person could maintain for the rest of his/her life, given present level of
29
wealth and income earned now and in the future (Dornbusch& Fischer, 1990). The
permanent income theory assumes that permanent income determines the rate of
consumption; and conversely the rate of savings as well as the rate of investment.
2.7.3 Keynesian and Accelerator Theories
The Keynesian theory andAccelerator theory of investment was developed by
Keynes, John Maynard in 1936. The Keynesian theory places emphasizes on the
importance of interest rate on investment decisions. Changes in interest rate affect the
level of planned investment undertaken by agro-based industries in the economy. A fall in
interest rate will lead to increased investment, while an increase in interest rate will result
to a decrease in investment. It follows therefore that an agro-based entrepreneur will only
invest on a project if the discounted yield exceeds the cost of the project (Keynes, 1936).
Accelerator theory on its part, states that when income or consumption increases,
investment will increase by a multiple amount. When the income and consumption levels
of agro-based entrepreneur increases, a higher amount of the commodities needs to be
produced in order to meet the increased demand. This theory brings out the fact that
investment (e.g. machines) fluctuates by much greater percentage than consumption. Also
net investment depends on a change in consumption which in turn is influenced by a
change in the level of income. If consumption must rise it must continue because any
decline will induce a greater fall in investment. The implication of the accelerator theory
is that in order to keep the economy prosperous, consumption must not just increase at a
low pace or even remain constant it must increase by leaps and bounds in order to ward
off the danger of depression (Ohale & Onyema, 2002).
2.8 Analytical Framework
30
Several analytical tools could be employed in carrying out analysis andthe choice
of which techniques to be useaccording to Eboh (2009) is a function of the nature and
purpose of the study. McNalley and Othman (2002) reported that descriptive tools such as
mean, frequency, graphs, charts and standard deviation, constitute the basic but important
tools used in data analysis. In explanatory studies for instance, descriptive tools will
suffice, however, studies involving case studies and sample surveys, especially those
dealing with quantitative data will require more detailed analysis (Eboh, 2009 as cited in
Offie, 2011). This study therefore will employ descriptive statistical tools particularly, the
likert scales as well as other analytical tools like the multiple regression, t-test, chi-square
and analysis of variance (ANOVA) technique.
2.8.1 Likert Scale
The Likert scale named after RensisLikert who developed it in 1932, is one of the
most widely used techniques to measure attitudes (Ary, Jacobs, Razavieh& Sorensen,
2006). They inferred that Likert scale assesses attitude toward an issue by presenting a set
of statements about the issue and requesting respondents to indicate for each whether
they strongly agree, agree, are undecided, disagree, or strongly disagree. These various
agree-disagree responses are assigned a numeric value, and the total scale score is found
by summing the numeric responses given to each item, which represents the individual’s
attitude toward the issue. This is why the scale is also called Summated-rating scale
(Anaekwe, 2007).
2.8.2 Multiple Regression
The multiple regression is an econometric tool of analysis used in determining the
effect of one variable on the other (Koutsoyannis, 1977). It is among the most commonly
and widely used techniques as it shows how changes in the independent variables affect
31
the dependent variable (Nzeh, 2011; Oti, 2008). The multiple regression model is
specified below:
Y = b0 + biXi + ei 2.1
Where:
Y = dependent variable
Xi = independent variables
b0 = intercept
bi = parameters
ei = error term
2.8.3 Analysis of Variance (ANOVA)
The analysis of variance (ANOVA) is a statistical tool developed by R. A. Fisher
for the analysis of data. It works like regression but specially allows for the breakdown of
total variance of a variable into additive components which may be attributed to various,
separate factors. These factors are the sources or causes of variation in the variable being
analyzed. The analysis of variance technique enables the determination of the number of
relevant factors (or causes) of variation and the logical significance of each one of them.
The ANOVA model is specified below:
F* = ¿ 2.2
[∑j=1
k
∑i=1
nj
(Yji−Yj)2¿ /(N – K )¿
Where:
nj = size of the jth sample
N = ∑j=1
k
nj=¿¿ size of the ‘pooled’ (enlarged) sample
K = number of samples.
2.8.4 T-Test
32
The t-test according to Koutsoyiannis (1977) is based on the Standard Normal
Distribution (or Gauss Standard Normal Curve). It is applicable when the population of
the parameters is normal and when the sample size is small (n < 30). It is also based on
the n-1 degrees of freedom.
The t-test is specified below:
t = bi - bi 2.3
σ(bi)
Where:
t = t-test;bi = estimated value of bi;bi = actual value of bi; σ(bi) = standard error of bi
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Area of Study
The study area was Anambra State of Nigeria. The state came into being on 27 th
August, 1991. It was part of the former Eastern Region, part of the former East Central
state and part of the former old Anambra state. It derives its name from the Anambra
River which is a tributary to River Niger (SEEDS, 2009). It is located between Latitudes
60451 and 50441N and Longitudes 60361 and 70201E of the Greenwich Meridian (SEEDS,
2009). Anambra state has a population of 4,182,032 people, and covers a land area of
about 4, 887 sq. km (NPC, 2006). There are 21 Local Government Areas in the state with
four agricultural zones (Aguata, Awka, Anambra, and Onitsha zones). Aguata
agricultural zone is made up of five (5) local government areas namely, Aguata, Orumba
North, Orumba south, Nnewi North and Nnewi South. Awka is made up of five (5) local
government areas namely, Awka North, Awka South, Njikoka, Dunukofia and Aniocha.
Anambra agricultural zone is made up of four (4) local government areas namely,
Anambra East, Anambra West, Anyamelum and Oyi. Lastly, Onitsha agricultural zone is
33
made up of seven (7) local government areas namely, Ekwusigo, Ogbaru, Ihiala, Onitsha
South, Onitsha North, Idemili North and Idemili South.
The predominant language is Igbo with dialectical differences. The State is
situated on a fairly flat land with tropical vegetation. The Climate is humid with mean
annual rainfall of 2010mm and average temperature of 87oF(SEEDS, 2009). It has a weak
soil that is easily eroded (SEEDS, 2009). Anambra State shares boundaries with Abia,
Enugu, Imo, Delta and Kogi States. Anambra State is rich in natural gas, crude oil,
bauxite, and ceramics and has almost 100 per cent arable soil. The State is endowed with
natural resources like iron deposits crude oil, lime stone, coal and clay (SEEDS, 2009).
Most of the natural resources remain largely untapped. The people are known to be
resourceful, industrious and very enterprising especially in the area of commerce, and
these constitute their primary activity in addition to agriculture. The industrial base of the
state is private sector driven, spanning from agro-allied, automobile and manufacturing
situated mostly in the Nnewi industrial belt.
3.2 Sampling Technique
Multi-stage random sampling technique was used to select 160 respondents for
the study.Firstly, one local government area was selected randomly from each of the four
agricultural zones in the state. These local government areas included: Aguata in Aguata
agricultural zone, Njikoka in Awka agricultural zone, Anambra East in Anambra
agricultural zone and Idemili South in Onitsha agricultural zone. Thereafter, two
communities were selected randomly from the selected local government areas followed
by random selection of 20 agro-processors that processed cassava, oil palm fruit,
groundnut, maize, plantain, palm kernel, soy bean and rice from each of the selected
communities from the list of small-scale agro-based entrepreneurs gotten from Anambra
State Ministry of Industry and Commerce.
34
3.3 Data Collection
Primary data were used for this study. The data were collected using detailed and
well-structured questionnaire administered to small-scale agro-based entrepreneurs in
AnambraState. These data centered on:
a. socio-economic characteristics of the small-scale agro-based entrepreneurs such as
age, sex, household size, level of education, marital status and level of experience
in small scale agro industry.
b. levels of income, savings and investment patterns of the respondents.
c. sources of capital for investment by small-scale agro-based entrepreneurs.
d. factors that affect their income, savings and investment patterns.
e. factors that affect the income of small-scale agro-based industry.
3.4 Analytical Technique
Descriptive statistics such as mean, tables, frequency distribution, graphand charts
were used to analyzeobjective (i), (ii), (iii) and (iv).The descriptive statistical tool,
likertrating scale was used to evaluate objective (vi). This was done on a 4-point scale:
Strongly Agree (4), Agree (3), Disagree (2) and Strongly Disagree (1) on items that
indicate the factors that affect the productivity of small-scale agro-based industries. The
rating will compare the mean score of the industries on the items with the weighted mean,
which is the sum of the 4-point scale calculated as follows: 4 + 3 + 2 + 1 = 10/4 = 2.5. A
mean score greater than or equal to 2.5 indicatesa strong benefit of income, savings and
investment decisions to small-scale agro-based entrepreneurs.Objective (v) was analyzed
usingmultiple regression analysis, while tests for perfect or near perfect linear
relationships between the explanatory variables in the multiple regression models were
conducted using Farrar-Glauber test for multicollinearity.
The model for the multiple regression analysis of income wasspecified as:
35
Yinc = b0 + b1X1 + b2X2 + …….. + b8X8+ e 3.1
Where:
Yinc = income level (N)
X1 = household size (number)
X2 = age of entrepreneur (years)
X3 = educational level (number of years spent in school)
X4 = level of skill trained in/acquired (dummy: 1 if trained; 0 if not)
X5 = savingslevel (N)
X6 = asset level (N)
X7 = marital status (dummy: 1 = married; 0 = single; 2 = widowed; 3 = divorced)
X8 = sex (dummy: 1 = male; 0 = female)
ei = error term
The model for the multiple regression analysis of savings wasspecified below:
Ysav = b0 + b1X1 + b2X2 +………+ b9X9 + e 3.2
Where:
Ysav = level of savings (N)
X1 = household size (number)
X2 = age of entrepreneur (years)
X3 = educational level (number of years spent in school)
X4 = level of skill trained in/acquired (dummy: 1 if trained; 0 if not)
X5 = income level (N)
X6 = savings interest rate (N)
X7 = asset level (N)
X8 = marital status (dummy: 1 = married; 0 = single; 2 = widowed; 3 = divorced)
X9 = sex (dummy: 1 = male; 0 = female)
36
ei = error term
The model for the multiple regression analysis of investment wasspecified below:
Yinv = b0 + b1X1 + b2X2 + …….. + b9X9+ e 3.3
Where:
Yinv = investment level (N)
X1 = household size (number)
X2 = age of entrepreneur (years)
X3 = educational level (number of years spent in school)
X4 = level of skill trained in/acquired (dummy: 1 if trained; 0 if not)
X5 = savings level (N)
X6 = amount of money borrowed (N)
X7= rate of interest (N)
X8= marital status (dummy: 1 = married; 0 = single; 2 = widowed; 3 = divorced)
X9 = sex (dummy: 1 = male; 0 = female)
ei = error term
The Farrar-Glauber test involves the use of chi-square test in the detection of the
existence and severity of multicollinaerity in the function i.e. it measures the departure of
the explanatory variables from orthogonality (Koutsoyiannis, 1977).If the observed *χ2 is
greater than the theoretical value ofχ2 with 1/2k (k-1) degrees of freedom, the assumption
of othogonality is rejected, that is, the existence of multicollinaerity is accepted. In other
words, the higher the observed *χ2 the more severe the multicollinaerity. The model was
specified as follows:
rxixj = 1 and rxixj = 0
*χ2 = - [n – 1 – 1/6 (2k + 5)]. loge [SD] 3.4
Where:*χ2 = chi-square value of χ2
37
n = sample size = 160
k = number of explanatory variables has a χ2 distribution with v= 1/2k(k-1)
degrees of freedom= 9
SD = value of the standardized determinant = correlation determinants
Hypothesis (i) was determined using t-test.Hypothesis (ii) was determined using
analysis of variance (ANOVA) technique.
The t-test was specified below:
t = bi - bi 3.5(Koutsoyiannis, 1977)
σ(bi)
Where:
t = t-test;
bi = estimated value of bi;
bi = actual value of bi;
σ(bi) = standard error of bi
Analysis of Variance (ANOVA) technique was specified below:
F* = ¿ (Koutsoyiannis, 1977) 3.6
[∑j=1
k
∑i=1
nj
(Yji−Yj )2 ¿ /¿¿)
Where:
nj = size of the jth sample
N = ∑j=1
k
nj=¿¿ size of the ‘pooled’ (enlarged) sample
K = number of samples.
38
CHAPTER FOUR
RESULTS AND DISCUSSION
4.1 Socio-economic characteristics of small-scale agro-based entrepreneurs
The socio-economic characteristics of small-scale agro-based entrepreneurs
considered in this study included age, sex, household size, level of education and marital
status. The rest were types of agro-based activity, nature of business and years of
experience in agro-based business.
4.1.1 Age of Small-scale Agro-based Entrepreneurs
The frequency distribution of the age of small-scale agro-based entrepreneurs is
shown in table 4.1.The result showed that the mean age of the entrepreneurs was 40 years.
The results further showed that majority (33.8%) of the small-scale agro-based
entrepreneurs were within the age range of 31-40 years while only 3.1% of them were
above 61 years of age. This implies that most of the agro-based entrepreneurs were still
young and energetic. Agricultural and agricultural processing activities are very tasking,
and require lots of energy. This may have been responsible for the dominance of the agro-
based entrepreneurs within their youthful ages.
39
Table 4.1: Age Distribution of Small-scale Agro-based Entrepreneurs in Anambra State
Mean age of small-scale agro-based entrepreneurs = 40 yearsSource: Field survey, 20144.1.2 Sex of small-scale agro-based entrepreneurs
Distribution of small-scale agro-based entrepreneurs according to sex is shown in
figure 2.1. The results showed that majority of the small-scale agro-based entrepreneurs
were males at 57% compared to females whose frequency was 43%. Agro-based
activities involve herculean tasks which require lots of energy to execute and as such
could have accounted for the higher proportion of males in the business than the females.
57%
43%
MaleFemale
Figure 2.1: Sex Distribution of Small-scale Agro-based Entrepreneurs in Anambra State.Source: Field survey, 2014.
40
Age distribution (years) Frequency Percentage (%)
21-30 35 21.9
31-40 54 33.8
41-50 38 23.8
51-60 28 17.5
61-705 3.1
71-80 0 0
Total 160 100
4.1.3 Marital status of small-scale agro-based entrepreneurs
The frequency distribution of small-scale agro-based entrepreneurs according to
marital status is shown in Table 4.2. The table shows that majority of the agro-based
entrepreneurs were married (43.8%) while 27.5% of them were single. Agricultural
activities in sub-Saharan Africa are subsistence and labour intensive. This means that
agro-based entrepreneurs require lots of hands to help them in the business. Due to the
low capital base of the entrepreneurs,their families become the readily and available
sources of labour for their businesses. It therefore makes it very difficult and
uneconomical for single entrepreneurs to successfully operate the business. This may
have contributed to the dominance of married men and women in the business.
Table 4.2: Distribution of Small-scale Agro-based Entrepreneurs According to Marital Status.
Marital Status Frequency Percentage (%)
Married 70 43.8
Single 44 27.5
Divorced 26 16.3
Widowed 20 12.5
Total160 100
Source: Field survey, 2014.
4.1.4 Household size of small-scale agro-based entrepreneurs
The frequency distribution of small-scale agro-based entrepreneurs according to
household size is shown in table 4.3.
Table 4.3: Frequency Distribution of Small-Scale Agro-Based Entrepreneurs According to Household Size.
41
Household Size Frequency Percentage (%)
1-5
6-10
11-15
>16
42
66
46
6
26.3
41.3
28.8
3.8
Total 160 100
Source: Field survey, 2014.
The result showed that the mean household size of the entrepreneurs were 9
persons while majority of them (41.3%) had between six to ten persons in their
households. The use of household members in agro-based businesses acts as incentive for
large household sizes for the entrepreneurs.
4.1.5 Educational level of small-scale agro-based entrepreneurs
The frequency distribution of small-scale agro-based entrepreneurs according to
level of education is shown in table 4.4.
Table 4.4: Frequency Distribution of Small-Scale Agro-Based Entrepreneurs According to Level of Education.
Educational level Frequency Percentage(%)
No formal education
Incomplete primary education
Completed primary education
Incomplete secondary education
Completed secondary education
Incomplete tertiary education
Completed tertiary education
Vocational/technical education
21 13.1
25 15.6
40 25
22 13.8
35 21.9
0 0
4 2.5
13 8.1
Total 160 100Source: Field survey, 2014.
The result indicated that majority of the agro-based entrepreneurs completed
primary school education (25%), 21.9% of them completed secondary school education
42
while 15.6% of the agro-based entrepreneurs had incomplete primary school education,
whereas only 13.8% of the respondents had incomplete secondary school education. This
study further showed that 13.1% of the respondents had no formal education, 8.1% had
vocational/technical education while 2.5% of the entrepreneurs had completed their
tertiary education. This implies that level of illiteracy in rural areas is high and as such
may affect their level of adoption of new technology as well as their income, savings and
investment patterns. Agriculture in developing economies like Nigeria islabour intensive,
as such most educated people are not attracted to the profession, and this may be
responsible for the very negligible proportion of agro-based entrepreneurs that had
tertiary education.
4.1.6 Type of agro based activity engaged by small-scale agro-based entrepreneurs
The frequency distribution of small-scale entrepreneurs according to their type of
agro-based activity they were engaged in is shown in table 4.5.
Table 4.5: Frequency Distribution of Small-Scale Entrepreneurs According to their Type of Agro-Based Activities.
Agro-based activities Processed (Output) Frequency Percentages (%)
Cassava processing
Oil palm fruit processing
Groundnut processing
Maize processing
Plantain processing
Palm Kernel processing
Soy bean processing
Rice
Total
Garri, Fufu, Abacha
Palm oil
Cooked and fried
groundnut, groundnut
butter, groundnut
powder
Popcorn
Plantain chips
Animal feed &palm
kernel oil
Soya milk
Rice
30
32
43
16
7
18
8
6
160
18.8
20.0
26.9
10.0
4.4
11.3
5.0
3.8
100
Source: Field survey, 2014.
43
The result indicated that groundnut processing was the predominant agro-based
activity being carried out by the entrepreneurs as it account for about 26.9%. This was
followed by oil palm fruit processing which accounted for 20%, cassava processing
accounted for 18.8% while the least agro-based activity was rice processing as only 3.8%
of the entrepreneurs were engaged in it. There are so many products that come from
groundnut processing such as fried groundnut, cooked groundnut, groundnut paste and
groundnut powder. These products place a lot of them on entrepreneurs for the processing
of groundnut. As such, this may have been responsible for the engagement of majority of
the agro-based entrepreneurs in groundnut processing. Similarly, palm oil is used in Igbo
land for virtually every cooking activity. So there is always a continuous demand for
palm oil in the market. This may to some extent influence the decision of the
entrepreneurs on the agro-based activity to engage in.
4.1.7 Nature of business of small-scale agro-based entrepreneurs.
The nature of the business of small-scale agro based entrepreneurs is shown in
figure 2.2. The result showed that 57.5% of the agro-based entrepreneurs were engaged in
agro-processing on full-time basis, while 42.5% of them were on part-time. This implies
that agro-based processing activities were their predominant occupation of the
entrepreneurs, and hence their major sources of livelihood.
44
frequency percentage0
102030405060708090
100 92
57.5
68
42.5
full-time part-time
Figure 2.2: Nature of business of small-scale agro-based entrepreneurs Source: Field survey, 2014.
4.1.8 Years of experience of small-scale agro-based entrepreneurs.
The frequency distribution of small-scale agro-based entrepreneurs according to
their years of experience is shown in table 4.6. The result indicated that majority (38.1%)
of the agro-based entrepreneurs had 6 – 10years experience in the business compared to
27.5% of them with 11 – 15years, while 3.1% of them had more than 21years experience
in the business. The low proportion of the respondents with more than 21years experience
in the business is an indication that most of them were still young and youthful. It is
therefore in tandem with earlier reports of this study which showed that the average age
of the entrepreneurs were 38.4yearsand that majority of them were within 31-40years.
This is encouraging as it will build and strengthen their competency and efficiency in the
business leading to an overall growth in gross domestic product and wealth of the
country.
Table 4.6: Frequency Distribution of Small-Scale Agro-Based Entrepreneurs According to their Level of Experience.
Level of Experience (Years) Frequency Percentage (%)
1-5
6-10
38
61
23.8
38.1
45
11-15
16-20
>21
44
12
5
27.5
7.5
3.1
Total 160 100
Mean years of experience of small-scale agro-based entrepreneurs = 9 yearsSource: Field survey, 2014.
4.1.9 Possession of requisite skills by small-scale agro-based entrepreneurs.
The possession of requisite skills by the small-scale agro based entrepreneurs is
shown in figure 2.3. The result showed that only 35% of the entrepreneurs possessed the
requisite skills in the agro processing activity they were carrying out while the greater
majority of 65% did not. In other words, 35 out of every 100 entrepreneurs had the
necessary trainings to undertake their various agro processing activity. This implies that
majority of the entrepreneurs would be operating below optimum as training is a
necessary prerequisite for efficiency. That is to say that the output and performance of the
vast 65% of the entrepreneurs may be severely hampered by their lack of training and
possession or requisite skills.
FrequencyPercentage
0
20
40
60
80
100
120
56
35
104
65
Trained Not trained
Figure 2.3: Possession of requisite skills by agro-based entrepreneurs Source: Field Survey, 2014.
46
4.2 Income and Savings Status and Patterns of Small-Scale Agro-based
Entrepreneurs
4.2.1 Income status of agro-based entrepreneurs.
The frequency distribution of income status of the small-scale agro-based
entrepreneurs is shown in table 4.7.
Table 4.7: Frequency Distribution of Small-Scale Agro-Based Entrepreneurs According to their Level of Income.
Income (₦) per month Frequency Percentage (%)
<5,000
6,000-10,000
11,000-15,000
16,000-20,000
>21,000
13
52
63
17
15
8.1
32.5
10.6
39.4
9.5
Total 160 100
Average amount of monthly income of agro-based entrepreneurs = N12,031.25Source: Field survey, 2014.
The result showed that monthly income of majority (39.4%) of the agro-based
entrepreneurs were between N16,000.00 and N20,000.00 while 9.5% of them had their
monthly income above N21,000.00 and only 8.1% of them earned less than N5,000.00 in
a month. The highest possible income of N20,000.00 per month for majority of the
entrepreneurs is low compared to that fact that many of them have many mouths to feed
and cater for. This also could be responsible for the low patronage of the agricultural-
based businesses by the youth especially the educated ones. The implication is that most
of the agro-based entrepreneurs may not have sufficient funds to capitalize their
businesses since their families depend also on these merge income.
4.2.2 Income sources of small-scale agro-based entrepreneurs
The frequency distribution of the sources of income of the small-scale agro-based
entrepreneurs is shown in table 4.8. The result showed that there were six different
47
economic activities which the small-scale agro-based entrepreneurs were engaged in, and
from which they derived their income. These activities included agro-processing,
government employment, trading, agro-processing and government employment, farming
andartisan jobs.
The result showed that agro-processing was the predominant economic activity of
the respondents as about 42% of them were engaged in it. This is in line with earlier
findings of the study which showed that over 40% of the incomes of the respondents were
derived from agro-processing activities. Further results indicated that 20% of the
respondents were engaged in agro-processing activity and government employment, 10%
were engaged solely in government employment while 8% were engaged in trading.
Furthermore, 14% of them were engaged in farming while 6% of the respondents were
engaged in artisan jobs.
Table 4.8: Distribution of Small-Scale Agro-Based Entrepreneurs According to their Sources of Income.
Sources of Income Proportion of total income(%)
Agro-processing activities 42
Government Employment 10
Trading 8
Agro-processing activities and Government Employment 20
Farming 14
Artisan jobs 6
Total100Source: Field survey, 2014.
4.2.3 Savings status of small-scale agro-based entrepreneurs.
48
The frequency distribution of savings status of small-scale agro-based
entrepreneurs is shown in table 4.9.
Table 4.9: Frequency Distribution of Small-Scale Agro-Based Entrepreneurs According to their Monthly Savings.
Savings (₦) per month Frequency Percentage (%)
1,500 - 3,000
3,500 - 5,000
5,500 - 7,000
7,500 - 9,000
9,500 - 11,000
52
65
19
15
9
32.5
40.6
11.9
9.4
5.6
Total 160 100
Average amount of monthly savings of small-scale agro-based entrepreneurs = N4,550 Source: Field survey, 2014.
The study indicated the savings level of the entrepreneurs were low as only 5.6%
of them saved above N9,500.00 in a month while vast majority of 40.6% saved between
N3,500.00 and N5,000.00per month with 32.5% of the saving less than N3,000.00 in a
month. This is not surprising in view of the merge monthly income which they earned
from agro-processing activities and of which majority of them were engaged in, on full-
time bases. This has severe consequences for the growth and development of this sector
and indeed the entire Nigerian economy.
4.2.4 Savings pattern of small-scale agro-based entrepreneurs
Distribution of savings pattern of small-scale agro-based entrepreneurs is shown
in figure 2.4. The study showed the various media through which the agro-based
entrepreneurs saved their money.These mediathe study found included banks, esusu
contributions, cooperative societies and personal/home savings.
49
Banks Esusu Cooperatives Personal savings0
10
20
30
40
50
60
5.5
58.3
15
21.2
The result showed that the small-scale agro-based entrepreneurs savedmajorly
through esusu contributions. This was evident as esusu contributions accounted for about
58.3% of the means of savings of the respondents compared to 21.2% by personal/home
savings and 15% by cooperatives while bank savings received the least patronage of
5.5%. The respondents generally have low level of formal education with low level of
income as indicated by this study. This may have contributed to their favouring esusu
contribution as the predominant means of saving compared to use of banks. It could also
be due to the prevalence of the esusu system in the area and may also arise from the fact
that most esusu systems are organized, run and managed by members of the community.
So, they know themselves and therefore have confidence in the system which could have
prompted their saving their money with the system. In a related development,
home/personal savings received an appreciable patronage and it was the second most used
means of saving by the agro-based entrepreneurs. This implies that if banks are made
more accessible to them they would embrace it very well as banks are stronger and more
reliable, and also have the capacity to extend many incentives to the entrepreneurs.
50
Perc
enta
ge (%
)
Figure 2.4: Distribution of small-scale agro-based entrepreneurs according to their pattern of savings.
Source: Field survey, 2014.
4.3 Investment patterns of the small-scale agro-based entrepreneurs
The investment patterns of small-scale agro-based entrepreneurs were shown in
table 4.10. The result indicated that the average amount of investment of the agro-based
entrepreneurs in their various businesses. The average amount of investment of the agro-
based entrepreneurs was N27,562.5(table 4.10). Also, majority of the entrepreneurs
(46.3%) invested within N21,000 to N30,000 followed by 27.5% of the entrepreneurs
who invested less than N20,000 in their businesses. Further result showed that there were
no significant (p>0.1) differences in the pattern of investment of the small-scale agro-
based entrepreneurs among the different agricultural zones in the state (Appendix 1). The
businesses of these small-scale agro-based entrepreneurs are rural-based, highly labour
intensive with limited capital investment. These could have accounted for the lack of
significant differences in their investment patterns across the agricultural zones of the
state. Furthermore, this is consistent with earlier reports of the study which stated that
most of the entrepreneurs were uneducated with large household sizes (tables 4.4 & 4.3).
These affect the ability of the entrepreneurs to accumulate and source for capital to invest
in their businesses. These therefore could have informed the low monthly income of the
entrepreneurs (table 4.7) which may have combined to retard their ability to grow their
businesses and raise their earning power and standard of living.
Table 4.10: Pattern of investment of agro-based entrepreneursAmount of Investment (N) Frequency Percentage (%) "000"
< 20 44 27.5
21 – 30 74 46.3
31 – 40 15 9.4
41 – 50 19 11.9
> 51 8 5.0
Total 160 100
Average Amount of Investment of small-sale agro-based entrepreneurs = N27,562.5Source: Field survey, 2014.
51
4.4 Sources of capital for investment by small-scale agro-based entrepreneurs
4.4.1 Sources of capital
The sources of capital for investment by small-scale agro-based entrepreneurs are
shown in figure 2.5. The result showed that 46.3% of the entrepreneurs sourced the
capital for their investmentsthrough personal savings. This is expected as most of them as
earlier reported in this study had limited formal education with low capital base. As such
it could have been difficult for them to raise capital from financial institutions to finance
their businesses. Perhaps, this may have accounted for the meager 2.5% of the
entrepreneurs who sourced their investment capital from banks, while 10%, 18.8% and
22.5% of them sourced theirs from money lenders, cooperative societies and as gifts from
friends and relatives, respectively.
Personal savings
Cooperative society
Money lender
Bank loan Gifts05
101520253035404550
4.5 Factors Affecting Income, Savings and Investment patterns of Small-scale
Agro-Based Entrepreneurs in Anambra State.
The chi-square result on the test of multicollinearity of some of the factors
affecting income, savings and investment patterns of small-scale agro-based
52
Figure 2.5: Sources of capital for agro-based entrepreneurs
Source: Field survey, 2014
Percentage (%
)
entrepreneurs are shown in appendices 2 –4. The tests of multicollinaerity between
savings level and asset level in income pattern, income level and asset level in savings
pattern, and savings level and amount of money borrowed in investment pattern failed as
their chi-square (*χ2) values were not significant (p<0.10).
4.5.1 Factors affecting income pattern of Small-scale Agro-based entrepreneurs.
The regression result on the factors affecting income pattern of small-scale agro-
based entrepreneurs is shown in table 4.11. The result showed that the independent
variables accounted for about 87 per cent of the variations in the income pattern of the
entrepreneurs and their overall effect was significant (p<0.01). The result further showed
that age, educational level, level of skill acquired, savings level and asset level were the
factors that contributed significantly (p<0.10)and positively to changes in the income
pattern of agro-based entrepreneurs. This implies that the income patterns of the
entrepreneurs changes in the same direction as these factors. In other words, as the age of
the entrepreneurs increases their income patterns increases. This means that the
entrepreneurs develop more sources of income as the progress in age. Age is a function of
time and opportunities, and as such, the entrepreneurs get more of such opportunities as
they get older compared to the younger ones.
Table 4.11: Regression result on the factors affecting the income of small-scale agro-based Entrepreneurs
Variables Coefficient Standard error t value
Constant 3911.62 859.697 4.550***
Household size 133.194 118.080 1.128
Age 84.2270 39.285 2.144**
Educational level 283.025 91.594 3.090***
Level of skill acquired 640.829 466.057 1.375*
Savings level 0.30951 0.171 1.810**
Asset level -0.0420 - 0.019 2.214**
Marital status 221.663 665.654 0.333
53
Sex -724.672 835.838 -0.867
R2 0.873
F 4.554***
*, ** and *** are 10%, 5% and 1.0% level of significance. t0.10 = 1.282; t0.05 = 1.645; t0.01 = 2.326Source: Field survey, 2014.
Similarly, the higher the educational level of the entrepreneurs, the more their
income patterns. Education has a way of exposing and equipping people about new
opportunities in life and how to go about them. It is not surprising therefore that the
entrepreneurs who have higher educational attainment have more sources of income. This
is an annex to the level of skills acquired by the entrepreneurs. The more skills they have
the more their patterns of income and hence their means of livelihood. In the same vein,
as asset and saving levels increases so also do their income patterns. Entrepreneurs that
have higher assets tend to have higher savings and with increased savings there are more
capital accumulations which could be used for more businesses. This may be responsible
for the positive significant effect of saving and asset levels on the income patterns of the
agro-based entrepreneurs.
4.5.2 Factors Affecting Savings Patterns of Small-scale Agro-based Entrepreneurs
The regression result on factors affecting the savings patterns of small-scale agro-
based entrepreneurs is shown on table 4.12. The result showed that the independent
variables accounted for about 73.5 per cent of the variations in the savings pattern of the
entrepreneurs and their overall effect was significant (p<0.05).
The result indicated that income level, household size, educational level, level of
skill acquired and asset level were the factors that significantly (p<0.10) affected the
savings pattern of small-scale agro-based entrepreneurs. While the effects of income
level, level of skill acquired and asset level were positive, those of household size and
educational level were negative.
54
The positive effects of income level, level of skill acquired by the entrepreneurs
and their asset level imply that as these variables increase so also do their savings patterns
increase. Income is a major determinant of the rate of socioeconomic development and
activity within any economy. A high income level for the entrepreneurs will enable them
to have high amounts of money to save after meeting basic business and family expenses.
In the same vein, the more the asset level of the entrepreneurs, the more their ability to
generate higher incomes, and the higher the incomes they generate the higher their ability
to save. Furthermore, skill acquisition enables the entrepreneurs to do more technical jobs
that attract higher wages and remunerations. This implies that the higher the level of skills
acquired by the entrepreneurs, the higher their income levels and this will also increase
their savings level.
Table 4.12: Regression result on the factors affecting the savings pattern of small-scale agro-based entrepreneurs
Variables Coefficient Standard error t value
Constant 4259.869 1265.520 3.366***
Income level 0.07844 0.036 2.179**
Household size -131.5921 52.912 -2.487***
Age 14.561 18.116 -0.804
Educational level -54.8935 41.586 -1.320*
Level of skill acquired 657.7469 371.189 1.772**
Asset level 0.028917 0.009 3.213***
Marital status -184.96472 175.655 -1.053
Sex 58.47065 377.230 0.155
Interest on savings 0.287928 0.258 1.116
R2 0.735
F 1.244**
*, ** and *** are 10%, 5% and 1.0% level of significance. t0.10 = 1.282; t0.05 = 1.645; t0.01 = 2.326Source: Field survey, 2014.
55
In analogy, household size and educational level affected the savings patterns of
the small-scale agro-based entrepreneurs negatively. This implies that the higher the sizes
of entrepreneurs’ household sizes and educational level, the lower their savings pattern.
Large household size connotes greater responsibility and as such most of the income of
the entrepreneurs will be spent on family upkeep and expenses. Similarly, as the
educational level of the entrepreneurs rises, it raises their tastes and expectations in life
such that their average expenses increases most time without proportionate increase in
income. This reduces their ability to save.
4.5.3 Factors Affecting Investment Pattern of Small-scale Agro-based
Entrepreneurs.
The regression result on the factors affecting the investment pattern of small-scale
agro-based entrepreneurs is shown on table 4.13. The result showed that the independent
variables accounted for about 70.1 per cent of the variations in the investment pattern of
the entrepreneurs and their overall effect was significant (p<0.10).
The regression result showed that household size, educational level, level of skill
acquired, savings level, amount of money borrowed and amount of interest paid on
borrowed money were the factors that significantly (p<0.10) affected the investment
pattern of the small-scale agro-based entrepreneurs. The effects of household size and
interest on borrowed money were negative. This meant that the higher the household size,
the lower the investment pattern of the entrepreneurs, and also, the higher the amount of
interest on borrowed money, the lower the level of investment, and vice versa. Large
household size places huge burden on the entrepreneurs for their day-to-day upkeep and
maintenance. This reduces the amount of capital available to the entrepreneurs for
investment. Similarly, large interest rates on borrowed monies reduce the amount of
56
money available for investment by the entrepreneurs. This is evident as the large sums
being paid out as high interests could have been invested in the business.
On the other hand, level of education and skills acquired, savings level and
amount of money borrowed had positive significant effects on investment level. The
higher the educational level or skills acquired by the entrepreneurs the more their ability
to articulate and make investment decisions. Investment at whatever level requires some
level of mental development and training, and that is why those that are trained are better
equipped to succeed and have high investment levels. An entrepreneur with the requisite
skills or education will command higher confidence, respect and patronage from the
publics compared to untrained or less educated ones. Also, the educated ones will be able
to access credit facilities from banks, government and non-governmental organizations
easily compared to less educated ones.
Table 4.13: Regression result on the factors affecting the investment pattern of small-scale agro-based entrepreneurs
Variables Coefficient Standard error t value
Constant 11053.164 4795.299 2.305**
Household size -544.04547 210.707 - 2.582***
Age 66.418 68.264 0.973
Educational level 336.52867 156.017 2.157**
Level of skill acquired 2829.1264 1439.759 1.965**
Savings level 0.473 0.309 1.531*
Marital status -28.307 676.725 -0.042
Sex 1536.2601 1449.302 1.060
Amount of money borrowed 0.247824 0.072 3.442***
Interest on money borrowed -2.516 1.068 -2.356**
R2 0.701
F 3.231*
*, ** and *** are 10%, 5% and 1.0% level of significance. t0.10 = 1.282; t0.05 = 1.645; t0.01 = 2.326Source: Field survey, 2014.
57
Basic economic theories show that whatever that is not consumed is saved, and
whatever that is saved is available for investment. It is not surprising therefore that
savings level had a significant positive effect on investment level. Also, most investment
decisions are financed from credits and grants. As such, the amount of money an
entrepreneur is able to borrow will to a large extent affect the level of investment. This
could have therefore accounted for the positive effect of borrowed money on the
investment pattern of small-scale agro-based entrepreneurs.
4.6 Factors Affecting the Income of Small-Scale Agro-Based Industry
The result of the Likert scale rating on the factors affecting the income and
productivity of small-scale agro-based industry on a 4-point scale is shown in table 4.14.
The result showed that the average rating of the challenges facing small-scale agro-based
industry was 2.85. This is above the minimum cut-off of 2.5 which implies that these
factors constitute serious impediments to the performance, income and productivity of the
entrepreneurs.
Table 4.14: Likert rating scale of factors affecting the income of small-scale agro-based industry
N = 160S/n Factors Average ratings/points
1. Lack of accessibility to their business areas 3.60
2. Epileptic power supply 3.50
3. Lack of portable water supply 2.60
4. Lack of access to land 2.41
5. Low patronage 3.47
6. Low technical know-how 2.80
7. Poor educational background 2.43
8. Multiple taxation by government 3.80
9. Inadequate procurement of raw materials 2.13
10. Irregularities in the supply of agricultural inputs 2.30
11. Challenge of environmental degradation 2.30
Average rating of entrepreneurs 2.85
58
Source: Field survey, 2014.
Multiple taxations, lack of accessibility to their business areas, epileptic power
supply and low patronage were the factors most highly rated above 3.0 by the
entrepreneurs as severely affecting them. The study indicated that the industries paid
different levies and duties to the different organs and arms of government for the same
purposes. These constitute multiple taxation and contribute to the dwindling fortunes of
the incomes of the industry. This is in line with the findings of Adepoju et al. (2012), that
small-scale agro-based industries are severely affected by multiple taxation. In the same
light, the road networks leading to the business areas of the entrepreneurs were not
accessible. This makes it difficult for the entrepreneurs to be easily accessed by
customers. It would not be surprising to adduce therefore that this poor accessibility of
the entrepreneurs may have accounted for the low patronage they receive as customers
can only buy goods and services from where they can access. Furthermore, Shitu (2012),
Amu and Amu (2012), Okpala (2006) and Afolabi (2010) reported in different studies
that lack of accessibility constituted significantly to the poor performance of small-scale
agro-based entrepreneurs. No wonder, therefore, that entrepreneur’s in this study
complained that customers found it difficult to access them and when they do, they do
them at very high cost due to the poor conditions of the roads.
More so, the study found that epileptic power supply cripples thebusinesses of the
small scale agro-based entrepreneurs thereby severely affecting their incomes. Several
authors had reported that lack of power supply was the most important factor that
negatively affects the growth and development of small-scale agro-based industry in
Nigeria (World Bank, 2011; CBN, 2005; FAO, 2008). As a result, most of them rely on
Private Power Providers (PPP) which they do themselves at very high costs coupled with
the attendant health and environmental hazards. The implication of this is that they
59
produce at higher costs and therefore sells at higher prices than they would have sold if
there were regular power supply. These higher prices are above the budget line of most
consumers, and as such, reduce the number of customers who come to patronize them
thereby affecting their income.
The study further showed that other factors that were rated highly by the
entrepreneurs to have severelyaffected their income included lack of portable water
supply and low technical know-how, while lack of access to land, inadequate
procurement of raw materials, irregularities in the supply of agricultural inputs and the
challenge of environmental degradation were rated lowly by the entrepreneurs.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
This study examined income, savings and investment patterns of small-scale agro-
based entrepreneurs in Anambra State, Nigeria. The specific objectives were to: describe
the socio-economic characteristics of small-scale agro-based entrepreneurs; determine the
income and savings status of small-scale agro-based entrepreneurs; and analyze the
investment pattern of small-scale agro-based entrepreneurs. The rest were to: analyze the
sources of capital for investment by small-scale agro-based entrepreneurs; ascertain the
factors that affected the income, savings and investment patterns of small-scale agro-
based entrepreneurs; and identify the factors that affected the income of small-scale agro-
based industry. The hypotheses included: socio-economic factors do not affect the
income, savings and investment patterns of small-scale agro-based entrepreneurs; and
60
there were no significant differences in the pattern of investment among the agricultural
zones in the state.
One hundred and sixty (160) respondents were sampled using multi-stage random
sampling technique across the four agricultural zones in the state. Data were collected
from these respondents using well-structured and pre-tested questionnaire that captured
their socio-economic characteristics, sources of capital as well as the factors that affect
their income, savings and investment patterns. Descriptive statistics, multiple regression
and likert rating scale were used to analyze the data collected. The t-test and analysis of
variance (ANOVA) were used to make inferences on the hypotheses.
The results indicated that the average age of the small-scale agro-based
entrepreneurs was 40years, while majority of them 33.8%were within the age range of
31-40 years. Also, majority of the small-scale agro-based entrepreneurs were males at
57.5%, while 43.8% of them were married. Household size of six to ten persons was the
highest at 41.3% with an average of 9 Persons per household, while most of the agro-
based entrepreneurs had completed their primary school education (25%). Furthermore,
26.9% of the entrepreneurs were engaged in groundnut processing, while the average
experience of the entrepreneurs was 9 years with majority (38.1%) of them had 6 – 10
years experience.
The monthly income of majority (39.4%) of the small-scale agro-based
entrepreneurs was between N16,000.00 and N20,000.00, while the entrepreneurs were
engaged mainly in agro-processing, farming, trading, as artisans, paid employment and/or
a combination of them. The average monthly savings of the entrepreneurs was N4,550
while majority (40.6%) of them saved between N3,500.00 and N5,000.00per month.
Majority (58.3%) of the small-scale agro-based entrepreneurs saved with esusu and also,
majority (32%) of them invested in groundnut processing. Furthermore, 46.3% of the
61
entrepreneurs invested within N21,000 - N30,000 in their businesses while 46.3% of them
also sourced the capital for their investment through personal savings and only 2.5% of
them received loans from banks for their investments. The results further showed that
there were no significant (p>0.10) differences in investment pattern of the agro-based
entrepreneurs across the agricultural zones in the state.
The results showed that the socio-economic characteristics were significant
(p<0.10) in explaining the changes in the income, savings and investment patterns of the
agro-based entrepreneurs, respectively. The independent variables accounted for 87.3% of
the changes in the income pattern of the entrepreneurs, while 73.5% of the changes in the
savings pattern of the entrepreneurs were accounted for by the independent factors and
70.1% of the variations in the investment pattern of the entrepreneurs were explained by
the explanatory variables.
The effect of age, educational level, savings level, asset level and level of skill
acquired by the entrepreneurs on their income pattern were significant (p<0.05) and
positive. Similarly, the effects of income level, level of skill acquired and asset level of
the entrepreneurs were positive and significant (p<0.01)respectively on their savings
pattern while the effects of household size and educational level were negative and
significant (p<0.05) respectively. Also, educational level, level of skill acquired, savings
level and amount of money borrowed by the entrepreneurs had positive and significant
(p<0.05) relationship with the investment pattern, respectively, while the effects of
household size and amount of interest paid on borrowed money were negative and
significant (p<0.05) respectively.
Research results further showed that the agro-based industry was besieged by a
litany of problems which affect negatively the income of small-scale agro-based
entrepreneurs at average rating of 2.85 on 4-point Likert rating scale. These problems
62
included lack of accessibility to their business areas, epileptic power supply, low
patronage and multiple taxation by the government.
5.2 Conclusion
The study found that the average age of the agro-based entrepreneurs was 35years
with average household size of 9 persons while majority of them were males. Also, the
study reported that the average monthly income of the entrepreneurs was N12,031.25 and
that majority of them were engaged in agro processing activities as their predominant
means of livelihood. Further, the results showed that the average savings of the agro-
based entrepreneurs was N4,550 and that most of them saved majorly through the esusu
saving scheme. Also, their average investment level was N27,562.5 and majority of them
raised their investment capital through personal savings. Age, educational level, level of
skill acquired, savings and asset levels were the factors that significantly affected the
income pattern of the entrepreneurs, while their savings pattern responded significantly to
income level, level of skill acquired, asset level, household size and educational level.
Results further showed that educational level, level of skill acquired, savings level,
household size, amount of money borrowed and amount of interest paid were the factors
that significantly affect the investment pattern of the agro-based entrepreneurs. The study
also found that the small-scale agro-based industry was constrained by some challenges
which affect the income of the entrepreneurs.
5.3 Recommendations
Based on the findings of this research the following recommendations are made.
1. The study found out that the small-scale agro-based entrepreneurs had very
limited formal and vocational/technical educations, and this factor had direct
significant effect on the income, savings and investment patterns of the
entrepreneurs, respectively. As such, the entrepreneurs should be enjoined to
63
attend adult education programmes to beef-up their knowledge and exposure.
Also, graduates in the country should be encouraged to take on the profession of
agro-based entrepreneurship for the development of our economy. Furthermore,
vocational and technical education should be given a prime place in the country to
strengthen and equip the knowledge and skills of the agro-based entrepreneurs.
2. Also, the study found that only a hand full of the agro-based entrepreneurs
possessed requisite skills and trainings in their respective agro-processing
activities. In this light, entrepreneurs should be encouraged to go into businesses
in areas where they have the necessary trainings and experience, while there
should be continuous training and retraining for them to improve their knowledge
and expertise.
3. Furthermore, the study reported that the agro-based entrepreneurs were over-
burdened by government through multiple taxations which may have contributed
severely in affecting their fortunes. Rather, agro-based entrepreneurs should have
some tax holidays as incentives to continue in business for the development of the
country.
4. More so, the study found that the investment level of the entrepreneurs was very
low to sustain any meaningful and viable agro-processing activity as many of
them sourced their investment capital through personal savings. This may not be
unconnected with high interest rate charged by banks which the study also found
to be impeding the entrepreneurs’ level of investment. The government should
therefore as a matter of priority provide consolidated pool of funds where agro-
based entrepreneurs can pool from and finance their businesses with minimal
interest rates on long term bases.
64
5. Lack of accessibility to their business areas and epileptic power supply are the
major challenges agro-based entrepreneurs are facing. As such, government
should provide good access road network and power supply to strengthen the
income of the agro-based entrepreneurs.
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APPENDICES
Appendix 1: ANOVA result of statistical difference in investment pattern across agricultural zones in the state
Sum of Squares df Mean Square F Sig
Regression 2002011 8 250251.375 0.241 0.486
Residual 156671899 151 1039549.0
Total 158973910 159
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Appendix 2: Chi-square tests of multicollinaerity between savings level and asset level Value df Asymp. Sig
Pearson chi-square 63.000a 36 0.243Likelihood ratio 36.77 36 0.978Linear by linear Association 0.127 1 0.722No. of valid cases 9
Appendix 3: Chi-square tests of multicollinaerity between income level and asset level Value df Asymp. Sig
Pearson chi-square 72.000a 64 0.230Likelihood ratio 39.550 64 0.993Linear by linear Association 0.006 1 0.937No. of valid cases 9
Appendix 4: Chi-square tests of multicollinaerity between savings level and amount of money borrowed
Value df Asymp. SigPearson chi-square 84.000a 36 0.323Likelihood ratio 56.21 36 0.045Linear by linear Association 0.314 1 0.647No. of valid cases 9
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Appendix 5: QUESTIONNAIRE
SECTION A
ANSWER ALL QUESTIONS AND TICK (√) IN THE APPROPRIATE SPACE PROVIDED
1.1 Zone : _______________________________________
1.2 Local Government Area: ________________________
1.3 Community/ Village: ___________________________
2) Socio- Economic Characteristics of Small-Scale Agro-Based Entrepreneurs
2.1 Name: ____________________________________________________
2.2 Age: (a) 20-30years (b) 31-40years (c) 41-50years (d) 51-60 years
(e) >61 years
2.3 Sex: (a) Male (b) Female
2.4 Marital status: (a) Married (b) Single (c) Divorced (d) widowed
2.5 Household Size: (a) 1-5 (b) 6-10 (c) 11-15 (d) >16
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2.6 Educational Status: (a) No Formal Education (b) Incomplete Primary Education
(c) Completed Primary Education (d) Incomplete Secondary Education
(e) Completed Secondary Education (f) Incomplete Tertiary Education
(g) Completed Tertiary Education (h) Vocational/ Technical Education
2.7 What type of agro-based activity do you engaged in? (a) Cassava (b) Oil palm
fruit (c) Groundnut (d) Maize (e) Plantain (f) Palm Kernel
(g) Rice (h) Others (Specify)________________________
2.8 Nature of your business: (a) Full-time (b) part-time
2.9 Years of experience: (a) 1 – 5 (b) 6 - 10 (c) 11 – 15 (d) 16 -20
(e) >21
2.10 Skill Acquired: (a) Trained (b) Not Trained
2.11 If trained, what is the Source of the training? ___________________________________
2.12 What is the type of training received? (a) Formal training (b) Informal training
SECTION B FINANCIAL ISSUES
3) Income Status and Patterns of Small Scale Agro Based Entrepreneurs
3.1 What is your major source of income? (a) Agro processing activities (b) Trader
(b) Government Employment (d) Agro-processing activities and Government
Employment (e) Others (Specify) ______________________________
3.2 What are your other sources of income? (a) Agro processing activities
(b) Trader(c) Government Employment (d) Agro processing activities
and Government Employment (e) Others (specify)_____________________
3.3 How often do you earn your income (a) Daily (b) Weekly (c) Monthly
(d) Yearly/Annually
3.4 How much do you earn from your enterprise? (a)N_________ Daily
(b) N_____Weekly(c) N________ Monthly (d) N__________ Yearly/Annually
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4) Savings Status and Patterns of Small Scale Agro Based Entrepreneurs
4.1 Do you save part of your income? (a) Yes(b) No
4.2a If No, why? (a) Low income (b) Large family size (c) Distance to banks
(d) Lack of financial institutions to save with (e) Lack of confidence in banks
(f) Others (Specify) _______________________________________
4.2b If yes, with which financial institution do you normally save?
(a) Banks (b) Esusu (c) Cooperatives (d) Personal/Home saving
(e) Others (Specify) _________________________________________
4.3 How much do you save? (a) N _______ Weekly (b) N ______ Monthly
(c) N ______ Quarterly (d) N ______ Bi-annually (e) N ________annually
(f) N __________Occasionally.
4.4 What is your motivation for saving? (a) To carter for emergency
(b) For Consumption (c) Consumption(d) Children’s education
(d)Accumulation/investment(e) Retirement
(f) Enterprise expenditure (g) Others (Specify) _________________________
5) Investment Pattern of Small Scale Agro Based Entrepreneurs.
5.1 What is the source(s) of capital for your business? S/n Agro-based business Amount(N) received 1 Personal savings 2 Cooperative society 3 Money lender 4 Bank loan 5 Gift from relatives 6 Gift from friends 7 Others (specify)
5.2 Did you receive any loan for agro based activities last year? (a) Yes (b) No
5.3 If yes, how much and from which source? (a) Relative ₦ _______ (b) Neighbours
₦________ (c) Friends ₦_______ (d) Banks ₦ _____(e) Governments ₦ ________
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(f) Self ₦____________
5.4 What was the loan for? (a) Buy machines (b) Pay for labour
(c) Buy raw materials (d) Others (specify) __________
5.5 What is the reason for your choice of institution for the loan?
(a) No interest rate is charged (b) Credit/loan is easily obtainable
(c) Short waiting time to process application (d) can pay it back anytime
(e) Others (Specify) _____________________________
5.6 What problem did you experience before you got the loan?
(a) Lack of collateral (b) High transport costs to the financial institution
(c) Lack of financial institutions (d) Did not know where to get loan from
(e) High rate of interest (f) Others (Specify) _________________________
5.7 How much loans have you collected? (a) N _____ (b) N _______ (c) N ________
5.8 How much of these loans have you repaid? (a) N ____ (b) N _____ (c) N ______
5.9 How much interest did you pay on the loan? N ______________________
5.10 How did you invest the capital?
Agro-based business Amount (N) invested
1 Groundnut processing 2 Palm oil processing 3 Cassava processing 4 Palm kernel processing 5 Maize processing 6 Plantain processing 7 Soy bean processing 8 Rice processing 9 Others (specify)
5.11 Indicate the problems that are affecting the income of small-scale agro-based industries or enterprises in Nigeria. {Please tick (√) where appropriate}.
Key: SA – Strongly Agree; A – Agree; D – Disagree; SD – Strongly Disagree.
S/N Problems affecting the income of agro- SA A D SD
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based industriesi. Lack of accessibility to their business areasii. Lack of power supplyiii. Lack of portable water supplyiv. Lack of access to landv. Low patronagevi. Low technical know-howvii. Poor educational backgroundviii. Multiple taxation by governmentix. Inadequate procurement of raw materialsx. Irregularity in the supply of agricultural
Inputsxi. Challenge of environmental degradationxii. Others(specify)
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