FINANCIAL FEASIBILITY STUDY OF FIVE BROWN SUGAR MINI-PROCESSING FIRMS IN NIGERIA
in ECONOMICS PROJECT TOPICS AND MATERIALS on September 11, 2020CHAPTER ONE
1.0 PROJECT 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. This may possibly be as a result of the poor and low sugar output experienced from the already established plants. Even at their highest production levels, the two estates (Nigerian Sugar Company, (NISUCO) and Savannah Sugar Company (SSC) could only satisfy about 5 % of the nation’s requirement (Table 1.1). For example, as from 1999 to 2006, the production of sugar has been on the decline, reaching an all time low value of less than 2% (FOS, 1990-2005). Thus the wide gap between sugar requirement and production is usually filled through massive importation with huge amount of foreign exchange (NSDC, 2007). In 2008 sugar importation was 98.82% exchange (NSDC, 2008). This cost the country billions of Naira in foreign exchange.
