INVESTMENT APPRAISAL OF OIL PALM PRODUCTION IN THE NIGER DELTA REGION, NIGERIA

Oil palm is an important crop in Nigeria and the main products are palm oil and palm kernel. These are used for food and nonfood purposes. The older trees are aging and new ones are not springing up commensurably, thereby creating a supply gap in the industry. Farmers are risk-averse and tend to prefer short gestation crops. There is the need to stimulate local production and substitute for hard currency payments for the imports. This study is aimed at establishing that despite the long gestation period of oil palm, investments in the enterprise was viable and profitable. The objective of the study was to carry out an investment analysis of oil palm production in Niger Delta Region of Nigeria. The questions guiding the study were whether oil palm production enterprise in the Niger Delta Region of Nigeria provided a viable means of livelihood for the farmers specifically: (a) Is the Net Present Value estimated for oil palm enterprise positive? (b) Is the Internal Rate of Return estimated for oil palm production greater than the opportunity cost of capital? (c) Is the Benefit Cost Ratio computed for oil palm production enterprise greater than unity? (d) How robust are the estimated decision ratios and what effect did fluctuations on yield and prices’ level have on the production process? Knowledge of the economic indicators of oil palm production will enable prospective entrepreneurs rank oil palm production properly among other candidate enterprises (for selection) for investment as a means of livelihood. The research design for this study is quantitatively descriptive research design following the investment analysis of the firm. The data used in this study was secondary data which were primarily collected during the Commodity and Enterprise Analysis Survey of the Niger Delta Region, Nigeria. The data was collated and analysed using Microsoft Excel. It was found out that the base Internal Rate of Return was 35%, and the base Net Present Value was estimated at N5,815,473 and the Benefit Cost Ratio was estimated at 3.4. Since the Internal Rate of Return was greater than the hurdle rate of 14%, and the Net Present Value greater than unity, it was concluded that oil palm production in the Niger Delta Region of Nigeria is profitable because it could pay back any loan and leave some surplus for the farmer. The estimated Internal Rate of Return was relatively stable and almost insensitive to small changes in yield, output price, total benefits, investment cost and operating costs. It is worthy to note that the annual incremental revenue without the oil palm enterprise was only N 20,960 per annum but with the oil palm enterprise the annual incremental revenue was N 2,227,640. This reaffirms the conclusion that oil palm production in the Niger Delta Region of Nigeria is profitably viable. The oil palm farmers in the Niger Delta were constrained by the high cost, adulteration non availability of farm inputs especially fertilizers and agrochemicals. Similarly, agricultural loans were not readily available to farmers because commercial banks were risk averse and require expensive collaterals which the farmers could not afford. It is recommended that the government should assist the farmers by enacting policies that would ensure timely provision of unadulterated inputs including land, fertilizers and agrochemicals to the oil palm farmers at affordable prices.