Determinant of Profit Efficiency among Small Scale Traditional Palm Oil Processors in Nigeria: A Profit Function Approach

Abstract

This study was designed to examine the determinants of profit efficiency among traditional palm oil processing in Nigeria, using stochastic Cobb – Douglas profit frontier model. A Multi – Stage random sampling technique was used to select 240 traditional palm oil processors from which input – output data were collected. Instrument of data collection was via well – structured and pre – tested questionnaire. The result of the Cobb – Douglas analysis showed that the mean farm level profit efficiency was 79 percent. Critical determinants of profit efficiency of traditional palm oil processors were age of processors, educational level, house hold size, net farm income, cooperative membership, credit availability, interest on loan, plantation ownership and mechanization level. Higher output and profit efficiency could be attained by efficient allocation of the employed resources, which is vital to the sustainability of Agriculture in Nigeria.