Nigeria is highly blessed with natural resources and its economy had been traditionally dependent on agriculture. Nigeria’s soils and climate allow cultivation of a wide variety of food crops. Estimates indicate that 82 million hectares out of Nigeria’s total land area of about 91 hectares are arable. However, only about 34 million are being cultivated presently. Most agricultural activities take place in the northern states of Nigeria such as Kano, Kaduna, Sokoto, Jigawa, Bauchi and western states such as Oyo,Osun etc.
In the 1960s and early 70s, agricultural products had been the main source of income for Nigeria. Its economy heavily relied on agricultural products such as Cocoa, Palm Oil, Millet, Sorghum, Maize, Cotton, Groundnuts, Corn, and Cassava, besides Rice and Wheat.
However, with the discovery of oil, the then Government of Nigeria shifted its focus to crude oil exports. Eventually, the agricultural sector suffered from neglects and food situation became insecure in Nigeria. The food production over the past two decades has not been keeping pace with the Nigeria’s burgeoning population and the Food and Agriculture Organization (FAO) listed Nigeria among the food-deficit countries.
Eventually, the country moved from being a large net exporter of agricultural produce at the time of independence to a sizable importer. More so, the importation of agricultural products from abroad has directly contributed to the depleted state of our economy and brought about total deterioration in the agricultural sector.
To rectify this ugly situation, the Federal Government introduced the Green Revolution Program and Operation Feed the Nation in which there is a frantic effort to boost the agricultural sector. Hence, in an attempt to corroborate the effort of government, this project is initiated.
Our focus in this project shall be on three agricultural produce, two of which are food crops (production takes duration of 6 months to 1 year) and Cash Crop, Palm Oil (which is produced within 3 to 4 years using hybrid method).
2.0 Executive Summary
We are proposing to develop a medium scale oil palm plantation with maize and plantain production in Iwo Local Government in Osun State, Nigeria. 50 hectare (125 acres) of land is to be acquired for this purpose. 47 ha would be used for cultivation of oil palm and maize. These crops are crossbreed for 2 1/2 years. Plantain would be planted separately on 1 ha of land. The remaining 3 ha would oil palm processing and construction of farm storage. As shown on the financial plan, this project is expected to generate N10,000,000.00 per annum (see profit and loss). It is expected to have 2,700 litres of palm oil per hectare.
Objectives & Vision
This project would seek to support the vision of Federal government through increased production of these food and cash crops to ensure local food security and potential for future exports to boost the National Income. While the mission is poverty reduction and creation of employment for the populace as it would be revealed in this survey that agriculture is a profitable venture.
Keys to Success
The writer have identified three keys that will be instrumental in its success. The first is the implementation of strict financial controls. By having the proper controls, production efficiency will be maximized. The second key will be the never ending pursuit for the industry's training, research and development. The third key is the recognition and implementation of the philosophy that 100% customer satisfaction is required to ensure a profitable business. Profits are a by product of satisfying customers.
Strength Weakness Opportunities and Threats (SWOT) Analysis
Large land mass
One of the noticeable weaknesses is the inability of the country to produce mechanized farming equipments. The latter are imported from abroad and this may add to the cost as the currency exchange rate is a bit unfavourable.
Enormous demand for all the proposed products, the availability of raw materials, availability of labor, availability of suitable climate, employment opportunity for the populace.
Foreign exchange instability which may affect the cost of farm equipments, Inappropriate agricultural policies that may restrain agricultural potential, Import tariffs that may put fertilizer out of producers’ reach thus leading to low yields.
3.0 Company Summary
This proposal if fund will be led by myself Adisa Kabiru Adeniyi (ACA) as the Managing Director and Mr. Adesina Adesoji Olukunle as the Operation/Marketing Manager. I bring a wealth of business and project management skills to the company. While working at different capacities in finance firms as detailed under Management summary I was responsible for the successful management and implementation of projects such as product formation and design. Utilizing these skills, I will be responsible for management of the farm.
Mr. Adesina, with a background of plant biology and the experienced he has garnered over years in agriculture, he will oversee both operations and marketing units of the farm.
4.0 Products Summary
These schemes shall focus on three (3) agricultural crops. These shall be discussed one after the other.
(1) Oil Palm
In Africa, no part of the oil palm is considered a waste. The residue after oil has been extracted is called palm kernel cake, which is useful in feeding livestock. The leaves of oil palm are used for making brooms, roofing and thatching, basket and mats. The thicker leaf stalks are used for walls of village huts. The bark of the palm frond is peeled and woven into baskets. The tree itself can be split and used as supporting frames in buildings. A sap tapped from the flower is processed into a drink called palm wine, which is a rich source of yeast. The palm wine can be allowed to ferment and then distilled into a gin known as “Akpetesin” in Ghana and “Ogogoro” in Nigeria. The empty fruit bunch, the shell and fibre that remain after oil extraction are used for mulching, manuring and as fuel. It is also an essential food item. About 90 percent of the palm oil produced ends in food products, while the remaining 10 percent is used for industrial production. Because of its many uses demand is growing fast as the world’s population increases and standards of living rise. Production of palm oil is more sustainable than other vegetable oils. It consumes considerably less energy in production, uses less land and generates more oil per hectare than other leading vegetable oils.
(2 ) Maize
This is another crop which is used for both consumption and industrial purposes. If sown on new land, opening is done well before to avoid nitrogen deficiency during early stages of growth. Sowing should be done as early as possible at the beginning or even before the break of the rains. This allows the crop to fully benefit from the rains during the crucial stages of growth. Early planting would also free the land earlier for second rains crop. There is no advantage in having a seed-bed with a fine tilth. In fact a coarse seed-bed is preferable provided that the land is free of weeds, particularly the blue couch grass. A coarse seed-bed helps to prevent sheet erosion during the early life of the crop. The recommended spacing generally is 3x1 feet when hand sown in pure stands or 26x15 inches by mechanical seeders. This gives a plant population of 14,500-16,000 plants per acre.
(3) Plantain and Banana:
Plantain and banana are major sources of food in many regions throughout Nigeria. Total production of these crops is estimated to be over 36 million metric tones. These crops can either be used for domestic consumption or used as input by other producers. For instance, plantain may be processed into chips and sold locally or exported abroad. Studies have shown that this is a good source of income to earning a living. Plantation of these crops is profitable as seedling is only purchased at the initial stage of farming. There would be seedlings that will spring up during harvest. Part of this can be sold out to realize more income.
5.0 Market Analysis Summary
This project has three distinct customers: companies, general public and foreigners. The first two clients will be sought locally in Nigeria. Any of the firm produce can be sold to them either for consumption or as input. The third client will be sought from abroad. This will enhance Gross National Product and thus boost the National Income. .
The market for different oil palm products is quite enormous. Also, there is large market for other crops nationwide. Surveys show that over 120 million consumers (over 75% of Nigeria population) or virtually all the populace consume or use these farm produce.
6.0 Strategy and Implementation Summary
The company will be operated according to international standards for quality control, documentation and bookkeeping. Although this will probably require some extra expense for hiring experts with these skills, it is expected that the investment would be technically viable. The fact that Mr. Adisa Kabiru Adeniyi is a chartered Accountant is an added advantage.
Finance: The project is to be financed via equity and debt. The farm is to be insured against fire and theft.
Personel: The success of any business depends on the caliber of its management. It is being proposed that a good farm manager with a qualification of First Degree in agronomy or any related course will be employed to manage the farm. All activities on the planting, maintenance, harvesting, processing and marketing of the 3 crops would be carefully co-ordinated by the farm manager. Two permanent staff is to be employed to assist the manager and also coordinate casual labours in the production process of all the crops. The Managing Director and the Operation Manager will be placed on the salary of N3,000,000.00 and N1,800,000.00 respectively. The farm manager’s remuneration per annum is stated at N1,500,000.00 while that of his assistants is N600.000.00 each. 10 casual labours are to be engaged for 90 days period at the rate of N1,000.00 per day (this amounts to N900,000.00). Casual labours are employed for weeding, fertilizer application, harvesting and oil palm processing.
Training: It is expected that the farm manager will liaise with IITA (Ibadan),OSSADEP and Ministry of Agriculture & Natural resources in Osun state to train staff on maintenance & processing of oil palm in a cost effective and efficient manner.
Equipments: some equipments that will be purchased are: Hydraulic press, Sterilizer, Cracker, etc
Land Preparation: The land is cleared by carrying out the conventional method of tillage, removing logs and thumbs for easy lining operation. The operation is carried out by the use of tractor which would be hired from Osun state Agriculture Mechanization Agency.
Lining and Transplanting: The spacing of Oil palm is measured out by using pegs at 9m by 9m triangular form which gives the total plant population at a rate of 150 plants per hectare. The polythene bags containing the seedlings are cut off (after digging holes at 45cm deep) and carefully placed inside the dug holes. Wire collars are fixed around each seedling. To prevent rodents from feeding on nut, mulching is applied at 90cm from the base of the seedling for conservation of moisture.
Cropping: The oil palm plantation is intercropped with maize. The cultivation of maize is done two times in a year (early planting and late planting) on the same piece of land with oil palm spacing of 60cm. Weeding is done 3 times before harvesting which serves as a way of depletion of nutrient in the soil and the formation of oil Palm Tree. The panting of Plantain and banana will be done on a separate piece of land and harvest is done once yearly.
Harvesting and handling technique: With the hybrid method of planting, harvesting is done when two or three loose fruits are found at the bottom of the tree. The harvesting is done by chisel and harvesting hook through pulling method and this operation is repeated at the interval of three weeks.
Processing: The oil winning process, in summary, involves the reception of fresh fruit bunches from the plantations, sterilizing and threshing of the bunches to free the palm fruit, mashing the fruit and pressing out the crude palm oil. The crude oil is further treated to purify and dry it for storage, sales and export. Silos will be built to store maize after harvest.
Storage: In large-scale mills the purified and dried oil is transferred to a tank for storage prior to dispatch from the mill. Since the rate of oxidation of the oil increases with the temperature of storage the oil is normally maintained around 50°C room temperature to prevent solidification and fractionation. The Tank will be lined with a suitable protective coating to prevent contamination of the storage. Silos will be built to store maize after harvesting.
7.0 Management Summary
Managing Director: Mr. Adisa Kabiru Adeniyi - HND (Accountancy), ACA, AMNIM is a qualified accountant in Nigeria. He holds Higher National Diploma in Accounting from Osun State Polytechnic, Iree in Osun State, Nigeria. Kabiru has worked in various capacities in both pubic office and private organizations. These establishments are: Osun State Agricultural Development Corporation (OSSADEP); Karrington Group (Management Accountant); Stallion Homes, Loan and Savings Limited (Manager Account); Zoom Mobile Limited (Senior Accountant);
He is the founders of Adeniyi Olubode Professional Services & Co (Chartered Accountants) and Guildance Community Development Foundation. These two companies are being managed successfully on a going concern basis.
Adisa is well versed in tax laws, commercial laws, company law, accounting and auditing standards, management consultancy, information system audit, information system consulting, mergers and acquisitions and risk management.
Operations/Marketing Manager: Adesina Adesoji Olukunle B.Agric OAU Ife & Diploma Certificate in Civil Engineering. He has over 18 years of experience in agricultural project management. Adesoji has successfully implemented over four oil palm plantation and processing in Nigeria.
8.0 Financial Plan Summary
The total cost of the project is N25,000,000.00 (Twenty five million naira only). This is made up of N19,376,150.00 fixed cost and N5,623,850.00 operating expenses as detailed on Table 1. Equity contribution would be N1,000,000.00 while the balance is to be raised from financial institution at interest rate of 4% per annum. The fund would be disbursed in the first year to enable the project take off smoothly. Thereafter, the project would be financed from the proceeds of the farm. Loan repayment starts in the 2nd year which means there is a grace period of 1 year. The loan will be fully repaid in 6 years.
For the purpose of clarity, it is necessary to state all the assumption used in our analysis. These are listed below:
a. The prices of items used in the analysis are the ruling prices goods and services in the market we have done our market survey before arriving of the prices hence the reliability of the data used.
b. The useful lives of the fixed assets of the proposed project have been taking into consideration in the calculation at annual depreciation cost of 5% and 10% for each respective asset..
c. Investment Capital: The investment cost covers the cost of land acquisition, development, equipments, intercrops, the total investment cost of the project is estimated at N25,000,000.00 (Twenty five million naira only), Details are provided below:-
Land Clearing of (50 ha) 166,250
Oil palm seedling: 2,850,000
Wheel barrow 19,200
Hydraulic press 720,000
Land acquisition 7,500,000
Maize seedling 250,000
Plantain & Banana seedling 450,000
Casual labour 2,700,000
Miscellaneous expenses 723,850
The expected targets are contained in table II with the projected revenue, the selling price used in the study is as follows:-
I. Palm oil N200 per litre
II. Palm Kernel N4,000 per 50kg
III. Maize N40,000 per ton
iv. Plantain N43,692.05 per metric ton
IV. Sludge (fuel) N750 per bag of 25kg-
Going by the table II under appendix, we expect to realize N11, 985,600; N11,985,600; N8,392,800; N22,404,200; N25,285,400; N28,166,600, N28,166,600 consecutively for 7 years.
Any increase in the sale of these farm produce will automatically increase the profit and revenue.
As depicted on (table ii & vii) of the appendix, the revenue from the sale of all the proposed crops is expected to be N19,483,828 on the average. While the average cost is estimated at N9,331,714.
Net Present Value (NPV) recognizes the time value of money. It is the net contribution of a project to its owner’s wealth i.e the present value of future cash flows less the present value of initial capital investment. In our analysis, all the projected cash flows are discounted at 22% to their present values. This project is technically feasible as our NPV is positive i.e N18,509,188.
The Benefit Cost Ratio (BCR) is 1.49 as depicted on (table ix). This shows that the project benefits outweigh the costs. Hence, the decision to consider this project as a worthwhile venture.
While the technical feasibility and financial viability of this project has been established via our production cost estimates, revenue projection and the budget analysis on appendix. We anticipate positive socio-economic impact both at local level and abroad. This project guarantees employment creation and local food security. The project is in accordance with the national objective of increased agricultural production in the country under the Green Revolution Programme of the Federal Government. Hence, we recommend the project to any financier interested in funding viable and profitable agricultural project.