CC BY
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UDC 332; DOI 10.18551/rjoas.2022-06.04
ECONOMIC ANALYSIS OF WOOD MARKET IN KAJOLA LOCAL GOVERNMENT AREA
OF OYO STATE, NIGERIA
Babatunde Oluyemisi Omowumi
Department of Wood and Paper Technology, Federal College of Forestry Jericho, Ibadan,
Oyo State, Nigeria
Babatunde Taiye Oluwasola, Olokeogun Yemisi Samuel
Department of Forestry Technology, Federal College of Forestry Jericho, Ibadan,
Oyo State, Nigeria
Babatunde Kehinde Oluwafemi
Department of Basic Science and General Studies, Federal College of Wildlife and Management, New-Bussa, Niger State, Nigeria
Ademigbuji Alice Titilayo, Adepoju Grace Adenike
Department of Forestry Technology, Federal College of Forestry Jericho, Ibadan,
Oyo State Nigeria
*E-mail: babatundeoluyemisi@gmail.com
ABSTRACT
This study focused on Economic Analysis of wood market in Kajola Local Government Area of Oyo State. Multistage sampling was used in this study. Budgetary and Gini coefficient were used for the data analysis. Result showed that 54.0% engaged in the business were female 49.0% was in age group between 41-50 years, 57.0% are SSCE holder and 55.0% had 5-7 employees also 99.0% were private. The result also revealed that among the timber species that were common in the market include, Terminalia superba (Afara) has the highest percentage of 29.4%, and Azandiranta indica (Dongoyaro) has the least percentage. Moreover, the budgetary analysis of the plank vendor was revealed, the average revenue for the year 2016-2020 ranged between #21,120,100- #30,240,000, the net profit ranged between #13,432,033- #20,523,753. The result also show the market efficiency of the business from 2016-2020 was 2.75%, 2.93%, 2.41%, 3.16% and 3.11% respectively. Furthermore, the result show the market structure and conduct of the market and also show the constraints facing the market, ranging from inadequate power supply, high cost of transportation, insufficient species and Government policy. It was recommended that Government should encourage private tree plantation so as to make available more trees since demand for wood is at increased and also they should improve the market price and supply level of timber business in Kajola Local Government.
KEY WORDS
Profitability, timber, market, economics.
Wooden based industries have contributed to the economy of Nigeria and it was mentioned through (Adeyoju, 2001) that during 1963 wood primarily based industries employed 17.5% of the labour force in the country, and 17.4% of the indigenous skilled and unskilled labour. A sawmill may be described as a timber processing industry geared up with diverse wood processing machines. The machine encompass band noticed and round saws. In sawmill enterprise, the timber must be transformed into various sizes as a way to maximize profit and also satisfy the demand of the human being.
Sawmill is a critical enterprise whose performance not most effective has direct implementation for gift livelihood but enormous majority of the industries spherical wooden produced in Nigeria. Maximum existing sawmill contain old and poorly upkeep horizontal
band saws which can be manually pushed against stationary logs. The economic wooden fuel value chain that materials cities and towns generate over 3 000 000 fulltime jobs, numerous studied on log conversion efficiencies in the sawmill processing center showed that the total volume of strong wood in typical saw log is much less than 35% when converted into sawn timber (Larinde, 2006), (Akande, 2007). Traditionally, as a consequence, there may be need to measure the financial performance of timber industry.
A forest is a large area dominated by trees. Hundreds of more species definitions of forest are used throughout the world, incorporating elements such as tree density, tree height, land use, felony status and ecological feature (Johnson, 2013) food and agricultural company definition. Forest covered 4billion hectares.
Nigeria forests are naturally endowed with plant and animal species (flora and fauna) and for this reason it has been included for wooden manufacturing. Timber may be defined as wooden in a shape suitable for construction or carpentry, joinery or reconversion to manufacturing purpose. Wood has been use for building materials for over 400,000 years and it is very not unusual and great recognized material for residence creation along with ramming of flooring, partitions and roofs. According to (Cummingham et al; 2005) wood bills for approximately half of worldwide wood consumption.
As a result, the primary recognition of this work is to evaluate the profitability of various wooden species in Kajola Local Government of Nigeria.
METHODS OF RESEARCH
The study was conducted in Kajola local Government area Oyo State, Nigeria. It is located on latitude of 8002' 1.90''N and longitude of 30 20 51. 32''E.The headquarters of Kajola LGA is situated in Okeho town. LGA includes: Ilero, Ilua, Ayetoro-Oke, Isemi ile, Iwere-Oke, Ilaji-Oke. It has an area of 609km2 and a population of 200,997 at the 2006 census (UNDP, 2006et al, 2005). It has an estimate landmass of about 4,320 square kilometer. It is bounded in the south by Ibarapa Local Government, in the west by Iwajowa LG and Republic of Benin; and in the North by Ifesowapo LG and in the Northwest by Itesiwaju LG. Rainfall figures over the state vary from an average of 1200mm at the onset of heavy rains to 1800mm at its peak in the Southern part of the State to an average of between 800mm and 1500mm at the northern parts of the state.
Primary and secondary data were used in this study. The primary data was collected through the use of structured questionnaire to gain pertinent facts in characteristics involved in wood processing and economics evaluation which include nature of business, enterprise operation capital, annual income, earning level, cost etc. Secondary records was obtained from Oyo state Ministry of Forestry, National Bureau of statistics.
Multistage sampling was used in this study. In the first stage, Kajola local government was purposely chosen. The motive being that it has the largest forest coverage and housed the highest saw-mills and forest reserves in the area, secondly, ten saw-mills were randomly selected from the local government, thirdly, ten (10) wood marketers (sellers)were randomly selected from each sawmill. Altogether one hundred (100) questionnaires were administered in the study area.
The data was analyzed using descriptive analysis and budgetary evaluation. This following profitability measures were calculated:
RMCF = TVP — TC (1)
RRTI = 100 (t^-) (2)
GM = TR— TVC (3)
RRFC = 100 (4)
Rate of return (ROR) and Rate of return on investment (RORI) are two alternative profitability measures that were used in comparing the extent of profitability in the study area:
Rate of Return (ROR %) =—X—
v ' TC 1
TR—TC 100
Rate of Return on investment (RORI %) = i^x —
T C 1
Where: RMCF = Return to management capital and family labour or net income; TVP = Total value product; TVC = Total variable cost; RRTI = Rate of Return on investment; TC= Total cost (Gross margin); RFC = Return on fixed cost (Gross margin); RRFC = Rate of return on fixed cost.
Figure 1 - Study Area
RESULTS AND DISCUSSION
The result revealed that 30.0% are of age 31-40yrs while 49.0% are of age 41-50yrs and 20.0% are of age 51yrs above. The result display that majority were adult. This result corroborates the findings of (Akanni, 2012) which stated that those in the age range of 41-50 are efficient and have power to produce work. The result revealed that most of plank sellers were female (54.0%) which means majority of the respondents was female and they have power to carry out the task. This corroborate with (Alfred and Akitade, 2002) when they opined that timber marketing were dominated by female and the result disagree with (Olawumi and okunlola, 2015) when they stated that majority of the timber marketers in Ondo sawmill were male. The result also again show that 56.0% transport their product by truck, 42.0% by lorry and 2.0% by car, Which means majority of sellers transport their product by truck. This result shown is in agreement with (Agborlahor, 2010) who found that majority of small holder timber mills in Ogun state owned their trucks for transport purpose. The result further show that 9.0% had between 1-3years experience, 27.0% had between 10 years above experience while 42.0% had between 7-9 years' experience. This result suggests that 57.0 % had secondary education, 27.0% and 11% have primary and tertiary education respectively while 2.0% had no formal schooling for most market stake holders confers a wide range of opportunities and advantages for success in life compared with illiteracy. (Babatunde, 2019) based totally on a previous, it is expected that higher levels of educational attainment by a market dynamics and thus better profit from use of sound business principle
and wise business decision. This result revealed that 14.0% had between 1-4 employees, 29.0% had 8 and above workers and 55.0% had 5-7 workers in the industry. This result implies that majority of the plank vendor had 5-7 workers and contribute to the output of their product. The result revealed that 99.0% of the saw mill are private while 1.0% they public.
Table 1 - Socio-Economic Characteristics of the Respondents
VARIABLES FREQUENCY PERCENTAGES
AGE N=100
Below 30years 1 10.0
31-40years 30 30.0
41-50yrs 49 49.0
Above 51years 20 20.0
GENDER
Female 54 54.0
Male 46 46.0
MEANS OF TRANSPORTATION
Truck 56 56.0
Lorry 42 42.0
Car 02 2.0
YEARS OF ESTABLISHMENT
1-3years 9 9.0
4-6years 22 22.0
7-9years 42 42.0
Above 10years 27 27.0
EDUCATION BACKGROUND
No formal education 03 3.0
Primary school 27 27.0
Secondary school 57 57.0
Tertiary education 11 11.0
NUMBERS OF WORKERS
1-4 Workers 14 14.0
5-7Worker 55 55.0
8 and above 29 29.0
NATURE OF BUSINESS
Private 99 99.0
Public 1 1.0
BUSINESS OPERATIONAL CAPITAL
#300,000 7 7.0
#300,000-#500,000 48 48.0
#500,000-#1,000,000 36 36.0
#200,000 and above 9 9.0
Table 2 - Identification of Wood Species
Variable Frequency Percentage C.F.
COMM ON NAME BOTANICAL NAME
Afara Terminalia catapa 30 29.4 29.4
Araba Ceiba Pentandra 21 21.6 52.0
Dongoyaro Azadirata indica 1 1.0 53
Iroko Milicia excels 6 5.9 58.9
Igi Obi Cola spp 14 13.7 72.6
Oro Antiaris Africana 8 7.8 80.4
Teak Tectonia grandi 19 18.6 100
Source: Field survey, 2021.
Table 3 - Budgetary Evaluation of the Plank Seller
Variable cost 2016 2017 2018 2019 2020
Transportation 1,876,000 2,230,000 2,650,000 2,916,000 2,212,000
Labour 297,560 342,700 367,780 411,360 455,200
Fuel 2,232,600 586,036 2,962,000 2,284,00 2,674,00
Maintenance 395,600 116,550 374,000 111,600 333,400
Rent 10,400 10,600 10,800 10,800 10,800
Processing 2,244,000 2,654,000 2,876,000 3,196,000 3,398,000
Taxes 5000 5,000 5,000 6,000 6,000
Total variable cost 7,061,160 7,944,886 8,825,580 8,935,750 9,089,440
Fixed cost 2016 2017 2018 2019 2020
Saw machine 321,467 321,467 321,467 321,467 321,467
Generating set 211,235 211,235 211,235 211,235 211,235
Vehicle 94,105 94,105 94,105 94,105 94,105
Total fixed cost 626,807 626,807 626,807 626,807 626,807
Total cost 7,687,967 8,571,693 9,452,387 9,562,567 9,716,247
Total revenue 21,120,000 25,080,000 22,840,000 30,240,000 30,240,000
Profit 13,432,033 16,508,307 13,387,613 29,277,433 20,523,753
Rate of return of investment 2.75 2.92 2.42 2.85 3.11
Rate of return of fixed cost 33,7 40.0 36.44 43.46 48.24
Source: Field survey, 2021.
Table 4 - Market Efficiency
n/n 2016 2017 2018 2019 2020
Total revenue(#) 21,120,000 25,080,000 22,,840,00 30,240,000 30,240,000
Total cost(#) 7,687,987 8,571,693 9,452,387 9,562,567 9,716,247
Market efficiency (#) 2.75 2.93 2.41 3.16 3.11
Table 5 - Computation of Gini Coefficient for Timber Sellers in Kajola Local Government ('000)
Income sales No of seller % of seller Freq. % of seller Total sale % of total seller of sale XY
500-1000 15 15 15 6.12 15,5000 5.7 5.7 0.856
2,000-2,500 35 35.0 50 20.41 80,000 29.3 35.7 0.1225
3,000-3,500 30 30.0 80 32.65 97,500 35.7 70.0 0.210
4000-4,500 20 20.0 100 40.82 80,000 29.3 100 0.200
Total 100 100 245 100 273,000 100 0.13885
Table 6 - Distribution of Respondent towards Conduct of the Market
Variable Frequency Percentage
OWNERSHIP
Cooperative society 16 16.0
Partnership 18 18.0
Sole proprietorship 66 66.0
Total 100 100.0
SUPPLY OF PRODUCT
Regular 99 99.0
Not regular 01 1.0
Total 100 100.0
TYPE OF BUSINESS
Retailers 8 8.0
Wholesaler 25 25.0
Both 57 57.0
Producers 10 10.0
MEMBERSHIP OF ASSOCIATION
Yes 98 98.0
No 02 2.0
Total 100 100.0
Source: Field survey, 2021.
Table 7 - Constraints Facing the Timber Business
Constraints Frequency Percentage
Inadequate power supply
Yes 99 99.0
No 01 1.0
High cost of transportation
Yes 99 999.0
No 01 1.0
Insufficient species
Yes 87 87.0
No 13 13.0
Government policy
Yes 40 40.0
No 60 60.0
Inadequate credit policy
Yes 85 85.0
No 15 15.0
Source: Field survey, 2021.
7.0% had access to less than #3000, 000 to start their business, 36.0% had access to #500,000-#1,000,000, 48.0 had access to #300,000-#500,000 etc. This result is in agreement with (Adetayo, 2011) which found out that amount of working capital for a business enterprise often determines the level of output and accurate profit margin.
Terminalia catapa had the very best percent within the market with (29.4%), followed by Ceiba pentandra (21.6%) while Azadirata indica had the least percentage (1.0%). This implied that, Terminalia catapa and Ceiba pentandra are most common species in the markets than other species. This is contrary to the findings of FDF (2000), which stated that, in south west Nigeria, the common tree species encompass Afara (Terminalia superba), Apa (Afzelia Africana), Opepe (Nauclea diderrichi), Ita (Lophira alata) amongst others.
The budgetary analysis of timber market in Kajola Local Government of Oyo state. The average revenue for the year 2016-2020 ranged between #21,120,100- #30,240,000.
The net profit ranged between#13,432,033 -#20,523,753. The rate of return investment was 27.5%, 29.2%, 24.2%, 28.5% and 31.1%. This result indicates that for every Naira invested (Also known as return to capital) was high in the wood market in Kajola Local Government. #28 - #31 was realized and the rate of return on fixed cost follows the same trend. This implying that the rate of return on investment was high in wood market in Kajola Local. It can be said that timber market in the study area was more profitable in the study area. This result agreed (Babatunde et al; 2017) who found out that the timber industries in Ijebu Ode were profitable.
The market efficiency of the business from 2016-2020 was 2.75, 2.93, 2.41, 3.16, and 3.11 respectively. The result implies that the market was efficient. The year with the highest efficiency was 2019 with the value 3.16. This result is in line with (Sambeet el al; 2015) who stated that sawmill market in Benue is efficient with high financial returns on the investment by the marketers. According to (Ozogwu,2002), the market efficiency ranges from 0% to infinity. If marketing is 100% (unity), it shows that the market is efficient, whereas if marketing is greater than 100% then there is excess profit. Also if marketing is less than 100% there is inefficiency.
Gini coefficient was applied to measure the relative degree of income distribution among the timber sellers. The values of Gini coefficient greater than 0.3445 are high indicating inequitable distribution of income sales (Dillion and herdeker 1993). The Gini coefficient for timber marketer in the study area is 0.86115. This value indicate higher level of concentration and consequently high in the market structure.
66.0% were sole proprietorship, 18.0% was partnership respectively. The result also showed that 1.0% of the timber marketers did not have regular supply of the product while 99.0% had regular supply in the business. This means that the business is not a seasonal business, which means they can source for their product at any season. The result further revealed that 98% of the marketers were retailers while wholesalers were 25% and 57.0% operate both types of business. This result show that the majority of the respondents were both retailers and wholesalers this show that the market nature is tending towards monopoly with majority combining both retailers and wholesalers business together. The result further show that 9.8% belongs to association while 2.0% did not belong to any association, this show that the majority of the marketers belong to an association. This means that before any of the wood marketers is allowed to the market he/she must belong to association, like (Sawyers association, Timber contractor association & Pullers association). The market structure also helps for price fixing of their product, this lead to high profit accruing to the stake holders in the market at the expense of the buyers who will find it difficult to haggle prices of these products. Therefore the timber marketing is not controlled and determined by forces of demand & supply. This usually results into imperfect market structure since the timber sellers are the price marker signifying monopoly. This is in contract to (Sambe et al; 2016) who stated that sawmill structure in Benue tends towards oligopoly.
Timber industries in the study area encountered several constraints. It reveals that 99.0% has inadequate power supply while 1.0% did not have .The result also show that 99.0% has high cost of transportation while 1.0% did not have. The result revealed that 8.3% has insufficient species while 12.7% did not have. Furthermore the result also show that 39.2% of the planks seller has low Government policy and 58.8% did not have; 8.5% has inadequate credit facilities while 14.7% did not have. These results corroborate the prospect of (Adetayo, 2011) who observed that high cost of energy, transportation, insufficient species and inadequate credit facilities affected the timber industries in Ogun State.
CONCLUSION
From the context of the result obtained from the study, 57% had the secondary school education while 54% engaged in the business were female. Terminalia superba had the highest frequency which means that they are dominant in the area. Moreover, the result revealed that 2019 had the highest profit.
Finally, the major constraints facing was in inadequate power supply, high cost of transportation and government policy.
Based on the findings and conclusion drawn in this study, the following recommendations were made:
• To improve market price and supply level of timber business in Kajola Local Government and there is need to improve on the supply of energy, adequate credit policy, Government policy and sufficient species for production processes in the study area;
• Government should encourage on private tree plantation so as to make available more trees since the demand for timber is increased.
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