Cooperatives have been said to be a form of business that is so unique, special and different from other forms of business.
It is also said that the earlier set of people who started cooperative business introduced it with the sole aim of fighting greedy middlemen, who capitalized in exploiting the consumers of already produced from the manufacturers.
This was part of the content of the paper presented by Dr. Okafo Okoreaffia of the Department of Cooperative Economics and Management, Federal Polytechnic Nekede, Owerri, Imo State at the just concluded 4th National Conference of the Institute of Cooperative Professionals of Nigeria (ICOPRON) tagged: ”Ekoco-op2018” held in Lagos last week.
According to the presentation titled: ”Distribution of Net Results in Cooperatives: A Challenge To Cooperative Professionalism In Nigeria” which cited Okechukwu (2011), and Andrews (2018), and Okoreaffia (2016), noted that: ”early cooperatives were set up to fight the exploitation of greedy middlemen, who procured goods from manufacturers and producers at cheap prices and sold same to consumers at exorbitant pieces. They bought in large quantities, had transport and warehouse facilities and therefore enjoyed haulage and storage advantages and generally relished the advantages of economies of scale. They had lower unit costs and yet sold at very high prices and reaped humongous profits. It was impossible to compete with them as individual consumers or smallholder buyers.”
He said: ”Consumers were encouraged to form cooperatives to be able to survive the era and so they pooled their capital and other resources together into large cooperatives with the same advantages of large scale production including lower price units. They also decided to sell at the cost price (referred to as ideal or cooperative price) since the consumers were primarily the owners of the cooperative business and there was no way the business can target to make profit from its owners, questionably for whom? This triggered off a price war from these middlemen who then sold at below-the-cost price until the Cooperatives became unnecessary while they reverted to even higher prices. As new Cooperatives emerged and died due to these price wars, later cooperators decided to sell at the prevailing market price to avoid further price wars but to refund the excess payment made by members, called surplus, in accordance with patronage. This is the origin of patronage rebate or patronage refund where, during the distribution of profit, those who bought more will get more and vice versa. This is one of the fundamental differences of cooperative businesses from other types of businesses.
He recommended that Cooperative professionals must insist on this practice and not to succumb to pressure from members who want profits shared equally or according to shareholding.