TABLE OF CONTENTS Page Decleration…………………………………………………………………………………… i Certification…………………………………………………………………………………. ii Dedication…………………………………………………………………………………… iii Acknowledgement………………………………………………………………………… iv Abstract……………………………………………………………………………………… v-vi
Table of Contents………………………………………………………………………. vii-xii
List of Tables…………………………………………………………………………….. xiii-xvii
List of figures………………………………………………………………………… xviii
List of Plates……………………………………………………………………………… xix
List of Appendices……………………………………………………………………… xx
1.1 Problem Statement……………………………………………………………….. 6-7
1.2 Objectives of the Study……………………………………………….. ………... 8
1.3 Justification for the Study……………………………………………. …… . 8-9
1.4 Hypothesis of the Study……………………………………….……………. 10
CHAPTER II: LITERATURE REVIEW 11-52
2.1 Sugar Production in the World…………………………………………… 11
2.1.1 Brazil……………………………………………………………………………. 11-12
2.1.2 Thailand…………………………………………………………………………. 12
2.1.3 India…………………………………………………………………………….. 12-13
2.1.4 China…………………………………………………………………… …………. 13
2.1.5 Cuba………………………………… ……………………………………………… 13-14
2.1.6 North America……………………………………………………………………. 14
2.1.7 Egypt……………………………………………………………………………………. 15
2.1.8 Sudan …………………………………………………………………………………15-16
2.2 The World Sugar Market………………………………………………………. 17-19
2.2 Sugarcane / Sugar Production in Nigeria………………………… 19-24
2.3 Nigerian Sugar Consumption Trend………………………………………… 24-26
2.4 Indigeneous Sugar Processing Technology in Nigeria……………… 26-29
2.5 Likely Reasons for the state of Sugar Situation in Nigeria……………29-34
2.5.1 Demand side ( Consumption)……………………………………………… 29-31
2.5.2 Production (Supply Side)……………………………………………… 31-34
2.6 Sugar Research and Development in Nigeria………………………… 34-35
2.7 Constraints Identified for the Dismal Performance of the Nigerian Sugar Industry……………………………………………. …… 36-37
2.8 Potential Impact of the Sugar Industry on the National Economy 38-39
2.9 Review of the Empirical Studies ………………………………………….. 39-40
10 2.10 Review of Analytical Tools………………………………………………… 40-52
2.10.1 Descriptive Statistics………………………………………………………. 40
2.10.2 Simple rate of Return (SRR)…………………………………………………41-42
2.10.3 Pay-Back-Period (PBP)……………………………………………………. 42-43
2.10.4 Benefit-Cost-Ratio (BCR)………………………………………………… 43-44
2.10.5 Net Present Value (NPV)………………………………………………. . 44-45
2.10.6 The Internal Rate of Return (IRR)…………………………………….. 45-47
2.10.7 Sensitivity Analysis Test..…………………………………………………. 47-52
CHAPTER III: METHODOLOGY 53-62
3.1 Study Areas………………………………………………………………………….. 53-55
3.2 Sampling Techniques……………..……………………………………………. 55-56
3.3 Methods of Data Collection…………………………………………………… 56-57
3.4 Analytical Techniques……………………………………………………………… 57-62
3.4.1 Descriptive Statistics……………………………………………………………… 57
3.4.2 Undiscounted cash flow meassures……………………………………….. 57-58
3.4.3 Discounted Cash flow Model………………………………… …. 58-60
3.4.4 Sensitivity Analysis Test……………………………………………………..61-62
CHAPTER IV: RESULTS AND DISCUSSION 63-126
4.1 Availability of Sugarcane Land in Nigeria ……………………………… 63-65
4.2 Yield per hectare Recorded across the Study Areas…………………66-67
4.3 Simple Rate of Return (SRR)……………………………………………. 68-73
4.4 Inputs for Mini-Cottage Brown Sugar Processing Firm…..………… 73-87
4.5 Pay-Back-Perod (PBP)………………………………………………………… 88-89
4.5 Benefit-Cost-Ratio (BCR), Net Present Value (NPV) and Internal Rate of Return (IRR)………………………………………….. 90-97
4.5.1 Benefit-Cost-Ratio (BCR) ………….………………………… …. 90
4.5.2 Net Present Value (NPV)…………………………………………… 90-91
4. 5.3 Internal Rate of Return (IRR……………………………………… 91-99
4.7 Sensitivity Analysis...………………………………………………… 98-126
4.7.1 Sensitivity indicators and Switching Values on NPV and IRR ……………………………………………………….. 125-126
SUMMARY, CONCLUSION AND RECOMMENDATIONS 127-131
5.1 Summary………………………………………………………………………… 127-129
5.2 Conclusion………………………………………………………………………… 129
5.3 Recommendations …………………………………………………………… 129-131
REFERENCES --------------------------------------------------------------------------------132-143
Appendix……………………………………………….......................…………… 144-152
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 7 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 MiniProcessing 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 .
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