Analysis of Agricultural Value Chain Finance in Smallholder Palm Oil Processing in Delta State, Nigeria

Abstract

This study analysed agricultural value chain finance in smallholder palm oil processing in Delta State, Nigeria by ascertaining the socioeconomic characteristics of palm oil processors and determining the effect of palm oil processors’ socioeconomic characteristics on the choice of credit channel in the value chain finance. Multi-stage random sampling procedure was applied to select 240 respondents from 12 communities in four local government areas. Data were obtained through the use of structured questionnaire and analysed by the use of descriptive and inferential (multinomial logit) statistical tools. Findings indicate that over 75% of the respondent palm oil processors are females while 70.42% are aged between 31 and 50 years and 69.17% are married. Also, 97% of the respondents had formal education while 85% have palm oil processing experiences of between 6 and 15 years and more than 51% have household size of between 7 and 10 persons. The multinomial logit model result suggests that the choice of source of credit channel by palm oil processors is significantly related to gender (p>0.10), age (p>0.01 and 0.10), education (p>0.01 and 0.05), level of income (p>0.01) as well as membership of organization (p>0.01 and 0.10) and location of business (p>0.05 and 0.10). The coefficients of the variables are positive which implies that the probability of the respondents accessing value chain finance from any of the sources relative to the formal finance increases with respondents’ gender, age, education, experience, level of income as well as membership of organization and location of business. It is the recommendation of the study that governments should implement measures that will bring down the interest rate paid on agricultural loans.

Keywords: Agriculture, Value chain finance, Palm oil Processing, Multinomial logit.