– Financial Feasibility Study of Five Brown Sugar Mini-Processing Firms in Nigeria –
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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.
BACKGROUND
More than 100 countries produce sugar (both white crystal and brown sugar), 78% of which is made from sugar cane grown primarily in the tropical and sub-tropical zones of the southern hemisphere, and the balance of 22% from sugar beet which is grown mainly in the temperate zones of the northern hemisphere. Generally, the costs of producing sugar from sugar cane are lower than those of processing sugar beets.
In the Year 2009, statistics show that 69% of the world’s sugar was consumed in the countries of origin, while the 31% was traded in world markets (ISO, 2009). Because of the residual nature of the world market, the free market price is one of the most unpredictable of all commodity price as indicated by Nadia (1987); Fry (2000); Mahmudulam and Samadmiah (2008) and ISO (2008).
The first sugar production in Nigeria occurred in 1964/1965, after commissioning of Sugar Plant at Bacita {Nigerian Sugar Company, (NISUCO)}, in 1962 (Oguntoyinbo, 1987). This was followed by the establishment of the Savannah Sugar Company (SSC) in Numan 1977 (National Sugar Development Council, 2003). The two sugar plants had a combined installed capacity of 105,000 tonnes/annum or about 10% of the country’s annual requirement.
Production however, oscillated around 50,000 tonnes / annum, between 1978 and 1990, making Nigerian sugar production slightly less than 5 % of its annual requirement. Another sugar plant at Lafiagi/Sunti, Kwara state, was established in the year 1991 with mini works producing insignificant amount of sugar. Since then, no new sugar plant has been established in Nigeria.
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