FINANCIAL FEASIBILITY STUDY OF FIVE BROWN SUGAR MINI-PROCESSING FIRMS IN NIGERIA

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 mini-processing 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 mini-processing 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 between 54% – 71%.      The Null Hypothesis, that       brown sugar Mini
2. 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

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 .

FINANCIAL FEASIBILITY STUDY OF FIVE BROWN SUGAR MINI-PROCESSING FIRMS IN NIGERIA