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

DEDICATION

This work is dedicated to Almighty God and to Our Lady of Perpetual help.

iii

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.

iv

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

xi

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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