Economic assessment of oil palm projects in Nigeria.

Abstract

Due to the dramatic increase in the incidence and severity of poverty in Nigeria arising from the dwindling performance of the agricultural sector where a preponderant majority of the poor are employed, the revenue from the farmer’s output is of paramount importance in order to maintain continuous cycle of production. However, this study was designed to economically assess oil palm projects in Nigeria. Secondary data used for this study were collected from Nigerian Institute for Oil Palm Research (NIFOR) and related journals. The data collected were analyzed using discounted cash flow techniques. The result shows that at 32% interest rate NPV was positive (N20,275), IRR was 33% and the BCR was 1.06. The sensitivity analysis revealed that at 5% fall in revenue of the project, the NPV was positive (N1,403) while at 10% fall in revenue, the NPV became negative (N-28,747). Therefore, since price and yield quantity is an important ingredient in determining the revenue from oil palm project, investor has to watch closely these variables that may affect the profitability of the project.

Keywords: Oil palm, NPV, IRR, BCR, discount factor.