FINANCIAL FEASIBILITY STUDY OF FIVE BROWN SUGAR MINIPROCESSING FIRMS IN NIGERIA
FINANCIAL FEASIBILITY STUDY OF FIVE BROWN SUGAR MINIPROCESSING FIRMS IN NIGERIA
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Date
2011-06
Authors
WAYAS, JOSEPH WAYAGARI
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Abstract
Sugar generally has been described as an international commodity that has
become the economic base of some developing countries (Wohlgenant
2008). Countries like Mauritius, Jamaica, and Sudan among others have
gained enormous economic benefits like employment generation, increase
in living standard of the citizenry from brown sugar processing, thus
justifying their existence and improvement (Baron, 1975; 1979; TD, 2001).
Why then Nigeria has not developed brown sugar?The broad objective of
this project was to study the financial feasibility of five brown sugar miniprocessing
firms in Nigeria (Baizare, in Kaduna State, Sara in Jigawa State,
Konar-Mada in Abuja - FCT, Gbajigi in Niger State and Omor in Anambra
State). A reconnaissance survey was carried out to identify the locations
and number of sugarcane farmers and sugar traders in the study areas as
sample frame. Random sampling technique was used in selecting one
hundred and sixty-three (163) sugarcane farmers and Purposive Sampling
technique was used in selecting the five Brown Sugar Mini - Processing
Firms/Processors. Both primary and secondary data were collected for this
study. Analytical tools used include; Descriptive statistics, Undiscounted
cash flow Measures, Discounted cash flow Measures and Sensitivity Analysis
Test models. The results established that; (i). Over 250, 000 hectares of
sugarcane land were available in Nigeria. (ii). An average yield of 55
tonnes per hectare was recorded from the respondents across the studied
areas. (iii). The average simple rate of return of the brown sugar miniprocessing
firm was 64%, which was higher than the 25% interest rate
prevailing in the capital market. (iv). The Pay-Back Period (PBP) for the
investment was three years. (V). The Benefit-Cost Ratio (BCR) of 3.2 was
obtained at a suitable discount rate of 25%, which was quite greater than
1. (vi). The average Net Present Value (NPV) at interest rate of 25% was
N54,005,492.58. (vii).The Internal Rate of Return (IRR) was positive and
even greater than 50%, which made the project worthwhile and financially
viable and (viii). The sensitivity analysis test carried out using pooled data
showed that both 10% and 20% either in increase in cost of processing or
decline in prices of output had no negative impact on the project. (ix)The
sensitivity indicators were less than 2%, the switching values ranges
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between 54% - 71%. The Null Hypothesis, that brown sugar Mini -
processing firm in Nigeria is not profitable ‘was rejected, while the
alternative hypothesis that ‘brown sugar mini -processing firm in Nigeria is
Profitable’ was accepted. The study recommends that; (i). Nigerian
government should encourage brown sugar processing using Mini-
Processing firms to help in bridging the gap (about 98%) between
domestic sugar production and consumption in Nigeria and reducing the
heavy amount of foreign exchange being spent annually on sugar
importation. It will also be of assistance in providing rural employment and
reducing rural-urban migration of youths therby assist in alleviating the
poverty of the rural poor. It will also play a part in the realization of the
country’s vission 20 : 2020. (ii). Financial institutions such as micro-finance
banks and Nigerian Agricultural co- operatives and Rural-Development Bank
should be well-informed and given courage to grant credit facilities to both
sugarcane farmers and prospective investors so as to enhance the
brown sugar production in Nigeria .
Description
I’ WAYAS, JOSEPH WAYAGARI hereby declared that the work in this
disertation entitled ‘Financial Feasibility Study of Brown Sugar Mini-
Processing Firms in Nigeria’ was carried out by me and that it is a record of
my own research work in the Department of Agricultural Economics and
Rural Sociology under the supervision of Professor J. F. Alamu, Professor A.
O. Ogungbile and Professor T. K. Atala. The information derived from the
literatures has been duly acknowledged in the text and a list of references
provided. No part of this dissertation was previously presented at any other
qualification.
Keywords
FINANCIAL FEASIBILITY,, FIVE BROWN SUGAR, MINIPROCESSING FIRMS IN NIGERIA