INCOME SAVINGS AND INVESTMENT PATTERNS OF SMALL SCALE AGROBASED ENTREPRENEURS IN ANAMBRA STATE NIGERIA


INCOME SAVINGS AND INVESTMENT PATTERNS OF SMALL SCALE AGROBASED ENTREPRENEURS IN ANAMBRA STATE NIGERIA

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INCOME SAVINGS AND INVESTMENT PATTERNS OF SMALL SCALE AGROBASED ENTREPRENEURS IN ANAMBRA STATE NIGERIA

ABSTRACT

The study examined income, savings and investment patterns of small-scale agro-based entrepreneurs in Anambra State. The study utilized primary data to achieve this objective. The data were collected through multi-stage random sampling technique from 160 respondents. These data were analyzed with descriptive statistics including 4-point Likert rating scale, and multiple regressions. Tests of significant effects and differences were carried out with t-test and analysis of variance (ANOVA) techniques. Research results indicated that the average age of the small-scale agro-based entrepreneurs were 40years, while majority (33.8%) of them fell within the age range of 31-40 years. Also, majority (57.5%) of the small-scale agro-based entrepreneurs were males, while 43.8% of them were married. Household size of six to ten persons was the highest at 41.3% with an average of 9 persons per household, while twenty five percent of the agro-based entrepreneurs had completed their primary school education. Furthermore, majority (26.9%) of the entrepreneurs were engaged in groundnut processing, while the average experience of the entrepreneurs was 9 years and majority (38.1%) of them had 6 – 10 years of experience. Further results showed that the average monthly income of the small-scale agro-based entrepreneurs was N12,031.25 while their average monthly savings was N4,550.00. Majority (58.3%) of the small-scale agro-based entrepreneurs saved with esusu. Further results showed that majority (46.3%) of the entrepreneurs invested within N21,000 – N30,000 in their businesses while 46.3% of them also sourced their investment capital through personal savings with only 2.5% of them receiving loans from bank to finance their investments. There were no significant (p>0.1) differences in investment pattern of the agro-based entrepreneurs across the agricultural zones. Furthermore, the results showed that the socio-economic characteristics were significant (p<0.1) in explaining the changes in income, savings and investment patterns of the agro-based entrepreneurs. Age, educational level, savings level, asset level and level of skill acquired were positive and significant (p<0.05) in affecting the income pattern of the agro-based entrepreneurs. Also, the savings level of the entrepreneurs were positively and significantly (p<0.01) affected by their income and asset levels, and level of skill acquired, while the effects of household size and educational level were negative and significant (p<0.05). Furthermore, educational level, level of skill acquired, savings level and amount of money borrowed by the entrepreneurs had positive and significant (p<0.05) relationship with their investment pattern while the effects of household size and amount of interest paid on borrowed money were negative and significant (p<0.05). Further results showed that the challenges facing small-scale agro-industry were at an average of 2.85 on a 4-point Likert rating scale. These challenges included erratic power supply, lack of accessibility to their business areas, multiple government taxation and low patronage. The study recommended policies that will enhance the income, savings and investment levels of small-scale agro-based entrepreneurs in Anambra State. 

 

 

 

 

                                                                  TABLE OF CONTENTS

 

Title Page                                                                                                                    i

 

Certification                                                                                                                ii

 

Dedication                                                                                                                  iii

 

Acknowledgement                                                                                                      iv

 

Abstract                                                                                                                      v

 

Table of Contents                                                                                                       vi

 

List of Tables                                                                                                              x

 

List of Figures                                                                                                             xi

 

Chapter One:                                     Introduction

 

1.1       Background of the Study                                                                               1

 

1.2       Problem Statement                                                                                          4

 

1.3       Objectives of the Study                                                          6

 

1.4       Hypotheses of the Study                                                                    7

 

1.5       Justification of the Study                                                                                7

 

Chapter Two:                                    Review of Related Literature

 

2.1       Concept of Small-Scale Agro Based Entrepreneurs   9

 

2.1.1    Meaning of Small Scale Industries/Enterprises            11         

 

2.1.2    Roles of Small-Scale Agro-Based Entrepreneurs in Economic Development            12

 

2.2       Socio-Economic Characteristics of Small-Scale Agro-Based Entrepreneurs 13         

 

2.2.1    Gender of Small-Scale Agro-Based Entrepreneurs      14

 

2.2.2    Age of Small-Scale Agro-Based Entrepreneurs  14                                                     

 

2.2.3    Education Level of Small-Scale Agro-Based Entrepreneurs          14

 

2.2.4    Marital Status of Small-Scale Agro-Based Entrepreneurs                15

 

2.2.5    Occupational Categories of Small-Scale Agro-Based Entrepreneurs 15        

 

2.2.5    Income Level of Small-Scale Agro-Based Entrepreneurs  16        

 

2.3       Sources of Capital/Funds for Investment by Small-Scale Agro-Based Entrepreneurs                                         16  

 

2.4       Patterns of Investment and Savings of Small-Scale Agro-Based Entrepreneurs 18          

 

2.4.1    Patterns of Investment of Small-Scale Agro-Based Entrepreneurs  18         

 

2.4.2    Patterns of Savings of Small-Scale Agro-Based Entrepreneurs 19

 

2.5       Factors Affecting Income, Savings and Investment Patterns of Agro-Based Entrepreneurs                                                    20       

 

2.6       Factors Affecting the Income of Small-Scale Agro-Based Industry 22    

 

2.7       Theoretical Framework                                                           27

 

2.7.1    Life Cycle Hypothesis                                                                 27

 

2.7.2    Permanent Income Hypothesis                                            28

 

2.7.3    Keynesian and Accelerator Theories                                              30

 

2.8       Analytical Framework                                                                                    30

 

2.8.1    Likert Scale                 31

 

2.8.2    Multiple Regression                                                                            31

 

2.8.3    Analysis of Variance (ANOVA)                                                                    32

 

2.8.4    T- Test                                                                         32

 

Chapter Three:                                 Research Methodology

 

3.1       Area of Study                                                                                                 33

 

3.2       Sampling Technique                                                                                        34

 

3.3       Data Collection                                                                                               34

 

3.4       Analytical Technique                                                                                      35

 

Chapter Four:                                   Results and Discussions

 

4.1       Socio-Economic Characteristics of Small Scale Agro Based Entrepreneurs  39

 

4.1.1    Age of Small-Scale Agro-Based Entrepreneurs         39

 

4.1.2    Sex of Small-Scale Agro-Based Entrepreneurs           40

 

4.1.3    Marital Status of Small-Scale Agro-Based Entrepreneurs   40

 

4.1.4    Household Size of Small-Scale Agro-Based Entrepreneurs 41

 

4.1.5    Educational Level of Small-Scale Agro-Based Entrepreneurs 42

 

4.1.6    Type of Agro-Based Activity Engaged by Small-Scale Agro-Based Entrepreneurs                                                                             43

 

4.1.7    Nature of Business of Small-Scale Agro-Based Entrepreneurs44

 

4.1.8    Years of Experience of Small-Scale Agro-Based Entrepreneurs 44

 

4.1.9    Possession of Requisite Skills by Small-Scale Agro-Based Entrepreneurs    45

 

4.2       Income and Savings Status and Patterns of Small-Scale Agro-Based Entrepreneurs                                                                             46      

 

4.2.1    Income Status of Agro Based Entrepreneurs        46

 

4.2.2    Income Sources of Small-Scale Agro-Based Entrepreneurs  47

 

4.2.3    Savings Status of Small-Scale Agro-Based Entrepreneurs   48

 

4.2.4    Savings Patterns of Small-Scale Agro-Based Entrepreneurs      49

 

4.3       Investment Patterns of Small-Scale Agro-Based Entrepreneurs    50

 

4.4       Sources of Capital for Investment by Small-Scale Agro-Based entrepreneurs 51

 

4.4.1    Sources of Capital                                                                                           51

 

4.5       Factors Affecting Income, Savings and Investment Patterns of Small-Scale

 

Agro-Based Entrepreneurs in Anambra State                                                52

 

4.5.1    Factors Affecting Income Pattern of Small-Scale Agro-Based Entrepreneurs 52

 

4.5.2    Factors Affecting Savings Pattern of Small-Scale Agro-Based Entrepreneurs 54

 

4.5.3    Factors Affecting Investment Pattern of Small-Scale Agro-Based Entrepreneurs 55

 

4.6       Factors Affecting the Income of Small-Scale Agro-Based Industry 57

 

Chapter Five: Summary, Conclusion and Recommendations     

 

5.1       Summary                                                                                                         60

 

5.2       Conclusion                                                                                                      62

 

5.3       Recommendations                                                                                          63

 

References                                                                                          65      

 

Appendices                                                                                    72                   

 

                                                                  LIST OF TABLES

 

Table

 

1:         Age distribution of small-scale agro-based entrepreneurs in Anambra State 39

 

2:         Distribution of small-scale Agro-based Entrepreneurs according to marital status 41

 

3:         Frequency distribution of small-scale agro-based entrepreneurs according to Household size                       41

 

4:         Frequency distribution of small-scale agro-based entrepreneurs according to level of education                                42

 

5:         Frequency distribution of small-scale entrepreneurs according to their type of agro-based activities                        43

 

6:         Frequency distribution of small-scale agro-based entrepreneurs according to their level of experience                            45

 

7:         Frequency distribution of small-scale agro-based entrepreneurs according to Their level of income                                    46

 

8:         Distribution of small-scale agro-based entrepreneurs according to their sources of income                                                                                           48

 

9:         Frequency distribution of small-scale agro-based entrepreneurs according to their monthly savings                             48

 

10:       Pattern of Investment of agro-based entrepreneurs      51

 

11:       Regression result on the factors affecting the income of small-scale agro-based entrepreneurs                                                                                53

 

12:       Regression result on the factors affecting the savings of small-scale agro-based entrepreneurs                        55

 

13:       Regression result on the factors affecting the investment pattern of small-scale agro-based entrepreneurs                           57

 

14:       Likert rating scale of factors affecting income of small-scale agro-based industry                                                                                        58

 

                                                                  LIST OF FIGURES

 

Figure

 

1:         Sex distribution of small-scale agro-based entrepreneurs in Anambra State  40

 

2:         Nature of business of small-scale agro-based entrepreneurs 44

 

3:         Possession of requisite skills by small-scale agro-based entrepreneurs 46

 

4:         Distribution of small-scale agro-based entrepreneurs according to their pattern of savings                                 49

 

5:         Sources of capital for agro-based entrepreneurs       52                    

 

CHAPTER ONE

INTRODUCTION

 

1.1       BACKGROUND OF THE STUDY

The role of agriculture and agro-based industries in Nigeria cannot be over emphasized. Agriculture is a source of food for consumption by man, feeds for animals and raw material for the agro-based industries (Edoumiekumo&Audu, 2009). Agriculture contributes to the growth of the economy and also provides employment opportunities for the teeming population and eradicates poverty in the economy, serves as means of income and livelihood, helps in wealth creation and generation of foreign exchange earnings for the country (Nigerian Investment Promotion Commission, 2004). This dominance of agriculture places great premium on the activities of agro-based industries and entrepreneurs in the growth and development of such economies. According to KarandMishra (2004), agro-based enterprises are involved in the production, processing, preservation, manufacturing of agricultural inputs and marketing of agricultural products,and the individuals involved in these activities are the entrepreneurs. An entrepreneur, according to Amuseghan (2008), recognizes opportunities and utilizes them. The entrepreneur starts a business, arranges business ideas and takes risks in order to make profit.

In Nigeria, just like other developing economies the activities of agro-based entrepreneurs are on small-scale bases not exceeding annual turnover of N500,000 (CBN, 2005). Onyebinama (2004) reported that agriculture and agro-based activities in Nigeria are largely on small-scale involving land holding between one (1) and five (5) hectares. In this context therefore, small-scale agro-based entrepreneurs refers to entrepreneurs that are involved in the processing of agricultural products and whose annual turnover are less than N500, 000. As such, this study will concentrate on entrepreneurs that are involved in the processing of agricultural products on small-scale level. Therefore, entrepreneurs involved in the processing of agricultural products add value to them by elongating their shelf life, reducing their bulkiness and creating different varieties and forms. Such agricultural products include cassava, palm nuts, palm kernel, groundnut, plantain, rice, soybean and maize. This has become very imperative in view of the high post-harvest losses associated with agricultural products due to their ease of perishability (Mehta, 2012).

Income, savings and investment are very important parameters that define the wellbeing and performance of small-scale agro-based entrepreneurs. This is because Nigeria, like other developing economiesfaces the herculean task of finding sufficient capital to pursue her developmental efforts (CBN, 2005). As such, the activities of the dominant sector in the economy (i.e. small-scale agro-based entrepreneurs) are affected by their income, savings and investment patterns. Several surveys have shown that Nigerians are trapped in the vicious circle of poverty−low income, low savings and low investments (Obayelu, 2012). The country, therefore, needs very high rates of savings and investments to make a leap forward in her efforts of attaining high levels of growth (CBN, 2005).

Successive administrations in the country have placed emphasis on savings and capital formation as the primary instruments of economic growth in order to increase national income (CBN, 2005).In other words, capital formation plays a vital role in continuous increased production of goods and services, and as such, capital formation has to be supported by appropriate volume of savings. A growth in economic activities stimulates investment, and increased investment in turn enhances economic growth, income and savings levels (Mishra, Das & Mishra, 2010). As noted by Obayelu (2012), increase in savings, use of increased savings for increased capital formation, use of increased capital formation for increased savings for a further increase in capital formation constituted the strategy behind economic growth. This process of increased capital formation leading to increased savings and increased savings leading to increased capital formation will continue till savings, capital formation and income reach desired levels after which savings and capital formation gets stabilized and there would be a steady and self-sustaining increase in national income (Obayelu, 2012).

According to The Macmillan English dictionary (2007), income refers to money that someone gets from working or from investing money. The investment of money is the pre-occupation of entrepreneurs. In the view of Keynes (1936) the income of the agro-based entrepreneurs is the excess of the value of entrepreneurs’ finished output over his prime cost.In other words, it is taken as being equal to the quantity of the output, depending on his scale of production which he endeavors to maximize.The level of income of small-scale agro-based entrepreneurs is central to their savings and investment patterns as almost all models of economic development incorporate a critical role for savings and capital formulation (Morokolo, 2001). Morokolo (2001) reported the view of Gersovitz (1995) that several theorists of the low-level-equilibrium trap adopt the simplification that all income is consumed until a critical level is reached, while a fixed proportion of income above this level is saved. The level of income of the small-scale agro-based entrepreneurs depends upon certain independent factors like family size, number of earners, age, educational level, asset level, savings and investment (Adetunji, 2002). Yusuf and Peters (1984) had argued that Keynesian economists regard the level of current income as the very first rung in a theory of savings. How much an individual, a family, a region and a nation might save depends, quite appropriately on total earnings.

Savings according to Amu and Amu (2012) refers to an amount of money put aside for future use. It is the sacrifice of current consumption to allow for capital accumulation, and is very imperative for supporting and developing rural industries (Obayelu, 2012). Savings provide numerous benefits to small-scale agro-based entrepreneurs directly for investment and indirectly as indication for repayment ability, increase in credit rating and as collateral in a credit market (Brata, 1999).

Investment on its part is the process of injecting capital into a business with the view to generate further capital (Arene, 2008). It leads to increased production which later enhances more consumption and income. The income-expenditure model holds that it is at the point where investment equals savings that the economy attains equilibrium. Adam and Agba (2006) view savings as an important macroeconomic variable that impact significantly on the rate of capital accumulation, productivity, and the independence of a nation in terms of capital and ownership of domestic assets. Alade (2006) succinctly hints that a farmer who consumes the seedlings meant for the next planting season does not expect any harvest. It follows therefore, that high level of domestic savings will facilitate investment, increase in productivity and finally growth in the economy.

INCOME SAVINGS AND INVESTMENT PATTERNS OF SMALL SCALE AGROBASED ENTREPRENEURS IN ANAMBRA STATE NIGERIA

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The study examined income, savings and investment patterns of small-scale agro-based entrepreneurs in Anambra State. The study utilized primary data to achieve this objective. The data were collected through multi-stage random sampling technique from 160 respondents. These data were analyzed with descriptive statistics including 4-point Likert rating scale, and multiple regressions. Tests of significant effects and differences were carried out with t-test and analysis of variance (ANOVA) techniques. Research results indicated that the average age of the small-scale agro-based entrepreneurs were 40years, while majority (33.8%) of them fell within the age range of 31-40 years. Also, majority (57.5%) of the small-scale agro-based entrepreneurs were males, while 43.8% of them were married. Household size of six to ten persons was the highest at 41.3% with an average of 9 persons per household, while twenty five percent of the agro-based entrepreneurs had completed their primary school education. Furthermore, majority (26.9%) of the entrepreneurs were engaged in groundnut processing, while the average experience of the entrepreneurs was 9 years and majority (38.1%) of them had 6 – 10 years of experience. Further results showed that the average monthly income of the small-scale agro-based entrepreneurs was N12,031.25 while their average monthly savings was N4,550.00. Majority (58.3%) of the small-scale agro-based entrepreneurs saved with esusu. Further results showed that majority .. agronomy project topics

INCOME SAVINGS AND INVESTMENT PATTERNS OF SMALL SCALE AGROBASED ENTREPRENEURS IN ANAMBRA STATE NIGERIA

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