CHAPTER ONE

I.O INTRODUCTION

1.1 Background of the Study

In Africa, agriculture and agro-industries account for more than 30% of national incomes
on average, as well as for the bulk of export revenues. Nearly three-quarters of the
African population depend on agriculture to secure their livelihoods (Oram 2012;
Connolly 2014). Due to the high population growth in Africa (WHO 2010) and growing
income, the demand for eggs and poultry meat has significantly increased in recent years
across large parts of the continent. According to estimates by the United States Agency
for International Development (USAID), this trend is very likely to continue over the
next few years. Therefore, the consumption of poultry and eggs will increase by 200%
between 2010 and 2020 for at least some countries in sub-saharan Africa (USDA 2013).
One African country where this trend can clearly be seen in Nigeria. The country is one
of the largest countries in Africa, with a total geographical area of 910,802 square
kilometers. Its estimated population in 2017 is 190.7 million people, and its population
growth rate is 3% per annum (USAID). Nigerian economic statistics reveal annual
economic growth rates that averaged over 7% in recent decades, making Nigeria one of
the fastest growing economies in the world (Byerlee et al.,2013).

The World Health organization (WHO) and Food and Agriculture organization (FAO)
recommended 3.6kg per capita intake of poultry products per annum. Therefore to meet
the basic minimum of the dietary needs of Nigerians, the country requires an annual
production of 10 to 20 billion eggs and 0.3 to 0.6 million tonnes of poultry meat (FAO).
The Agricultural sector in Nigeria has remained the largest contributor to the Gross
Domestic Product of the nation's economy. For the past two decades it has contributed an
average of 39% of the country's GDP and employing nearly 60% of its workforce. Over
80% of the country's population living in the rural areas is directly or indirectly
dependent on agriculture for its livelihood. Livestock sector plays a crucial role in rural
economy and livelihood. This is one sector where the poor contributes to the growth
directly instead of getting benefit from growth generated elsewhere (USDA).

ln Nigeria, the livestock sector forms an important livelihood activity for most of the
farmers, supporting agriculture in the form of critical inputs, contributing to the health
and nutrition of the household, supplementing incomes, offering employment
opportunities, and serving as a store of wealth in times of need. It acts as a supplementary
and complementary enterprise. Livestock is also important as a part of agriculture
diversification and income enhancement. Livestock plays a vital role in the overall
economic development of the farm households and nation as a whole. The prolificacy of
livestock which include; goat, pig and poultry are the influencing factors for rearing
them. The returns are quick; losses, if any, are recovered soon and the poor can afford
them. The animal husbandry system is also environmental friendly. Income from
livestock production contributes a significant percentage of the total income of rural farm
households engaged in agricultural production. Among livestock based vocations, poultry
occupies a pivotal position because of its enormous potential to bring about rapid
economic growth. The importance of the poultry subsector is chiefly in the provision of
meat and egg as well as the provision of employment either directly or indirectly and the
contribution to the revenue (Gross Domestic Product) of the country, Afolami et al.,
(2011). For developing countries, poultry contributes just about 15% of total animal
protein intake, with approximately I.3kg of poultry products consumed per head annum
(FAO).

The Nigerian poultry industry in particular has been rapidly expanding in recent years
and is therefore one of the most commercialized (capitalized) subsectors of Nigerian
agriculture. Poultry meat and egg play a very useful role in bridging the protein gap in
Nigeria. They are palatable and generally acceptable. This acceptability cuts across nearly
all cultural and religious boundaries in the country. The production costs per unit remain
relatively low, and the return on investment is high. Therefore, farmers need a relatively
small amount of capital to start a poultry farm. Also, the production cycle is quite short,
so capital is not tied up over a long period. Finally, eggs, one of the major products of
poultry production, are more affordable for the common person than other sources of
Animal protein (Ojo 2003; Aboki et aI., 2013). It gives about 3.5g of the total 7.2ganimal
protein requires for individual dietary need per day. It is a good sources of several
minerals that can be hard to get in other foods, such as iodine and selenium. This is
probably one of the reasons why the campaign for one egg perday could not be easily
faulted.

The importance of poultry to the national economy cannot be overemphasized, as it has

become popular industry for the small holders that have great contribution to the
economy of the country. The enterprise has assumed greater importance in improving the
employment opportunity and animal protein production in Nigeria. To this end, an up to
date knowledge of the profitability and efficiency of resources utilization in the industry
will go a long way in bridging some knowledge gap and help in formulating policies
aimed to ensure increased and more profitable poultry marketing in the country.
Marketing is concerned with all stages of operatives which include the movement of
commodities from the farms to the consumers. It involves the performance of all
activities involved in the flow of goods and services from the point of initial production
until they are in the hands of the ultimate consumers. Most of the eggs marketed and
consumed in Nigeria come from poultry birds. Only little attention is given to other
sources such as ducks, turkey, guinea fowl and geese because of their ability to lay few
eggs.

1.2. Problem Statement

Despite all the criticisms around eggs on the cholesterol and other things, the poultry
industry in Nigeria has not been able to support the demand for eggs. The usual pattern of
egg sales in Nigeria is such that eggs move between May and the following year
February. March and April are usually very dull with egg sales and farmers record glut.
Two key reasons have been tied to this:

 Many farmers sell their old layers in December (in order to get inputs for next
production) and stock point of lay in January. They start having cheap eggs in
march and force down the price of eggs
 Religious fasting reduces the volume of eggs sold by the popular tea selers known
as "me shayis" as northerners are great consumers of eggs.

In 2016, things were different. There was a very deep decline in egg production and
that seem to have doubled the demand that can’t be met by the Nigerian market.
Hence there is need to investigate the various market scenarios and distribution flow
of poultry egg.

The study will have the following research questions

 What are the influence of social economic characteristics of egg marketers in

Kano metropolis?
 What is the degree of marketing structure, conduct and performance in Kano
metropolis?
 Is egg marketing a profitable business in Kano metropolis?
 Are poultry egg marketers efficient in Kano metropolis?
 Where are the constraints associated with poultry egg marketing in Kano
metropolis?

1.3. Justification of the Study

In trying to meet the short fall in protein requirement and increase in fat intake, various
studies have been carried out in livestock production and feed production. However, this
study will bring to right recent developments in the marketing of egg in the chosen study
areas. Such information will guide poultry egg marketer where on to buy their eggs and
how profitable the business could be. Also, efficient marketing of egg ensure that supply
of egg will become available throughout the year with little variation in prices that can be
attributed to the seasonality of eggs supply. In this situation both marketers and
consumers of eggs will benefit ultimately from this study.

The result of this analysis will or may be useful as a reference material or information on
the economics of poultry egg marketing in Kano metropolis of Kano State. It is also
hoped that this analysis will encourage more potential marketers to get involved in large
scale marketing in order to achieve the required increase in production that would keep
pace with population growth and demand by boosting local supply, export' and thus
improving on the poor dietary situation of the people.

1.4. Objectives

The broad objective of the study is to analyze the economics of poultry egg marketing in
Kano metropolis.

The specific objectives are to;

 determine the influence of socio economic variables on poultry egg marketers in

Kano metropolis.
 describe the structure, conduct and performance of the egg marketing
 determine the costs and return associated with egg marketing
 determine the efficiency of egg marketers in Kano metropolis
 describe the constraints associated with egg marketing in Kano metropolis,
 CHAPTER TWO

2.0. LITERATURE REVIEW

2.1 Economic Importance of Poultry Egg Marketing

In a free market economy, the price System and competition provide the coordination
mechanism for determining the flow of resources into production and the flow of

Goods and services in to use. It is within the marketing system that prices, allocation of
resources, income distribution and capital formation are determined' Therefore the
structure and performance of marketing system may have some significant effect on the
total production of a given commodity consumer prices, on adoption of
improvedtechnologyinmarketingmethodsanduponthegrowthanddevelopmentof

The entireeconomy,(olukosietal,20OT)'overthelastdecade,theconsumptionof poultry

products in developing countries has grown by 5'8% per annum' faster than that of human
population growth' and has created a great 2011). Poultry keeping is making an important
contribution Most vulnerable rural households in developing countries. In a study on
income Generation intransmigrant farming systems in East-Kalimantan, lndonesia, family
poultry generated about 53% of the total income, which was used for food, school fees
and expected expanses such as medicines (FAO 2011)' Poultry production is no"

Doubt one of the most important ways of alleviating the scourge of protein deficiency in
Nigeria and other developing countries' The contribution of poultry products (meat

and eggs) to total livestock output increased from 26% in 1995%to in 1999 while
increase in production of eggs alone accounted for about 13% during the same period
(Ojo,2003).Nutritionally, eating an egg per day is a good way of putting proteins' fats,
vitamins and minerals in human diet' According to Binuomote et al' (2008) a

medium sized egg supplies about 80 calories of energy to our body. The author further
asserted that egg contains not only a trace of carbohydrate, but it was also adjudged to be
a replacement for meat as it contains all essential amino-acids in adequate proportion
required by the body for general growth and repair. It is also a source of vitamin A which
protects against night blindness and prevents skin infections. It has been described as the
source of income to the poultry egg marketers (Adetimirin, 2000).

2.2Conceptual Framework

The conceptual framework consist of concepts, assumptions, principle, and rules that
hold the idea of the economic analysis of poultry egg marketing
2.2.1. Market and marketing

A market is traditionally defined as a specific geographical area where buyers and sellers
meet for exchange of goods and services. The most common way we obtain goods and
services we do not produce ourselves is to buy them from others who specialize in
producing them. To make such purchases, buyers seek out sellers in markets, Modern
definition considers market as an arena for organizing and facilitating business activities
and for answering the basic economic questions described as how much to produce?
What to produce? How to distribute production?

A location, a product, a time, a group of consumers, or a level of the marketing system

may define it. The choice as to which market definition to use depends on the problem to
be analyzed. Market is an institutional and organizational arrangement to facilitate
exchange of one thing for another. The most observable features of a market and
exchange processes. A market is thought of as a meeting of buyers and sellers: a place
where sellers and buyers meet and exchange takes place, an area where price determining
forces (supply and demand) operate, an area where there is a institution through which
buyers and sellers exchange information and transact. No to meet physically for a market
to operate especially in today's information and technologies.

2.2.2. Agricultural marketing

Agricultural marketing has evolved over the years as a separate discipline that studies the
process of resource mobilization in the agricultural sector aimed at meeting the changing
needs of customers. Agricultural marketing has developed into a system of component
parts or sub-systems which have defined common goal. Thus an agricultural marketing
system comprises all of the functions, and agencies which perform those activities that
are necessary, in order to in the market place. Each of the components or sub-system
another but a change in any one of them impacts on process of demands Giroh el al,
(2009) added that agricultural marketing depicts a and motivation of sellers to distribute
food items unto ultimate consumers at a profit.

2.2.3. Structure-conduct-performance paradigm

The paradigm is based on two theories; industrial organization and price theory. The
industrial organization theory proposes the use of degree of vertical integration, industrial
maturity, government participation, cost structure and diversification in examining how a
particular firm behaves. The structure of the market, which refers to how the market is
functioning, is the concept behind the industrial organization theory, Based on the
industrial organization theory, the structure of a market has an influence on the strategy
and decision making of a company in terms strategic supply management (Raible,2013).
According to Tiku et al, (2009), market structure is mostly measured by the Gini
coefficient and Iorenz curve. The Gini coefficient expresses the extent to which the
market is concentrated. It ranges from zero to one, with zero indicating perfect equality in
the size and distribution of buyers or sellers, and one implying perfect
monopsony/monopoly in the market. The Lorenz curve, on the other hand, is used to
represent income distribution by showing the proportion of income which goes to a
particular percentage of the population.

2.2.4. Market structure

According to Tiku et al, (2009), market structure is mostly measured by the Gini
coefficient and Lorenz curve. The Gini coefficient expresses the extent to which the
market is concentrated. It ranges from zero to one, with zero g perfect equality in the size
and distribution of buyers or sellers, monopsony/monopoly in the market. The Lorenz
represent income distribution by showing the population of income which goes to a
particular percentage of the population. In Lorenz curve analysis; high inequality in the
distribution of market share reflects high market concentration, which is depicted by a
wide gap between the Lorenz curve and the line of perfect equality.

To further explain the structure of the market, the degree of product differentiation and
barriers to entry/exit are assessed. Product differentiation refers to the process of
distinguishing a product or service from others in the market in order to make it more
attractive to a particular target market (Afolami, 2011). Thus, from market structure
perspective, in an efficient market there should be sufficient number of firms in an
industry given the size of the overall market and the firms of appropriate size are needed
to fully capture the economies of scale; there should no barriers to entry to the market;
and firms should have full market information. Determining the presence or absence of
the requirements of the model of perfect competition can be used indirectly to assess the
economic efficiency of markets. Many studies concerned with the efficiency of
agricultural markets begin in this form of analysis. Following, three methods of measures
of market concentration are discussed.

2.2.5. Market conduct

Market conduct refers to firm behavior (Lee, 2008). It refers to the price and other market
policies which are pursued by market players and the way in which they coordinate their
decisions (Haruna et al, 2012). The conduct of the actors in a adjustment behavior to the
Market structure Market conduct is different from m that it refers to behavior and
strategies of market participants refers to the outcome of such behavior and market
specified structural features of atomistic numbers, homogeneous product, and free entry
and exit require a form of conduct such that each firm must operate as if in isolation. The
market behavior of firms will determine whether or not they compete and whether they
are acting innovatively to improve market efficiency.

2.2.6. Market performance

Market performance refers to the outcome or the equilibrium assessed in terms of

locative efficiency (Lee, 2008; Haruna et al, 2012). Market performance is the ultimate
impact of the market to its participants in terms of pricing, volumes traded and marketing
costs. It is indicated by profitability and efficiency of firms in the market and Profitability
is used as a proxy to assess the performance of a market and to test the two hypotheses in
the SCP paradigm; whether profits are accrued because of efficiency of the firms
(Efficient-structure hypothesis) or because of market concentration (Structure-
performance hypothesis).lf the market structure in an industry resembles monopoly rather
than pure competition, then one expect poor market performance, As a method for
analysis the SCP paradigm postulates that the relationship exists between the three levels
distinguished. Suppose a causal relations starting from the structure, which determine the
conduct, which together determine the performance (technological progressiveness,
growth orientation of marketing firms, efficiency of resource use, and product
improvement and maximum market services at the least possible cost) of agricultural
marketing system in developing countries . Market performance can be measured by
marketing costs and margins.

2.2.7 . Marketing efficiency

Marketing efficiency is the degree of market performance' (2010) it is defined as the

maximization of ratio of further reported that the marketing inputs are the costs of
providing marketing services while the marketing outputs are the benefits or satisfaction
created or value added to the commodity as it passes through the marketing system.
Therefore, it consist of the following two major components viz; the effectiveness with
which a marketing service would be performed and the effect on the costs and the method
of performing the service on production and consumption (Teka, 2009). Hence markets
are efficient when the ratio of the values of output to the value of input throughout the
marketing system is maximized; the higher the ratio, the greater the marketing efficiency
(Olukosi et al,2007). Higher efficiency means better performance, while lower efficiency
denotes poor performance. Most of the changes proposed in marketing are justified on the
grounds of improved efficiency. Markets are efficient when the ratio of the value of
output to the value of input throughout the marketing system is maximized. The output of
marketing is the consumer satisfaction with the goods and service and the inputs are the
various resources of labor, capital and management that marketing firms use in the
process accomplishing particular job without reducing consumer's satisfaction and with
the output of improvement is efficiency However, a change that reduces costs but also
reduces consumer satisfaction with the end product might actually reduce marketing
efficiency,

2.3. Theoretical Framework

Marketing margin is influenced primarily by shifts in retail demand, farm supply and
marketing input prices. According to Olukosi et al, (2007), market structure tends to
consider whether the number of firms producing a product is large or whether the firms
are of equal sizes or dominated by a small group. It is also concerned with whether entry
for new firms is easy or difficult and whether the purchases for the products are in a
competitive state or not. It equally relates to the degree of market knowledge that is
available to the participants. Market structure analysis emphasizes the nature of market
competition and attempts to relate the variables of market performance to types of market
structure and conduct. It is a description of the number and nature of participants in a
market. Market conduct deals with the behavior of firms. Firms that are price makers are
expected to act differently from those in a price taker type of industry. The setup of the
market consists of the degree of ,concentration of buyers and sellers, integration, product
differentiation and the degree of competition between buyers and sellers, Imoudu and
Afolabi (2002) posited that the market structure for agricultural products in Nigeria is not
perfectly competitive due to the collusive tendencies of sellers by forming associations
for particular products. The market structure can be examined by using the Lorenz curve
and Gini coefficient (Dillon and Hardaker, 1993). According to them, the Lorenz curve is
obtained by plotting the cumulative proportion of sellers from the smallest number to the
largest against the cumulative proportion of their sales earnings. If the distribution is
totally equitable, the curve will fall on the 45-degree line. The greater the inequality, the
greater the departure from 45 degree line, Gini coefficient is the rate of the area between
the curve and the 45-degree line to the area under the 45- degree line. It is also a measure
of inequality. In other words, higher Gini coefficient means higher level of concentration
and consequently" high inefficiency in the market structure.

2.4, Analytical Framework

The analytical framework consist of analysis organizational techniques.

2.4. 1. Gini-coefficient

Gini-coefficient is a very convenient shorthand summary measure of concentration. It is

done based on Lorenz curve and is obtained, by calculating the ratio of the area between
the diagonal and the Lorenz curve divided by the total area of the half square in which the
curve lies. It is this ratio that is known as the Gini-Concentration ratio or more simply as
the Gini coefficient, named after the Italian statistician who first formulated it in 1912.
Alternatively, Gini-Coefficient is computed using the formula:
❑

G.C=1- ∑ Y
X

Where:

G.C= Gini-coefficient

X : the percentage of poultry egg marketers,

Y : the cumulative percentage of their sales or revenue

Gini-Coefficients are aggregate inequality measures and can vary any' where from zero
(perfect equality) to one (perfect inequality). In actual fact, the Gini-Coefficient with
highly unequal distributions rypically lies between 0.50 and 0.70, while with relatively
equitable distributions it is on the order of 0.20 to 0.35. However, although Gini-
Coefficients provide useful information based on Lorenz curve shapes, a problem arises
when Lorenz curves cross. It is problematic whether we can in this special case claim that
a higher coefficient means a more unequal distribution. The other problem associated
with Gini-Coefficients is that it favors equality of market shares without regard to the
number of equalized firms. In other words, the coefficient equals zero for two firms with
50 percent market shares, for three Firms with 33.33 percent market shares each, and so
on' This study employs study the structure of poultry marketing in the study area'

2.4.2. Inferential statistics

The inferential statistical tool used was the multiple regression model' The probability of
a trader's efficiency was determined by an underlying response variable that captures the
economic status of the trader. This was meant to show the relationship between the
dependent (quantity of egg marketed) and the independent (age, household size, marital
status, years of experience, duration of stay) variables. The multiple regression model
was used to analyze the influence of socioeconomic characteristics on egg marketing.
The model used for the multiple regression analysis is as follows;

Y: Bo + B1X B1+ B1+ B2X B2+ B3X B3+ B4X B4+ B5X B5+ B6X6

Quantity of egg marketed (numbers for retailers and crates for wholesalers)

X1X2X3X4XX6 = independent variables

2.4.3. Marketing margin

Marketing margin refers to the difference between the price paid to the first seller gate
price) and the price paid by the final buyer (retail price) (Olukosi et al, It is a tool for
assessing market performance by evaluating efficiency of price and transmission in a
marketing system (Tadesse, 2011). Results of analysis of marketing margins are used to
determine whether there are excess profits serious inefficiencies or whether wide margins
are due to technical constraints as transportation bottleneck). The size of market margins
is largely dependent upon a combination of (1) the quality and quantify of marketing
services provided; (2) the cost of providing such services; and (3) the efficiency with
which they are undertaken and priced. Wider marketing margins usually consumers and
low prices to producers (Kariuki, 2011) splitting the -marketing margin into two portions
namely, retailer margin ,and wholesaler margin. The wholesaler margin refers to the
difference, in price at which wholesalers sell their products and the price they pay to
producers to acquire the products, while retailer margin refers to the difference in price at
which retailers sell the produce acquired from the wholesaler and the price they pay to
the wholesaler.

2.5. Empirical review

Analysis on poultry egg marketing in Kuje Area council Municipality of Abuja by

Mohammed et al, (2013) shows that 95% of the marketers were between 21-50 years,
95.5% were married, and mallet Male 70% dominated egg marketing. All the marketers
100%had primary education, 87.5% had over five years of experience in Egg marketing
in the study area was profitable with about N37,500 per and had a marketing margin of
20% and a return to investment of N0,25 on Problems of price fluctuation and
transportation were identified as the facing marketers in the study area Isene (2014)
evaluated egg marketing in Effurun and its environs in Warri -South Local Government
Area of Delta State which highlighted 10% of the egg marketers were single while the
remaining 90% were A literacy level of 51% was obtained among the marketers. The
analysis also that the profitability level of the marketers showed N52,593.71 per month
Gini Coefficient of 0.865.03 which indicates a high level of inequality in income the
respondents. The result also disclosed that the regresses explained about in the variability
of the regress and, with all the were all positive, thus sales revenue of the respondent.
(2007) evaluated poultry egg marketing in The profitability analysis showed that an
average marketer earned N4222.55 as gross margin per month. A Gini coefficient of
0.87692 obtained in the study indicates a high level of inequality in income among the
respondents. The result revealed that the regressors explained about 67.l% in the
variability of the Ekunwe and G.O, Alufohai (2009) examined the profitability of egg
marketing well as the market structure and marketing margin of poultry egg in Benin
City, 10% of the respondents were single while the remaining 900% were married. level
of 70.50% was obtained among these marketers. Analysis also that 67% of these
marketers were retailers while only 10%were Edo state, Nigeria. Six markets (Uselu,
oliha, ogida, oba, osa and New Benin markets) in Benin City were purposively selected
for the study. The results of the showed that majority (96.7%) of the respondents were
females. The mean age of the respondents was 45 years while the household size was 6
persons. A Gini coefficient of 0,81296 obtained in the study indicates a high level of
inequality in income distribution among the respondents. The profitability analysis
showed a grossper seller of $104.61 and a net return per seller of $93.74. Finally, a
marketing margin of $0.53 was obtained in the study area.