


































African Journal of Agricultural Marketing Vol. 2 (1), pp. 091-094, January, 2014. Available online at 
www.internationalscholarsjournals.org © International Scholars Journals 
 
 
 
 
 
 

Full Length Research Paper 

 

The formation, technique and presentation of palm 
oil marketing in Cross River State, Nigeria 

 

James Oganiru
1
*, Isaac Makinwa

2
, Precious Okon1

 
 

1
Department of Agricultural Economics and Extension, Cross River University of Technology, Obubra Campus Nigeria. 

2
Department of Agricultural Economics and Sociology, Ahmadu Bello University, Zaria, Nigeria. 

 
Accepted 22 September, 2014 

 
The business of palm oil in Nigeria has undergone successive marketing arrangements, each with its 
inherent deficiencies. The paper examined the structure, conduct and performance of palm oil marking 
in Cross River State, Nigeria. The study adopted the multi-stage sampling techniques in the selection of 
6 local Government Areas, 18 Villages, 180 processes, 90 commissioned agents, 90 retailers and 30 
merchants for the study. The descriptive statistics, the Gini-co-efficient combined with the Lorenz curve 
was used to determined the degree of market concentration among the participates; the marking 
margin analysis was employed to measure the performance of palm oil marketing in Cross River State. 
The result reveals that the Gini Value for processors, commissioned agents, Merchants and retailers 
was 59, 54, 65 and 32% respectively. The over all performance of the market was 41.43%, while the 
processors received 37.17% of the market share, while merchant 29%, retailers 26% and commissioned 
agent 7.8%. Generally, the market was observed to be a pure market competition as no individual trader 
has market power to influence the market prices. The paper recommended that more research should 
be conducted to improve the reddish colour of hybrid palm oil to avoid marketer adding colour 
substances to the palm oil in attempt to improve the colour to attract customers. 

 
Key words: Palm oil market structure, conduct and performance. 

 
 
INTRODUCTION 
 
The business of palm oil has undergone successive 
marketing arrangement firstly, under the traditional 
system of marketing agricultural products in Nigeria, as in 
other tropical African countries. The system was 
described as being inefficient, disorganized, and unre-
sponsive and oligopsonistic in nature (Abu, 1996). Se-
condly, arising from this, Commodity Marketing Board 
(CMB) was established to organize the markets for 
efficiency. The CMB became exploitative of the primary 
producers because the prices they paid were low relative 
to cost of production, average world prices of other crops 
(Olukosi and Isitor, 1990). The CMBs had almost destroy-
yed the very foundation and superstructure of the nation’s 
 
 

 
*Corresponding author.  E-mail: oganiru_j@yahoo.com. 

 
 
 

 
agricultural economy (Olatunbosun and Olayide, 1971). 
This hampered the farmers’ income levels, the incentives 
and abilities to expand production under the CMBs 
arrangement. Oil palm farmers suffered all sorts of 
frustrations such as transport difficulties, extortion by 
market functionaries, under-payment and delay in 
payment among others (Olukosi and Isitor, 1990). By 
1986, it became Obvious that if measures were not taken 
to address the problems, palm oil products and related 
industries would collapse.  

Nwawe and Edokpayi (2005) observed that after 1965, 
Nigeria seized from being the leading producer and 
exporter of palm oil, falling from 43% in 1980s to 7% in 
the 1990s of the total global output. Informed by this, the 
government abolished the commodity board system and 
established a free and competitive marketing system. 
Thereby changing the structure, conduct and perfor- 



Oganiru  et al.              091 
 
 

 
mance of the palm oil marketing in the Nigeria. It is based 
on implementing this policy for twenty-three years that it 
is necessary to as-sess the extent to which the 
deficiencies of the previous monopsony marketing 
system have been eliminated. 
 
 
Conceptual framework 
 
Several studies in agricultural marketing based on the as-
sessment of the free-market system have been con-
ducted using this approach. William (1971) gave the as-
sumption of this approach to be that of the performance 
of any market is the result of the conduct of participants, 
which in turn is determined by the marketing structure. 
Nyong (1990) further stressed that the structure- con-
duct-performance (SCP) hypothesis, is a basic paradigm 
of individual organization maintains that the structure of 
an industry (that is organization characteristics such as 
concentration ratio, market share, and the condition of 
entry) influences the conduct of firms in their decisions 
regarding prices sales, employment, and technological 
innovations. It insists that the conduct of firms in turn, 
influences performance, particularly the profit earned in 
the industry. In the views of some analyst, they to argued 
that the chain relationship is not necessary unidirectional. 
It may also be bi-directional in the sense of reverse 
causation. That is, the performance of the industry may 
influence the structure of the industry (performance-
conduct-structure approach) (Pickering, 1974; Nyong, 
1990).  

Because of these contradictions, recently the structure-
conduct-performance hypothesis has received more de-
tail analysis resulting into the decomposition of the hypo-
thesis into four main contrasting versions. There are the 
traditional view of structure-conduct and performance 
hypothesis, the relative market power hypothesis, the x-
efficiency or managerial efficiency hypothesis and the 
scale efficiency hypothesis. The emergence of mislea-
ding results from these approaches because of the para-
meter estimates are most times biased and in consis-
tence arising from the neglect of a feedback mechanism. 
Nyong (1990) suggested that market researches should 
adopt a system of estimation procedure that takes into 
consideration the interdependence or interactions among 
structural, conduct in explanation, prediction and control 
of the market. Kriesel (1969) observed that the basic 
purpose of analyzing a market is to determine how well 
the system is performing the necessary marketing func-
tions, and how this performance can be improved. Among 
the variables considered important in determining market 
structure are number and relative size of buyers and 
sellers, the degree of product differentiation, the ease of 
entry and exist of buyers and sellers into and out of the 
market. Also important are the status of knowledge about 
costs, prices, and market conditions among the 
participants in the market (Olukosi and Isitor, 1990; 
Nyong, 1990; Maiangwa et al., 2004). 

 
 
 

 
Identifying variables in studying market structure, 

Okereke and Anthonio (1988) opined that market con-
centration is the most important element, since it depicts 
a situation in which a few large firms have the largest 
share of the business. They developed an index of 
concentration to reflect the interplay between the few 
large firms in retail industries and the many small ones. 
His concentrations index is expressed as: 
 

D 
C =  P 
 
Where C = industry concentration index, D = percentage 
of industry employment sales or other assets held by the 
largest firms, P = percentage of all firms in the smallest 
size class in the array.  

The ratio is roughly that of economic power of the 
largest firm in the industry. At any rate, the assumption of 
the exercise of political power by the smallest firms in the 
industry may not always be true because the smallest 
firms may be so weak that they are incapable of 
organizing themselves to exercise any political power 
(Okereke and Anothonio, 1988). Due to the deficiency in 
the above method, analyst recommend the combination 
of Lorenz curve and the Gini coefficient to determine 
market concentration. Several analysts have adopted this 
method (Okereke and Anthonio, 1988; Abu, 1996; Tiku, 
2001). The researcher ob-served that since 1986, the 
policy of privatization and deregulation of the economy is 
being vigorously pursued by government at all levels, it is 
pertinent to study the structure, conduct and performance 
of the palm oil marketing in Cross River State, being a 
major palm oil producing state in Nigeria.  

The objectives of the work are to: 
 
1) Determine the degree of the market concentration 
among the market participants in other to classify the 
structure of palm oil market in Cross River State.   
2) Analysis the conduct of palm oil market state.   
3) Ascertain the performance of palm oil markets in the 
state.  

 
The finding of this work shall help to provide relevant 
information for adjustment and management of palm oil 
marketers in Nigeria as millions of Nigerians depends on 
palm oil in one form or the other. It is also expected that 
this work shall be useful to investors in the palm oil 
industry. 

 
METHODOLOGY 
 
The study was conducted in Akamkpa, Biase, Etung, Boki Ogoja 
and Bekwarra Local Government Areas of Cross River State. The 
six LGAs are evenly spread across the state. Cross River State is at 
the south zone of Nigeria. It has eighteen LGAs with a population of 
about 28 m people (NPC, 2006). The climate of the area is con-
trolled by two tropical air masses namely the equatorial maritime 
(MT) air mass that originates from the south-west and the tropical 
continent (CT) air mass that originates from North East (Alobi, 
1992). Average annual rainfall in Cross River State is about 2,298.7 



092      Afr. J. Agric. Mark. 
 
 

 
mm (CBN Statistical bulletins, 2005). The relatively moderate 
rainfall, long west season and high humidity favoured the growth of 
tree Crops like Cocoa and Oil Palms and non-tree Crops such as 
maize, cassava, melon etc.  

Information for the study was from primary sources. The primary 
data were from Cross-sectional data. Personal interviews using 
structured questionnaires were used to conduct interview among 
the processors, palm oil buyers’ agents in 18 villages in the six 
selected LGAs. The study adopted the multi-stages sampling 
technique. The first stage was the grouping of the 18 LGAs that 
constituted the state into three districts; each district is composed of 
six LGAs. The second stage is the selection of two LGAs per district 
using random sampling method to select six LGAs used for the 
study. The third stage was the random selection of three villages 
per LGA to give a total of 18 villages. The proportionality factor was 
introduced to select 180 processors, 30 palm oil merchants, 90 
commissioned agents and 90 retailers for the study.  

The proportionality factor used is stated as follows: 
 
S = P/p*n 
 
Where; p = the number of respondents sampled from a district; P = 
the number of respondents in all the districts in the state; n = the 
desire numbers of respondents to selected for study. 

 
Analytical tools 
 
The study adopted the descriptive statistics, the Gini Co-efficient 
and Lorenz curve to measure the degree of concentration. The Gini 
Co-efficient model is given by: 
 
G = 1 - ∑xy 
 
Where: G = value of the Gini coefficient, X = percentage of market 
participants, Y = cumulative of purchase (palm oil), ∑ = summation 
sign.  

Gini coefficient is equal zero when there is perfect equality in the 
size and distribution of buyers or sellers, and G = 1 when there is 
perfect monopoly in the market. Generally, Gini coefficient value 
range from zero to one and expresses the extent to which market is 
concentrated. The Gini coefficient is a numerical representation of 
degree of inequality in the distribution that is derived directly from 
Lorenz curve.  

The marketing margin (Table 1) analysis was also employed. 
This is an indicator of market performance. The model given as: 
 
 SP - CP 

 

MM =  

× 100   
 

 SP 
 

 
Where: MM = Marketing margin, \sp = Selling price of palm oil, cp = 
supply price of palm oil. 
 
RESULTS AND DISCUSSION 
 
The socio-economic characteristics of the market par-
ticipants revealed that 60% of the processors were fe-
males while 40% were males. The combination of other 
market participants (merchants, commissioned agents, 
and retailers) shows that 69.5% of the market participants 
constituted the females and 30.5% males. The finding 
agrees with FAO (2007) report that culturally men cul-
tivate or produce oil palm while women process and sell. 
Traditionally, women decide the form in which the pro- 

 

  
 

 
duced is traded and determine the degree of processing 
they are willing to undertake. The study also revealed that 
69% processors were married, 25% merchant, 60% 
commissioned agents and 72% retailers are married men 
and women. The study showed that the age bracket 
between 35 and 45% constituted the highest number of 
palm oil marketers. In term of educational qualification, 
56% of the respondents were secondary certificate hol-
ders. The implication is that majority of the marketers 
could read and write. The distribution of marketers by 
income shows that personal savings represented 47% of 
the total source of capital and merchants are the major 
financiers of the oil palm business other personal saving.  

The Gini coefficient and the Lorenz curve were 
employed to measure the degree of market 
concentration. The Gini values for processors, 
merchants, commissioned agent and retailers were 59, 
65, 54 and 32% respectively. The implication of the result 
is that there is sufficient competition among the 
processors and no single individual or organization can 
influence the market. In addition, there exist a healthy 
competition among the commissioned agents and 
retailers. The merchants Gini-Coefficient values of 65% 
were rather high; this is because few firms in the 
business control the trade at the merchant level. The 
result is true because the “big merchant” do backward 
integration by advancing money to the farmers, process-
sors and commissioned agents. They do this to guaran-
tee supply of the products. The study also revealed that 
there is no barrier to entry into palm business in the 
study. It was observed since the palm oil marketing board 
was abolished, individuals and corporate organizations 
are allowed to buy and sell palm oil. What seems to be a 
restriction are the activities of the trade unions in some 
Local Government Areas. Prospective buyers were ad-
ding to register for membership at a cost of N5, 000.00 
(five thousand Naira only). Technically, oil palm yield is 
distributed over the entire year. Cross River State expe-
rience bimodal rainfall seasons. The oil palms bear fruit in 
response to the rainfall pattern and hence there are two 
peaks of harvesting periods in the state.  

The nature of product differentiation is influenced by 
both the field and market factors. The field factors that 
affect the composition and final quality of palm oil in the 
study area are genetic, age of the tree, agronomic, en-
vironmental, harvesting technique, handling and trans-
port. Many of these factors are beyond the control of 
small-scale processors (FAO, 2005).  

The market factors are that of market participants 
adding colour substances to the product to attract custo-
mers to facilitate sales. The marketers do this because 
local breed of oil palms produces palm oil that is more 
reddish in colour and better flavoured than the hybrid that 
produce less reddish palm oil. Customers tend to patro-
nized Local breed palm oil than hybrid oil. Because of 
this, most marketers add colour substances to the hybrid 
palm oil to make it appear reddish and attractive to 



Oganiru  et al.              093 
 
 
 
Table 1. Marketing margin for palm oil in Cross River state (N1 ton, 2007/2008). 
 
 

Participant Item Average Average 
Margin Percentage 

 

 
cost ( N ) sale (%)  

    
 

  FFB/tone 14,000     
 

  Splitting the bunches 600.00     
 

  Transportation to processing site 1,500     
 

  Sorting 300     
 

  Water 150     
 

 
Processors 

Fire wood 100     
 

 
Removing the boiled nuts to the milling machine 200 

    
 

      
 

  Milling and pressing/the extract oil 400     
 

  9 empty rubbers 2700     
 

  Conveying the 160 L is to the store from the processing site 160     
 

  Others 200     
 

  Total N20,310 24,000 15.4 37.17 
 

 
Commissioned agent Purchases commission 

24,000  
24,800 3.33 7.80  

 
800  

 

       
 

  Supply price 24,000     
 

  Commission 800     
 

  Containers 2,800     
 

  Transportation 400     
 

  Storage 200     
 

  Security 80      
 

  Insurance -   4800 x 8   
 

 Merchant Handling 160  rubbers   
 

  Administration 200     
 

  Association dues 20      
 

  Buying permit 20      
 

  National palm produce 160     
 

  Hoilage 80      
 

  LGA 400     
 

  Total 29,400  33,480 12.0 28.96 
 

  Supply price 33,480     
 

  Handling 160     
 

  Transportation 400     
 

  Insurance -      
 

 Retailers Storage 200     
 

  Association fees -      
 

  Registration with LGA -      
 

  Security -      
 

  Total 34,240  38,400 10.8 26.07 
 

 Total marketing margin      41.43 100 
 

Source: Survey data   (2008). 
 

 
 

 
customers. The study revealed that palm oil buyers and 
sellers had prior knowledge of the prevailing prices before 
they either sold or bought palm oil, as well as 

 
 

 
knowledge about the cost of processing and marketing 
input. Agents of information dissemination were the 
merchant, processors, commissioned agents; local 



094      Afr. J. Agric. Mark. 
 
 

 
assembles retailers market information was not obtain 
from public information media and extension agents.  

The conduct of the market participants, which reflects 
the behavour of the firms, or the decision that firms make 
relating to their pricing and output policy and other 
competitive tactics, revealed that palm oil sold in three 
major ways: cash sales, credit sale and advance sale. It 
was statistically revealed that 80% of the respondent sold 
on cash and carry basis, 10% on credit to customers they 
considered reliable, and 10% in advance to finance 
processing activities. The other minor method of sale is 
by barter system. The barter systems simply involve pro-
cessors exchanging palm kernel nut for cost of milling 
and sorting out the fibre from the palm kernel nuts. The 
owners of processing plants prefer this method because 
the value of the palm kernels- most cases out strip the 
cash to be paid for the processing activities. Apart from 
the merchant engaging in vertical integration in order to 
secure the supply of palm oil from the producers, other 
market participants do not engage in any other tactics to 
influence market prices. No advertisement, no research 
and development among marketers to create diffe-
rentiated products to enhance profit. All the marketers 
adopt the same market system of buying and selling 
homogenous product and facing the same industrial 
curve determined by the invisible forces of demand and 
supply making palm oil business in the state very elastic.  

The marketing margin was determined as a measure of 
market performance. This was done by calculating the 
average cost of market for each participant in the various 
stages involved in the transaction of palm oil business. 
The major participants are processors commissioned 
agents, merchants and retailers. The result revealed a 
marketing margin of 41.43% which is the overall 
performance of the palm oil business in the state. Of this 
value, it shows that processors received 37.17%, 
merchant 28.96%, retailers 26.07%, and commissioned 
agent 7.80%. The implication is that the highest share of 
the marketing margin is received by the processors 
followed by the merchants. However, the share of the 
margin corresponds to the services provided by the 
various market agents and the financial involvement of 
the market participants. Table 1 shows the schedule of 
the marketing margin. 
 
 
CONCLUSION AND RECOMMENDATIONS 
 
The socio-economic characteristics of the study revealed 
that more females are involved in palm oil marketing than 
the males. In addition, Gini co-efficient values showed 
sufficient evidence that palm oil market structure in the 
study area is pure market competition as the market 
concentration index ranges from 32 to 65%. The overall 

 

 
 

 
performance of the market was 41.43%. This means that 
the present market condition is better than the defunct 
monopsony system institutionalized by the then govern-
ment where product prices could not cover cost of pro-
duction.  

It is therefore, recommended that more research should 
be carried over to eliminate the problem of genetic 
variations in terms of colour of edible palm oil. A 
deliberate policy on palm oil market research and 
development should be formulated to remove market 
distortions and promote market efficiency in terms of 
quality control, stable supply of product and reduced price 
fluctuation in the system. 
 
 
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