ECONOMIC AND ENVIRONMENTAL IMPACTS OF OIL PALM PRODUCTION AND PROCESSING IN EDO AND ONDO STATES, NIGERIA

Abstract

ABSTRACT The need to bridge the widening demand and supply gap of palm oil calls for increase in oil palm production and processing. However, increase in oil palm production and processing has consequential impact on the environment like climate change, deforestation, eco-water toxicity amongst others. This study assessed the economic and environmental impacts of oil palm production and processing in Edo and Ondo States. Multistage sampling technique was used to select 550 respondents for the study. Data were acquired using structured questionnaire. Gross margin analysis was utilized to determine the profitability of oil palm production and processing. Stochastic production frontier was used to determine the production efficiency of the farmers and processors. Life cycle analysis (LCA) was employed to evaluate the environmental impacts of oil palm production and processing. Dichotomous-Choice Contingent Valuation Method (DC-CVM) was used to determine the economic value of the externalities caused by oil palm production and processing. Multinomial logit regression was used to find the marginal effect of factors influencing the choice of coping strategies and benefit cost analysis (BCA) was utilized to decide the most feasible and cost-effective adaptation strategy. Findings showed that the mean age of the respondents was 57 years in Ondo State and 52 years in Edo State. Majority of the farmers in Edo and Ondo States obtained their seedlings from the Nigerian Institute for Oil Palm Research (NIFOR). Majority (74.58% and 71.79%) of the farmers, processors (83.33% and 89.47%) and farmers/processors (97.3% and 97.56%) in Ondo and Edo States respectively have no access to extension services. Majority (96.61% and 100%) of the farmers, processors (96.97% and 92.11%), farmers/processors (95.95% and 97.56%) in Ondo and Edo States respectively have no access to credit. Majority (57.63% and 51.28%) of the farmers, farmers/processors (98.65% and 89.43%) in Ondo and Edo States respectively have less than 1500 palm trees. The gross profit margin of the farmers, processors, farmers/processors were 0.27 and 0.37; 0.43 and 0.39; 0.47 and 0.43 in Ondo and Edo States respectively. Result showed that the mean technical efficiency of the farmers in Edo and Ondo States was 0.85, processors 0.83 and farmers/processors 0.89. LCA result shows that the significant impact categories were eco-water toxicity (1.31E+05 CTUe), climate change (44021.79 kgCo2 eq), fossil fuel (15051.12 MJ) and respiratory inorganics (25050.01 kg). The estimated annual cost of externalities caused by oil palm production and processing in Edo State was ₦28,960,084,800 and ₦32,231,355,840 in Ondo State. Result of the BCA showed that the conversion of empty fruit bunch to bio-fertilizer was the most feasible and cost-effective adaptation strategy, with a Net Present Value of ₦556,577.85, benefit cost ratio of 1.10 and internal rate of return of 46.3%. In conclusion, oil palm production and processing has been shown to be a profitable venture but contributes to climate change, eco-water toxicity amongst other environmental impacts. Farmers and processors should join cooperative societies for easy access to credit, extension services, increased production and training on sustainable agricultural practices to better preserve the environment.