Model Feasibility Study and Business Plan for Kenaf ... feasibility study and business plan for kenaf processing to “jute sacks” production in nigeria ... 4.6.7 manpower requirement

MODEL FEASIBILITY STUDY AND BUSINESS PLAN FOR KENAF

PROCESSING TO “JUTE SACKS” PRODUCTION IN NIGERIA

Economic& Management Insights Ltd No 3 Benue Crescent, Sun city, Abuja

Email: [email protected]

websites: www.emilim.com

Tellephone: +123- 08050588535.

=AN INDUSTRY WIDE STUDY TO ATTRACT INVESTORS AND SPUR INVESTMENTS=

Table of Contents Pages

mailto:[email protected]

http://www.emilim.com/

Model Business Plan for Kenaf Processing to “Jute Sack” Production

©Emilim Konsults 2017 Page 3

Table of Contents……………………………………………………………………..….…..3

Abbreviations and Meanings …………………………………………………………...……7

List of Figures …………………………………………………………………………...…...9

List of Tables ..…………………………………………………………………………….…10

Executive Summary ………………………………………………………………...…..….13

SECTION ONE: OVERALL ECONOMIC AND INDUSTRY SURVEY

1.1 Introduction…………………………………………………………………………..… 20

1.2 Background. …………………………………………………………………………..…21

1.3 The Motivation for Renewed Interest in Kenaf Development in Nigeria……….……....23

1.4 Scan of the Business Environment for Kenaf Development…………………….....…..27

1.5 Industrial and Economic Potentials of Kenaf Development in Nigeria…………..…..….31

1.6 Economic Diversification Imperatives of Kenaf Development…………………..….…..35

1.7 Risk Analysis and Mitigation Strategies in Kenaf Development in Nigeria……..…....…40

1.8 Role of stakeholders in Promoting Kenaf Development in Nigeria…………….….....….42

SECTION TWO: MARKET STUDY ……………………………………………….….....……48

2.1 Introduction ……………………………………………………………………….….….48

2.2 Objectives of the Market Survey …………………………………………….…………49

2.3 Market Survey Analysis of kenaf Value Chain Development in Nigeria …….………..49

2.3 .1 Market for Kenaf Seeds production ……………………………………….………….50.

2.3.2 Market for kenaf Fiber production…………………………………………….……….54

2.3.3 Global Supply and Demand for kenaf fiber and implication for Nigeria………………55

2.3.4 Market Survey for Kenaf Jute Sacks in Nigeria……………………………....………60

2.3.5 Market for Kenaf Loss Circulation and Bio- Absorbent Products in Nigeria.………….63

SECTION THREE: MODEL BUSINESS PLAN FOR KENAF SEED PRODUCTION.….….....…..66

3.1 Introduction…………………………………………………………………...….........….66

3.2 Background …………………………………………………………………….……..… 66

3.3 Inadequacy of current Seed Production Strategy………………………………..........….68

3.4 Rationale for Sustainable Seed Production Investment………………………....….……69

3.5 Kenaf Seed Production: The Business……………………………………….….………..69

3.6 Kenaf Seed Production: Technical Operation Details ………………………...............….71

3.6.1 Process Flow Chart…………………………………………………………..........……72

3.6.2 Kenaf Seed Production and Selection………………………………………….........…73

3.6.3 Kenaf Seed Yields and Soil Fertility……………………………………………….…...….75

3.6.4 Kenaf Seed Planting and Timing …………………………………………………….……76



3.6.5 Seed Row Spacing, Planting Dates and Plant Population……………………………....…78

3.6.6 Seed Harvesting……………………………………………………………………….......79

3.6.7 Seed Treatment and Storage ……………………………………………………..…...…..81

3.7 Machinery and Equipment: Sources and Prices……………………………………......…85

3.8 PRODUCTION PLANNING AND IMPLEMENTATION ……………………………….……86

3. 8.1 Organization and Management ………………………………………………………….86

3.8.2 Legal Structure ……………………………………………………………………...……87

3.8.3 Limited Liability Corporate Structure …………………………………………….……..87

3.8.4 Management Systems ……………………………………………………………………88

3.8.5 Marketing Strategy ……………………………………………………………….……...96

3.8.6 Competition Strategy ……………………………………………………………...……..97

3.9 FINANCIAL STUDY AND FEASIBILITY……………………………………………………....………99

3.9.1 Introduction ……………………………………………………………………….……..99

3.9.2 Summary of Financial Needs…………………………………………………….………99

3.9.3 Sources of Funds for the Business…………………………………………...…………100

3.9.4 Mission and Vision Statements…………………………………………………...……..101

3.9.5 Budgets, Financial Analysis and Projections …………………………………….….….102

3.9.6 Sales Projections…………………………………………………………….…...,,,….…102

3.9.7 Budgets for Full Financial Projections and Analysis …………………………..….…....103

3.9.8 Fixed Inputs Budgets and Costs……………………………………………….......….…104

3.9.9 Variable input Budgets and Costs …………………………………………….....….…..105

3.10 FINANCIAL STATEMENT ANALYSIS……………………………………………....…....110

3.10.1 Income Statement Analysis …………………………………………………….....…...110

3.10.2 Cash Flow Statement Analysis ……………………………………………….………..112

3.10.3 Balance Sheet Statement Analysis…………………………………………….....……..115

3. 11 FINANCIAL EVALUATION……………………………………………………………….…....………118

3.11.1 Rate of Return on Investment ( RRI) ……………………………………….…….……118

3.11.2 Rate of Return on Sales ( RRS)…………………………………………….…….….....119

3.11.3 Break Even Point Analysis ( BEP)………………………………………….………….120

3.11.4 Recommendations…………………………………………………………...…………120

SECTION FOUR: MODEL BUSINESS PLANT FOR KENAF FIBER PRODUCTION ……………. 121

4.1 Introduction…………………………………………………………………………….…..121

4.2 Background ……………………………………………………………………….…….….121

4.3 Technical Analysis ……………………………………………………………………’’….122

4.3.1 Process Flow Chart ……………………………………………………………………....122

4.4 Kenaf Cultivation for Forage ( Feed) Production ………………………………….…...….123

4.4.1 Process Flow Chart ………………………………………………………………..…..…127

4.4.2 Maximizing Kenaf Bio mass for Livestock Feed Production………………….…..…..…127

4.5 KENAF CULTIVATION FOR CORE FIBER PRODUCTION…………………………......……128

4.5.1 Introduction ……………………………………………………………….………..............…….128



4.5.2 Background …………………………………………………………………….……..…134

4.5.3 Technical Analysis and Flow Chart…………………………………………….….....….135

4.6 KENAF CULTIVATION FOR BAST FIBER PRODUCTION……………………………...……140

4.6.1 Production input plans and Budgets ……………………………………………..….…..140

4.6. 2 Organization and Management ………………………………………….………….…..141

4.6.3 Legal Structure…………………………………………………………….………....…..141

4.6.4 Limited Liability Corporate Structure…………………………………….……….….…142

4.6.5 Management Systems …………………………………………………….............……..142

4.6.7 Manpower Requirement………………………………………………………...…....…..143

4.6.8 Machinery and Equipment………………………………………………………........….151

4.7 Marketing Strategies …………………………………………………….……….……….156

4.7.1 Market Supply and Demand Determinants ………………………………….….………158

4.7.2 Market Development ………………………………………………………….……..….158

4.7.3 Competition Strategy ……………………………………………………………..….….158

4.8 FINANCIAL STUDY AND FEASIBILITY………………………………………….……......… 159

4.8.1 Introduction………………………………………………………………….…......……159

4.8.2 Summary of Financial Needs……………………………………………….……......….159

4.8.3 Sources of Funds ……………………………………………………………….……….160

4.8.4 Mission and Vision Statements……………………………………………….……..…..161

4.8.5 Budget keys for Financial Analysis ………………………………………………….....161

4.8.6 Budgets and Full Financial Analysis ……………………………………………..…….161

4.8.7 Fixed input Budgets ……………………………………………………………….……165

4.8.8 Variable input Budgets…………………………………………………………….……165

4. 9 FINANCIAL STATEMENT ANALYSIS ………………………….…………………….…….…..169

4.9.1 Income Statement Analysis ………………………………………………………….….169

4.9.2 Cash Flow Statement Analysis ……………………………………………………....….171

4.9.3 Balance Sheet Statement Analysis …………………………………………………...…174

4.10 FINANCIAL EVALUATION…………………………………………………………………..…….……177

4.10.1 Rate of Return on Investment …………………………………………………...….….178

4.10.2 Rate of Return on Sales ………………………………………………………...….…..178

4.10 3 Break- Even Point Analysis ……………………………………………………..…….179

4.10.4 Recommendations…………………………………………………….…………….….179

SECTION FIVE: MODEL BUSINESS PLAN FOR KENAF “JUTE SACK” RODUCTION……….……. 180

5.1 Introduction ………………………………………………………………………….……180

5.2 Background…………………………………………………………………………….….180

5.3 THE PROPOSED “JUTE SACK” PRODUCTION PLANT: THE BUSINESS………………....…181

5.4 Technical Operation and Process Flow Chart for “Jute Sack” Production………….…….182

5.5 Machinery and Equipment: Sources and Prices………………………………...........……189

5.6 Production Plan: Raw Materials Requirements………………………………............……194

5.6.1 Scalable Production Plan…………………………………………………….……...…195

5.7 ORGANIZATION AND MANAGEMENT……………………………………..….…198



5.7.1 Legal Structure ………………………………………………………….……...…..…198

5.7.2 Management Team……………………………………………………….…….….… 199

5.7.3 Scalable Manpower Requirements…………………………………….………..….…202

5.8 MARKETING STRATEGY……………………………………………….…....…,,.….206

5.8.1 Segmented Markets for Jute Sacks in Nigeria……………………….…….….…...…..206

5.8.2 Pricing Strategy …………………………………………………….…….…..….……208

5.8.3 Competition Strategy ……………………………………………….………..….....….208

5.8.4 Market Development…………………………………………….…………...….....….209

5.9 FINANCIAL STUDY AND FEASIBILITY…………………………...........................211

5.9.1 Introduction…………………………………………………………...……….………211

5.9.2 Summary of Financial Needs…………………………………………..………..……..211

5.9.3 Sources of Funding…………………………………………………….….…….….….212

5.9.4 Vision and Mission Statement…………………………………….…….………..……213

5.9.5 Budgeting for Financial Analysis …………………………………….…….….….…..214

5.9.6 Jute Sack Projected demand, Market share and Sales……………….…………..….…215

5.9.7 Financial Projections and Analysis ………………………………….……….….….…215

5.9.8 Budget for Fixed and Variable Inputs and Cost…………………….………..….……216

5.10 FINANCIAL STATEMENT ANALYSIS …………………….……..….………....…222

5.10.1 Income Statement………………………………………………...……….…..…...…222

5.10.2 Cash Flow Statement…………………………………………....…...…....….………224

5.10.3 Balance Sheet Statement…………………………………………...……....….…..…227

5.10.4 Financial Evaluation……………………………………………..……...….….…..…230

5.10.5 Rate of Return on Investment ( RRI)…………………………….…………..........…230

5.10.6 Rate of Return on Sales (RRS)……………………………………………...........…..231

5.10.7 Break Even Point Analysis ( BEP)………………………………….………....…...…231

5.10.8 Recommendations…………………………………………….…….…….........…..…232

5.10.9 Conclusion…………………………………………………………….………........... 233

References ……………………………………………………………………….…........…..234

Appendixes…………………………………………………………………………......…….235



Abbreviations and Meanings

1. ACP- EU: African Caribbean Pacific and - European Union Trade Agreement

2. AGOA: African Growth and Opportunity ACT

3. ANAN: Associations of National Accountants of Nigeria

4. CADLE: Capital Agricultural Development Limited

5. CBN: Central Bank of Nigeria

6. CEO: Chief Executive Officer

7. DAP: Days After Planting

8. ECOWAS: Economic Commission of West African States

9. FAO: Food and Agricultural Organization

10. FIIRO: Federal Institutes of Industrial Research Oshodi

11. GDP: Gross Domestic Product

12. IAR & T: Institute of Agricultural Research and Training

13. ICAN: Institute of Chartered Accountants of Nigeria

14. KEAN: Kenaf Association of Nigeria

15. KEPPMAN: Kenaf Producers and Marketers Association of Nigeria

16. MBA: Masters in Business Administration

17. NARICT: National Research Institute for Chemical Technology

18. NIFINKO: Nigerian Fiber Industries Co. limited

19. NBS: National Bureau of Statistics

20. NIFINKO: Nigerian Fiber Industries Co. limited

21. OPEC: Organization of Petroleum Exporting Countries



22. RMRDC: Raw Materials Research and Development Council

23. SWOT: Strengths, Weakness, Opportunities and Threats

24. WEO: World Economic Outlook

List of Figures



Figures Number Titles

Figure 1 Contribution of Agriculture to GDP ( 1981-2013)

Figure 2 Annual Kenaf Production in Nigeria ( 2004-2015

Figure 3 Distribution of Kenaf Farmers in Nigerian States

Figure 4 Estimated Kenaf Value Chain Jobs ( 2018-2022)

Figure 5 Projected Kenaf Seeds demand in Nigeria ( 2017-2021

Figure 6 Projected Demand for kenaf Fiber products (2012-2022

Figure 7 Global Distribution of Industry driven Demand for kenaf fiber

Figure 8 Annual Cash Crop Exports in Nigeria ( 2002-2016)

Figure 9 Estimated Imports of Jute Sacks in Nigeria (2012-2016

Figure 10 Value of imports of Drilling Mud in Oil Sector ( 2012- 2022

Figure 11 Process Flow Chart for Kenaf Seed Production

Figure 12 Management Organogram for Kenaf Seed Production Firm

Figure 13 Budget Information for Financial Analysis and Projections

Figure 14 Process Flow Chart for Kenaf Fiber Production

Figure 15 Process Flow Chart for kenaf Core Fiber Production

Figure 16 Process Flow Chart for kenaf Core Fiber Production

Figure 17 Organogram for Kenaf Fiber Cultivation and Production


Figure 19 Process Flow Chart for Jute Sacks Production

Figure 20 Organogram for Kenaf Jute Sack Production Firm


List of Tables



Tables Number Title

Table 1 Global Production and Supply of Kenaf Bast Fiber (2008-2020)

Table 2 Kenaf Seed Cultivars, Yield Characteristics and Uses

Table 3 Soil Fertility and Kenaf Seed Yields on different Soil types

Table 4 Optimal Combination of Planting Dates, Seeds Spacing and Plant Population

Table 5 Optimal Combination of Planting Dates, Seeds Spacing and Plant Population

Table 6 Kenaf Seed Production Plans- Raw Material Estimates

Table 7 Scalable Seed Farm Capacity Utilization and output Capacity (2018-2020

Table 8a Scalable Manpower Requirement Schedule – Management Staff

Table 8b Scalable Manpower Requirement Schedule- Farm Department Staff

Table 8c Scalable Management Requirements- Administrative Staff

Table 8d Scalable Management Requirements- Administrative Staff

Table 9 Scalable Manpower Requirements- Marketing Department Staff

Table 10 Firm Projected Kenaf Seed Sales ( 2018-2021

Table 11 Estimated Fixed Input Costs

Table 12 Estimated Variable Input and Costs ( Farm Field Operations

Table 13 Schedule of Manpower Requirements- Management Staff

Table 14 Administration Department Staff Budget

Table 15 Marketing Department Staff Budget

Table 16 Estimated Fixed Input Budget

Table 17 Estimated Variable Input Budget

Table 18 Kenaf Seeds Cost of Production

Table 19 Estimated Income Statement: Profit and Loss Account projections

Table 20 Estimated Cash Flow Statement

Table 21 Estimated Balance Sheet Statement Analysis

Table 22 Kenaf Fiber Production: Impact of Soil Types and other applications

Table 23 Plant Population and Row Spacing



Table 24 Relative Contributions of kenaf forage to Animal Protein

Table 25 Production Plans- Raw Material Estimates per hectare

Table 26 Scalable Seed Farm Capacity Utilization schedule

Table 27 Scalable Manpower Requirement Schedule – Management Staff

Table 28 Scalable Manpower Requirement- Farm Management Dept

Table 29 Scalable Manpower Requirement- Administration Staff Dept

Table 30 Scalable Manpower Requirement – Marketing Dept

Table 31 Firm Projections for kenaf Fiber Production and Sales

Table 32 Estimated Fixed Input Costs

Table 33 Estimated Variable input Costs

Table 34 Schedule of Manpower Requirements and labour costs – Management staff

Table 35 Farm Department Staff estimated Budget

Table 36 Administration Staff Budget


Table 38 Bast Fiber Cost of Production, Revenue and Profit Estimates

Table 39 Estimated Income Statement ( 2018-2022

Table 40 Cash Flow Statement Projections – (2018-2022

Table 41 Balance Sheet Statement Projections (2018-202

Table 42 Production Plans- Raw Material Estimated costs for Jute Sack Production

Table 43 Small Scale Jute Sack Production Capacity Utilization Schedule

Table 44 Scalable Production Programme Plan for Medium Scale Jute Sack Plant

Table 45 Capacity Utilization Schedule for a Large Scale Jute Sack Production Plant

Table 46 Scalable Manpower Requirement schedule – Management Staff

Table 47 Scalable Manpower Requirement Schedule – Production Department Staff

Table 48 Scalable Manpower Requirement Schedule - Administration Dept. Staff

Table 49 Scalable Manpower Requirement Schedule - Marketing Dept. Staff

Table 50 Actual and Projected Jute Sack Revenue, Market Share and Sales

Table 51 Estimated Fixed Cost input Requirement Costs



Table 52 Estimated Variable Input Costs

Table 53 Schedule of Manpower Requirement and labour Costs- Management Staff

Table 54 Staff Requirement – Production Department

Table 55 Staff Requirement- Administrative Department


Table 57 Jute Sack Costs of Production, Revenue and Profit Estimates

Table 58 Estimated Income Statement for Jute Sack Production

Table 59 Cash Flow Statement Analysis for Jute Sack Production

Table 60 Estimated Balance Sheet Statement for “Jute Sack” Production



Executive Summary

I. Introduction

This study evaluated the feasibility of kenaf development in Nigeria against the backdrop of the

declining fortune and uncertain future of oil in the Nigerian economy. Consequently, government

in its recent several policy pronouncements indicated that the development of the agricultural

sector holds the key to Nigeria’s economic diversification, industrialization and sustainable

growth. Notwithstanding, in the mid- 1960s and 70s Nigeria experimented with the development

of kenaf to provide local substitute for Jute sack imports which was considered critical to its

agricultural exports development programmes. However, it proved not to be so successful then.

Consequently, the early attempt at domestic development of kenaf fiber saw the establishment of

the Nigerian Fiber Industries Co. Limited (NIFINKO) in Badagry in 1966 and Jerma kenaf

initiative in Jos in 1968. However, a combination of reasons led to the closure of the two

aforementioned Jute manufacturing firms. The obvious reasons include the unsustainability of

supply of kenaf fiber to feed the Jute sack production line; the establishment of the processing

plants far afield of the source of raw materials and poor pricing strategy that made imported jute

sacks cheaper than locally produced ones and finally, the comparative advantage that food

production had over kenaf production at that time.

II. Motivation for Renewed Interest in Kenaf Development in Nigeria

The current renewed interest in kenaf development was motivated by three main considerations:

first, the volatility of government revenue from oil and its impact on fiscal sustainability as a result

of the downward spiral in global oil prices and domestic production output; Second, the huge

foreign exchange spent on importation of jute bags for agro sacking of agricultural exports; third,

the huge potentials for kenaf production in Nigeria with 18 states of the federation proven to have

agronomic conditions that support kenaf commercial production. These states include Adamawa,

Bauchi, Borno, Kaduna, Benue, Kwara, Kogi, Niger, Nassarawa, Plataux, Ekiti, Lagos, Ogun,

Oyo, Osun and FCT; fourth, according to FAO statistics (2014), the combined arable land for the



cultivation of Kenaf in Nigeria is about one million hectares with the prospects of increase as

investors become more aware about the economic and business potentials of kenaf production.

III. Scan of the Business Environment for Kenaf Production in Nigeria

There exists huge potential for the demand and supply of kenaf products in the Nigerian market.

With the recent economic diversification programme of the federal government and the attention

paid to agro- industrial complex through import substitution of raw material imports, kenaf

development in Nigeria will provide the needed launch pad for industrialization and reduction in

unemployment and poverty in several respects. For instance, there is huge demand for Kenaf

seeds, which currently will require importation to bridge the domestic demand gap. The local

production and multiplication of kenaf seeds will provide investment opportunities with enormous

returns for the investors as demonstrated by the model business plan on seed production and

multiplication in Nigeria.

In addition, there exists huge potential for business in kenaf biomass production which includes

the cultivation of kenaf fiber, kenaf foliage for animal feed production and kenaf core fiber for the

production of bio-absorbent and loss circulation materials for the oil industry. More importantly,

the market for kenaf Jute Sack production is quite huge with the market demand estimated at over

500,000 in the next few years given the growing demand for jute sacks for sacking of agro

products for export and the damaging health effects of the use of synthetic fiber bags. Investments

in these kenaf value chains have returns of above 30 percent on average and the prospects for

exporting kenaf products to ECOWAS sub-region remains attractive.

IV. Economic Importance of kenaf Value Chain Development in Nigeria

Aside from the business potentials of kenaf in Nigeria, its economic significance is equally as

compelling. The development of kenaf value chain products will conserve enormous amount of

foreign exchange currently needed to import raw materials for Nigerian industries Such raw

materials as pulp and paper for the print industry, imported jute sacks for agro products bagging,

and kenaf absorbents and loss circulation fluids for the oil industry put strain on Nigeria’s foreign

reserves. On the other hand, domestic production of these raw materials and allied products for



exports will diversify sources of foreign exchange earnings and act to enhance our trade balance

with the rest of the world. The employment potentials of kenaf development in Nigeria cannot be

over emphasized. Targeting youth and women unemployment in the rural areas, the cultivation

and establishment of industries to use locally produced kenaf bye products will greatly reduce the

high unemployment among these vulnerable groups especially in the rural arears. The

unemployment rate in Nigeria is currently put at over 14 percent, with under employment

hovering around 23 percent. The Youth and women unemployment targeted by kenaf

development is expected to drop significantly because of the rural focus of the kenaf development

in Nigeria.

V. Risk Analysis and Mitigation Strategies for kenaf Value -Chain Investment

The major risks associated with the kenaf investment in Nigeria include lack of off takers for the

products due to industrialization policies that emphasized importation of raw materials. Currently,

the few tons of kenaf fiber produced in the country cannot find markets because investors are

scared because of over reliance on imported inputs into industrial production in Nigeria. The

foregoing challenge could be mitigated by developing processing plants that will off-take the fiber

produced in Nigeria and transform them into raw materials that will readily use by other industries

along the kenaf fiber development value chain.

Another risk to the production of kenaf jute sacks in Nigeria is the competition mounted by the

local production of Kenaf synthetic fiber sacks. Aside from the health hazards posed by synthetic

sacks, Nigerian agro products are rejected in export markets because of the health consequences of

its bagging process and materials. The mitigation strategies for this challenge could be addressed

by the establishment of factories to produce jute Sacks in commercial quantities to address both the

health challenges and the export challenges of Nigeria’s agricultural outputs.

Very challenging to kenaf investment in Nigeria is obvious lack of National Policy on Kenaf

Development. The current attempt at reviving kenaf production in Nigeria is driven by disparate

sectoral policies that are sometimes poorly coordinated and at other times conflicting and

overlapping. To avoid the negative impact of this policy incoherence, there is need to develop a



national policy on kenaf development in Nigeria that will articulate policies that will address the

issues of stakeholder mobilization, industrial development, land access for farmers and financing.

VI. Market Survey for kenaf Products in Nigeria

The market for kenaf products exists in Nigeria given the result of the extensive market survey

conducted during the course of this study. The projected demand for kenaf seeds between 2018

and 2022 is about 5,000 ton to 120, 000 tons respectively. Currently, IARTA is only able to

supply between 5,000 to 10,000 tons, which is grossly inadequate if kenaf value chain

development will rise to the domestic market demand for kenaf products that currently exist.

However, increasing the import of kenaf a seed simply begs the question because the soil texture

and agronomic conditions of the kenaf cultivars must be adapted to the Nigerian environmental

conditions. This makes it imperative that investors in kenaf seed multiplication must be supported

to complement the efforts of the IARTA in Ibadan.

The market for kenaf fiber is very low currently because the export market is very competitive

and there are no local processing plants to demand the little that is locally produced. However,

with investment in local processing plants for kenaf fiber, current production will be inadequate to

feed the plants without huge private and public sector investment in kenaf fiber production. The

market for kenaf jute sacks also exists largely because of the growing investment in agricultural

cash crop production such as cocoa, palm oil, soya beans, millet etc.

The market for Jute Sacks in Nigeria is estimated at about half a billion annually mainly driven by

the demand for Agro Sacks for agricultural products and proliferation of shopping malls with

associated demand for shopping bags. Other kenaf product related markets in Nigeria include

Animal Feed that could serve the growing livestock market in Nigeria and further act to reduce

tension between farmer and herdsmen. The bio-absorbent market due to the need for cleaning up

oil spillage in oil producing communities and loss circulation products that is critical for oil

exploration and drilling.



VII. Model Business Plan for kenaf Seed Production

The technical feasibility for kenaf production indicates that it is feasible to grow kenaf seeds in

Nigeria given its agronomic conditions and soil characteristics. High seed yields can be achieved if

the recommendations of the flow chart and factor analysis of seed production which includes seed

breeding and selection; seed yields and soil fertility; seed planting and timing and seed harvesting,

storage and preservation are strictly followed.

The machinery for seed production is available and may be found with Alibaba.com. The major

machineries include seed planters, harvesters, threshers and silos for storage. The management of

the investments for seed production include carefully chosen a given legal structure including

Board of Directors, management staff and line staff. The Budget for fixed and variable inputs are

estimated and the financial feasibility shows that in five years of operation, a seed production

investment will achieve 68.60 percent returns on investment, with over 30 percent return on sales

and the business will break even at the production and sales of just 17.81 thousand tons of seeds

per annum. From results of the market survey and financial feasibility the study recommends that

the location of seed farms will be better suited for states that have much of alluvial soil that is very

conducive for kenaf seed farming. Such states include, Ekiti, Ogun , Oyo, Nasarawa and Benue States. The

other important factor that would be critical for location of kenaf seed farms is transportation facility for

evacuation of cultivated seeds and construction of seed Silos.

VIII Model Business Plan for kenaf (Cultivation) for Production of Bast Fiber

Evaluation of the Technical and Financial feasibility for kenaf cultivation for the production of

bast fiber indicated that a capital outlay of 120 million naira (One hundred and Twenty million

naira) is a viable kenaf farm for Fiber production could be established and run profitably over a

period of five years (2018-2022). Currently, the local production of kenaf fiber is being hampered

by lack of sufficient off -takers for their fiber output. Reasons adduced for lack of Off-takers could

be traced to hitches in initial efforts at local production of fiber in the middle and late 1960s. The

chief reason was that the jute sack production plants set up in Badagry and Jos could be sustained



due to fierce competition from jute sacks imports and the introduction of synthetic fiber bags into

the Nigerian market among other reasons.

The prospects for successful local production of kenaf fiber in Nigeria are quite bright given that

over 1 million hectares of arable land is available for kenaf cultivation and there is growing

interest among kenaf farmers to take advantage of government interest and incentives in the

development agriculture value chain in Nigeria to serve as the anchor for economic transformation

and diversification. The study reviewed all the stages of technical process of kenaf fiber production

including seed selection and planting dates; plant population and stalk yields; soil preparation and

fertility for improved stalk yields; weed and pest control measures and harvesting and retting of

kenaf fiber for processing. In addition to the technical analysis of kenaf fiber production, the study

also did technical analysis of kenaf production for foliage (used for animal feeds) and for core

fiber (bio-absorbent and loss circulation) production was also undertaken. All the analysis suggests

that the soil and agronomic conditions in Nigeria fully support the production of kenaf for the

aforementioned purposes.

The management of kenaf farms for the production of bast fiber was fully explored by the this

feasibility analysis. The legal structure suggests a limited liability company with a full board of

directors to be made of experienced professionals with backgrounds in fields that will enhance

their input in the management of the firm. A management team that will comprise the CEO, Farm

managers, administration manager, marketing manager and procurement personal were also

discussed by this report. Other manpower requirements were fully identified and extensively

discussed by the report in terms of their job roles and remuneration packages. The financial

feasibility of the kenaf farm for production of bast fiber was undertaken in this report. The budget

for fixed and variable inputs were estimated and discussed, in addition to the full estimation and

discussion of the financial statements. The financial evaluation was undertaken in this report and it

shows that the Return on investment is 69.10 percent, while Return on sales was 30.89 percent.

The firm will breakeven at the production of 66, 952.4 metric tons of kenaf fiber.

The report recommends that farms for fiber production should be set up state with loamy soils

which studies have found to be very conducive for kenaf fiber production. The states that such



farms could be set up include Osun, kwara, Ekiti, Oyo and Lagos states. Another important

consideration for setting the farms in some of these states is that they have rail systems that could

be utilized in transporting bast fibers to processing plants.

IX Model Business Plan for Kenaf Processing to “Jute Sack” Production

The technical and financial feasibility of kenaf processing to Jute Sack production indicated that

with an investment of about N650 million (Six hundred and fifty million Naira) a kenaf processing

to Jute Sack manufacturing plant could be established to produce evaluated the prospects of

establishing a medium scale Jute sack production company to produce about 2million jute bags

from 80,240 metric tons of fresh fiber. The technical and flow chart were analyzed detailing the

various technical levels involved in the processing of fresh kenaf fiber to yarns that would be used

in jute sack production. These processes include selections and batching of fresh kenaf fiber;

softening of the fiber; carding, drawing, laminating, weaving of yarn; beaming, spinning, cutting

of the sack sizes, dying, printing, checking and packing. The machinery needed for each of the

process was identified and their manufacturers and associated costs presented in the business plan.

The production plan of Jute sack involved estimating the raw material budgets and firm capacity

utilization levels over a period of five years (2018-2022). Main issues that were featured in the

organization and management included legal structure of the firm, the management system, the

management team and other personnel requirements. The financial feasibility of investing in kenaf

processing to “Jute Sack” production in Nigeria was extensively discussed in the report. The

financial ratios indicated that rate of return on total investment (RRI) was 36.31 percent, while the

rate of Return on Sales, which measures the how; management uses sales income effectively and

efficiently was 63.68 percent. The Break Even point (BEP) of the business will be achieved at the

point of the production of 1.640 million jute sacks.

SECTION ONE



OVERALL ECONOMIC AND INDUSTRY SURVEY

1.1 Introduction

Long before Nigeria demonstrated keen interest in harnessing the potentials of kenaf plant as an

important cash crop, its commercial production and processing as a crucial industrial raw material

had advanced in other parts of the world. For instance, in the United States of America, Europe

and Asia, kenaf production and processing had been developed into a mega agro-industrial

complex that formed a major base of their domestic industrialization programmes. It is therefore

not surprising that the raw material output and end- products from processed kenaf biomass

boosted their export trade to the rest of the world, including Nigeria.

Consequently, in the early 1960s, Nigeria became aware of the significance of kenaf plant through

the need for jute fiber sacks in the context of her post-colonial agricultural development strategy

anchored on production and export of cash crops such as cocoa, groundnut and palm kernels.

Kenaf Jute sacks were needed for bagging these agro products for exports from the late 1960s up

until early 1970s when oil dethroned cash crops production and export as a major revenue earner

for the nation. The need to ensure availability of jute sacks began to receive attention in the

overall agricultural value chain development in Nigeria.

However, the unilateral emphasis on cash crop production and commodity export as the single

most important pillar of Nigeria’s economic development strategy then gave rise to

industrialization policies that not only denied Nigeria the benefits of domestically driven economic

growth and development, but also exposed the economy to international commodity price shocks

that often undermined her economic transformation and diversification.



Therefore, to reverse this de-industrialization trend in Nigeria became a major policy challenge for

many administrations over the decades. It was against the backdrop of the devastating impact of

lack of value addition to agricultural raw materials exports, coupled with global trade politics, and

heavily stacked against commodity dependent countries like Nigeria that motivated the quest for

agricultural policy reform to reverse the prolonged neglect of agricultural sector development. This

reform was essentially targeted at domestic industrial development of agricultural value chains to

boost domestic industrialization with the potential to boost export trade with the rest of the world.

The need to anchor Nigeria’s industrialization and economic transformation on agricultural value

chain development consequently motivated recent interest in kenaf development in Nigeria.

1.2 Background

In Nigeria, Kenaf development started in 1961 shortly after independence when the Western

Nigerian Government commissioned research into Kenaf production as a source of industrial fiber

for jute sack production to Agricultural Research Division of the Federal Ministry of Agriculture

and Natural Resources. Two major objectives were targeted in this policy: First, kenaf production

was part of the overall agricultural development policy of both the Western Nigerian regional

government and the Federal Government as a way of deepening the potential role agriculture

would play in the nation’s overall development. While oil as a major source of revenue earner for

Nigeria was yet evolving at that time, large scale production and revenue from export of cash crops

such as Cocoa, palm produce and groundnut among others were heavily relied upon to anchor

Nigeria’s fiscal sustainability and economic growth.



Second, having established the first indigenous Jute bag in Nigeria by the Western Nigerian

government- the Nigerian Fiber Industries Co. Limited (NIFINKO) in Badagry in 1966, the need

to ensure steady supply of kenaf bast fiber to feed the company necessitated further research and

the need to commission studies into kenaf production in Nigeria. Similar efforts in Northern

Nigeria led to the establishment of the Jermas Fiber project located in Jos. Indeed, by 1966, over

56 percent of the annual requirement for jute bag needed for packaging cocoa and other cash

crops in Nigeria was locally produced by NIFINKO, while the remaining 44 percent was imported

from Europe and Asia (RMRDC, 2005),

However, the two pioneer Jute manufacturing companies- NIFFINKO and JERMA could not be

sustained because of fierce competition from jute bag imports and lack of policy continuity in the

industry at the time. Eventually, the companies were closed down a few years after take- off in

1969. Reasons for their closure are myriad but a few are outstanding; (a) the processing capacity of

the Jute bags manufacturing firms far outweighed the plan for industrial raw materials needed to

feed the plants sustainably. This situation led to capacity underutilization of the firms which

invariably rendered their continued operation inefficient and unprofitable; (b) Perhaps, for political

reasons, the firms were established far afield of the raw materials production centers which also

led to high transportation costs and made the price of their outputs comparatively uncompetitive

with available import substitutes such as jute and synthetic fibre bags; (c) poor pricing strategy and

lack of incentive support made food crop production comparatively more profitable than kenaf

farming and farmers routinely abandoned kenaf farms for food cropping during the period.



Overall, the most devastating blow to the survival of the kenaf project in Nigeria, especially the

Jute bag-manufacturing firms was that export of crude oil was already steadily improving and the

price of international crude oil was rising especially after the formation of OPEC due to the

Western Oil price crises of 1973. These developments led to gradual shift of emphasis from

agricultural production to oil production that provided higher revenue with minimal labour input

and very little domestic and international competition in terms of improved revenue. The petro

dollar that was delivered to the Nigerian government was needed for reconstruction after the

devastating civil war of 1966 to 1970.

1.3 The Motivation for Current Renewed Interest in Kenaf Development in Nigeria

Agriculture was the bedrock of Nigerian economy before and a few years after independence and

remains a potential growth driver for Nigeria till date. Between 1929 and 1963 the contribution of

Agriculture to Gross Domestic Product was about 60 percent.



Fig 1: Comparative Contribution of Agriculture and Oil Sectors to Total GDP ( 1981-2013)

0.00

10,000,000.00

20,000,000.00

30,000,000.00

40,000,000.00

50,000,000.00

60,000,000.00

70,000,000.00

TOTAL GDP AGRIC GDP OIL GDP

Source: NBS Abstract of Statistics and CBN Statistical Data base (various issues)

However, as earlier indicated, the discovery of oil in 1956 and the subsequent development of the

oil sector routinely displaced agriculture as the main revenue earner for Nigeria. Consequently, the

contribution of agriculture to GDP gradually declined from 61.50 percent in 1963/ 1964 to 14.63

percent in 1983.

The change of focus from agriculture to oil production completely altered the structure of the

Nigerian economy as it was considered cheaper to import than to consume locally made goods

given the quantum of revenue realized from oil exports. This phenomenon known as Dutch

Disease was made possible due to strong domestic currency. The obvious consequence of this

development was that Nigeria not only became a “dumping ground” for most exports, but also

become import dependent not only for industrial raw materials but more crucially, food, which it



had achieved relative self-sufficiency soon after independence. Today, while oil sector accounts

for less than 10 percent of GDP, it provides over 87 percent of total government revenue and about

90 percent of the government foreign exchange earnings (NBS, 2014).

However, Nigeria’s overdependence on oil sector for both revenue and foreign exchange earnings

was not without consequences. The volatility in oil demand and prices to which Nigeria had no

internal policy control presented enormous challenges for managing the Nigerian economy on a

sustainable basis. Consequently, because of Nigeria’s strong attachment to oil economy, each time

the international oil markets “sneezes” Nigerian economy quickly catches “cold”. For instance,

Nigeria witnessed three major episodes of budget failure in 1982, 1991 and 2013 as a result of the

slump in oil demand and prices which rendered ineffective its oil price benchmark projections used

for budget estimates. Therefore, the volatility of oil prices and the uncertainty surrounding oil

production in terms of its geopolitics has forced a reversal of policy attention to agriculture as the

main driver of the nation’s economy as can deduced from the gradual recovery of agriculture as a

major contributor to overall GDP from 2006 till date (Fig 1 above)

Kenaf, one of the agricultural plants with really huge potential to grow in Nigeria thus became one

of the many agricultural value- chains that hold immense promise for the diversification of the

Nigerian economy away from oil given the multi-utility of its by-products for variety of

commercial and industrial uses. In addition, the environmental health consequences of the use of

synthetic fibre bags had been cited, as one of the reasons Nigeria’s agricultural exports was not

enjoying enthusiastic patronage in European and American markets. Therefore, the clamor for the

use of jute bags for packaging agricultural exports was based on the fact that not only are they bio-



degradable to protect the environment, but reduces the incidence of cancogenic exposure of

consumers of goods packaged with synthetic materials. Issues surrounding food processing and

packaging had been one of the major reasons why Nigeria has not leveraged on such trade policies

as AGOA and ACP-EU Trade Partnerships to grow their export sector.

Another major imperative for the renewed interest in Kernaf production in Nigeria is its potential

for growth and sustainability as both a temperate and tropical farm crop. The agronomic potentials

for growing kenaf in Nigeria are quite high and encouraging. Indeed, Nigeria possesses the soil

texture as that of Texas in United States where Kenaf production had thrived in commercial scale.

Again, the temperature and humidity requirements for the survival of the kenaf plant in Nigeria are

above average and could be harnessed to make Nigeria one of the worlds’ leading countries for

kenaf production and processing in a very short while.

Kenaf development in Nigeria has the potential to address persistent unemployment among

vulnerable youths and rural populace. Obviously, unemployment remains very high in Nigeria,

averaging between 8-12 percent and underemployment between 20-23 percent of the active

available labour force in Nigeria in the last decade (NBS, 2015). There is no gainsaying that

unemployment in Nigeria had gradually become a grave social, economic and security “time

bomb” waiting to explode. In the past, the search for effective policies to address unemployment in

Nigeria underplays the seminal role agricultural development can play in tackling the crises.

Before now, policy approaches rarely addressed the linkage between agriculture and industry, but

rather concentrated on agricultural development programmes that emphasized engaging more rural

populace in subsistent farming without industries to absorb their products on sustainable basis. The



result was an inverse relationship between agricultural development and unemployment in the

country. Agricultural programmes such as “Operation Feed the Nation” and “Green Revolution”

did little to reverse the growing unemployment and declining industrialization thus worsening

unemployment in the land. In fact, the obvious policy- delinks between the industry and

agricultural output worsened the unemployment situation by further encouraging rural - urban

labour migration. Consequently, the policy not only created more post-harvest losses and further

made rural engagement in agriculture inefficient and further compounded the unemployment

challenge they were set out to solve in the first place.

The policy thrust of kenaf value chain development has the potential to sustainably address the

foregoing policy gap given its emphasis on the development of the agro-industrial kenaf

production linkage. Specifically, the idea to develop an industry wide kenaf value chain to attract

investments through the establishment of downstream industries to absorb kenaf farm gate outputs

and provide sustainable backward integration in the entire agro- industrial kenaf value chain could

be revolutionary in agro-industrial development in Nigeria. While kenaf farming will address rural

unemployment among youth and women (mostly unskilled), kenaf industrial processing plants will

address urban unemployment among professionals and skilled labour. The salutary effect of the

kenaf agro-industrial complex could competitively transform Nigeria’s non-oil trade with the rest

of the world in the shortest possible time.

1.4 Scan of the Business Environment for Kenaf Value –Chain Development.

The Nigerian economy is hugely endowed with natural and agricultural resources including arable

land for cultivation of variety of cash crops and staple foods. Indeed, the conducive weather



conditions for both cultivation and animal husbandry and huge market to sustain the demand for

agricultural and industrial outputs make the Nigerian market for agro allied investments one of the

most attractive in the West African sub region, if not the Africa continent as a whole.

However, these potentials have not received the required policy attention with the aim to translate

them into concrete outcomes for the sustainable development of the nation’s economy. The

uncertainty in global oil prices which impacted government revenue and expenditure in recent

times forced policy makers to seriously consider the options provided by the agriculture sector as

the potential growth driver for the Nigerian economy. One of the agricultural value chains

receiving both government and private sector attention in recent times is Kenaf value-chain

development. The reasons for this renewed interest are the high favorable business environment

for the commercial success in kenaf production and processing in Nigeria.

Kenaf plants are proven to grow in all states of Nigeria, but have been discovered to grow in

commercial quantities in eighteen out of the thirty-six states of the federation. These states include

Adamawa, Bauchi, Borno, Kaduna, Benue, Kwara, Kogi, Niger, Nassarawa, Plataux, Ekiti, Lagos,

Ogun, Oyo, Osun and FCT. According to FAO statistics (2014), the combined arable land for the

cultivation of Kenaf in Nigeria is about one million hectares with the prospects of increase as

investors become more aware about the economic and business potentials of kenaf production.

Currently, FAO statistics (2014) further estimates that about 500 hectares of Kenaf are being

cultivated yearly in Nigeria with annual average yield of about 2.6 tons per hectare as against 22

tons per hectare in China and United States (Webber et al, 2002)



Fig 2: Annual Kenaf Production in Nigeria from 2004 - 2015

Source: FAO Statistics (2014); RMRDC, (2010)

Nevertheless, FAO statistics further show that kenaf production in Nigeria has been fluctuating

since 2004 when the development of the crop started receiving renewed attention in Nigeria’s

agricultural development programmes. As indicated in Fig 2 below, Kernaf production peaked in

2005 and declined between 2007 and 2010. In 2011, production started improving once more and

peaked in 2012 after which it started declining gradually till 2015.

Following the renewed interest in kenaf production and processing in Nigeria, in-depth research

was carried out to determine the viability of the survival of kernaf seed in the Nigerian soil and

agro-ecological zones. The essence of the research was to multiply the seeds and build sustainable

database for agronomic conditions necessary for its commercial farming. Some varieties used for

the experiment include Cuba 108, Cuba 2032, Everglades 71, Guatemala 2A, and Guatemala 2B.



The adoption of these varieties and evaluation of their relative performance in the Nigerian soil vis

a vis other soil types were carried out in the entire Western region towns of Odeda, Ado-Ekiti,

Ijebu Ode, Ogbomosho, Shaki and a few other towns. The result showed that Cuba 108 is capable

of yielding about 2.6 tons of long fiber per hectare where the core yield was about 30 percent of

the total yield. The results encouraged initial efforts at experimenting with the plant in other

regions and states across the country.

The encouraging performance of kenaf production in Nigeria led to increasing participation of

rural farmers since the late 1960s when the Jute sack manufacturing firm, NIFINKO was

established. An average of 150 farmers are estimated to engaged in kernaf farming in each state

where Kernaf is grown successfully, while states like Ogun, Oyo and Osun have over 2000 farmers

each (Keppman, 2017) due mainly to early exposure of the farmers to benefits of kenaf production

earlier than others.

Fig 3: Distribution of Kenaf Farmers by States 2017



Source: Authors market survey and Keppman Concept note 2017.

The growing interest in kenaf production in Nigeria suggests that its future is quite bright

notwithstanding current challenges ranging from lack of National Policy on kenaf value- Chain

development to inconsistent agricultural policies and obvious lack of proper coordination in kenaf

value- Chain development implementation among the various stake holders and more importantly,

weak mobilization of interested investors in kenaf value chain by stakeholders.

1.5 Industrial and Economic Potentials of Kenaf Value – Chain Development in Nigeria

In terms of economic and industrial potentials, Kenaf has the capacity to boost industrialization

and export of agricultural and manufactured products in Nigeria on a sustainable basis.

Notwithstanding the very poor attention paid to its development in the past, current emphasis on

Agricultural development as the pillar for domestic industrialization could be the shot- in –the-

arm needed to reinvigorated interest in kenaf value chain development. In addition, the need to

quickly diversify the Nigerian economy has revived interest in agricultural production and

marketing for exports.

1.5.1 Industrial Development Potentials.

There are several value- chains products associated with kenaf plant around the world. However,

each value-chain reflects the level of industrialization and sophistication of the agri- industrial

complex of the given country or region. It is important to note that the development of kenaf

value-chain in Nigeria must be strategically focused on what the infrastructure for industrialization

can carry at the moment. The intuition is that kenaf industry wide value chain development will



progress alongside the industrialization and economic development of Nigerian, especially in

terms of infrastructure and capability for local processing of kenaf products with a view to

translating them into industrial raw materials and end products. Currently, the following value

chains are considered to be potentially viable in Kenaf development in Nigeria.

a. Improved Seed Production and Multiplication programme: Currently, kenaf production in

Nigeria is at subsistence levels, just servicing the limited rural needs of kenaf products at the rural

areas. In other words, current output is neither substantially driven by export demand or industrial

raw material demand because of the low level of integration of the kenaf value chain in Nigeria

industrialization strategy. Specifically, the local output lacks the required quality for export

because of the poor level of standardization of the product and processing for the export market.

Lack of improved seeds to boost output per hectare to make the production economically viable is

currently limited to what a few research institutes can provide. Therefore, there is need for not only

importation of improved seeds but to treat improved seed multiplication as an important value-

chain requiring development within a business model. Sustained importation of improved seeds

without a deliberate plan to increase investment in its local multiplication efforts will constitute a

cost element in kenaf investment cost structure. This is more so as agriculture is increasingly

receiving attention as a business which presupposes that agriculture subsidy may not continue to

receive increasing subsidy by government in the near to medium term.

b. Kenaf Cultivation (Farming) and Fiber Production: Kenaf farming requires improved

seeds and machinery that will enhance its large scale production and processing to make impact

not only on the domestic economy but for the export market. Therefore, relying on current



subsistence farming for kenaf using primitive methods and labour intensive processes cannot

guarantee efficiency and enhanced profitability to keep the farmers in business. Informed farmers

must be encouraged to adapt modern methods of kenaf production so as to ensure that its outputs

are of best international qualities for both domestic and industrial use and for exports. Therefore,

for kenaf production to impact on the nation’s economic diversification efforts, its production must

graduate from subsistence to commercialization. The commercialization of kenaf production in

Nigeria will start with the supply of improved seeds to ensure high fiber and core yields and

subsequently treating the two important outputs as critical value chain in the kenaf agro-industrial

complex.

c. Kernaf Bast Fiber and Core Industrial Processing: There are several by products that can be

obtained from the processed fiber and Core of kenaf plant for industrial use. To ensure steady

supply of processed fibre/core, there is need to increase investments in Fibre and Core processing

plants in Nigeria. The following products are most likely to benefit from setting up Fibre and

Core processing plants in Nigeria in the medium to long term:

Jute Sack Production: The market demand for Jute Sacks in Nigeria can be extrapolated

from the Synthetic bag demand which is currently high but basically rely on imported raw

materials and to some extent locally produced inputs from Nigerian petrochemical plants.

However, a rough estimate of the market demand for agricultural packaging is put at

5,000 tons per annum which translates into 5, 000,000 pieces of Jute sacks. Given the

huge regional market which Nigeria’s agricultural products services, the demand for jute

sacks has the potential to grow very fast in the future. The demand is projected to reach



about 10,000 tons by 2020 given the attention currently paid to agricultural sector

development in Nigeria. Therefore the development of the jute sack production plant in

Nigeria has huge market prospects in Nigeria domestic consumption and for export

markets.

Pulp and Paper Production: Another kenaf value- chain that will be useful in

industrialization includes the production of pulp and paper for newspaper and printing

sub-sector of the Nigerian economy. The closure of Oku Iboku and Iwopin paper and pulp

mills in the mid-80s created a huge market for domestic production of pulp and paper

production in Nigeria. Unfortunately, almost all the pulp and paper required for printing

industry today in Nigeria is imported with scarce foreign exchange. With dwindling oil

revenues and declining forex reserves, the overreliance on imported pulp and paper are no

longer sustainable thus paving the way for local production of Pulp and paper. Research

shows that kenaf pulps are softer and easier to process that wood. It could also be cost

effective with diverse adaptability into hardboard panels, lining for roofs and handmade

art paper etc.

Livestock Feeds and Animal Bedding: The livestock subsector of the Nigerian economy

is currently thriving and creating demand for Animal feeds. As a substitute for Animal

feeds, kenaf leaves, seeds and stem can be dried, ground and used as animal feedstock.

Kenaf leaves holds advantage over other leaves because of its high protein content,

estimated to be up to 30 percent. There is no gainsaying that improved production of

kenaf livestock feeds could enhance ranching business in Nigeria and drastically reduce



occasional tension between migrant herdsmen and rural farmers. Kenaf bedding can be

packaged and sold in bags to livestock farmers and ranchers because of their superior

absorbent characteristics. They equally need fewer changes and is cost efficient when

compared to the traditional litter and bedding products (wood shavings, saw dust et) used

in most poultry farms.

Bio-Absorbent products for Oil and Gas Industry: The kenaf core fiber can be used for

absorbent materials in the oil and gas industries. The core can be extracted from the fibre

and coarsely ground with some PVC elements and bagged in 12.5 kg bags to be used in

variety of industrial ways. For instance, kenaf Bio-sorbs granular contain bioremediation

capabilities that are critical in the cleaning oil spillages. They are also biodegradable

which means that it can easily be disposed in a more cost effective way without

endangering the environment. It has been discovered also that kenaf fiber has microbes

that can eat up oil spill substances and they are natural and renewable sources. In

addition, the Core Fiber can also be used as Drilling Mud Additives which could be used

as a Lost Circulation Material in Drilling to prevent and reduce “Stuck Pipes” in the Oil

and Gas services industry ( Keppman Concept Paper, 2017).

1.6 Economic Diversification and Transformation Imperatives of Kenaf Development.

The development of kenaf value chain will promote growth and diversification of the Nigerian

economy in several respects. Currently the industrial sector of the Nigerian economy is down as

manufacturing contribution to GDP has consistently on the decline in recent times due to scarcity

of forex to import critical raw materials for production. The Nigerian economy needs urgent



diversification away from dependence on oil and the kenaf provides the opportunity to begin to

domesticate the production of essential raw materials to feed the emerging agro-industrial complex

expected to drive Nigeria’s economic growth and diversification in the medium to long term. The

following economic benefits are identified as kenaf value chain development “low hanging fruits”

that can be readily plucked in the near to medium term.

1.6.1 Conservation of Foreign Exchange as the Import of Synthetic Bags and other industrial

materials could be replaced through import substitution strategies. The Import bill for the

importation of industrial raw materials in Nigeria has been phenomenal in the past 40 years.

Efforts to domestic the production of raw materials to feed local industries have been at best

lukewarm and at worst politicized through policy reversals and inconsistency. For instance, the

importation of rice alone consumes over 40 percent of the import demand for foreign exchange in

a given year ( CBN, Statistics bulletin, 2013). Currently, Nigeria relies on the importation of jute

sacks and reasonable quantity of synthetic fiber bags for packaging of its agricultural products.

This can be replaced with local production of jute bags using - Kenaf fiber.

1.6.2: Diversification of Foreign Exchange earnings through increased export of locally

produced Agricultural and industrial products. Currently Oil exports account for over 90 percent

of foreign exchange earnings in Nigeria. The implication is that volatility in international oil

markets adversely impacts Nigeria’s foreign exchange market with consequences for

macroeconomic volatility. The Agricultural sector in Nigeria has huge potentials not only to

conserve foreign exchange in terms of import substitution strategies, but can also be a major

source of foreign exchange earnings for Nigeria. As earlier noted, the poor packaging of



agricultural products has continued to deny Nigeria substantial export markets in commodities

around the world. With anticipated increase in crop and food production given the renewed

attention to agriculture, the proper packaging and preservation of the farm products could benefit

from Kenaf jute bag production that will certainly open international export markets for

agricultural products to boost foreign exchange earnings for the country.

1.6.3 Creation of employment, especially among the unemployed rural youths and women that

will be absorbed by increased activities through kernaf value chain development: The

Agriculture sector provided most of the rural employment opportunities in the early 60s and 70s.

However, with the emergence of the oil boom and consequent neglect of agriculture, there was

phenomenal increase in rural and urban unemployment in Nigeria. These developments are

explained by the rural-urban migration that reduced the number of youths and women engaged in

agriculture in the rural areas in search of urban white-collar jobs sustained by imported raw

materials. With current decline in oil activities, there is growing unemployment among youths and

women who would have been the source of manpower for agricultural sector. Indeed, Keppman

estimates that for every 100 jobs created in primary production, about 10 jobs would be created

within the kenaf value chain in the process including industry hands, marketers and primary

producers.



Fig 4: Estimated Kenaf Value- Chain Jobs ( 2018-2022)

0

5

10

15

20

25

30

35

40

45

2018 2019 2020 2021 2022

Kenaf Value Chain Jobs ('000)

Source: Arthurs trend projections and Keppman Concept paper, 2017.

The development of the Kenaf value chain will not only provide opportunities for employment of

youths and rural women as entrepreneurs and farm hands, but will also create white collar jobs in

the industrial integration of the Kenaf value- chain into the industrialization strategy of the

Nigerian government.

1.6.4. Boost Rural Industrialization for Wealth Creation: One of the compelling reasons why the

NIFINKO jute bag company failed was the location of the industry away from the production

zones of kenaf farms. Today most industries are located away from their raw material production

bases because of lack of infrastructure in the rural areas to encourage location of industries near

their raw production sites. In addition poor transportation network such as good roads and railways

are not available to facilitate easy transportation of raw materials to industrial processing sites.



With rural electrification programmes and road network development in progress, kenaf-

processing plants will be located in the rural communities where the raw materials are produced.

This will have salutary effect on two major cost elements; namely, transport costs and labour.

While transport cost of raw materials will be drastically reduced, the abundant rural labour will be

harnessed to create employment and grow income that will enhance wealth creation in the rural

areas.

1.6.5: Enhanced waste management and control through the use of by- products that are

environmentally friendly: Waste management in Nigeria remains a major expenditure item for

government both at the local, state and federal levels. While much attention is paid to

environmental waste management, the incidence of industrial waste management is becoming

intractable and expensive. With increasing incidence of oil spill and other industrial waste

management challenges, kenaf absorbent characteristics provide a cost effective alternatives to

industrial and environmental waste management control in Nigeria. Specifically, kenaf plant

possesses bio-sorbs granular absorbent with natural bioremediation capabilities suitable for

cleaning oil spills and industrial leakages both in oil and gas production and other environmentally

unfriendly waste management challenges.

1.6.6: Kenaf Value-Chain development will play a key role in the supply of industrial inputs for

domestic needs in Nigeria: The Nigerian industrial and manufacturing sector heavily depends on

imported raw materials for their sustainable operations. Not only that external sourcing of these

raw materials exert demand pressure of Nigeria’s foreign reserves, but it also does not support

backward integration in our industrial development. Development of the Kenaf value-chain will



encourage the production of several industrial raw materials that will drastically reduce the

dependence of local industries on imported raw materials. Some of the raw materials include pulp

for paper printing, wood plastic components (WPC), Cellulose products such as core and bast

fibers that could be adapted for the production of alcohol etc.

1.7 Risk Analysis and Mitigation Strategies in Kenaf Development in Nigeria.

Notwithstanding the growing number of farmers involved in kenaf production in Nigeria, total

kenaf output has been progressively declining on average as earlier discussed. Three main reasons

accounts for this:

a. Lack of Off- Takers of Kenaf Products: Since the closure of the Jute Bags production

firms in Badagry and Jos in late sixties and early 1970s, there has been very low patronage

of kenaf fresh plants because of lack of off-takers. The local market for kenaf plants is

weak to absorb kenaf output production since there are no industries that patronize the

outputs of Kenaf products in recent times. This challenge can be overcome by the

development of Industry wide business plans to attract investors to the kenaf value chain in

Nigeria. Processing of kenaf plants into industrial raw materials and use could engender

sustained demand of kenaf farm gate outputs.

b. Competition from Synthetic fiber and Jute bag imports: Most of the jute bag

requirements for bagging agricultural products are imported mainly from China and South

East Asia. While the need for agricultural product packaging in increasing in Nigeria

because of the renewed interest in agriculture and agri-business, especially crop production,



the local demand for jute bags is on the increase. However, most of the domestic demands

are met by cheap imports from India, china and Malaysia. The dependence on imported

jute bags poses great risk to local manufacturers of jute bags who may become

uncompetitive because of cheap alternative imports. Two approaches to addressing the

foregoing issues may be valid here; first; design an appropriate incentive package to

encourage entrepreneurs to invest in the kenaf sack or jute manufacturing. Second, creating

the awareness about the harmful effects of the use of synthetic fiber bags for packaging

consumer goods will address the issue of fierce competition from synthetic fiber bags and

jute sack imports.

c. Absence of National Policy on kenaf development: Current interventions in the kenaf

development lack clear national policy that will guide its development. Other agricultural

value chains such as Rice, wheat, Cocoa etc have national policy framework that spell out

the role of institutions, agencies and governments in their development. The development

of kenaf National Policy framework will provide guidance on funding, policy coordination

and implementation and determine a clear role for kenaf development in the Nigeria’s

industrialization and economic transformation.

d. Agricultural Development Policy Overlap, Inconsistencies and Reversals: Another

critical risk in the development of the kenaf value chain is lack of policy consistency in the

development of the agricultural sector in Nigeria. In the mid-eighties for instance, wheat

import was banned to support local production, but soon after subsequent regimes have

continued to un-ban the importation of wheat and rice. Another example is the policy on



Cassava bread that was envisaged that domestically produced bread would be made of 10

percent cassava flour. Soon after, this policy was discontinued and the expected impact of

the policy on the development of the cassava crop lost over the years. The likelihood of the

kenaf value-chain development to suffer this fate is very palpable. The risks posed by

agricultural policy inconsistency, overlap and reversals will be addressed by the

development of national policy on kenaf development as well constant stakeholder

engagement with government on the imperatives of kenaf development to Nigeria’s

economic transformation and diversification.

e. Poor Coordination of Agricultural policy implementation among Stakeholders: The lack

of a national policy on kenaf development presupposes that there are no guidelines

informing the development of kenaf policies and programmes in Nigeria. The disparate

approach to the development of kenaf among the stakeholders constitutes a veritable risk

that can be mitigated by constant interaction among the stakeholders through workshops,

seminars and extension services.

1.8 ROLE OF STAKEHOLDERS IN PROMOTING AND DE-RISKING KENAF VALUE-

CHAIN DEVELOPMENT IN NIGERIA.

The effort to integrate domestic production and processing of kenaf into the agricultural

programme and policies started in Nigeria in 1966. The initial attempt was geared towards the

establishment of kenaf farms with improved seeds to basically produce bast fiber to feed the

Badagry Jute Bag Factory in the Western Region and the Jerma Fiber factory in Jos, Northern

Nigeria. Unfortunately both programmes were undermined by a combination of policy missteps,



weak competitive advantages and the total neglect of the agricultural sector in preference for oil

as the main revenue earner for the government. Government and other stakeholders are avoiding

the experience of the 1960s and early 70s in their current effort to revive interest in the

development of the kenaf value-chain in Nigeria through the activities of the following

institutions, agencies, NGOs and government ministries.

1.8.1 KENAF RESEARCH AND DEVELOPMENT (R&D) ACTIVITIES.

The following institutions are engaged in Research and Development of kenaf in Nigeria. They

are:

Institute of Agricultural Research & Training (IAR&T) Ibadan

The Institute of Agricultural Research & Training (IAR&T) Ibadan was given the mandate

anchor the drive for Kenaf and Jute improvement programme in Nigeria. This mandate was

transferred from IAR, Samaru Zaria to IAR&T Moore Plantation Ibadan to undertake strategic

research into the development of Kenaf Seed varieties for distribution to farmers. The Institute

has successfully developed the varieties of Cuba 108 and Tiannung 1 adapted to the Nigerian

soil and efforts are in progress to produce these improved seeds in commercial quantities for

distribution to kenaf farmers across the Nigerian Federation.

Federal Institute of Industrial Research( FIIRO) Oshodi

The Federal Institute of Industrial Research Oshodi was commissioned in 1986 by the Federal

Government to undertake the Physio-chemical characterization of Kenaf and further completed

its laboratory pulping, paper making and testing in 1990. The study clearly established that Kenaf



has individual bast fiber of about 2.6-2.8mm long and 14-20 microns wide and produced high

quality tensile strength that can be exploited for industrial use in the country.

National Research Institute for Chemical Technology (NARICT), Zaria.

The Institute is engaged in the development of processing machines for kenaf fiber from fiber

producing plants. The purpose is to fabricate locally made machinery that will enhance the local

industrial processing of fiber for yarns and thread. The two machines they are currently working

on are as follows:

Local fabrication of Spinning Machines: The Institute developed spinning machines for

spinning fiber from banana, sisal and kenaf fiber. The yarns spun from the developed spinning

machines have tested for twist per meter, tensile strength and linear density and found to

compete with global spinning machines. Their prices are also very affordable and competitive

apart from domesticating the technology for development of the industrial fiber industry in

Nigeria.

Fiber Retting, Plant Extraction methods and Equipment: The institute has also

developed modified ways of fiber retting processes which has given best analytical results for

kenaf, jute and sisal fibers. The institute targets to develop other machines required in the kenaf

and other fiber related value chains in Nigeria and ensure that the local industry is made

sustainable and competitive.



RAW MATERIALS RESEARCH AND DEVELOPMENT COUNCIL ( RMRDC)

The Raw Materials Research and Development Council (RMRDC) made remarkable progress in

promoting the development of the kenaf value- chain development in the Nigeria through the

following initiatives:

Development of Optimal Pulping Parameters: The Council conducted a pilot survey to

develop pulping technology for the paper mills in Nigeria. In 1991, the Council set up a

research Task force to study the challenges of developing a pulping process that will sustain

the Nigeria paper mills industry. The study recommended that the problem of lack of long

fiber pulp mill can be addressed through adequate investment in the development of kenaf

pulp mills and kenaf cultivation to provide kenaf fiber for the proposed kenaf pulp mills.

Boosting the Supply of kenaf Seeds

The Council has been promoting the development of kenaf seed since 1991 by sponsoring

multi-locational-field trials of improved kenaf seeds through collaboration with the IAR&T

Ibadan. The Council also supported the Kenaf Association of Nigeria (KEAN) with 2 tons

of kenaf seed for multiplication purposes in Ilorin in 1997 and 2002.

Design and fabrication of Pilot Plants for the processing of kenaf fibers for

manufacture of jute bags and pulp in Nigeria

In recognition of the importance of kenaf to the overall economic and industrial

development in Nigeria, the Council in 1999 commissioned FIIRO to establish a 5 ton /day



kenaf processing demonstration plant for the manufacture of jute bags in Nigeria which

could be made available for jute bag manufacturers to copy.

Production of Blue Print for Production of Jute Bags from kenaf Fiber.

The Council, in 2006 inaugurated and eleven members Technical Committee to produce

blue prints for the production of jute bags from kenaf. The committee after visiting

relevant institutions such as FIIRO, Obafermi Awolowo University Department of

Agricultural Engineering and NASCO Group of companies recommended the funding of

3 projects associated with kenaf jute bag development and also organized workshops and

seminars to promote the production, utilization and marketing of kenaf. The effort led to

the funding of the design and development of kenaf decorticating machines at OAU, Ile

Ife and IAR&T Ibadan, and the establishment of pilot scale kenaf farm and processing

centre in Ogbomosho, Oyo State.

PROSPECTIVE OFF-TAKERS AND INVESTORS IN THE VALUE-CHAIN

KEPPMAN – The umbrella body of kenaf stakeholders dedicated to advancing the course of

kenaf development in Nigeria.

GINCOC NIGERIA LIMITED- A critical player in the kenaf development value chain in

Nigeria and a prospective investor. Gincoc is also the Local representative for kenaf industry

of South Texas and are engaged in the supply of imported improved seeds and lost

circulation materials in the oil and gas industry.



MATAD GROUP OF COMPANIES- A private indigenous company involved in various

agricultural produce commodities and a prospective investor in Kenaf jute Sack

manufacturing plant.

CAPITAL AGRICULTURAL DEVELOPMENT LIMITED ( CADL) – a renowned seed

company and prospective investors in the kenaf Seed production and multiplication value-

chain.



MARKET STUDY

MARKET SURVEY FOR KENAF VALUE –CHAIN PRODUCTS IN NIGERIA

2.1 Introduction

A critical element of the economic feasibility of kenaf value chain development in Nigeria is the

availability of market for kenaf products. Without the existence of a robust and sustainable supply

and demand of kenaf products, its development will be grossly undermined. However, it is

important to note that demand for kenaf products is a derived demand ie its demand is driven by

the demand for what it is used to produce ie the end- product. Therefore, the development of kenaf

value chain critically depends on the level of industrialization of a given country which could drive

the demand and supply of the raw materials needed by the industries. Globally, industrial and

commercial demand and supply for kenaf products is interlinked with global economic growth and

trade developments across many countries, Nigeria inclusive.

The relationship between trade and economic growth is quite strong in the sense that when global

trade booms, global economic growth is enhanced and the reverse is the case when global

SECTION TWO



economic recession occurs. Therefore, global trade on kenaf benefited from the global trade boom

of the 1980s and 1990s, and when the Global Financial Crises of 2008-2010 occurred, it affected

global trade and the global demand and supply for kenaf fiber related products were also affected.

2.2 Objectives of the Market Survey

The overarching objective of this market survey was to determine the domestic and international

factors that drive demand and supply of kenaf products in Nigeria. The result of the market survey

will be used to identify potential markets for kenaf related products that could motivate investments

in kenaf value chain on a sustained basis. The research questions that guided market survey

responses are as follows: (a) What is the current market demand for kenaf products in Nigeria, (b)

what determines the supply of kenaf products in the Nigerian market, (c) Where does the market for

kenaf products exist (d) Are the identified market opportunities robust enough to guarantee

sustained investment in the kenaf value chain in Nigeria, (d) what recommendations are necessary

for potential investors in kenaf in Nigeria.

2.3 Market Survey Analysis Of Kenaf Value- Chains in Nigeria and Recommendations

The market survey covered both demand and supply analysis of the critical stakeholders and market

segments in the kenaf value chains that were identified for development in Nigeria. The most

important kenaf value chain development include the market for seeds multiplication, kenaf

cultivation (farming), kenaf fiber processing for use in Jute manufacturing, forage products for use

in animal feed production and core fiber products for absorbents and chemical reduction used in

drilling in oil and gas industry.



2.3.1 Market For Kenaf Seeds in Nigeria

A. Demand Analysis and Projections

From the results of the market survey conducted, it was obvious that the demand for kenaf seeds is a

derived demand. Therefore, the level of investments in kenaf cultivation will drive the demand for

kenaf seeds. Currently in Nigeria, subsistence kenaf farming drives the current supply and demand

for kenaf seed and which unfortunately is not even met by the research institutes with the mandated

to develop and supply kenaf seeds to Nigerian kenaf farmers. Resort is therefore made towards filling

the gap through importation and distribution.

The second important determinant of kenaf seeds demand is the level of mechanization in the kenaf

value chain development. Given low level of mechanization, individual kenaf farmers in Nigeria

cultivates between just between 2 to 3 hectares maximum on average nationwide annually.



Fig 5: Projected Kenaf Seed Demand in Nigeria 2017- 2021.

0

4,000

8,000

12,000

16,000

0

20,000

40,000

60,000

80,000

100,000

120,000

2016 2017 2018 2019 2020 2021

HECTARES SEEDS (tons)

Current demand for Kenaf Seeds is therefore limited by constraints imposed by lack of medium and

large scale investments in kenaf farming and farmers’ inability to scale up their operations to higher

levels. For instance, from our projections, between 5 to 10 hectares of kenaf farms will require about

75kg and 150kg of seeds to cultivate respectively. Therefore, on the average to be able to cultivate

current 500 hectares requires about 7.5 tons of kenaf seeds annually. The projected quantity of seeds

required to put 10,000 hectares under cultivation will be about 1,300 tons of seeds and in 2021, to



cultivate 100,000 hectares will require about 13,000 tons of improved seeds annually. Realizing that

100,000 hectares is just 1 percent of the available 1 million hectares for kenaf cultivation in Nigeria,

the market for seeds is quite huge and current supplies can hardly meet the growing demand in the

years ahead.

B: Supply Analysis and Projections.

The major source of kenaf Seeds today in Nigeria is the collaborative effort between the International

Institute for Tropical Agriculture (IITA) Ibadan and Raw Materials Research and Development

Council (RMRDC) on the production and multiplication of improved kenaf seeds for onward

distribution to farmers. The Council commissioned IITA to produce about 5 tons of Kenaf Seed, but

can only deliver about 2.5 tons for this purpose. More importantly, Nigeria is reported to have over

one million hectares of cultivable land for kenaf by the Food and Agricultural Organization (FAO

Statistics 2015). Currently, available records indicate that only about 500 hectares of land are

cultivated annually. The implication for this statistic is that there is huge supply gap of improved

seeds to sustain the cultivation of up to even 0.5 percent of the over 1 million hectares of available

cultivable land for kenaf in Nigeria.

Earlier analysis showed that an acre will hold about 185,000-plant population for it achieve maximum

yield. This suggests that a hectare (4 acres = I hectare) will require about 740,000-plant population

for maximum seed yield. Translated into seed requirements, one hectare will require about 15kg of

seeds that amounts to about 7 tons of seeds for at least 500 hectares. Although IAR&T was

commissioned to produce and supply about 2.5 tons of the contracted quantity, there still exist a

supply gap of about 5. 5 tons. The inability of IAR&T to meet current supply of kenaf seeds now and



in the future is attributed to the fact that while they have capacity for Seed research and selection,

they lack the scale of infrastructure for large scale seed multiplication programme.

Two options exist to address the issue of Seed supply shortfall in kenaf value chain development in

Nigeria. The first option would be to rely on the research institutes such as IITA to develop and

multiply improved varieties to be distributed to farmers. The second option would be to import the

difference from abroad. On the first option, the critical issue is the lack of capacity for commercial

production of improved seeds to satisfy the increasing demand in the future. The second option of

importing the difference has to contend with two very critical issues, (a) Imported kenaf seeds needs

to be adapted to the agronomic conditions of the Nigerian soil and environment for improved yield

and (b) the cost of importation will at one point be transferred to the farmer which will increase their

production cost and make their products uncompetitive in the international and even domestic

markets. Obviously, it is doubtful whether these two options will be sustainable in the long run given

its aforementioned constraining factors.

Therefore, the option of attracting domestic and foreign investors into kenaf Seed multiplication

value chain in Nigeria holds the best promise in the circumstance. The supply for kenaf seed can only

be met if there are investors willing to specialize in the production and commercial multiplication of

seed varieties within a business and profit motive model. In the United States for instance, RIO Farms

Incorporated and D.B;M Farms located in Tempico Mexico, have been producing improved kenaf

Seeds since 1945 for the United States kenaf development programme. When the Research Institutes

produce seed mutants, its commercialization for the entire value chain in United States is provided by

both Rio farms and D.B.M farms and sold to farmers at a margin.



However, to attract domestic investors to engage in commercial production of kenaf seeds in Nigeria

requires the implementation of special incentives for investors. Such special incentives can be

articulated with the development of National Policy on Kenaf Development currently not in place in

Nigeria.

2. 3.2 Market Survey Report for Kenaf Fiber in Nigeria

Currently in Nigeria, the market survey indicated that majority of kenaf farmers are engaged in the

production targeting the fiber market. Unfortunately, the market for kenaf fiber domestically

produced in Nigeria is at rudimentary levels owing to a number of reasons: First, the absence of

processing plants for kenaf fiber limits both the production and sales of kenaf fiber. Second, the

industrial value chain to absorb the supply of kenaf fiber raw materials is yet to be developed. The

above two reasons reinforce the issue of lack of off-takers for kenaf fiber products in Nigeria.

However, in the market research conducted. Two developing markets sustain the current level of

production and sale of kenaf fiber in Nigeria, namely, the domestic POP market demand and

international demand for kenaf processed fiber through the internet.

A. The Domestic Market Demand for Kenaf Fiber in Nigeria

The result of the market survey for domestic kenaf fiber market in Nigeria suggests that it has

potentials yet to be tapped because of some obvious reasons. After the collapse of NIFINKO- the

Jute Production plant located in Badagry in the late 1960s and similar efforts with Jerma Jute

manufacturing plant in Jos, the domestic production of kenaf fiber which was essentially targeted at

feeding these plants gradually declined and eventually stopped. Two main reasons accounted for this



development; First, the domestic production of jute could not withstand the competition from imports

of jute and Synthetic bags from abroad. Second, the domestic supply of kenaf fiber was not adequate

to feed the plants and therefore the operations of the plant became inefficient and had to be

abandoned.

However the challenge posed by these two elements still impact the market for kenaf fiber quite

substantially. For example, during the survey, it was discovered that AGROSACK Nig. Limited, a

firm owned by the Dangote Group of Companies which produces synthetic fiber bags has an installed

capacity of about 1billion sacks per annum and services many companies bagging needs such as flour

millers, cement companies and other food processing industries like Nestle foods and Cadbury

Nigeria limited. etc. Notwithstanding, the domestic market for kenaf fiber is now gradually picking

up because of developments in the emerging two market segments.

B. Emerging Domestic Market for POP For Building Sector.

A field survey of kenaf farmers revealed that kenaf fiber is used for making POP that is in hot

demand in house interior deco was opening a new market for the demand for kenaf Fiber in Nigeria.

About 10 farmers randomly selected agree to the fact that they have been receiving booking orders

from POP makers for various tons of semi processed kenaf bast fiber to which, they unfortunately fail

to meet. It is possible that the development of this market, POP makers could grow to become a

veritable market segment for off- takers for processed kenaf bast fiber in the near future. This market

could off-take about 20 percent of the kenaf bast fiber produced in Nigeria going by the size of their

current demand placements and the future projections of the growth of the housing market in Nigeria.



2.3.3 Global Supply and Demand of Kenaf Fiber and Implications for the Nigerian market.

The global market for kenaf bast fiber is growing and thriving because of globalization powered by

the Internet. A survey of the kenaf fibers market demand in Nigeria show that there is growing

demand for their products for the international market executed through orders placed on the Internet.

Indeed about 40 percent of the domestic demand for semi processed kenaf bast fiber is from Internet

placements for exports to other countries. The literature reviewed on the market for kenaf fiber

globally showed that global demand is outpacing global supply – a situation that indirectly sustain the

global demand for kenaf fiber products even in Nigeria. The increase in global demand for kenaf and

other fiber products suggest that the industrial use for kenaf fiber is on the rise all over the world as

people discover the enormous advantages it has over other forms of fiber. A. Global Supply

Analysis of kenaf Fiber Products

Desk review of Internet resources reveal that global supply of kenaf fiber is slowing down because of

the global economic recession that may have impacted industrial use of kenaf fiber products.

However, it does not suggest that supply will not pick up in the future as the global economy recovers

as from 2017 as projected by World Economic Outlook (WEO 2016) published by the International

Monetary Fund. In the Report, the global economy was projected to grow by 3.4 percent and 3.6

percent in 2017 and 2018 respectively, as against 3.1 percent in 2016.



Table 1: Global Production and Supply of kenaf Bast Fiber ( ‘000 tons), 2008-2020

ACTUAL Projected PROJECTED

Kenaf Fiber and Allied Products 2012 2013 2014 2015 2016 2017 2018 2019 2020

China 86.1 86.8 67.8 82.3 79.9 84.2 81.64 82.2 82.8

India 144.0 139.7 120 131.2 140 140 135.0 145.0 152.6

Indonesia 3.1 4.7 4.1 3.8 4.0 4.0 4.2 5.2 6.2

Thialand 3.6 2.2 2.9 2.0 2.0 1.7 1.3 1.0 1.7

Vietnam 10.6 25.7 7.8 12.1 5.0 8.2 7.9 8.3 9.2

Cambodia 0.6 0.3 0.3 0.2 0.3 0.3 0.1 0.2 0.4

Pakistan 1.6 1.5 1.5 1.5 1.5 1.5 2 1.8 2.3

Brazil 26 25.7 13.4 14.9 14.2 14.2 12.7 14.9 15.3

Cuba 10 10 10 10 6.6 6.6 6.1 5.3 4.5

Other 15.8 14.8 14.6 10.7 10.1 10.1 8.9 11.8 10.7

Africa 13.1 11.2 11.3 13.3 12.4 12.4 12.5 13.4 13.8

Near East 3.7 3.6 3.6 3.6 3.5 3.5 3.4 3.7 4.0

World 318.2 326.2 257.3 285.6 279.5 286.7 275.8 292.8 303.5 Source: FOOD and Bio-Based Research 2014.

Table1 above indicated that China, India, Vietnam and even Africa are major contributors to

global production and export of kenaf bast fiber between 2012 and 2016. As earlier indicted, the

World Supply of kenaf Fiber is expected to rebound as the Global economy returns to growth

trajectory from 2017 suggesting that kenaf fiber demand will begin to rise in the coming years.

B. Global Demand Analysis of kenaf Fiber



From the available information gathered during literature review, it was discovered that global

demand for kenaf fiber far outweighs its supply, thereby sometimes putting upward pressure on

its price. However, because the demand for kenaf fiber is a derived one, its demand often reacts

to changing global economic conditions.

Fig 6: Actual and Projected Demand for Kenaf Fiber ( ‘000 tons) 2012 - 2021

source: FAO Data Base 2014.

From Fig 6 above, it can be observed that there is a huge supply gap between current and future

demand of kenaf bast fiber indicating increasing significance of kenaf by-products of for various

industrial uses. Simple trended projection showed that while global supply was 318.2 million

metric tons in 2012, its demand was 520.4 million metric tons. However, when the future demand

and supply was forecast using trend analysis, it showed that supply increased to 325.1 million

metric tons while demand slightly declined to 501.6 million metric tons. Overall, the future

market for global kenaf fiber is assured given the trend of demand and supply dynamics.



Fig 7: Global Distribution of Industry Driven Demand for Kenaf Fiber Products (%)

Source: Food and Bio-Based Research 2013

Fig 7 above showed that the percentage of industry demand for kenaf fiber come from the

increasing development of new and existing industrial value chains all over the world. For

instance, while sacking and canvas account for about 15 percent of the world usage of kenaf fiber,

Composites account for about 12 percent and paper and board production use about 13 percent of

global demand for kenaf fiber.



The implication of the foregoing on the domestic market for kenaf fiber in Nigeria is that apart

from the global demand, the development of a few key industrial value chains such as jute bag

manufacturing or absorbents and paper and pulp firms will greatly boost domestic demand for

kenaf fiber. The importance of the above information is that it shows which industries use more or

less of kenaf fiber products and could become a guide for developing appropriate industries

locally.

2.3.4 Market Survey for Jute Bags in Nigeria.

The main reason why Nigeria Agri-business is not doing well internationally was because of the

safety conditions of packaged agricultural commodities for export. In an era where environmental

issues are dominating discussion about production processes globally, the issue of what

packaging method to use for agricultural products will remain topical now and in the future. In

2002, there was a global ban on the use of synthetic bags for packaging agricultural products

because of health and environmental concerns. As a result, despite the high quality of agricultural

products from African countries, Nigeria inclusive, it was still rejected in world markets because

of the use of synthetic essentially because of its environmental and health implications. The

negative consequences for this development on Nigeria’s commodity trade are very palpable

given in our growing trading imbalances with the rest of the world.

Therefore, the market survey for jute bags in Nigeria was conducted by focusing on the demand

and supply determinants, with information from stakeholders in the production and export of

agricultural products. There was also extensive review of web resources to determine the market



opportunities for jute bags supply and demand in Nigeria during the course of the survey. The

results of the survey are hereby presented as follows:

A. Jute Sack Market Demand Sources and Analysis

The results of the market survey for jute sacks in Nigeria reveal that most of the jute sacks

currently in use are imported from Brazil, USA, China, India and Bangladesh. The jute bags are

used to packages such cash crops as Cocoa, Cotton, Benni seed, Cashew, Sesame seeds and

Cashew nuts. These products have witnessed increased export from Nigeria in international

market since the drive to diversify into non-oil sector of the economy became a policy trust of

government starting from the early 2000s.

Fig 8: Annual Cash Crop Exports in Nigeria between 2002 -2014



Source: Annual Abstract of Statistics and FAO Statistics 2015.

About 3.4 million jute sacks are required and were imported for packaging these crops for the

international market annually. It has been estimated that Nigerians spent an average of not less

than $15 million annually on jute sack importation (Bizwebsnig.com). The increasing need for

jute bags for sacking Nigerian exports is projected to increase as the diversification of the

economy away from oil into other sectors gather momentum in the years ahead. Therefore the

market demand for jute bags is assured in the medium to long term thus creating domestic

opportunities for jute production to cover not only the Nigerian market, but also for the West

African Sub-region.

Fig 9: Estimated Import Cost of Jute Sacks in Nigeria ( 2012-2016)



Source: NBS Trade Statistics 2016 and This Day Newspapers ( several issues)

B. Supply Determinants and Analysis

Market survey for jute sacks in Nigeria reveal that about 3.4 million pieces of jute bags is required to

package about 5,000 tons of products per annum which will require 500,000 pieces of Jute bags to

handle. Given the huge regional market which Nigeria’s agricultural products services, the demand

for jute bags has the potential to grow very fast in the future. The demand is projected to reach about



10,000 tons by 2022 as the development of the agricultural sector and increasing attention on the non-

oil exports progresses.

C. Supply determinants and Analysis

The determinants of the supply of jute bags in Nigeria include, but not limited to the following:

a. The huge potential market loss incurred by farmers as a result of weak market demand for

agricultural products packaged with synthetic fiber

b. The increasing cost of imported jute fiber and its implications on the nations reserves including the

impact on the competitiveness of locally produced agricultural products

c. The need to develop local industries and enhance the employment opportunities in Nigeria

d. The sub-regional demand for jute bags in west African countries creates a veritable market for the

jute sacks in ECOWAS region

2.3.5 Market Survey for Drilling Loss Circulation and Bio-Absorbents in the Oil and Gas sector

The Oil and Gas sector of the Nigerian economy is quite huge contributing about 87 percent to

national revenue and 90 percent to foreign Reserves. Nigeria has a proven oil reserve of about 40

billion barrels and further prospecting is still ongoing. Therefore is projected that oil and gas

reserves in Nigeria has potential to last for the next 40 years. It is therefore no wonder that oil and

gas has been driving the Nigerian economy for over half a century and its contribution to the

national revenue will remain significant in the future. The development of the kenaf value chain in

Nigeria has positive implications for the oil and gas sector in two major areas:



A. Drilling Mud Additives (Drilling Loss Circulation): It has been proven that the kenaf

core when ground and mixed with some chemicals it is used for loss circulation in drilling

in oil and gas sector. The drilling mud is mainly used to recover stuck drilling pipes in oil

drilling pits. The market for drilling mud can only be extrapolated using the import bill for

the product and the size of the Nigerian oil and gas sector.

Fig 10: Value of the Imports for Drilling Mud in ($’000) 2012-2022

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

US

Do

llarf

s in

mill

ion

s

Source: NBS Trade Statistics (various years) and Consultants trend projections

Fig 10 above indicated that the import demand for drilling mud in Nigeria will keep rising in the

future. However, it is projected that the import cost of drilling mud will keep fluctuating with

activities in the oil sector. The table shows that the $600 million was spent on imports of drilling

mud in 2013 and it will peak at over $700 million by 2020. The expectation is that domestic

production of Drilling mud from kenaf core can take advantage of this huge market in the future.



B. Bio-Absorbent Products: Research has shown that kenaf chips are highly absorbent. The

powder can be more absorbent than most products currently commercially available. Its

very low bulk density and high surface area make it ideal for multiple uses. In addition, a

combination of kenaf powder and polymer resin (PP/PVC/PE) can also be used for

excretion and inject molding processing for the production of spare parts of machines and

plastics. The market for Bio-Absorbents in Nigeria can easily be found in the many oil

spillages that occur in Niger Delta. The local production of kenaf core will benefit

immensely from the use of the core to produce both Bio-Absorbent materials needed for oil

spillage and the production of injecting molding for the growing auto industry in Nigeria.



MODEL BUSINESS PLAN FOR KENAF SEED PRODUCTION

3.0 PROJECT CONCEPT

3.1 Introduction

In Nigeria, experience has shown that availability of kenaf seed is critical to the kenaf

improvement programme. In other words, without making seed selection and multiplication an

important value-chain investment in Nigeria, the kenaf improvement programme may be

constrained. Ensuring steady supply of improved seeds to meet the projected demand of kenaf

farmers in Nigeria requires (a) de-risking investment in seed commercial production and

multiplication through policy and infrastructure support in a business model (b) develop a well-

articulated business plan which will attract commercial seed farmers to take interest in seed

multiplication investments in Nigeria.

3.2 Background

Kenaf seed breeding and multiplication started in Nigeria in 1988 when IARTA acquired 54

varieties of Kenaf seeds for research and adaptation to the Nigerian ecological and agronomic

conditions. This experiment was conceptualized with the aim to identify which varieties have the

potential to resist pest and nematode attacks, including other biotic and abiotic threats. Various

technologies were adopted in the research including but not limited to biotechnology, cost

reduction, environmental assessment and harvest and post- harvest techniques ( Oloruntoba, et al

SECTION THREE



2012). Very importantly, the need to determine whether there was genetic variability among the

two promising seed varieties of Cuba 108 and Tiannung#1 using Gamma Irradiation technology

were extensively and scientifically explored.

However, five out of the many imported varieties, namely Cuba 108, Cuba 2032, Everglades 71,

Guatemala 2a and Guatemala 3F cultivars were tested in western Nigerian soil in the towns of

Odeda, Ado-Odo, Ijebu-Ode, Eruwa, Ilora, Ogbomosho, Ado-Ekiti, Shaki, Sepeteri and Igbimo-

Ekiti. In these experimental trials, of the five varieties, Cuba 108 was found to be most adaptable

to the Nigerian soil and agronomic conditions as it yielded between 2.6 tons of long fiber per

hectare with a core of about 30 percent of the total yield (Oloruntoba et al, 2012).

The study further revealed that their genetic variability was very minimal suggesting that there

may not be much difference in the performance of the two seed varieties in the Nigerian

environment. The mutants of the two seeds are Ife Ken 400 mutant from Cuba 108 and Ife Ken DI

100 mutant from Tiannung#1. Both mutants were found to be daylight insensitive, tolerant to most

insect pests including flea beetle and aphids and resistant to most soil borne nematodes. This does

not suggest that other seed varieties are not suitable for cultivation in Nigeria but it requires further

breeding techniques to adapt them to the Nigerian soil conditions and to develop more varieties

based on the different uses the kernaf improved seeds will be put into. The two selected mutants ie

Ife Ken 400 from Cuba 108 was reportedly officially released in 1991 and Ife Ken D1 400 from

Tiannung#1 was released in 2011.



3.3 Inadequacy of current kenaf Seed Production and Multiplication Model.

Currently, the Institute of Agricultural Research and Training (IATA) Ibadan was mandated to

research into improved seeds for Kernaf improvement project in Nigeria. The Raw Materials

Research and Development Council (RMRDC) commissioned IATA to produce a minimum of 5

tons of improved Kernaf seeds for distribution to farmers across Nigeria in 2016 (RMRDC,

Annual Report, 2015). Given that the current drive for kernaf improvement in Nigeria is clearly

meant to take kernaf production from current mainly subsistence level to mechanized commercial

level, the supply of improved seeds to power this initiative becomes critical. However, while

IARTA and other institutions may have the facilities for research into the improvement of kenaf

Seeds, its production in commercial quantities to service the growing demand for seeds by kenaf

farmers justifies making kenaf seed commercial production an important value-chain investment.

Even in countries where the production of kernaf has advanced, such as United States and India,

the programme of seed multiplication has two critical Stages; First the scientific research into how

the seeds could be improved upon to resist attacks with specific nematodes and insects that could

be associated with given soil types. Second, the initiative to encourage farmers to specialize in

seed multiplication investments to ensure that what research institutes have developed is produced

in large quantities to meet the growing demand for improved seeds by the farmers. Therefore, the

facilities at IATA for kernaf seed multiplication may be adequate to address the first condition, but

may not satisfy the condition to address the second.



3.4: Rationale for Sustainable Seed Production and Multiplication Investment.

The overarching rationale for delivering kenaf seed multiplication in a business model is that

different Kernaf varieties or cultivars are associated with t improved yield for different industrial

value- Chain uses. Many researchers over the years have identified the unique botanical, economic

and industrial uses of many varieties of kernaf seeds that support its development through

biotechnology and breeding in different parts of the world. For instance, Tiannung#1 as a variety

has high stalk yields that averages about 13.8 metric tons per hectare and requires minimal rainfall

and fertilizer application to deliver higher yields. Others like the Guatemala 3A has been identified

to be rich in Core yields which averages about 50 percent of total stalk yield oven dry weight.

Evaglades71 and Guatemala 2a can yield rich foliage’s (leaves), while Cuba 108 can yield both

high Stalk and seeds of about 35,000 to 40,000 seeds per (ha).

3.5: THE PROPOSED KENAF SEED (MULTIPLICATION) PRODUCTION: THE BUSINESS

The proposed kenaf Seed production and multiplication business envisages investments in the

kenaf Seed production farms with an estimated scaled seed production capacity of 10,000, 25, 000

and 50,000 tons (small, medium and large scaled farm operations, respectively) of varieties of

kenaf seeds to be produced in farms with 10 hectares (small), 20 hectares (medium) and 30

hectares (large) respectively. The projected market demand for Kenaf Seed to serve the cultivation

of at least 100, 000 hectares of land between 1918 and 2022 is put at over 1.3 million tons of seed



annually. The production of seeds will engage not less than 15,000 farm families nationwide and

create job opportunities for the teaming unemployed youths and women in the rural and urban

centers.

The Business of kenaf seed production requires the cultivation of improved kenaf seeds at

commercial levels which is meant for distribution to farmers to ensure improved yield per hectare

and to leverage on the unique characteristics of different cultivars to service several industrial and

commercial purposes of kernaf in the entire value- chain. As earlier indicated, while the Research

Institutes have the facility to breed the improved seeds, they may not have the infrastructure to

produce at commercial levels to meet growing demand of kernaf farmers across Nigeria over time.

A supply- demand gap may be created if all the improved seed supply is left to the limited efforts

of these research institutes. Therefore, improved Kernaf seed multiplication remains the foundation

of any programme for kernaf improvement anywhere in the world, Nigeria inclusive.

Table 2: Kenaf Seed Cultivars, Yield Characteristics and Uses

Varieties Botanical

Advantages

Yield per (hectare) Industrial Uses

Tiannung #1 High Stalk

Yields

13.8 mt (ha) Fibre Production for cordage and jute

Guatemala

3F

High Core

Yields

40 % of total stalk

yield

Improved core yield for absorbents

Guatemala 2a High leaves

yields

3-7 lobes per leaf High foliage production for livestock

feeds

Everglades 71 High leaves

yields

3-8 lobes per leaf High foliage production for livestock

feeds



Cuba 108 High Seed

and fibre yields

35,000 -40,000 Seeds

(ha)

High seeds yields for multiplication

and industrial lubricants

Source: Webber et al (2002a and b); Oloruntoba et al (2014)

The importance of the research into the various botanical advantages of each of these seed varieties

was to help farmers choose what varieties of seeds to plant depending on what kernaf markets they

want to compete in. In countries where the market for jute products and other associated uses are

high, farmers prefer to grow varieties that can produce high stalks and therefore require the supply

of high stalk yielding cultivars. Same goes for multiplication and supply of other seed varieties

depending on the industrial uses it is likely to be put into. This makes for specialization in seed

multiplication investments, efficiency and profitability in the business of kernaf seeds

multiplication and uses.

3.6 KENAF SEED PRODUCTIONS BUSINESS: TECHNICAL ANALYSIS

The production of kenaf Seeds for purposes of multiplication of varieties for improved cultivation

undergoes a number of processes that will act as a guide for investors in the seed production

investments.

3.6.1 Process Flow Chart and Factor Analysis for Kernaf Seed Production Business

Fig 4 below presents the process flow chart and factor analysis for kernaf seed multiplication

project that is considered very critical to sustainable development of kenaf value-chain in Nigeria.



Fig 11: Process Flow Chart for kenaf Seed Production Project

The above process flow chart features several sequential processes for improved seed production.

These processes include seed breeding and selection that involves the selection of the required

improved seeds that will be researched upon by Research Institutes and genetically improved upon

to produce hybrid mutants. Other processes include soil preparation, planting and soil fertility; the

SEED BREEDING AND SELECTION

SEED YIELDS AND SOIL FERTILITIY

SEED PLANTING AND TIMING

SEED HARVESTING, STORAGE AND

PRESERVATION



deployment of best practice farm technologies and machinery for seed production, seed harvesting

and timing, and finally seed storage and preservation. The essence of this section is to guide

investors on the critical process required to successfully produce high quality seed varieties for

supply to kenaf farmers across the nation. Therefore, understanding the sequences of the

production process is key to successful implementation of the business plan for seed production

investment.

3.6.2 SEED BREEDING AND SELECTION

The production strategies for kenaf seed are sensitive to three main factors, namely: the cultivars

ie the quality of the improved seeds, the location –especially the latitude which has to do with the

photosensitivity of the kernaf plant and cultural practices of the farmers (Webber et al, 2002). In

breeding kernaf seeds for selection purposes, the photosensitivity ie sensitivity and responses to

daylight is essential, but it is actually the length of darkness that determines the day-length for any

particular time of the year. Three very important varieties of kenaf Seed have been identified in

literature:

(a) Ultra Early Maturing: This variety of cultivars are developed for latitudes greater than 37o

and mostly used in Russia and Korea that mature between 70 to 100 days. These cultivars are

known to produce high Seed yields because the shorter growing periods does not allow the plants

to grow too tall and produce too much foliage at the expense of seed pod growth; therefore, the

shorter the kernaf plant, the higher seed content and lower fiber stalks produced. However, these

cultivars are not suitable for United States with lower latitudes because they will flower earlier

than high latitude countries and produce even shorter and lower yielding plants (Dempsey 1975).



(b) The Early to Medium Maturing: This variety of cultivars are generally preferred for growing

stalk fiber and they are the Everglades 71 and Everglades 41 which were developed in the United

States to encourage vegetative growing (foliage) before the plants initiated flowering. These

cultivars initiate flowering even with as short as days with short span of 12.5 hours, which occurs

in Nigeria around the month of September. However, it is advised that there may be need to delay

the flowering because it reduces vegetative growth rate (Dryer, 1967).

(c) The Late Maturing cultivars: These cultivars are known to mature late mainly because they

are day-light neutral ie that they are photo- insensitive meaning that they initiate flowering early

irrespective of the span of day light or darkness. They are noted to perform well within Latitudes

surrounding the Equator that are mainly characterized by intense sunlight such as Nigeria. They

are noted not to start initiating flowering as early as 100 days after planting. These cultivars are

noted to yield improved seeds per hectare because there is an inverse relationship between high

early flowering and the resulting seed production. In other words, the earlier the cultivar initiate

flowering, the lower the seed production rate which decreases the vegetative growth of the plant.

The lower the vegetation, the lower the stalk and fiber yield. The two varieties that exhibit these

characteristics are Everglades 41 and Everglades 71 (Dempsey 1975).

These two cultivars according to research belong to the late maturing cultivars that initiate

flowering early but are highly sensitive to freezing temperatures. Therefore investments for

reproducing seed for these cultivars are in states that have less cold weathers such as the South

West and South East Geopolitical zones of Nigeria. They may not be suitable for Cultivars in

states like Jos, and other northern states noted for high cold weathers in Nigeria.



3.6.3: SEED YIELDS AND SOIL FERTILITY

The relationship between seed yields and soil fertility has been well researched both in temperate

and tropical regions. The consensus was that planting for high seed yields does not require too

much fertile soil. These research efforts yielded the following facts about the relationship between

seed yields and soil fertility:

a. The less fertile the soil is or less usage of fertilizer favors high seed production (Seale et al

1952). Thus suggesting that the investment for kenaf seed production will be cost effective

in terms of soil treatment for increased yields.

Table 3. Soil Fertility and Kenaf Seed Yields on Different Soil Types

Seed Yield Fertilizer Applications and Types Soil Types Recommendations

Nitrogen Phosphate (P o

High 22.kg /ha 78.8 kg/ha Sandy Clay Highly Recommended

Moderate 44kg/ha 90kg/ha Soft Loam Recommended

Low 60kg/ha Above100kg/ha Sandy Clay Not Recommended

Source: Various publications on kenaf



b. Planting on very fertile soil or the application of too much of fertilizer increases the

vegetative growth of the kenaf plant which does not encourage increased seed yields. The

implication is that fertile soils translate into plant height and vegetative growth both of

which does not give rise to improved seed yields.

c. Moderate fertilizer application to marginal soils are recommended especially when the

focus is on seed production and not vegetative or fiber production.

3.6.4 SEED PLANTING AND TIMING FOR MAXIMUM KENAF SEED YIELD

Planting date is crucial to efficient production of kenaf Seeds. The photosensitive nature of the

seeds implies that planting dates must be carefully chosen to accord with the location (latitude) and

temperature of the area that guarantees efficient yields. For Cuba 108 or its Nigerian variant, Ife

Ken 400, the best planting dates are August and September for maximum seed production (Crane

and Acuna, 1945). Research has shown that when cultivars such as Cuba 108 and Tiannung# 1 are

planted around these dates, it yields more seed capsules and greater seed number/ plant than fibers

or stalks.

Table 4: Planting Dates and Tradeoff between Vegetative growth and Maximum Seed Yields

Planting Dates Seed Yields Vegetative Growth Seed Yield/ha Recommendations

August 1 to 4th Sept High Yields Low growth 3,819 kg/ha Recommended

Earlier than August Low High 1,013 kg/ha Not Recommended



After September High Low 996 kg/ha Not recommended

August 15- August 20 Very High Very low (1.2- Above 4000kg/ha Highly recommended

Source: Webster et al (2002)

Fig 5 shows that the best dates to plant in tropical climates are between August 15 and August 20

which ensures maximum seed yield of over 4,000 kg/ha. However, planting kenaf earlier than

August yielded higher vegetative growth as compared to seed yields. For purposes of Seed

multiplication programme it is therefore advised that planting date should be between August 1

and early September for higher seed yields and lower vegetative growth.

3.6.5. Seed Row Spacing, Planting Dates, Plant Population and Maximum Seed Yields.

A combination of appropriate Row- Spacing, distance between seed plants, planting date and the

number of kenaf plants in a given cultivable land area have been identified to positively impact

seed yields in kenaf production.

Table 5: Optimal Combination of Planting Dates, Seed Spacing and Plant Population.

Planting

Dates

Seed Spacing Plant

population

Seed Yield Variety Recommendations

Row

(cm)

Spacing

b/w plants

July 10 52 3.8 36,904 301 kg/ha Everglades 71 Not Recommended

August 21 52 3.8 197, 680 672kg/ha Everglades 41 Recommended



August 24 52 3.8 542,510 1,719kg/ha Everglades 71 Highly

Recommended

Source: Crane and Acuna (1945), Joyner and Wilson (1967)

The impact of these variables on seed production varies from location to location given soil

texture, humidity and rainfall levels. Three important planting dates, which must be combined with

appropriate row spacing and plant population to produce higher seed yields are July 10, August 21

and August 24 (Crane and Acuna, 1945).

Table 7, clearly shows that the combination of August 24 planting date with 52 cm row spacing,

3.8 cm distance between seeds and plant population of 542,510 per hectare produced the highest

seed yield of 1,719 kg/ha against 301kg/ha for July 10 planting date and 672 kg/ha for August 21

planting date. It can also be observed that the more plant population given the three dates, the more

the seed yield. Therefore, for improved seed yield, the choice of August 24 date with the

appropriate combination of the critical variables mentioned above would be highly recommended

for tropical kenaf farmers. This combination had been tested in Cuba, Bangladesh and Brazil with

high success rates, which indicates that using the combination for tropical climates like Nigeria

would most likely produce the same results.

3.6.6 SEED HARVESTING

Kenaf Seed harvesting is a crucial process in Kenaf production process for two main reasons: First,

the nature of the kenaf plant with tiny itchy hairs on the seed capsules render non-mechanical

harvesting labour intensive, inefficient and unhealthy. Second, mechanical harvesting of seeds is



expensive and the technology is yet evolving. However, the mechanized form of harvesting is

preferred because it is not only more efficient, but it produces less damaged seeds after harvesting.

Timing of the harvest of kenaf seeds is considered crucial because vegetative growth of kenaf

could hamper adaptation to mechanical harvesting methods. Therefore it is recommended that

kenaf cultivars planted in July, August or September should take place in December or January, 4-

6 months after planting (Wilson 1965, Dempsey 1975). Specifically, it is advised that kenaf should

be harvested when the stalk has grown to between 1.2 to 1.8 meters tall given that these are

moderate stalk growths that can be handled by current combined harvesters. Kenaf seeds are ready

for harvest when the capsules turn brown which indicates mature seeds and it is recommended that

kenaf seeds be harvested when about 10 percent of the kenaf seeds have dehisced (break open)

3.6.7 SEED TREATMENT AND STORAGE

Kenaf seed storage is an important consideration to preserve the seeds in good condition before

planting to ensure high rate of survival and performance. Due to the fact that kenaf seeds have high

oil content of between 21.4 % and 26.4 % requires precaution to be taken in its preservation that

will ensure it remains viable. Research has shown that seeds with high oil content require being

stored in an environment of higher humidity of about 8 percent RH and higher temperatures.

Specifically, it is recommended that kenaf seeds be stored in a humid environment of between -

10 percent to 10 percent to remain viable for about 5 and half years (Toole et al 1960)

Before kenaf seeds are stored, it is treated, cleaned, conditioned and dried to avoid attack by

pathogens that could reduce its viability. Chemical treatment of kenaf seed is undertaken to protect



the seeds from fungal attacks which could reduce the viability of the seeds over a fairly long period

before planting. Recommended chemicals for treatment include fungicides like metalaxy, carboxin

and captan which must be applied individually or a combination of the three chemicals (Cook et al,

1992).

Research on the significance and role of seed treatment indicate that it enhances plant stand, aids

effective germination and drastic reduction in mold growth. In addition, seed treatment plays a

significant role in seed preservation for maximum performance when planted later and helps the

seed to resist soil-borne pathogens that could impact the healthy growth of the seeds when planted.

Notwithstanding, the effectiveness of seed treatment, the preferred approach would be to develop

pathogen resistant varieties that require less expenditure on treatment when harvested.

Cleaning kenaf seeds and properly drying them also helps to avoid the seeds heating up soon after

harvest. The recommended method for cleaning the seeds is the Crippon Model M-4272, which

was reported to prove effective in retaining the seed moisture at between 14.0 % to 16.5 %

optimal range. The need to properly dry the seeds is to ensure that a given level of the moisture

appropriate for prolonged bagging is maintained. Having the seed too dried will reduce the optimal

moisture content required to be kept at 14. 0 percent and not drying the seeds to required levels

will encourage mold growth that has the potential to reduce the effectiveness of the seeds when

bagged and preserved for planting at a future date.



3.7. MACHINERY AND EQUIPMENT FOR KENAF SEED PRODUCTION

a. TRACTOR MOUNTED UPM KENAF SEED PLANTER.

Source: Alibaba.com; Prices range from $6,000 to $12,000.

This kenaf seed-planting machine was developed by University of Putra Malaysia (UPM) in 2012

and is available at Alibaba.com. It has capacity of planting two hectares (precisely, 1.7 hectares) a

day and 2,000 Kenaf seeds. It also tills the soil and plants simultaneously. It is tractor mounted and

very efficient. They are available at Alibaba.com online shopping platform.



b. Kenaf Seed Thresher

;

Source: Alibaba.com; prices range from $4,600 to $6,000.

This kenaf seed thresher machine removes the kenaf seeds from dry kenaf stalks. It has capacity to

thresh about 1 ton of dry kenaf stalks per day. The thresher is about 98 percent efficient and is

widely recommended for kenaf farmers, especially those who specialize in kenaf seed production.



d. Kenaf Mechanized harvesters

e. Source:

Alibaba.com; Prices range from $5, 000 to $8,000

This tractor- mounted- kenaf harvester is designed to harvest at least a hectare of kenaf stems daily

It is for medium scale kenaf farmers and very efficient. It is available at Alibaba.com and can be

delivered to buyers on a fee at a very short period of time.



f. Kenaf hand driven harvesters

Source: Alibaba.com; Prices range from $15,000 to $22,000

This kenaf harvester is hand driven and is suited for small and medium scale kenaf farmers. It has

capacity to harvest a minimum of 2 acres of kenaf seed daily and it fuel efficient.

g. Kenaf Seed Silos: Source: Kotzur PTY. Ltd. email: [email protected].

http://kotzur.com/wp-content/uploads/seedsilo.jpg



3.8 PRODUCTION PLANNING.

The estimated farm land requirement for kenaf seed requirement are 10 hectares for 10,000 tons of

seed; 20 hectares for 25,000 tons of Seed and 30 hectares for 30,000 tons of Seeds. These estimates

are informed by the projection that seed requirements to cultivate at 100,000 hectares of kenaf land

will be about 1,3 million tons of seeds between 2018 and 2022. The seed multiplication production

will engage several thousands of farm families and create job opportunities for youths and women in

the rural areas.

Table 6: Kenaf Seed Production Plans and Raw Material Estimates Per Hectare

Raw Material Hectare Use per (ha)

Seeds 1 hectare 15kg (ha)

Herbicides 1 (ha) 3 gallons (12 liters) (ha)

Insecticides 1 (ha) 4 gallons (16 liters) (ha)

Fertilizers 50kg 1 (ha) 10 bags (ha)

Source: Consultants estimates

Table 3.1 above estimates that about 35,000 improved seeds will be required for the cultivation of

of one hectare of land. On the other hand, the herbicides and insecticides required for the treatment

of the plants will be about 3 and 4 gallons of 25 liters.



Table 7: Scalable Seed Farm Capacity Utilization and Output projections 2018-2022

Years 2018 2019 2020 2021 2022

Capacity utilization (%) 50 60 75 85 100

Small Scale ( 10 hectares) (tons) 5,000 7,000 8,500 9,600 10,000

Medium Scale ( 20 hectares) (tons) 12,000 14,500 18,700 22,800 25,000

Large Scale ( 30 hectares) (tons) 20,000 22, 500 25,000 28,000 30,000

Note: The projected Kenaf Seed output is in ‘000 of tons spread over a period of 5 years.

3.9: ORGANIZATION AND MANAGEMENT

The organization and management of kenaf Seed Production remains critical to its success. The

scope of the kenaf farming business and the legal structure determines the type of management to

put in place for successful delivery on strategic corporate objectives.

3.9.1 Legal Structure of Kenaf Seed Production Business

Kenaf Seed Production farm business in Nigeria can be organized as a sole proprietorship in which

case the business is owned and managed by one man. However, the sole proprietorship limits the

expansion of the business to industry level that require input of professionals and technical experts

to professionally manage the investment and gain access to bank investible funds for growth and

expansion. Though sole proprietorship fits into the subsistence levels of kenaf farming business



currently practiced in Nigeria, the development of the kenaf value chain will benefit more from

limited liability corporate business legal structure.

3.9.2 Limited Liability Corporate Structure Model.

The development of Kenaf value chain in Nigeria targets mechanization and commercialization

of kenaf farming business to sustain the backward integration of kenaf farm outputs for

industrialization and economic growth. To transit from subsistent kenaf farming to large scale

commercial and mechanized ones requires a legal structure that maximizes professional management

and economies of scale in operation. Therefore it is highly recommended that investors in kenaf Seed

production farm business should consider partnerships through limited liability corporate legal entity model.

3.9.3 Management System

I. The Board of Directors

A critical success factor in setting up a kenaf Seed farm business would require a strong and

transparent corporate governance structure to ensure transparency in its operations. A major

prerequisite for a strong management system is the composition of the board of directors. For

effective management of the envisaged kenaf seed farms, there will be clearly demarcated

functions between the Board and the Management of the firm. Often businesses of the envisaged

scale die when there overlapping functions between the Board and the Management of the firms.

The role of the Board will be to ensure that the corporate objectives of the firm are at all times

achieved and that the vision and mission of the firm is clearly guiding management operations.



Therefore the choice of members of the Board for the envisaged kenaf seed production firm will

consider the following criteria:

a. Credibility and proven industry experience and expertise in their chosen fields of endeavor

b. The constitution and size of the board must follow extant regulations of the industry

c. A fair mix of various industrial experiences such as farming business, engineering,

marketing and technology will ensure that maximal utilization of Board experience in

efficient and effective running of the kenaf seed production firm business.

d. Those who constitute the Board should have financial commitment to the firm.

2. Secretary to the Board.

There shall be a secretary to the board with the responsibility to take board minutes, circulate

communication on meeting days and follow up with board decisions. The relevant qualification for

the secretary to the board shall be a degree in Law and other relevant qualifications in secretarial

matters.

3. Management Team

The management team will be composed of qualified persons with relevant experiences in their

areas of expertise and ability to deliver on the key corporate objectives of the firm. The criteria for

recruiting Management staff are as follows:

a. Sound management training and experience



b. Clear roles and pre-set key deliverables for each manager to enable performance

monitoring

c. Proven ability to act purposefully with minimal supervision in achieving the corporate

goals of the firm.

The following are recommended management Team for the envisaged kenaf Seed production firms

business is as follows:

i. Chief Executive Officer- CEO

The kenaf Seed production firm should hire a CEO whose responsibility will be to oversee the

operations of the farm on day- to- day basis. Identify the strengths, weaknesses and opportunities

of the firm. The CEO/ MD will arrange and manage resources to maximize the strengths of the

investment, while minimizing its weaknesses to ensure that the farm operates sustainably and

profitably. Coordination of management activities and overall planning and execution of strategic

plans of the firm to achieve investment goal will be the responsibility of the CEO. Therefore, the

CEO will be someone with at least a First degree in business related courses such as management,

economics, finance and accounting. An MBA will be an added advantage but will have at least 5

years cognate experience in farm management field

ii. Farm Manager/s

Farm manager are required to head the field operations in the kenaf farm and to ensure the

application of professional farm management skills to achieve the yield to achieve the ultimate

marketing strategy for the firm. Farm managers must be knowledgeable on agronomic best



practice in seed production. The important considerations about growing kenaf for seed production

include knowledge of when to plant, soil preparation, harvesting, storage and appropriate

machinery to be purchased and effective supervision of its use in the farms. The requisite

qualification of Farm managers should be the possession of Bachelors in Agriculture degree in

either Crop production, agronomy or farm management. At least 5 years cognate experience in the

management of related field will be an added advantage.

iii. Marketing Manager.

The marketing manager of the farm will oversee the development of target markets for the farm

product and building marketing access and relationships. The task of identifying existing markets

and developing new ones for seed distribution to satisfy market demand will be a major function of

the marketing manager. All marketing personal will be directly under his or her control. The

requisite qualification for the marketing manager will be a first degree in Marketing or related

fields of economics and finance. An MBA will be an added advantage and at least 5 years of

cognate experience working in related fields.

iv. Manager (Administration)

The Manager in charge of Administration will be responsible for the day to day management of the

offices to ensure that relevant services are effectively rendered by the staff. It will be the , and

relevant staff needed by the firm to effectively function well are properly motivated and

supervised. The procurement and distribution of all needed inputs into the farm will also fall under

the purview manager administration. The Manager (Administration) will possess first degree in



Personnel management, Administration or Business Management or other related with at least 5

years cognate experience in heading the Administration Dept. of a farm. An MBA or related

higher degree will be an added advantage. There will be three main units in the Administration

Department.

a. Accounts Unit: Accountant will head this unit with at least a first degree in Accounting.

Possession of professional certificate such as ICAN, ANAN etc will be added advantage.

The Chief Accountant will oversee all financial and book keeping records and prepare

annual financial reports of the firm.

b. Personnel Unit: The Personnel unit will be headed by a staff with the responsibility to

recommend proposals on recruitment, remuneration, training and staff discipline. The

requisite qualification will be a first degree in Personnel Management and related field such

as human resources management or Administration. A 5 years cognate experience in

related fields will be required to ensure successful delivery of the mandate of the human

resources department.

c. Procurement Unit: The Procurement officer will be reporting directly to Manager

(Administrative). The function of this unit will be arranged for the procurement of all input

inputs and ensure accountability of all procured inputs. The unit will also be responsible for

over sea the store.



3 Other Personal Requirements

a. Drivers (Tractors and other farm equipment’s)

b. Farm hands (unskilled labour to engage in daily farm maintenance)

c. Office administrative staff likes secretaries and clerks as the case may be.

Fig 12: Proposed Organogram

The Board of Directors

Chief Executive Officer- CEO

Farm Manager Manager (Administration) Marketing Manager

Agronomists

Machinery

operations and

maintenance

Farm maintenance

Accounts

Human Resources

Procurement

Market Development

Distribution management

Communications

Company Secretary

and legal adviser



Table 8a: Scalable Manpower Requirement Schedule- Management Staff

Management Staff

Job Roles Small scale Medium Scale Large Scale

10 hectares 20 hectares 30 hectares

CEO Overall manager 1 1 1

Manager Farms 1 2 3

Manager Administration 1 1 1

Manager Marketing 1 1 1

Total 4 5 6

Table 8b: Scalable Manpower Requirements Schedule – Farm Departments

Farm Dept



Agricultural Experts Farm advisers 3 4 6

Mechanics Maintenance 4 6 8

Tractor Drivers Cultivation 3 5 8

Farm hands ( unskilled) General Services 10 18 25

Total 20 32 47



Table 8c: Scalable Manpower Requirement: Administration Department

Administration

Dept



Accountants Accounts/ Book

keeping

3 4 6

Secretaries/ ICT Secretarial/ Computer

services

4 4 5

Procurement

officers

Procurement 3 3 3

Personnel officers Human resources 3 5 6

Drivers Driving 4 6 8

Messengers General Services 3 4 6

Cleaners Cleaners 4 6 8

Guards Security 4 6 8

Total 28 42 50



Table 8d: Scalable Manpower Requirements: Marketing Department

Marketing

Department

Job Roles Small scale Medium

Scale

Large Scale


Salesmen Sales Operations 4 6 12

Wholesale

Distributors

Distribution/ Silos

management

6 6 6

Retail

Distributors

Distribution 12 15 20

Market

Development

officers

Promotional officers

and Advertisements

5 5 6

Total 27 32 34



3.10: MARKETING STRATEGIES.

The target market for kenaf seeds is a farmer who is desirous of having the supply of improved

seeds to increase their farm yields. Currently, over 15 thousand farmers of kenaf seeds are

identified all over Nigeria and cultivating a combined 500 hectare of kenaf farms. The kenaf seed

demand for these farmers is under short supply even to address the demand for 500 hectares. To

encourage the demand and supply of kenaf seeds to this target markets, the following factors must

be properly addressed.

A. Production Cost: To attract investors into the market for kenaf seed production the cost of

inputs such as land, machinery and labour must be such that the unit production cost is low enough

to sustain the supply of kenaf seeds to the farmers.

B. Pricing Strategy: The overall pricing strategy for kenaf seed producer would be to competitive.

Currently to global kenaf seed price is $3/lb (which translates into N2,150 the of exchange rate of

N450 to $1). A strategy that delivers one pound of kenaf seeds at a lower price will make imports

uncompetitive. The strategy would be to ensure an efficient production cost that will deliver

relatively affordable demand prices for kenaf seeds by farmers. Currently, the price of kenaf seeds

are heavily subsidized by government, but this is not a sustainable strategy as the value chain of

kenaf become better developed and the returns for kenaf investments starts rising in the future. The

business would have been self-sustaining and government might consider the option of allowing

market forces determine the demand and supply of kenaf seeds.



D. Distribution: Kenaf seeds can be distributed nationwide using whole sale and retail outlets.

The construction of Seed Silos in the six Geopolitical Zones will help to distribute the seeds to

wholesale and retail outlets. The distribution channels could be through locating warehouses at

state capitals of kenaf producing states or appointing dedicated retail outlets that will be purchase

for onward distribution to rural farmers. However, for the seeds to be healthy and to yield

maximally, there is need to store them in given temperatures and humidity. Infrastructure for

ensuring that the seed are properly treated and preserved will be made by whole sale and retail

companies in the distribution chain.

Market Development: The market development for kenaf seeds will involve advertising and

targeted promotional fares for farmers. Another process of market development will be to organize

agricultural fares where seed farmers will showcase their products for kenaf farmers to buy. The

market for kenaf seeds can be also be extended to ECOWAS and other African countries interested

in developing their kenaf value chains. The sensitization of the kenaf farmers to the role of

improved seeds in their expected farm yields will enhance the kenaf value chain development in

Nigeria sustainably.

3.11: COMPETITION STRATEGIES:

However, currently, there is complete absence of competition in the market for kenaf seeds

currently, mainly because the government through IAR&T and RMRDC has taken up the

responsibility of supplying improved seeds to the farmers at little or no costs. Notwithstanding, it

has been observed that for sustainable development of the kenaf value chain in Nigeria, supply of



seeds must be made a profitable investment and requires a special incentive structure designed to

de-risk investment in commercial production of seeds.

Nonetheless, the competition strategy for kenaf farmers would be targeted at both domestic and

external investors who would take advantage of the huge market for seeds in Nigeria to considered

alternative supply chains. Therefore, competitors for kenaf Seed Production investors are as

follows:

a. Seed Importers: When the kenaf value chain is fully developed, importers will target some

lucrative value chains to make money. Such market segments will be kenaf Seed imports.

Therefore, if policies are not put in place to discourage seed imports, this could become huge risk

for kenaf seed production investor

b. Research Institutes: Research institutes who are involved in Seed development may improve

their capability of large scale seed production as a way to secure a substantial chunk of the kenaf

seed market share.

The competition strategy for kenaf seed producers would be to take advantage of their scale

operations to reduce production costs in the market for seeds. Another effective strategy would be

to diversify their distribution outlets to ensure that demand for seeds are easily met by their

network of distribution outlets. There could also be advantage in the investors in silos to ensure

that the seed are well treated and in perfect condition for improved yield performance.



4.0 FINANCIAL FEASIBILITY FOR KENAF SEED PRODUCTION PROJECT.

4.1 Introduction

This section translates kenaf seed demand and supply forecasts into quantifiable financial outlays

to determine investment feasibility and profitability or otherwise within a five-year time frame

2018-2022. The financial study starts with outlining the budgets for fixed and variable input,

manpower requirements and full financial forecasts featuring summary of financial needs, sources

and application of loan funds, income statements, cash flows and balance sheet analysis. The

financial study will be concluded with an evaluation of investment using important financial ratios

such as rate of return on investment, rate of return on sales, and breakeven point Analysis (BEP).

4.2 Summary of Financial Needs

The total initial investment capital for a medium scale kenaf seed farm is estimated at 100 million

naira (one hundred million). This sum can be sourced 51 percent through owners’ equity

(amounting to N51 million) and 49 percent through bank loans (amounting to N49 million naira).

The sourced funds will provide working capital needed for funding variable requirements such as

raw materials and other sundry expenses that are to be repaid through cash during the business’s

next full operating cycle, generally one year. The Growth capital will be sourced based on the

prospects of increase in the profits of the business and to be repaid over several years. Equity

capital will be raised from investors who desire to take the risk in return for profit and dividend

returns in case the company decides to go public ie to be enlisted in the stock market.

Therefore, the major requirement of the kenaf seed production investment in the application of the

sourced funds will be to fund machinery and equipment, construction of farm house and offices,



construction of Seed silos, purchase of raw materials and payment of salaries and wages. The

details of application of the funds are presented in the subsequent subsections dealing with the

specifics of the financial feasibility.

4.3 Sources of funds for the Business

The most important use of any business plan is for sourcing investment funding. Funding for

business can come from three main sources, namely, personal savings, loan from banks, and equity

finance from investors who are convinced that the business will yield returns to them. For this

particular business plan, of the N100 million (One hundred million Naira) investment outlays, the

funding is expected from the following sources:

a. 51% (N51m) will come from contributions from Board Members.

b. 49% (N49m) from loans to be sourced from banks.

It is important to note that sourcing capital to fund a business requires professional advice.

However, if the annual return of the business is sufficient to fund its growth prospects, there may

be no need for writing a business plan. The fact is that business plans are mainly meant to attract

funding from investors such as banks and leveraged individuals. The distribution of sources of

funding the business is not cast in stone. The proportions can change depending on the relative

advantage one sources offer over others. For instance, the advantage equity finance has over debt

is that it does not require servicing. The equity investors are stakeholders motivated to take risks

and reap rewards if the business does well and also to suffer losses if otherwise. Bank loan is a

debt that must be serviced on an agreed interest payments over time. It does not depend on whether



the business succeeds or not. This explains why a business plan must be put in place to convince

backers that the prospects of the business are bright to warrant their investments. Initial

contributions from the business owners are also a risky stake as the success or failure of the

business impacts their investment.

4.4 The Vision and Mission of the Business

A business should be guided by both vision and mission statements. Its purpose is to inspire both

lenders and owners to see the opportunities and to keep their focus on achieving their set

objectives respectively. For this business, the vision would be:

a. Vision Statement

Our vision is that in the next five years, no kenaf farmer in Nigeria will be constrained by lack of

improved seeds to boost their productivity and profit.

b. Mission Statement

Our business is farming kenaf to produce the best quality seeds for use by farmers and to ensure

that kenaf production in Nigeria becomes an anchor for Nigeria’s industrialization and

diversification.

4.5: Budget Keys for Financial Analysis and Projections

The information needed for building the budget for preparing the financial statements are

presented below:

Fig 13: Budget Assumptions for Financial Analysis and Projections

Price of Kenaf Seeds = $6.00 per 1000 kg (= One pound)

Required kenaf Seeds is 8kg per hectare

Seed Yield = 3,819kg per hectare

Seed Plant Population = 542,510 per hectare



The information in the box is meant to guide budgeting and financial projections of the company

From the technical analysis done, the required amount of seeds for optimal cultivation of one

hectare was put at 8kg/ha, while the seed plant population is 542,510 kenaf stands. The price of

kenaf seed currently in the market is $6.00 per pound and the expected yield of kenaf seed is

3,819kg per hectare at optimal levels.

4.6 : Kenaf Seeds Sales Projection for financial Analysis

The corporate objective of the business is to capture 15% market share of the projected kenaf Seed

supply needed for the cultivation of at least 100,000 hectares between 2018 and 2022.

Table 9: Company Projected Kenaf Seed Sales ( 2018 – 2022)

Years Projected Demand Projected Hectarage Projected Sales at 15% Market Share

2016 50,150 500 7522.5

2017 500,150 5000 75022.5

2018 1,300,000 10,000 195000

2019 2,600,000 20,000 390000

2020 6,500,000 50,000 975000

2021 13,000,000 100,000 1,950, 000

2022 18,000,000 150,000 2,700,000

Table 1 above presents the projected market demand and hectareage of kenaf farms in the years

ahead. From the schedule, the demand for kenaf seeds in 2020 will be about 6.5m tons of kenaf

seeds to be used in cultivating 50,000 hectares of kenaf farms, while the Seed production firm

targets 15% market share which amounts to 390,000 tons of kenaf seeds ( note the blue colored

section is historical seeds demand and perhaps supply. The markets are going to be in states with

high density of kenaf farmers such Oyo, Ekiti and Ogun states. The West African sub-region will



also be veritable source of market for kenaf seeds given that some countries also have robust kenaf

development programmes.

4.7 Budgets, Full Financial Projections and Analysis

In the preceding section we presented the demand and sales forecast of kenaf seeds from 2018 to

2022, and also presented the budget keys for financial projections and analysis. In this section we

shall the present the full budgets and financial projections to determine the profitability or

otherwise of the investment. The financial analysis starts with schedules of variable and fixed costs

estimates. Budget is a detailed plan that outlines future expectations in quantitative terms. Its

purpose in business plan development is to give formality to the planning process. Equally if the

budget involves other people, it serves as a way of communicating the plan to these other people.

Ultimately, the process of preparing a budget is very critical in planning for the future (Label,

2013)

4.7.1 Budget for Fixed Input Requirements and Costs

Kenaf Seed production requires fixed cost expenditures that do not change as production output

changes over time. These costs are made up of the following items:

Table 10: ESTIMATED FIXED INPUT COSTS

S/N ITEMS UNIT COST TOTAL COST

A LAND PROCUREMENT/ FARM HOUSE

1 Land Procurement/ leasing 30, hectares N12,000,000.00



2 Farm House Building and Offices N22 m N 22,000,000.00

Sub-Total N33,000,000.00

3 Depreciation (5%) N1,650,000.00

B MACHINARY/ EQUIPMENT

3 Tractors (2 number) 5.2m x 2 N 10,400,000.00

4 Tractor mounted harvester (1 number ) $4,000.00@ N400/$1 N1,600,000.00

5 Seed Thresher (1 number) $6,000.00@N400/1$ N 2,400,000.00

6 Construction of Seed silos (2 number) $10,000.00@N400/1$ N 8,000,000.00

7 Herbicide Sprayer (2 number) $2000x2 = $4,000.00 N1,600,000.00

8 Pesticide Sprayers ( 2 number) $2,300x 2= $4,600.00 N1,840,000.00

Sub-total N25,840,000.00

10 Depreciation (10%) N2,584,000.00

TOTAL N59,840,000.00

Note: The costs are based on current and projected market prices. Exchange rates are based on

current average rates of N400/$1. Depreciation was calculated using The Straight Line method at

10 percent for Buildings and 5 percent for machinery and Equipment.

Table 1.1 above presents the estimated fixed costs of inputs which are captured as long term costs

that its repayment are spread over a long period of time.



4.7.2 Budget of Variable Inputs and Costs

Variable inputs and their associated costs are short term in nature and are expected to change in

relation to change in market demand for the products. In other words, as market output for

produced seed increase, the demand for variable inputs increase linearly.

Table 11: Estimated Variable inputs and Costs (Farm Field Operations)

S/N ITEM Description/

Quantity

Unit Cost Total Cost (30

hectares)

1 Seeds 8kg/ha N20,800/ha x 30 N624,000

2 Fertilizer (Nitrogen) N.P.K

20-10-10 (50kg/bag)

15 bags/ha 15x 10,000x30 = N4,500,000.00

3 Herbicides (Pre-emergence) 6 liters/ha N2000 x30 N60,000.00

4 Herbicides (Post emergence) 5 liters N2200 x 30 N66,000.00

5 Furadan insecticide 6kg N1,500/ha X30 N45,000.00

6 Nuvacron Insecticide 5 liters N2000/ha X30 N60,000.00

7 Chemicals for seed treatment 10 liters N2000/ha X30 N60,000.00

8 Energy costs (ploughing,

harrowing, planting, weeding

harvesting and threshing)

5,000 liters of

petrol/ha

N5000 X 30 N150,000.00

9 Insurance 4% N100,000,000.00 N4,000,000.00



10 Bank Service Charge 5% N45,000,000.00 N2,250,000.00

11 Interest expenses 22% N45,000.000.00 N9,900,000

TOTAL N21,715,000.00

Note: The dollar is converted at a rate of N400 = 1$ and used to determine the cost of inputs

Table 11 above presents the variable inputs on the farm field that includes the seeds, fertilizer,

herbicides and insecticide. The quantities required for a hectare was first estimated in column two

and their projected costs for 30 hectares which is the to be continued

Table 12. Schedule of Manpower Requirements and Labour Costs: Management Staff

S/N Manpower Requirement Number Monthly Salary/ Wages Annual Total

1 CEO 1 N250,000 X12 N3,000,000

2 Manager ( Farms) 1 N130,000 X12 N1,560,000.00

3 Manager (Administration) 1 N130,000X12 N1,560,000.00

4 Manager (Marketing) 1 N130,000 X12 N1,560,000.00

SUB-TOTAL N7,680,000.00

Table 13: FARM DEPARTMENT STAFF BUDGET


1 Agronomists/ Farm experts 3 N120,000 X12 N1,440,000.00

2 Machine servicing staff 2 N60,000.00 X12 X2 N1,440,000.00



3 Tractor Operators 3 N60,000.00 X12X2 N1,440,000.00

4 Unskilled Farm hands 6 N25,000 X12X10 N1,500,000.00

SUB-TOTAL N5, 850,000.00

Note:

Table 14: ADMINISTRATION DEPARTMENT


1 Accountants 2 N120,000.00 X12X2 N2,880,000.00

2 Secretarial/ ICT Staff 2 N70,000.00 X12X2 N1,680,000.00

3 Procurement staff 2 N60,000.00 X12X2 N1,440,000.00

4 Personnel officers 3 N60,000.00X12X3 N2,160,000.00

5 Drivers 4 N30,000.00X12X4 N1,440,000.00

6 Cleaners 3 N25,000.00X12X3 N900,000.00

7 Messengers 2 N20,000.00X12X2 N480,000.00

8 Security Staff 4 N25,000.00X12X4 N1,200,000.00

SUB-TOTAL 12,180,000.00

Table 15: MARKETING DEPARTMENT STAFF BUDGET


1 Sales men 4 N40,000.00X12X4 N1,920,000.00

2 Seed Silos maintenance staff 4 N40,000.00 X12X4 N1,920,000.00



3 Retail outlets Staff 4 N40,000.00X12X4 N1,920,000.00

4 Promotional Staff 3 N50,000.00X12X3 N1,800,000.00

Advertisement budget 4 slots N250,000.00 X4 N1,000,000.00

Sub-Total N8, 560, 000.00

GRAND TOTAL N33,925,000.00

1.0 Table 16: Estimated Fixed Iinput Budget

EXPENDITURE ITEMS Total Cost ( Naira)

FIXED COST EXPENDITURE

Land Lease/ Purchase N12,000,000.00

Farm House/ Offices Construction N22,000,000.00

Machinery and Equipment N25,840,000.00

Total N59,840,000.00

Table 17: Estimated Variable Input Budget

EXPENDITURE ITEMS Total Cost ( Naira)

VARIABLE COST EXPENDITURE

Variable Inputs N21,715,000.00

Management Salaries N7,680,000.00



Line Staff Salaries N26,590,000.00

Miscellaneous/ Contingencies N5,000,000.00

Total N60,985,000.00

Table 18: Seeds Cost of Production, Revenue and Profit Estimates

PRODUCTION (QUANTITY AND COST)

Items

Quantity Produced Unit cost Total Cost Estimated Profit

SEEDS

PRODUCTION

20 tons ( 44,444.4lbs) N1,372.17 N60,985,000.00 N88,888,000.00

Less

N60,985,000.00=

SALES (QUANTITY AND PRICE)

Quantity Sold Unit price Total Revenue

SEED SALES 20 tons ( 44, 444.4

lbs)

N2000.00/

$5 per Ib

N88,888,000.00

TOTAL PROFIT N27,903,040.00

Note: Unit Costs and Sales price were based on information from Kenaf Farmers and Internet Search.



Note: Basic Assumptions for the Preparation of Financial Statements

1. Cost of Goods vary upwards as plant Capacity Utilization increases

2. Insurance premium decreases as the asset value decreases due to depreciation

3. Goods sold increases as plant capacity Utilization increases

4. Loss is recorded when cost of goods is higher than Sales

5. Bank Service charges varies with Central Bank monetary policy changes



4.8 Financial Statements Analysis

4.8.1 INCOME STATEMENT

TABLE 19: Estimated Income Statement: Profit and Loss Account Projections 2018-2022

Year ended December 31ast

2018 2019 2020 2021 2022

Sales N88, 888,040.00 N120, 934,000.00 N89,913,235.00 N114,567,234.00 N348,657,345.00

Cost of Goods Sold N60,985,000.00 N72,345,000.00 N68,679,132.00 N89,145,678.00 N69,234,976.00

Gross Profit N27,336,040.00 N48,589,000.00 N21,234,103.00 N25,421,556.00 N279,422,369.00

OPERATING EXPENSES:

Salaries and Wages N14,270,000.00 N15,345,210.00 N15,658,103.00 N17,439,264.00 N19,345,837.00

Seeds Purchase N624,000.00 N234,000.00 N129,000.00 N100,000.00 N124,000.00

Fertilizer ( Nitrogen NPK) N1,500,000.00 N1,600,000.00 N2,345,789.00 N2,457,689.00 N1,245,908.00

Herbicides(Pre-emergence) N60,000.00 N63,459.00 N76,000.00 N123,000.00 N89,897.00

Herbicides(Post-emergence) N66,000.00 N68,865.00 N82,890.00 N127,987.00 N102,675.00

Furadan insecticide N45,000.00 N50,142.00 N58,679.00 N60,436.00 N67,812.00

Nuvacron insecticide N60,000.00 N62,000.00 N67,000.00 N70.567.00 N72,543,00



Insurance N200,000.00 230,000.00 N430,000.00 N560,456.00 N120,000,000.00

Chemicals for seed treatment N60,000.00 N64,000.00 N71,456.00 N76,298.00 N89, 432.00

Bank Service charge N52,000.00 N60,000.00 N109,456.00 N150,467.00 N220,000.00

Maintenance expenses N65,000.00 N65,000.00 N76,000.00 N82,000.00 N100,000.00

Energy costs( fuels/ disel) N150,000.00 N200,000.00 N300,000.00 N450,458.00 N648,000.00

Total Operating Expenses N16,882,000.00 N18,042,676.00 N19,404,373.00 N21,628,055.00 N141,944,129.00

Net income from operations N10,454,000.00 N30,546,324.00 N1,829,730.00 N3,793,401.00 N137,478,240.00

Other Revenues & Expenses

Sales of bast Fiber Revenue N4,000,000.00 N5,000,000.00 N1,345,786.00 N6,379,123.00 N7,456,256.00

Bast fiber processing Expense (N350,000.00) (N420,000.00) (N534,000.00) (N654,890.00) (N857,000.00)

Interest expense (N5,009,900,000) (N6,005,234.00) (N7,234,678.00) (N10,768,345.00) (N12,564,178.00)

Net income before taxes N9,094,100.00 N29,121,090.00 (N4,593,162.00) (N6,250,711.00) N131,513,318.00

Less: Income Taxes (CIT =30%) N2,728,230.00 N8,736,327.00 0.0 0.0 N39,453,995.00



Net Income N6,365,870.00 N20,384,763.00 (N4,593,162.00) (N6,250,711.00) N92,059,323.00

4.8.2: CASH FLOW STATEMENT

Table 20: CASH FLOW STATEMENT 2018-2022

Year ended 31st December 2018 2019 2020 2021 2022

CASH FLOW FROM OPERATING

ACTIVITIES

CASH INFLOWS

From Customers N88,888,000.00 N120, 934,000.00 N89,913,235.00 N114,567,234.00 N348,657,345.00

LESS: Accounts Receivable (N21,000,000.00) (N32,345,000.00) (N8,679,132.00) N20,134,497.00 N34,276,789.00

Revenues from sale of bast fiber N4,000,000.00 N5,000,000.00 N1,345,786.00 N6,379,123.00 N7,456,256.00

CASH OUTFLOWS

Cost of Goods Sold N60,985,000.00 N72,345,000.00 N68,679,132.00 N89,145,678.00 N69,234,976.00

Inventory N5,000,000.00 N10,246,769.00 N7,386,124.00 N6,349,126.00 N8,321,876.00



LESS: Accounts payable (N8,000,000.00) (N7,689,217.00) N5,678,903.00 N7,890,134.00 N5,213,943.00

Salaries and Wages N14,270,000.00 N15,345,210.00 N15,658,103.00 N17,439,264.00 N19,345,837.00

Seeds Purchase N624,000.00 N234,000.00 N129,000.00 N100,000.00 N124,000.00





Nuvacron insecticide N60,000.00 N62,000.00 N67,000.00 N70.567.00 N72,543,00

Pre- Paid Insurance N200,000.00 230,000.00 N430,000.00 N560,456.00 N120,000.00

Chemicals for seed treatment N60,000.00 N64,000.00 N71,456.00 N76,298.00 N89, 432.00


Maintenance expenses N65,000.00 N65,000.00 N76,000.00 N82,000.00 N100,000.00

Energy costs( fuels) N150,000.00 N200,000.00 N300,000.00 N450,458.00 N648,000.00



Bast fiber processing Expense (N350,000.00) (N420,000.00) (N534,000.00) (N654,890.00) (N857,000.00)

Interest expense (22%) (N2,200,000.00) (N2,640,000.00) N1,540,000.00) (N1,320,000.00) (N1,760,000.00)

Income Taxes (CIT =30%) (N2,728,230.00) N8,736,327.00 0.0 0.0 N39,453,995.00

Net Cash Flow from Operating Expenses (N11,249,000.00) (N5,032,555.00) (N16,494,643.00) (N22,226,243.00) N60,284,893.00

CASH FLOW FROM INVESTING ACTIVITIES

Land purchase/ lease (N4,000,000.00) N2,000.000.00 N3,000,000.00 N2,000,000.00 N1,000,000.00

Cost of Farm House and Offices (N6,,000.000.00) N5,000,000.00 N5,000,000.00 N3,000,000 N4,000,000.00

Purchase of Machinery and Equipment (N8,000,000.00) N5,000,000.00 N4,000,000.00 N3,000,000.00 N5,000,000.00

Total Cash flow from Investing Activities (N18,000,000.00) (N12,000,000.00) (N12,000,000.00) (N8,000,000.00) (N10,000,000.00)

CASH FLOW FROM FINANCING

ACTITIVITIES

Owners Investment N21,000,000.00 N15,000,000.00 N8,000,000.00 N9,000,000.00 N7,000,000.00

Borrowing from Banks N22,000.000.00 N9,000,000.00 N6,000,000.00 N4,000,000.00 N8,000,000.00

Total Cash flow from financing Activities N43,000,000.00 N24,000.000.00 N14,000,000.00 N13,000,000.00 N15,000,000.00



Net increase in Cash and Cash Equivalents N3, 760,000.00 N6,967,445.00 (N14,494,643.00) (N17,226,243.00) N65,284,893.00

4.8.3: BALANCE SHEET STATEMENT

Table 21: Estimated Balance Sheet Analysis and Projections 2018-2022

Year Ended December 31st 2018 2019 2020 2021 2022

ASSETS

Short- term Assets

Cash N3, 760,000.00 N6,967,445.00 (N14,494,643.00) (N17,226,243.00) N65,284,893.00

Accounts Receivable N21,000,000.00 N32,345,000.00 N8,679,132.00 N20,134,497.00 N34,276,789.00

Allowance for bad debts (N2,345,765.00) (N1,347,890.00) N2,634,190.00 N1,589.345.00 N2,678,042.00

Inventory N5,000,000.00 N10,246,769.00 N7,386,124.00 N6,349,126.00 N8,321,876.00

Pre-Paid Insurance N200,000.00 230,000.00 N430,000.00 N560,456.00 N120,000.00

Total Short Term Assets N23,854,235.00 N48,441,324.00 N4,634,803.00 N9,817,836.00 N110,681,600.00



Long Term Assets

Pre-Paid Insurance N200,000.00 230,000.00 N430,000.00 N560,456.00 N120,000.00

Land Lease/ Purchase N12,000,000.00 N12,000.000.00 N10,200,000.00 N8,160,000.00 N1,000,000.00

Farm House/ Offices Construction N22,000,000.00 N22,000,000.00 N18,700,000.00 N14,960,000.00 N4,000,000.00

Machinery and Equipment N25,840,000.00 N25,000,000.00 N21,250,000.00 N17,000,000.00 N5,000,000.00

Less Depreciation N4,234,000.00 N4,234,000.00 N4,234,000.00 N4,234,000.00 N4,234,000.00

Total Long Term Assets N55,606,000.00 N42,996,000.00 N46,346,000.00 N36,446,654.00 N5886,000.00

Total Assets N79,660,235.00 N91,437,324.00 N50,980,803.00 N46,264,292.00 N116,567,600.00

LIABILITIES AND OWNERS EQUITY

LIABILITIES

Short-Term Liabilities

Accounts payable N8,000,000.00 (N7,689,217.00) N5,678,903.00 N7,890,134.00 N5,213,943.00

Provision for Taxation N2,728,230.00 N8,736,327.00 N1,087,128.00 N3,247,672.00 N2,458,975.00



Loan payable (Amortization + interests@22%) N24,200.000.00 N10,980,000.00 N7,320,000.00 N8,800,000.00 N8,000,000.00

Total Short Term Liabilities N34,202,235.00 N27,405,544.00 N14,086,031.00 N19,937,806.00 N9,760,000.00

Long- Term Liabilities

Total Loans Payable N31,000,000.00 N44,115,780.00 N10,795,780.00 N49,000,000.00 N49,000,000.00

Total Liabilities N65,202,235.00 N69,425,544.00 N40,881,811.00 N68,937,806.00 N58,760,000.00

OWNERS EQUITY

Owners investment N2,000,000.00 N12,000,000.00 N8,000,000.00 N5,000,000.00 N7,000,000.00

Retained Earnings N1,000,000.00 N10,011,780.00 N2,000,000.00 N3,456,678.00 N2,865,970.34

Total Owners’ Equity N3,000,000.00 N22,011,780.00 N10,000,000.00 N8,456,678.00 N9,865,970.00

Total liability and Owners’ Equity N68,202,235.00 N91,437,324.00 N50,881,811.00 N60,528,292.00 N116,567,600.00



5.0 FINANCIAL EVALUATION

This section evaluates the financial statements and further determines the feasibility of the

projects or otherwise. The following financial ratios are presented below:

5.1 Rate of Return on Investment

This is the known as the accounting rate of return and focuses on accounting net operating

income rather than on financial statements. The rate of return is calculated based on estimated

revenue that will be generated by the investment from where all the projected expenses are

associated.

RRI = Total Production Cost X 100

Total Revenue

= 60,985,772 X 100

88,888, 000.

= 68.60 %.

5.2 Rate of Return on Sales

The rate of return on sales indicates how management uses the sales income efficiently and

effectively. The most important use of Rate of Return on Sales is that it measures how efficiently

costs can be managed and it also indicates how robustly a firm can withstand adverse economic

conditions such as dwindling prices, rising costs or declining sales. The higher the figure, the



better a company is able to endure price wars and dwindling prices, and the lower the figure the

more vulnerable the company is to adverse economic conditions in the market

RRS = Profit before Tax x 100

Total Sales

= 27,336,040 X 100

88,888,040

= 30.75 %

5.3 Break- Even Analysis

The break-even analysis determines how much sales volume your business needs to start making

a profit. This is especially useful when there is need to develop a pricing strategy useful in

developing a marketing plan or a business plan. The formula for conducting a Break- even point

analysis is as follows:

BEP = Fixed Costs

Revenue per unit - Variable Cost per unit

= 59,840,000

4444402-1085750

= 17.81 tons of Seeds



5.4: Recommendations on Proposed Location of the Seed Farms

The location of seed farms will be better suited for states that have much of alluvial soil that is

very conducive for kenaf seed farming. Such states include, Ekiti, Ogun , Oyo, Nasarawa and

Benue States. The other important factor that is critical for location of kenaf seed farms is

transportation facility for evacuation of harvested seeds and construction of seed Silos.



MODEL BUSINESS PLAN FOR KENAF (FARMING) CULTIVATION

4.0 KENAF CULTIVATIOIN FOR BAST FIBER PRODUCTION

PROJECT CONCEPT

4.1 Introduction

In this sub-section we are focusing on developing the economic feasibility for the establishment

of kenaf farms for the production of Fiber and other important value chain products such as

forage and core needed to feed kenaf processing plants for the production of industrial raw

materials essential for industrialization and economic transformation in Nigeria.

4.2. Background

Currently, kenaf is cultivated at mainly subsistence levels in many states of Nigeria. This is in

spite of the enormous economic and industrial potentials of the crop. To be able to raise current

cultivation levels to sustain an industrial value chain, kenaf farming must be commercialized,

mechanized and de-risked to attract huge investments into kenaf fiber production value chain.

The process of de-risking investment in kenaf fiber production requires that a comprehensive

feasibility of the process is presented which will highlight its major production processes,

financial outlay for investment in the farms and addressing some major constraints such as

market potentials and manpower requirements.

SECTION FOUR



4.3 Growing kenaf For Fiber Production: Technical and Factor Analysis

To establish and run kenaf farm involves a number of critical production processes such as seed

selection and development, soil preparation and fertility factors, plant population and row

spacing and weed control, and harvesting and processing. Each of these processes has its unique

contribution to successful farming of kenaf for fiber production.

Fig 14: Process Flow Chart and Factor Analysis for Kenaf Fiber Production

SEED SELECTION AND PLANTING

DATES

PLANT POPULATION AND STALK YIELDS

WEED AND PEST CONTROL FOR HIGHER

FIBER YIELDS

HARVESTING AND RETTING FOR

PROCESSING

SOIL FERTILITY MANAGEMENT FOR

IMPROVED STALK YIELDS



A. SEED SELECTION AND PLANTING DATES

Research has shown that seed selection is an important consideration for kenaf cultivation for

stalk yields. Some varieties of kenaf are known to produce high stalk yields than others and are

specially breed for that purpose. For instance, cultivars such as Tiannung#1 and Guatemala 3F

are varieties that have been developed specifically for improved Fiber production in the United

States of America and Thailand (Weber, 1945). In Nigeria, the equivalent variety is Ife ken D1

400 from Tiannung#1 developed and released in 2011 are genetically engineered to produce high

fiber than other mutants.

In addition to the selection of appropriate cultivars for fiber production, the choice of planting

dates is considered very crucial in kenaf farming for fiber production. For instance, while it is

recommended that kenaf for seeds production should be planted between July and September,

planting kenaf for fiber production is recommended as early as April to May. The reasons for

early planting of kenaf for fiber production are that planting during heavy rains or frosting

periods aids vegetative growth of kenaf that is often traded off with stalk growth. Planting for

higher stalk yields can be done either flat ground or raised beds depending on the available

specifications of the planting machines. Row spacing should be between 3.4 and 2.5 cm and

seeds depth should be between 1.25 cm to 2.5 cm.

B. WEED AND PEST CONTROL FOR HIGHER STALK AND FIBRE YIELDS

Kenaf plant is susceptible to weed and pest attacks given that it grows rapidly and competes with

weeds once the plant are of sufficient size to shade the ground. Therefore, attention must be paid



to weed control early so as to reduce the number of weeds that compete with kenaf plants for

available soil nutrients. It has been observed that moderate weed pressure could reduce fiber

yield in one season by as much as an average of 1.0 ton/ha (Orsenigo 1964; Williams 1968). In

some soil conditions and depending on the capacity of some soils to retain necessary nutrients,

weed competition could reduce fiber and stalk yield by as much as 69% by dwarfing plant

heights and stalk diameter.

Three herbicides have been identified as very effective and efficient in weed control in kenaf

farming for fiber production, namely metolachlor, trifluralin and pendimethalin. For instance, the

application of 3.4 kg ai(ha) (ai= active ingredient per hectare) of metolachlor provided

appreciable 90 percent of grass control and 80 percent weed control in both temperate and

tropical climates. More importantly, trifluralin remains the registered standard herbicide in use in

weed control in most kenaf farms that specialized in fiber production. However, while trifluralin

is recorded to control weeds applied at 6.7 kg ai/ha proved 100 percent effective in weed control

but at lower quantities of 2.2 kg ai(ha) may have toxic effects that could reduce kenaf fiber yields

by as much as 3.9 tons/ha ( Burnside and Williams, 1968).

Application of pendimethalin at 0.56 kg ai(ha) proved effective at weed control at about 70

percent, but the greatest risk of the application of these herbicides is its health implication for

human consumption. Importantly, trifluralin and pendimethalin were not present in kenaf at

detectable levels for any of the application rates for either in the leaves or stalks. On the other

hand pest and disease control is considered essential for kenaf growth even though reports had

shown that pests such as cotton boil worms and aphids do not constitute a major problem to stalk



growth if the soil and the seeds are well treated before planting. Diseases such as anthracnose,

root knot nematodes can also be controlled by the commonly used registered herbicides

discussed in the previous chapter.( University of Kentucky College of Agriculture publication,

2005)

C. PLANT POPULATION AND FIBER YIELDS

Plant population, which is the number of kenaf plants per hectare or acre are crucial for

improved fiber yields. While 15 kg/ha of seeds is needed for kenaf seeds production, 8 kg/ha is

recommended for kenaf fiber production. While plant population for Seeds production is

recommended to be between 36,917 and 542,510 for maximum seed yields, plant population for

fiber yields is put at between 185,000 to 370,000 per hectare or 75,000 to 150,000 per acre

(Higgins and White 1969). The reasons for relative reduction in plant population when planting

for improved stalk yields as follows:

a. Plant population is positively related to fiber yields such that low plant population

induce lower fiber production( Higgins and White 1969)

b. At very low levels of plant population, the kenaf plants produces multiple branches rather

than producing higher stalks that will yield more fiber;

c. When the consideration is for higher fiber yields, planting kenaf in the upper limits of

370,000-plant population induces competition among the plants for available

environmental resources such as light, soil moisture and essential nutrients. Through the



process of natural selection, the plants that could not compete effectively die off leaving a

more sustainable number to survive.

D. SOIL FERTILITY MANAGEMENT FOR FIBER PRODUCTION

Kenaf for fiber production does well in soils with high organic peat, Sandy desert soils and well-

drained fertile soils. Notwithstanding that kenaf requires well drained soil for maximum

performance, it can also withstand late season flooding, low soil fertility and a wide range of soil

acidity (PH) values when the consideration is for fiber production. Proper fertility maintenance

demands that Nitrogen fertilizer be applied to optimize stalk yields as compared to low Nitrogen

fertilizer application when the consideration is for seed production. However it is important to

note that soil fertility management for improved fiber yields must be within the context of the

type of soil, soil texture and fertilizer (PH) content of the soil and variety of seed used for fiber

and stalk yield as presented in table 9 below.

Table 22: Fiber Production: Impact of soil types, fertilizer application and Seed varieties

Variety Soil Type Fertilizer Application(

Nitrogen)

Stalk and Fiber

yields

Recommendations

Everglades 41

Organic Peat 112 kg (ha) 32 % Recommended

Sandy Soil 168kg (ha) 30 % Not recommended

Silty Clay loamy 224kg (ha) 40% Highly recommended

Source: Weber et al ( 2002a)



E. HARVESTING AND STORAGE

For maximum fiber yields, harvesting of kenaf must be sensitive to a given period in its growth

and development. It is advised that kenaf for maximum fiber yield should be harvested about 4 to

5 months after planting at the peak of its flowering indicating that it produces higher stalk and

fiber yields during flowering periods. Harvesting is done by hand or mechanical means using

adapted harvesting machines to kenaf fiber and stalks. Harvesting using hand is both inefficient

and with health implications. When appropriately harvested and in time, fiber and stalk yield

potential can occur within the range of between 2.5 tons to 15 tons per acre and in some

instances between 6 to 8 tons per acre (University of Kentucky Report 2005). The harvested fiber

is processed and stored for usage in variety of industrial uses along the kenaf value chain.



4.4 KENAF CULTIVATION FOR FORAGE (FEED) PRODUCTION

PROJECT CONCEPT

4.1 Introduction

The development of kenaf value chains in Nigeria requires that all the necessary value chain

products that have huge market potentials be considered. One of such value chains products is

Feed production for livestock. Nigeria is reported to have more than 80 million cattle heads and

more than double that number in other livestock such as goat, sheep, horses and camels.

Currently, these herds are fed by either imported feeds supplements or by rearing them in

unrestricted open fields. There have security concerns surrounding the issue of not having

livestock bred in ranches or pens because of the frequent clash between the herdsmen and rural

farmers whose farms are often invaded by these marauding livestock.

4.2 Background

One of the suggested solutions to contain the increasing security implications of open rearing of

livestock is for Nigeria to consider the option of establishing ranches across the country to

control migrant movement of livestock which would make the business of livestock breeding not

only more profitable but less controversial in terms of the conflict that arise from current

management strategies. It has been suggested that for ranching to be successful, the issue of

grass to feed the livestock should be comprehensively addressed. One option was to import

grasses from Brazil and other heavy livestock breeding countries like Australia and United States

of America.



4.3 Production Processes and Technical Analysis

The production process of kenaf forage for purposes of animal feed follows the procedure of the

previously discussed flow charts and factor analysis. Basically it follows the same production

process excepting of course changes in some important agronomic conditions that emphasize the

growth of kenaf leaves rather than perhaps stalk or fiber.

Fig 15: PROCESS FLOW CHART AND FACTOR ANALYIS: THE TECHNOLOGY

PLANT POPULATION AND ROW SPACING

SOIL FERTILITY MANAGEMENT

WEED AND PEST CONTROL

SEED SELECTION AND PLANTING DATES

HARVESTING AND PROCESSING




The scientifically tested cultivar for kenaf leaves is Guatemala 51 ( 32 percent biomass ) and

Guatemala 45 ( 30 percent biomass) developed in the United States and has been multiplied for

massive production kenaf forage for industrial production of plant protein extensively used in

feed production (Kitinger, 1969). The preferred planting dates are between early April and late

June as it is discovered that its photosensitivity favour longer day light periods required for

foliage growth.

Table 23: PLANT POPULATION AND ROW SPACING

Planting

Dates

Leaves Yield Row spacing

Plant population

(ha)

Recommendations

April 1 to 4th

June

High Yields ( 6-8 lobes

per leaf)

52 cm 3.8 cm 542,510 (ha) Highly

Recommended

Earlier than

April

Low leaves yield (3-5

lobes per leaf)

52 cm 3.8 cm 472,312 (ha) Recommended

After June Low leaf yields ( 2-3

lobes per leaf)

52cm 3.8 cm 269,520(ha) Not recommended

Source: Crane and Acuna (1945), Joyner and Wilson (1967), Webber et al (2002a)

The relationship between planting dates and high forage yields has to do with the

photosensitivity characteristics of the cultivars used- in this case Guatamala 51 and Guatamala



45. Using normal row spacing of 52 cm between plants and 3.8 cm in-between ridges, planting

dates of between April 1 and June 4th

yielded the highest 6-8 lobes per leaf . The plant population

that yielded the highest leaf lobes is 542, 510 plants per hectare and followed by 472,312 (ha).

The lowest leaf yields occurred when the plant population was reduced to 269,520 (ha)

indicating that higher leave yields is proportional to plant population per hectare.

B. SOIL FERTILITY MANAGEMENT FOR PRODUCTION OF KENAF LEAVES

Kenaf for foliage production does well in soils with high organic peat that support vegetative

growth. The soil also requires high fertilizer application since the target is to encourage high

forage yields that will be used for feed production. Like in stalk yields, proper fertilizer and soil

maintenance are important considerations for improved leaf yields in kenaf. However, it must be

noted that for the purposes of feed production, it is not only kenaf leaves that matter because the

important ingredients for feed production remains the protein content which could be found also

in stalks and fibers both of which also perform well in high organic peat and loamy soils that

support vegetative growth.

C. WEED AND PEST CONTROL FOR KENAF FORAGE PRODUCTION

The routine weed and pest control measures remain the same in Kenaf cultivation be it for

purposes of leaves, fiber or even seed production. The approved herbicides remain metolachlor,

trifluralin and pendimethalin. Specifically, the application of 3.4 kg ai(ha) (ai= active ingredient

per hectare) of metolachlor provided appreciable 90 percent of grass control and 80 percent weed

control in both temperate and tropical climates. More importantly, trifluralin remains the



registered standard herbicide in use in weed control in most kenaf farms that specialized in both

leaves and fiber production. However, while trifluralin is recorded to control weeds applied at

6.7 kg ai/ha proved 100 percent effective in weed control but at lower quantities of 2.2 kg ai(ha)

may have toxic effects that could reduce kenaf leaves and fiber yields by as much as 3.9 tons/ha

( Burnside and Williams, 1968).

D. HARVEST OF KENAF FOR FORAGE MAXIMISATION AND PROCESSING

The timing of the harvest is an important consideration for maximizing the leaf yields of Kenaf

for feed production. The major determinants of the kenaf production for forage include the

following (a) the age of the plant at harvest because it can influence the plant composition to

maximize leaf percentage and (b) the protein content of the biomass. The leaf biomass

percentage and percentage crude protein content of the entire kenaf biomass decreases as the

kenaf plant increased in height and maturity. The quality of kenaf biomass changes in relation to

he age of the plant because the lower leaves starts senescing few days after planning and

germination.

The kenaf plant crude protein decreases from 8 percent to 5 percent between if harvested

between 70 and 140 DAP (Days After Planting). There is also the possibility of multiple harvest

of kenaf leaves in during a single growing season ie harvesting kenaf between 85, 92 and 99

DAP. The results indicate the protein content of the second harvest was greater than the first

harvest which shows that bigger harvest occur at lower DAP schedules.

4.3.2 Maximizing Kenaf Total Biomass for livestock Feed.



Kenaf is majorly known as a fiber crop but it has been discovered through research that its entire

biomass including stalk (core and bark), and leaves can be used as livestock feeds, because of its

high protein content. Research has shown that the crude protein content of kenaf is very high and

diversified. The active protein ingredients for the entire kenaf biomass have make the

exploitation of the kenaf biomass for feed production an attraction for this value chain.

Table 24: Relative Contribution of Kenaf for Maximizing Protein for livestock feeds

Biomass Combinations Crude Protein Content Recommended for Feed Production

Leaves 15%-29% Highly Recommended

Stalk 2% -12% Not Recommended

Whole plant 6% -23% Recommended

Seeds 14% - 34 % Recommended

Dry Matter 58%- 71% Very Highly Recommended

Source: Clark and Wolff (1969)

Table 6 above identifies the content of each of the kenaf biomass and its crude protein content

for purposes of producing livestock feeds. The best source of crude protein essential for livestock

feed production can be obtained from the Dry matter that includes all the biomass combination

crushed together to be used as input into livestock production. However, it is important to

understand the main sources of this crude and digestible protein when growing kenaf for



purposes of feed production. In a hierarchical order, the best source of protein is the Dry matter,

closely followed by the Seeds and the leaves and finally the whole plant.

4.5 KENAF CULTIVATION FOR CORE FIBER PRODUCTION

PROJECT CONCEPT

4.5. 1 Introduction

It is hardly arguable that in terms of holistic utility, the kenaf plant ranks second only to the palm

tree. Every single part of the kenaf plant, just like the palm tree, carries with it potential value

that can be harnessed both for production of industrial raw materials or direct commercial value.

Therefore, the maximization of the kenaf value chain must be comprehensive in terms of the

feasibility of each of this biomass one of which is the core fiber. The kenaf core consists of about

60- 65 percent of the whole kenaf stem (Pande et al 2000). However, in the recent past kenaf

core was chosen over wood because of its renewability, biodegradability and high strength. For

instance, annual yield of kenaf whole stem including the stalk ranges between 12-30 tons/ha

which more than tripled the yield of alternative best wood core substitute depending on the soil

type, climate and other agronomic requirements (Viller et al, 2009)

4.5.2 Background

The stalk of kenaf is made up of two important fiber components, namely, the bast fiber that is

the bark and the core. Initially, the kenaf core was pulped along with the bast fiber for use in

paper making until research developed other very useful purposes for core fiber alone. For

instance, the kenaf core powder has been found to be very useful in producing absorbents and



had proven to be more effective than most currently used absorbents. This is essentially because

of its very low bulk density and high surface area that make it ideal for multiple uses. Other uses

for core powder include filter, pressing, pellets for carbonizing, papers, bio composite materials

and many more. Therefore, due to the high efficiency of the core powder, strong market uptake

has been developed. To ensure that the markets for the core fiber product s are sustained,

research developed some kenaf varieties with the potential to yield more core fiber than the bast

fiber varieties. In addition; specific agronomic conditions that promote higher yields of core fiber

for commercial and industrial use were also developed and applied in growing kenaf biomass

targeted at core fiber markets.

4.5.3: The Production Process and Technical Analysis

The production process (farming) of kenaf for purposes of core fiber enhancement is not quite

different for farming kenaf for other purposes that has been exhaustively discussed previously.

However, the only difference is that the cultivars developed to enhance the growth of core fiber

are adapted to the specific agronomic conditions that are of essence if the growth of the kenaf

plant were to be assured.



Fig 16: Process Flow Chart and Factor Analysis: The Technology.

SEED SELECTION AND PLANT DATES

PLANT POPULATION AND ROW SPACING

SOIL FERTILITY MANAGEMENT

WEED AND PEST CONTROL

HARVESTING AND PACKING




The known seed cultivars Tiannung#1 and Guatemala 3F was developed for improved Fiber

production in the United States of America and Thailand (Weber, 1945). In Nigeria, the

equivalent variety is Ife ken D1 400 from Tiannung#1 which was developed and released in

2011 and have been genetically modified and engineered to produce high fiber than other

mutants.

However, there was no attention paid to particular effect of these cultivars in terms of its unique

impact in enhancing the growth of either the bast or the core fiber. Currently, further research in

the United States developed the V36 cultivar that breeds the best core fiber and is used by seed

multiplication companies to grow the seed for farmers that specialized in producing core fiber.

The planting dates for Core fiber production remains the same for stalk fiber production as

discussed under Stalk fiber production processes above.

B. PLANT POPULATION AND ROW SPACING

Just like the in the production of kenaf for fiber production, the plant population for cultivating

V36 is not very different. While about 15 kg/ha of seeds is needed for kenaf seeds production, 8

kg/ha is recommended for kenaf fiber production and specifically 14kg/ha seeds are required for

Core Fiber production using V36 cultivar. On the other hand, while plant population for Seeds

production is recommended to be between 36,917 and 542,510 for maximum seed yields, plant

population for fiber yields is put at between 185,000 to 370,000 per hectare or 75,000 to 150,000



per acre, the plant population per ranges between 178,000 to 430,000 per hectare (Higgins and

White 1969).

C. SOIL FERTILITY AND MANAGEMENT

Kenaf plant for Core fiber production does well in soils with high organic peat, Sandy desert

soils and well drained fertile soils just like the soil types needed for whole stalk production. The

PH values for core fiber production is not different from what is required in the stalk production

as discussed in previous sections on fiber production. As in the production of bast fiber, proper

fertility maintenance demands that Nitrogen fertilizer be applied to optimize core fiber yields as

compared to low Nitrogen fertilizer application when the consideration is for seed production.

However it is important to note that soil fertility management for improved core fiber yields

must be within the context of the type of soil, soil texture and fertilizer (PH) content of the soil.

D. WEED AND PEST CONTROL

The approved herbicides for stalk production remain the same for kenaf core fiber production.

Therefore metolachlor, trifluralin and pendimethalin are still the recommended herbicides

suitable for improved weed control in the cultivation of V36 which is the cultivar genetically

engineered to enhance the production of Core fiber in kenaf. The application of 3.4 kg ai(ha)

(ai= active ingredient per hectare) of metolachlor provided appreciable 80 percent of grass

control and 86 percent weed control in both temperate and tropical climates in farms that

cultivated V36 mutants. More importantly, trifluralin remains the registered standard herbicide in

use in weed control in most kenaf farms that specialized in both leaves and fiber production. The



specific application of trifluralin in Core fiber farms recorded appreciable weed control when 5.6

kg ai/ha proved 85 percent effective in weed control but at lower quantities of 3.2 kg ai(ha) may

have toxic effects that could reduce kenaf core fiber growth by as much as 4.0 tons/ha ( Chin

Hu Chang et al 2013 in Bio Resources)

E. HARVESTING AND BAILING

It is must be noted that there are no specialized harvesting technologies dedicated to core fiber

harvesting different from stalk harvesting. The same machines that are used for Forage-type

harvesting and baling systems have been widely evaluated for use in kenaf stalk production

harvesting and will be exhaustively discussed when considering machinery for kenaf production

in subsequent sections. Note that Bailing simply means compressing of kenaf in cotton modules

to increase the bulk density of the kenaf for storage and transportation purposes are both applied

for bast fiber production and kenaf Core production.



4.6 KENAF CULTIVATION FOR FIBER PRODUCTION: THE BUSINESS

The business for kenaf fiber cultivation is envisaged to produce a scaled output of 250,000 tons

of fresh kenaf fiber on a 10,000 hectares of farm land (Small Scale); the production of 750,000

fresh kenaf fiber on a 30,000 hectares of farm land (medium scale) and 1.25 million tons of fresh

kenaf fiber stems on 50,000 hectare farm land (large scale). These investments will produce

11,420 tons of dried retted fiber (Small Scale), 34, 025 tons of dried retted fiber (Medium Scale)

and 2.272 million tons of fresh retted fiber for the jute manufacturing plants. The investments

will provide job opportunities for more than 5,000 farm families and substantially penetrate the

jute sack demand in Nigeria put at over 500,000,000 pieces annually.

4.6.1 PRODUCTION INPUT PLANNING AND BUDGETING ESTIMATES

Table below presents the estimates for raw materials inputs per hectare from where scale

operations can be projected.

Table 25: Production Plan: Raw Material Estimates per hectare Requirement

Raw Material Hectare Use per (ha)

Seeds 1 hectare 8kg (ha)

Herbicides 1 (ha) 3 gallons ( 12 liters) (ha)

Insecticides 1 (ha) 4 gallons ( 16 liters) (ha)



Fertilizers 50kg ( N) 1 (ha) 10 bags (ha)

Note: The per hectare raw material estimates are based on projections

Table 26 : Scalable Seed Farm Capacity Utilization and Output Projections 2018-2022

Years 2018 2019 2020 2021 2022


Small Scale ( 10,000 hectares) 120,000t 150,000t 170,500t 200,600t 250,000t

Medium Scale ( 30,000

hectares)

250,000 280,500 340,700 570,800 750,000

Large Scale ( 50,000 hectares) 450,000t 659, 500t 865,000t 970,000t 1,25m(t)

Note: 2,667 hectares produces 3,000 tons of fresh fiber stalks (IARTA, 2014)

4.6. 2 ORGANIZATION AND MANAGEMENT

The organization and management of kenaf farms is critical to its success. The scope of the kenaf

farming business and the legal structure determines the type of management to put in place for

successful delivery on the strategic vision and mission of the business.

4.6.3 Legal Structure of Kenaf Farm Business

Kenaf farm business in Nigeria can be organized as a sole proprietorship in which case the

business is owned and managed by one man. This is predominantly the current case in kenaf



farming in Nigeria over the years. However, the sole proprietorship limits the expansion of the

business to industrial levels that require input of professionals and investment fund access to

ensure sustainable growth and expansion. Though sole proprietorship fits into the subsistence

levels of kenaf farming business currently practiced in Nigeria, the development of the kenaf

value chain will benefit from both corporative society and limited liability corporate structures.

4.6.4 Limited Liability Corporate Model.

The development of Kenaf value chain in Nigeria targets mechanization and commercialization

of kenaf farming business to sustain the backward integration of kenaf farm outputs for

industrialization and economic growth. To transit from subsistent kenaf farming to large scale

commercial and mechanized ones requires a legal structure that maximizes professional

management and economies of scale in operation. Therefore it is highly recommended that investors in

kenaf farming business should consider partnerships through limited liability corporate legal entities.

4.6.5 Management System

a. The Board of Directors

A critical success factor in setting up a kenaf farm would require a strong and transparent

corporate governance structure to ensure transparency in its operations. A major prerequisite for

a strong management system is the composition of the board of directors. For effective

management of the envisaged kenaf farm, there will be clearly demarcated functions between the

Board and the Management of the firm. Often businesses of the envisaged scale die when there

overlapping functions between the Board and the Management of the firms. The role of the board



will be to ensure that the corporate objectives of the firm are at all times achieved and that the

vision and mission of the firms is clearly guiding management operations. Therefore the choice

of members of the Board for the envisaged kenaf firm will consider the following criteria:

e. Credibility and proven industry experience and expertise in their chosen fields of

endeavor

f. The constitution and size of the board must follow extant regulatory prescriptions

g. A fair mix of various industrial experiences such as farming business, engineering,


efficient and effective running of the farm business.

h. Those who constitute the Board should have financial commitment to the firm.

4.6.6 Management Team

The management team will be composed of qualified persons with relevant experiences in their

areas of expertise and ability to deliver on the key objectives of the firm. The criteria for

recruiting Management staff are as follows:

d. Sound management training and experience

e. Clear roles and pre-set key deliverables for each manager to enable performance

monitoring

f. Proven ability to act purposefully with minimal supervision in achieving the corporate

goals of the firm.



The following are recommended management Team for the envisaged kenaf firm project.

v. Chief Executive Officer- CEO

The kenaf farm should hire a CEO whose responsibility will be to oversee the operations of the

farms on day- to- day basis. Identify the strengths and weakness of the investment and arrange

resources to maximize the strengths of the investment and minimize its weaknesses to ensure that

the farm operates sustainably and profitably. Coordination of management activities and overall

planning and execution of strategic plans of the farm to achieve investment goal will be the

responsibility of the CEO. Therefore, the CEO will be someone with at least a First degree in

business related courses such as management, economics, finance and accounting. An MBA will

be an added advantage but will have at least 5 years cognate experience in farm management

field. However, it is important to note that the requirements for a CEO depends on the scale of

business that the promoters of kenaf farms envisages and what the financial outlay of the firm

will support sustainably.

vi. Farm Manager/s

Farm managers are required to head the field operations in the kenaf farm and to ensure the

application of professional farm management skills to achieve the yield to achieve the ultimate

marketing strategy for the firm. Farms managers must be knowledgeable on the best practice

approach in terms of the timing of planting, soil preparation, harvesting, storage and appropriate

machinery to be purchased and effective supervision of its use in the farms. The requisite

qualification of Farm managers should be the possession of a professional certificate in



specialized Agricultural science degree such as Bachelors in Agriculture specializing in Crop

production, agronomy or farm management. At least 5 years cognate experience in the

management of related field will be an added advantage.

vii. Marketing Manager.

The marketing manager of the farm will oversee the development of target markets for the farm

product and building marketing relationships. The task of identifying existing markets segments

and the packaging of the finished products to suit market demand is the responsibility of the

Marketing Manager. There is also the need to develop potential markets and organize the

distribution chain of the farm will be the function of the marketing manager. All marketing

personal will be directly under his or her control. The requisite qualification for the marketing

manager will be a first degree in Marketing or related fields of economics and finance. An MBA

will be an added advantage and at least 5 years of cognate experience working in related fields.

viii. Administrative Manager

The Administrative manager will be responsible for the day to day administration of the office to

ensure that all administration related activities are in place. The Administrative Manager will

oversee the following departments:

d. Accounts Department: This department will be headed by a Chief Accountant will be a

first degree in Accounting. Possession of professional certificate such as ICAN, ANAN

etc will be added advantage. the Chief Accountant will oversee all financial and book

keeping of the farms and keep books on all expenses and returns a professional manner



e. Human Resources Department: The human resources department will be headed by a

head of department with the mandate for recruitment, remuneration, training and staff

discipline. The requisite qualification will be a first degree in Personnel management or

related fields such as human resources management or Administration. A 5 years cognate

experience in related fields will be required to ensure successful delivery of the mandate

of the human resources department.

f. Procurement Department: A Head of department reporting directly to Administrative

manager will be responsible for the Procurement Department. The function of this

department will be arrange all input purchases and ensure steady supply of all required

inputs in the effective management of the farm.

5 Other Personal Requirements

d. Drivers ( Tractors and other farm equipment’s)

e. Farm hands ( unskilled labour to engage in daily farm maintenance)

f. Office administrative staff.



Fig 17: Proposed Management Organogram



Farm Manager Administrative Manager Marketing Manager

Agronomists

Machinery

operations and

maintenance

Farm Hands

Accounts

Human Resources

Supply Chain

Other personnel

Market Development

Distribution management

Communications

Company Secretary

and legal adviser



4.6.7: Scaled Manpower Requirements for kenaf Fiber Farming Project

The manpower requirements of kenaf fiber farm investments are scaled to reflect the changing

number of management and line staff according to the size of farm investments as indicated in

the tables below:

Table 27: Scalable Manpower Requirement Schedule- Management Staff

Management

Staff


10.000

hectares

30.000 hectares 50.000 hectares

CEO Overall

manager

1 1 1

Manager Farms 1 2 3

Manager Administration 1 2 3

Manager Marketing 1 1 1

Total 4 6 8



Table 28: Scalable Manpower Requirement: Farm Management Department

Farm Dept


10,000 hectares 30,000 hectares 50,000 hectares

Agricultural Experts Field Supervisors 5 8 12

Mechanics Maintenance 4 6 8

Tractor Drivers Cultivation 3 5 8

Farm hands ( unskilled) General Services 10 18 25

Total 20 32 43

Table 29: Scalable Manpower Requirement: Administration Department

Administration

Dept


10,000

hectares

30,000

hectares

50,000 hectares

Accountants Accounts/ Book

keeping

3 4 6

Secretaries/ ICT Secretarial/ Computer

services

4 4 5



Procurement

officers

Procurement 3 3 3

Personnel officers Human resources 3 5 6

Drivers Driving 4 6 8

Messengers General Services 3 4 6

Cleaners Cleaners 4 6 8

Guards Security 4 6 8

Total 28 42 50

Table 30: Scalable Manpower Requirement: Marketing Department

Marketing

Department

Job Roles Small scale Medium

Scale

Large Scale

10,000

hectares

30,000

hectares

50.000 hectares

Salesmen Sales Operations 4 6 12

Wholesale

Distributors

Distribution/ Silos

management

6 6 6



Retail

Distributors

Distribution 12 15 20

Market

Development

officers

Promotional officers

and Advertisements

5 5 6

Total 27 32 34

4.6.8 MACHINERY AND EQUIPMENT FOR KENAF FIBER CULTIVATION

a. Kenaf Planter

Sourc

e: Alibaba.com: Prices range from $12,000 to $15,000



4.8.7 Kenaf Combine Harvesters ( large Scale)

Source: Alibaba. Com: Prices range from $150,000 to $238,000

c. Kenaf Tractor mounted Harvester (Medium Scale)



v. Kenaf Decorticator

Source: Alibaba.com: Prices range from $10,000 to $18,000.

https://www.alibaba.com/product-detail/Automatic-Natural-Fiber-Processing-Machine-Sisal_60383237600.html



d. Kenaf medium sized Decorticator


https://www.alibaba.com/product-detail/in-Malaysia-decorticating-fiber-machine_60066467910.html



d: Large scale Fiber Extractor Machine


https://www.google.com.ng/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&ved=0ahUKEwixmP6h7-zRAhURyWMKHSltDlQQjRwIBw&url=https://www.alibaba.com/showroom/decorticating-fiber-machine.html&psig=AFQjCNEW9Qux0lgLTX2IYCbpt4c2Ke4_DQ&ust=1485968788256836



4.7 MARKETING STRATEGIES.

The market survey conducted identified both domestic and international market outlets for kenaf

farm products in Nigeria. The determinants of the demand and supply of kenaf farm products

such as seeds, bast fiber, core fiber and forage will largely depend on the development of the

downstream industries that will require these farm outputs as raw material inputs into their

operations. However, these farm outputs are not demanded as finished products but rather as

inputs that will be used to ensure the steady supply of raw materials for processing industries.

As a niche market, the market for kenaf farm products are sustained by identified the needs,

wants and requirements that are being addressed poorly currently and developing and delivering

these products to them at affordable prices, ease of access and availability of the products to

satisfy their needs. Therefore the market Analysis for the target market for these products is as

follows:

4.8.8 Market Demand Determinants for Kenaf Bast Fiber: The target market for kenaf bast

fiber in Nigeria is currently hampered by lack of mechanized fiber processing plants. The

current fiber processing in Nigeria is not mechanized and grossly inefficient. However,

despite the very demanding and laborious nature of hand processing of kenaf fiber, there

is still demand for them in both the domestic market and the international market. The

market determinants of kenaf bast fiber are as follows:

a. Production Cost: The manual labour cost of kenaf bast fiber processing is

inefficient and does not encourage the growth of the fiber market in Nigeria. The



off-take of kenaf fiber farm products can only increase to sustain the market with

the establishment of kenaf fiber processing plants in Nigeria. The high cost of

manual processing of kenaf fiber does not guarantee an encouraging profit margin

for kenaf farmers.

b. Price: The international market for the product currently sustains the price for

kenaf fiber outputs. Estimated prices for Nigerian kenaf fiber products like many

other export products are priced low because of processing inefficiencies such as

product quality and packaging. It is important to note that the demand for locally

processed kenaf fiber by makers of POP in Nigeria is sustained by it is

comparatively cheaper when compared with the price of imported ones.

c. Distribution: Effective distribution of kenaf fiber will be done through the use of

wholesale and retail outlets. However, it is important to note that supply

agreements between farmers and fiber processing plants can also encourage an

effective off-take of kenaf fibers from farmers on sustained basis,. Currently,

distribution is not considered a critical issue because of lack of mechanized

industrial processing plants for kenaf fiber in the country. It is expected that the

development of the kenaf value –chain will create profitable opportunities for

distributors and retailers of kenaf fiber products on a sustainable basis.



4.7.2 MARKET DEVELOPMENT

There is generally lack of awareness of the existence of kenaf fiber alternatives among fiber

users in Nigeria. Sustained advertising and targeted market development strategies such as the

Agricultural Fairs and niche marketing strategies will increase awareness not only for increased

production of kenaf fiber but to attract investments in the kenaf fiber processing plants in

Nigeria.

4.8.9 COMPETITION STRATEGY

Pricing strategy is key to ensure sustained off –take of locally processed kenaf fiber in Nigeria.

Competitive pricing can be guaranteed with investments in kenaf fiber processing plants which

will encourage competition and efficiency necessary for the development of the kenaf fiber

market in the country on a sustainable basis. Currently, competition among kenaf fiber farmers is

defined by the following:

a. Competing Farm Investments: Cotton, Cocoa, Soya beans etc. If the incentive

conditions in these competing farming investments are better than that from kenaf

producers could switch to these farm investments. Therefore the strategy would be to as

much as possible creating an environment where profit margin from kenaf farm

investment is better than the competing crops.

b. Import of end- Products from kenaf Fiber: The import of kenaf fiber end products

could out compete local production of fiber and drive investors out of the market. The

strategy to address this would be to ensure that unit price of locally end- products are



competitive in a manner that consumers would prefer local end products to imported

ones.

4. 8. FINANCIAL FEASIBILITY

4.8.1 Introduction:

The financial feasibility of kenaf cultivation aimed at the production of bast fiber translates the

economic feasibility into financial estimates and ratios that will guide investment decisions in the

project. The financial study starts with the outlining the budgets for fixed and variable inputs,

manpower requirements and full financial forecasts featuring the summary of financial needs, the

application of loan and owner’s funds, income statements, Cash flow projections and balance

sheet construction and analysis. The concluding sections of the financial study will feature the

evaluation metrics of the investment using important financial ratios such as rate of return on

investment, rate of return on sales, breakeven analysis and payback period schedules.

4.8.10 Summary of financial Needs:

The funds for financing a medium scale kenaf farm for the cultivation of bast fiber will be

deployed as working capital for investments in fixed capital such as farm houses and offices,

machinery and equipment. Part of the funds will also serve for the procurement of variable inputs

such as seeds, salaries and wages, farm maintenance and other sundry variable expenses that

could be repaid through short term cash returns during the business’s next full operating cycle,

generally one year. The Growth capital will be sourced based on the prospects of increase in the

profits of the business and to be repaid over several years. In the long term, equity capital could

be raised from investors who desire to take the risk in return for profit and dividends in the



future. The details of application of the funds are presented in the subsequent subsections

dealing with the specifics of the financial feasibility.

4.8.3 Sources of Funds for the Business:

The critical element of any business plan is for sourcing investible funds from willing investors

either from backers such as banks or equity investors. The funding outlay for the business of

establishing and operating a medium scale mechanized kenaf farm for the production of the bast

fiber is estimated at about one hundred and twenty million ( N120 million). The funding is

expected to come from the following sources:

a. 60 percent ( N72 million) from owners’ equity

b. 40 percent ( N48 million) from bank loans

c. Equity capital could be included in the future when the prospects of the firm warrants

sourcing of diversified growth funds.

The distribution of sources of funding could be changed depending on the relative cheapness of

each source and accessibility. For instance, owners’ equity does not attract interest payments as it

serves as Angel capital for the investment. On the other hand, loans from banks are a debt which

attracts interest payments and amortization over time, while equity investment attracts dividends

which is subject to profits made by the firm. The importance of the business plan is essentially to

convince backers that there are prospects in the business to warrant their investing in it.



4.8.4 Vision and Mission Statements

A business should be guided by both vision and mission statements. Its purpose is to inspire

both lenders and owners to set objectives and to keep their focus on achieving them on a

sustainable way. For this business, the vision would be:

c. Vision Statement

Our vision is that in the next five years, kenaf processing plants will have enough bast fiber to

feed their plants on relatively competitive prices to boost their output in the context of Nigeria’s

industrialization.

d. Mission Statement

Our business is farming kenaf to produce the best quality bast fiber for use by kenaf processors

to anchor Nigeria’s industrialization and economic diversification.

4.8.5 Budget Keys for Financial Analysis and Projections


presented below:

Fig18: Budget Assumptions for Financial Analysis and Projections

Average yield of fresh kenaf fiber is 25 tons per hectare

10,000 hectares will yield 250,000 metric tons

Required kenaf Seeds for fiber production is 15kg per hectare

Plant Population for fiber production is 185,000 to 370,000 per hectare

Current Price for a ton of dry retted fiber is $400=N160,000 @N400/1$.



The information in the box is meant to guide budgeting and financial projections of the company.

From technical analysis done, the required amount of seeds for optimal cultivation of one hectare

was put at 15kg/ha, while the fiber plant population is 185,000 to 370,000 per hectare. The price

of a ton of dry retted fiber is estimated at $400 ( N160,000.00 @ N400/1$)

4.8.6 Sales Projection for financial Analysis

The corporate objective of the business is capture 20 % market share of the projected kenaf fiber

needed for the production of several fiber products such as jute bags, ropes, particle board etc. It

is estimate that at least 100,000 hectares of land will be cultivated for kenaf between 2018 and

2022.

Table 31: Company Projected Kenaf Fiber Production and Sales ( 20 18 – 2022)

Year Kenaf Fresh Stems

Kenaf Retted Fiber Hectareage Projected sales at $400/ton

2016 66,667 3,000 2,667 $1,200,000

2017 80,000 4,500 3,000 $1.500,000

2018 100,000 6,000 4,500 $2,125,000

2019 120,000 7,000 6,300 $2,540,000

2020 150,000 8,000 7,000 $2,800, 000

2021 200,000 8,500 8,000 $3,000,000

2022 250,000 9,000 10,000 $3,200,000.00 Note: The blue colored section are actuals, while the yellow colored sections are projections

Table 31 above presents the projected market demand and hectareage of kenaf farms between

2018 and 2022. From the schedule, the demand for kenaf retted fiber will increase from 6,000

metric tons in 2018 to 9,000 metric tons in 2022. The number of hectares needed to produce the

projected quantity will increase from 3,000 hectares to 10,000 hectares between 2018 and 2022.



The projected values of sales of retted fiber at current prices of $400 per metric tons will increase

from $2.1m to $3.2m between 2018 and 2022. The market for kenaf retted fiber will be sustained

by industries that will use them as raw materials to produce kenaf bags, cordage, carpets, particle

doors and other associated end products with estimated market size of over 500 million annually.

4.8.11 Budgets, Full Financial Projections and Analysis

Budget is a detailed plan that outlines future expectations in quantitative terms. Its purpose in

business plan development is to give formality to the planning process. Equally if the budget

involves other people, it serves as a way of communicating the plan to these other people.

Ultimately, the process of preparing a budget is very critical in business planning, especially

when projecting for the future. In this section the full budgets and financial projections to

determine the profitability or otherwise of the investment is presented. The financial analysis

starts with schedules of variable and fixed costs estimates.

4.8.12 Budget of Fixed Input Requirements and Costs

Kenaf fiber cultivation requires fixed cost expenditures that does not change as production

output changes over time. These costs are made up of the following items:

Table 32: ESTIMATED FIXED INPUT COSTS


A LAND PROCUREMENT/ FARM HOUSE

1 Land Procurement/ leasing 10,000 hectares N30,000,000.00



2 Farm House Building and Offices N25,000,000.00 N 25,000,000.00

Sub-Total N55,000,000.00

3 Depreciation ( 5%) N2,750,000.00


3 Tractors (3 number) 5.2m x 2 N 15,600,000.00

4 Tractor mounted harvester (2 number ) $4,000.00@ N400/$1 N3,200,000.00

5 Kenaf Planter (2 number ) $15,000 @N400/$1 N12,000,000

6 Kenaf Decorticator ( 2 number) $10,000.00@N400/1$ N 8,000,000.00

7 Herbicide Sprayer ( 2 number) $2000x2 = $4,000.00 N1,600,000.00

8 Pesticide Sprayers ( 2 number) $2,300x 2= $4,600.00 N1,840,000.00

TOTAL N42,240,000.00

9 Depreciation (10%) N4,224,000.00

Grand TOTAL N97,240,000.00


current average rates of N400/$1.

Table 32 above presents the estimated fixed costs of inputs which are captured as long term costs

with repayments spread over medium to long term.

4.8.13 Budget For Variable Inputs and Costs

Variable inputs and their associated costs are short term in nature and are expected to change in

relation to change in market demand for retted kenaf fibers. In other words, as market output for

produced kenaf retted fibers increases, the demand for variable inputs increase linearly.



Table 33: Estimated Variable Inputs and Costs (Farm Field Operations)


Quantity

Unit Cost Total Cost (10

hectares)

1 Seeds 15kg/ha N20,800/ha x 10 N208,000.00

2 Fertilizer (Nitrogen) N.P.K

20-10-10 (50kg/bag)

25bags/ha

(112kg/ha)

25x 10,000x10 N2,500,000.00

3 Herbicides ( Pre-emergence) 12 liters/ha N6000 x12x10 N720,000,000.00

4 Herbicides ( Post emergence) 10 liters/ha N4,400 x 10 x10 N440, 000.00

5 Furadan insecticide 8kg N1,800/ha x10 N180,000.00

6 Nuvacron Insecticide 10 liters N2000/ha x10 N120,000.00

7 Chemicals for fiber retting

treatment

10 liters N2000/ha x10 N120,000.00

8 Energy costs ( ploughing,

harrowing, planting, weeding

harvesting and threshing)

20,000 liters of

petrol/ha

N20,000 X 10 N2, 150,000.00

9 Insurance 4% N3,880,000.00 N3,880,000.00

10 Bank Service Charge 0.05% N362,245.000 N303,245.00 stop

11 Interest expenses 22% N10,160.000.00 N10,560, 000.00

TOTAL N17,715,000.00

Note: The dollar is converted at a rate of N400 = 1$ and used to determine the cost of inputs



Table 1.2 above presents the variable inputs on the farm field which includes the seeds, fertilizer,

herbicides and insecticide. The quantities required for a hectare was first estimated in column

two and their projected costs for 10 hectares which is the to be continued

Table 34 Schedule of Manpower Requirements and Labour Costs: Management Staff


1 CEO 1 N120,000 X12 N1,440,000

2 Manger ( Farms) 1 N80,000 X12 N960,000.00

3 Manager ( Administration) 1 N80,000X12 N960,000.00

4 Manager ( Marketing) 1 N80,000 X12 N960,000

SUB-TOTAL N4,320,000.00

Table 35: FARM DEPARTMENT STAFF ESTIMATED BUDGET


1 Agronomists/ Farm experts 3 N80,000 X12 N960,000.00

2 Machine servicing staff 2 N50,000.00 X12 X2 N600,000.00

3 Tractor Operators 3 N50,000.00 X12X2 N600,000.00

4 Unskilled Farm hands 6 N20,000 X12X10 N240,000

SUB-TOTAL N2, 400,000.00

Note:



Table 36: ADMINISTRATION DEPARTMENT STAFF BUDGET




3 Procurement staff 2 N30,000.00 X12X2 N720,000.00

4 Personnel officers 3 N30,000.00X12X3 N1,080,000.00

5 Drivers 4 N30,000.00X12X4 N1,440,000.00

6 Cleaners 3 N20,000.00X12X3 N720,000.00

7 Messengers 2 N20,000.00X12X2 N480,000.00


SUB-TOTAL N8,760,000.00



1 Sales men 4 N30,000.00X12X2 N720,000,000.00

2 Retail outlets Staff 4 N30,000.00X12X2 N720,000.00

3 Advertisement budget 4 slots N200,000.00 X4 N800,000.00

Sub-Total N2,240,000.00




Table 38: Bast Fiber Cost of Production, Revenue and Profit Estimates

PRODUCTION ( QUANTITY AND COST)

Items

Quantity

Produced

Unit cost Total Cost Estimated Profit

FIBER

PRODUCTION

120,000 metric

tons

N115,000/1per

metric

N132,675,000.00 N192,000,000.00

Less

N132,6750,000.00

SALES ( QUANTITY AND PRICE)

Quantity Sold Unit price Total Revenue

RETTED FIBER

SALES

120,000 metric

tons

N160,000/ 1

metric ton

@$400per

metric ton

N192,000,000.00

TOTAL PROFIT N59,325,00.00



Note: Basic Assumptions for the Preparation of Financial Statements








4.9 Financial Statements Analysis

4.9.1 INCOME STATEMENT

TABLE 39: Estimated Income Statement: Profit and Loss Account Projections (2018-2022)


2018 2019 2020 2021 2022

Sales N192, 000,000.00 N240, 000, 000.00 N272,000,000.00 N320,000,000.00 N400,000,000.00

Cost of Goods Sold N132,675,000.00 N172,000.000.00 N195,500,000.00 N230,000,000.00 N287,500,000.00

Gross Profit N59,325,040.00 N67,589,000.00 N76,500,000.00 N90, 000,000.00 N112,500,000.00

OPERATING EXPENSES:

Salaries and Wages N17,720,000.00 N19, 245,210.00 N23,321,598.00 N28,975,321.00 N39,450,837.00

Seeds Purchase N208,000.00 N224,000.00 N265,129.00 N365,000.00 N120, 345.00







Nuvacron insecticide N120,000.00 N162,200.00 N169,500.00 N176.432.00 N153,543.00

Pre-Paid Insurance N3,880,000.00 N3, 230,000.00 N4, 130,000.00 N5,601,456.00 N6,120,000.00

Chemicals for Fiber Retting N120,000.00 N164,120.00 N171,421.00 N197,421.00 N209, 521.00


Energy costs( fuels/ diesel) N2, 150,000.00 N2, 340,000.00 N3,200,000.00 N4,501,458.42 N4,782,648.00


Net income from operations N33,143,895.00 N38,609,840.00 N48,056,686.00 N45,180,572.53 N56,236,691.00

Other Revenues & Expenses

Sales of Kenaf other biomass Revenue N2,000,000.00 N5,000,000.00 N6,678,908.00 N4,270,970.00 N2,674,532.00

Other kenaf biomass processing Expense (N450,000.00) (N400,000.00) (N634,231.00) (N754,521.00) (N642,453.00)

Interest expense (N2,500,000,000) (N1,200, 234.00) (N2,754,231.00) (N5,768,345.00) (N7,346,178.00)



Net income before taxes N30,645,445.00 N42,009, 606.00 N51,347,032.00 N42,928,676.00 N50,890,592.00

Less: Income Taxes (CIT =30%) N9,193,633.50 N12, 602,881.80 N15,404,109.6 N12,878,602.80 N15,267,177.60

Net Income N21,451,811.50 N29,406,724.20 N35,942,923.00 N30,050,073.20 N35,623,414.40

4.9.2 CASH FLOW STATEMENT ANALYSIS

Table 40: CASH FLOW STATEMENT PROJECTIONS (2018-2022)



ACTIVITIES

CASH INFLOWS

From Customers N192, 000,000.00 N240, 000, 000.00 N272,000,000.00 N320,000,000.00 N400,000,000.00

LESS: Accounts Receivable (N31,523,152..00) (N42,545,000.00) (N38,779,132.00) (N60,134,497.00) (N104,276,789.00)

Revenues from sale of other Kenaf biomass N2,000,000.00 N5,000,000.00 N6,678,908.00 N4,270,970.00 N2,674,532.00

TOTAL N162,476,848.00 N247,455,000.00 N384,405,467.00 N264,136,473.00 N298, 397,743.00

CASH OUTFLOWS




Inventory N18,456,324..00 N16,346,769.00 N35,386,124.00 N56,569,326.00 N48,521,976.00

LESS: Accounts payable (N13,497,521.00) (N128,789,217.00) N45,678,903.00 N67,890,134.00 N15,313,643.00


Seeds Purchase N208,000.00 N224,000.00 N265,129.00 N365,000.00 N120, 345.00





Nuvacron insecticide N120,000.00 N162,200.00 N169,500.00 N176.432.00 N153,543.00

Pre- Paid Insurance N3,880,000.00 N3, 230,000.00 N4, 130,000.00 N5,601,456.00 N6,120,000.00

Chemicals for Fiber retting treatment N120,000.00 N164,120.00 N171,421.00 N197,421.00 N209, 521.00




Energy costs( fuels) N2, 150,000.00 N2, 340,000.00 N3,200,000.00 N4,501,458.42 N4,782,648.00

Other kenaf biomass processing Expense N450,000.00) N400,000.00) N634,231.00 N754,521.00) (N642,453.00)

Interest expense (22%) (N2,750,000,000) (N2,200, 000.00) N3,080,000.00 N1,320,000.00 (N1,100,000.00)

Income Taxes (CIT =30%) N9,193,633.50 N12, 602,881.80 N10,782,876.90 N9,015,021.96 N10,687,024.32

Total N179,247,299.00 N73,693,830.00 N147,435,448.00 N401,368,430.38 N420,028,405.32

Net Cash Flow from Operating Expenses (N16,770,451.00) (N173,761,170.00) (N236,970,018.00) (N137,231,957.30) (N103,630,662.32)



Cost of Farm House and Offices (N6,000.000.00) N4,000,000.00 N5,000,000.00 N7,000,000.00 N3,000,000.00

Purchase of Machinery and Equipment (N8,440,000.00) N7,782,000.00 N8,820,000.00 N9, 234,000.00 N7,964,000.00

Total Cash flow from Investing Activities (N20, 440,000.00) (N15,782,000.00) (N21,820,000.00) (N21,000,000.00) (N17,964,000.00)


ACTITIVITIES





Total Cash flow from financing Activities (N43,000,000.00) (N28,500.000.00) N34,500,000.00 N14,000,000.00 N10,000,000.00

Net increase in Cash and Cash Equivalents N81,506,397.00, N28,811,830.00 (N224,290,018.00) (N144,231,957.30) (N111,594,662.00)

4.9.3 BALANCE SHEET STATEMENT

Table 41: Estimated Balance Sheet ( 2018-2022)


ASSETS

Short- term Assets

Cash N81,506,397.00, N28,811,830.00 N224,290,018.00 N144,231,957.30 N111,594,662.00

Accounts Receivable N31,523,152..00 N42,545,000.00 N38,779,132.00 N60,134,497.00 N104,276,789.00

Allowance for bad debts N3,231,765.00 (N2,347,890.00) N3,234,180.00 N2,789.145.00 N3,456,345.00

Inventory N18,456,324..00 N16,346,769.00 N35,386,124.00 N56,569,326.00 N48,521,976.00





Long Term Assets


Land Lease/ Purchase (N6,000,000.00) N4,000.000.00 N8,000,000.00 N5,000,000.00 N7,000,000.00

Farm House/ Offices Construction (N6,000.000.00) N4,000,000.00 N5,000,000.00 N7,000,000.00 N3,000,000.00

Machinery and Equipment (N8,440,000.00) N7,782,000.00 N8,820,000.00 N9, 234,000.00 N7,964,000.00


Total Long Term Assets N30,796,000.00 N27,190,200.00 N25,023000.00 N19,848,245.00 N26,825,000.00



LIABILITIES


Accounts payable N13,497,521.00) N128,789,217.00) N45,678,903.00 N67,890,134.00 N15,313,643.00



Provision for Taxation N9,193,633.50 N12, 602,881.80 N10,782,876.90 N9,015,021.96 N10,687,024.32

Loan payable (Amortization +

interests@22%)

N15,250,000.00 N12,700,000.00 N17,080,000.00 N7,310,000.00 N6,100,000.00



Total Loans Payable N12,500.000.00 N10,500,000.00 N14,000,000.00 N6,000,000.00 N5,000,000.00

Total Liabilities N50,441,154.00 N164,092,098.00 N87,541,779.90 N90,215,155.00 N137,100,667.00

OWNERS EQUITY




Total liability and Owners’ Equity N169, 393,638.00 N110,241,689.00 N333,842,454.00 N286,385,485.00 N300,793,772.00




This section evaluates the financial statements of investing in kenaf fiber cultivation and

processing. The evaluation further determines the feasibility of the projects or otherwise. The

following financial ratios are used to determine the profitability, sustainability and profitability

of the invested as presented below:

4.10.1 Rate of Return on Total Investment

This is the known as the accounting rate of return and focuses on accounting net operating

income rather than on financial statements. The rate of return is calculated based on estimated

revenue that will be generated by the investment from where all the projected expenses are

associated.


Total Revenue

= 132,675,000 X 100

192,000,000

= 69.10 %.

4.10.2 Rate of Return on Sales








more vulnerable the company is to adverse economic conditions in the market.

RRS = Profit before Tax X 100

Total Sales

= 59,325,040 X 100

192,000,000

= 30.89 %

4.10.3 Break- Even Analysis





BEP = Fixed Costs


= 59,325,040

1600-147.625

= 66,952.4 metric tons



4.10.4 Recommendations on Proposed Location of the Seed Farms

The location of fiber production farms will be located in states with loamy soil texture that has

been found to be suitable for fiber cultivation. These states include Osun, Kwara, Ekiti, Oyo and

Lagos states. Another critical consideration for locating fiber production farms is proximity to

the market for exports and local processing. In this consideration states such as Lagos and Osun

states take preference.



MODEL BUSINESS PLAN FOR KENAF INDUSTRIAL FIBER PROCESSING AND

“JUTE SACK” PRODUCTION

5.0 PROJECT CONCEPT

5.1 Introduction

Attracting investments in kenaf fibre-processing plant is key to the development of the kenaf

value chain in Nigeria. Since the market for kenaf products is a niche one, the processing of

kenaf fiber intermediate products such as ropes, yarns for jute sacks, pulp and paper and core

powder etc are critical to the envisaged backward integration needed for the industrialization of

the Nigerian economy. Specifically, this section considers the development of a business plan for

the processing of kenaf fiber for the production of the yarn that will ensure the production of

“Kenaf bags” in Nigeria. To achieve the foregoing, three objectives will guide the development

of the business plan: (a) identify the appropriate techniques for the production and processing of

kenaf fibers; (b) develop a process technology for the conversion of the kenaf fibers to spun

yarns needed for the jute sack manufacture and (c) analyze the necessary economic and market

requirements that will facilitate the establishment of kenaf fiber processing plant as a sustainable

profitable venture in Nigeria.

5.2 Background:

After the initial attempt at the establishment of Jute bag manufacturing plants in Badagry and Jos

in the late sixties, which collapsed due to domestic and external unfavorable economic

SECTION FIVE



conditions, there had been no further attempt at the establishment of domestic kenaf fiber

processing plant in Nigeria. The implication was that growing domestic demand for kenaf fiber

based industrial raw materials was filled through imports from china and Asia with negative

consequences on Nigeria’s dwindling foreign reserves, weak industrial development and

growing unemployment. For instance, local demand for jute bags was filled from two sources;

namely, (a) foreign imports and (b) domestic production of synthetic Fiber bags.

However, imports of jute sacks in Nigeria have two aforementioned sources for jute sack in

Nigeria has consequences for both environmental health conditions of Nigerians and for the

Nigerian economy. The continuous reliance on synthetic bags for packing cash crops and food

items in Nigeria have been condemned by both environmentalist and health experts for its

potential environmental degradation because of its lack of biodegrablility of the later have been

adjudged by Nigerian government and global environmentalists as being unhealthy for

packaging of agricultural products and other food items for human consumption. Currently, the

demand for bast fiber in Nigeria is hampered by lack of large-scale off-takers that can only be

made possible through the establishment of kenaf processing industries. Therefore, the success

of the development of kenaf value chain in Nigeria will be incomplete with investments in kenaf

fiber processing plants.

5.3 The Proposed “Jute Sack” Production Plant: The Business

The proposal evaluates the establishment of an industry for processing of kenaf fresh plants with

an expected capacity of 80,240 metric tons per year which will be used as raw materials to

process retted kenaf fiber with an expected capacity of 4,000 tons to serve as major intermediate



raw material input into the production of kenaf sacks with an expected capacity of about 3

million pieces of sack per year. The market demand for jute sacks in Nigeria is estimated at

5,000 tons per year which will produce about 500,000,000 tons per year (IATA, 2015). 650,000

farm families nationwide.

5.4 Technical Operations and Process Flow Chart For “Jute Sack “ Production

Kenaf biomass goes through a number of technical production stages before it is processed into

raw materials used for either cordage or jute sack manufacture. For purposes of kenaf fiber

processing, the growth of the kenaf stalk is considered very important. The need for kenaf

farmers to specialize in the cultivation of the kenaf varieties that can yield high stalk growth is

key to the sustainability of kenaf fiber plants.

On the average, kenaf stalk grows to a height of about 1-4 meters, with stem diameter of about

10-20 mm as at the time of harvest. Kenaf harvesting aimed at maximizing the fiber content is

preferably done when it starts flowering due to its photosensitive properties. Kenaf can be

harvested hand-cut, pulled or mowed with harvesting machines. The harvested kenaf fiber is

extracted from the stem through a process known as mechanical decortication and batched ready

to be moved into kenaf processing plants where it will undergo several technological processes

up to the production of yarn needed for production of kenaf bags.

After kenaf fresh stems have been harvested, it undergoes the following processes considered

necessary for the final production of the yarn which is the main raw material for jute sacks

production. It is important to keep in mind that the strength and fineness of the yarn determines



the quality of kenaf sacks to be produced. In addition, the efficiency of the fiber processing

methodology also determines the cost effectiveness of the produced kenaf sacks.

Fig 18: Process flow Chart for kenaf fiber processing for “Jute Sack” Production

A. Selection/ Batching Process.

Selection is the process of sorting harvested kenaf fresh stems according to their strengths, color

and fineness. It also enables the removal of the defective portion of harvested kenaf fresh stems.

The need for selection arises because kenaf is grown in different areas and perhaps supplied by

different farmers with diverse soil condition that reflect in the growth of the kenaf fiber stalks.

Therefore the different characteristics of kenaf fiber supplied by different farmers reflect in their

sizes, texture and colour and therefore require proper sorting and batching for uniformity



according to the purpose for which the kenaf raw stems are to be used. Usually, kenaf stems are

batched in either 150kg weights or 180kg weights both for ease of transportation and adaptation

to machine processing.

B. Softening Process.

Kenaf fibers are fed into the softening machine and treated with oil emulsion and water in order

to make the material suitable for other machines such as the heavy spiral fluted rollers. The

purpose of this process is to render the kenaf fiber pliant and to remove any barky portions

adhering to the fiber. Two methods can be adopted for softening kenaf fiber; (a) the use of

softening machine or the jute good spreader. Most times the softening machine approach is

adopted because of the fineness of the output given the effectiveness of the technology which

consists of gear pump, motor, jet sprayer, nozzles, emulsion tank and the jacket. This process

prepares kenaf fiber for the next phase which is called Carding.

C. Carding Process:

Carding is a combination of operations designed to convert the long and meshy kenaf fibers into

spinable fiber of desired linear density known as SILVERs. The process is usually carried out in

two or three stages. After 2 or 3 days the meshy structure of kenaf fiber is passed through a sense

of carding machines arranged in an increasing order of fineness. The three stages are as follows:

a. Breaker carding machine used to break down the meshy structure into

individual long entities of filament and also remove dust and other impurities in

the fiber.



b. Inner Carding machine used to make the fiber straight and smoother by teasing

and combine the Silver to form a long continuous ribbon of between 5” or 6”in

width.

c. Finisher carding machine makes the silver more uniform and regular in length

and weight with their more pair of rollers, staves, pinning arrangements and

speed.

D. Drawing Machine:

Drawing is a process for reducing silver width and thickness by simultaneously mixing 4

to 6 silver together. In jute sack production, two drawing processes are needed:

a. The first drawing frame makes the silver more blended, equalizing it and doubling

two or more silvers, level and provides quality and colour. This machine includes

the delivery roller, pressing roller, retaining roller faller screw sliders, check

springs, back spring and crimpling box etc

b. Second Drawing machine obtain the silver from the first drawing machine and

makes the silver more uniform and reduce the jute into a suitable size for the next

process.

E. Spinning Process:

Spinning is the last operation in converting kenaf fiber into spurn yarn. This process

twists the silver and delivers an elongated yarn with specified density and then further



twisted to develop the yarn strength needed for sacking. The other processes are

carefully followed with the intentions that the yarn will be the best quality needed for the

purposes of sacking. The objective of spinning is to transform the single fiber into a

cohesive and workable continuous length of yarn. Spinning process is carried with a

spinning machine with capacity to produce 8lbs to 28lbs with a flyer speed of 3200 to

4000 rpm (runs per minute).

F. Beaming Process:

After spinning, the yarns are wound into the warp yarn for subsequent processing. In

beaming operation yarn is wound over a beam of proper width and correct number of end

to end weaves cloth. The operation of beaming helps to increase the quality of woven

cloth and weaving efficiency, the warp yarn are coated with starch paste. It requires

adequate moisture to ensure that it does not break while the process is ongoing.

G. Weaving Process:

Weaving involves interlacing two types of yarn known as warp or ends to produce a

rigid fabric. The jute sacking looms are equipped with eco-loader to load a cop

automatically into the shuttle to enhance the process of weaving. Three levels of

operation are important for a successful interlacing of the warp and weft yarn to form the

fabric used for jute sack manufacturing. These processes are divided into two: namely,

the primary and secondary actions.

1. The Primary Actions: The three primary actions are as follows:



a. Shedding: The process of separating the warp yarn into two layers by raising the

harness to form an open area between two sets of warps known as shed. To form

any weave structure all warp treads with the same pick has to pass over powered

loom.

b. Picking: The process of inserting the filling yarn through the shed by the means

of the shuttle while the shed is opening.

c. Beating: Finally after the insertion of the each brick, the pick of weft in itself has

to be pushed forward by a reed (a type of closed comb through which all of the

warp threads are drawn) to a point adjacent to the previous pick, known as the

“fell” where the is cloth is formed.

2. The Secondary Action:

Two secondary actions are important after the primary action notwithstanding the sequence of

how the action is performed as that is at the discretion of the weaver in the case of simple

handlooms. On the other hand strict control and timing in relation to primary actions are required

for power looms: These two processes are as follows:

a. Taking up: This is process of taking up of woven cloth as weaving proceeds so that the

fell is maintained in the same position continuously as the woven cloth roles out of the

loom.

b. Letting off: This process involves the letting off the further warp from a beam above the

loom to replace the woven cloth.



H. Laminating:

This is process of using adhesive in the form of starch to behind the surface fibers

together. It also helps to lay flat any projection surface fibers or other perfect yarn should

not exceed 20 percent if the lower quality yarn were used. The use of lower quality yarn

leads to high breakage rates and consequently to an increase in the number of operative

hours.

I. Yarn Cutting:

Yarn cutting devise for mechanical looms involves arranging the fabric in layers and cutting

according to product patterns required for the “Jute Sacks”. It is at the level of cutting that sizes of

the proposed sacks are measured and cut to fit into the purposes for which the sacks are to be

used. Cutting device for mechanical looms have first and second blade carriers with an end-side

blade. There is also a drive that carries on the yarn cutting function between the blades that is

electronically energized.

J. Printing:

Screen-printing is applied to the cut fabric by arranging the fabrics in large printing tables. Water

based Azo-Free colors are used for printing. After printing is done the fabric is left to dry and then

it is taken into the stitching machine

K. Stitching:



All the body part of the Jute bag are sewn using mechanical sewing machines. Sewing treads are

mode more efficient, smooth stitching that will not break or become distorted for the life of the

sewn product. The main function of the sewing trade is to hold together parts that could be of

textile, leather etc. to form sacks or other end products. Sewing machines are used to join the

parts with sewing trade that ultimately holds the sacks firmly together to withstand pressure

during use as either for bagging agricultural products or for shopping as the case may be. There

are three main sewing operations:\

a. Mechanical Operations: Stapling, sewing.

b. Physical: welding or heat –setting

c. Chemical: by means of resins

L. Checking and Packing:

Finished bags are quality checked for any kind of errors which is mended and finally the

sacks are packed in their various sizes and bailed for either export or for delivery to

distributors to companies that require them for either packing cash crops or for

supermarkets in case of shopping bags.

5.5 MACHINERY AND EQUIPMENT REQUIREMENTS: SOURCES AND PRICES

Every single level of operations in the kenaf fiber processing for jute sack production has

machines designed to execute the functions: These machines are carefully arranged in a

production line to ensure free flow of operations and easy adaptation to fit into the scale of



operations of the firm. The machines have been arranged in The required machines for the

processing of kenaf fresh plants for Jute sack manufacturing.

Fig 18: Machines for Processing in Small Scale Jute Sack Production Plant ( 2M Sacks)

A. Kenaf Decorticating Machines:

Source: Ali-baba.com.

Price: from $28,000. 00

B: KENAF CARDING MACHINE



SOURCE: alibaba.com: Price from $15,000.00

B. Kenaf Jute Spinning Machine

Available at Alibaba.com; Prices ranges from $25,000.00 to $35,000.00



D: Beaming Machine:

Available: Alibaba.com; Price ranges from $30,000

C. K

e

n

af

Fiber Weaving Machine



Available at [email protected]; Price ranges from $42,000.

D: Jute Sack Cutting Machine ( Medium Sized)

Source: Alibaba. Com: Prices range from $20,400 to $32,600.

mailto:[email protected]

http://99businessideas.com/wp-content/uploads/2015/06/download.jpg



5.6 Production Planning: Estimated Raw Material Requirements for Jute Sack Industry.

The estimated production capacity of the proposed fiber processing and jute sack production

plant will be 80, 240 tons of fresh fiber plants per year which will translate into 4, 000 tons of

dried retted fiber that will yield 3 million pieces of various types of jute sack per year. The plant

will take about 16 percent current market share and will grow the market into a 30 percent

market share by the year 2022. The estimated jute sacks demand in Nigeria in 2022 will be about

15,000 tons per year that translates into 1.5 billion pieces of sacks per year. This projection is

informed by the renewed attention by all stakeholders in making agriculture the hub of Nigeria’s

industrialization and economic transformation in the next five years. It is also projected that the

proposed fiber processing and jute sacks production industry will create employment for over

120 persons including (women and youth), and both skilled and unskilled labour, and indirectly

engage about 650,000 farm families nationwide.

Table 42: Production Plan: Raw Material and end products Budget:

Raw materials Yield (ha) Percentage of

Biomass

Output Estimates

One (ha) of cultivated

kenaf

30 tons(ha) of fresh kenaf

plants

75 % of total biomass 80,224 tons of fresh fiber leaves

per year

One (ha) of cultivated

kenaf

I (ha) = 1.5 tons of retted

fiber

7.5 % of biomass 4000 tons of dried retted fiber per

year

0.003 = 3kg of retted 2 Jute kenaf Sack Average weight of 3million kenaf sacks per year.



fiber 600kg

Source: Authors calculations and estimates

5.6.1. Production Programming and Scalable Production Plan.

To attain full installed capacity of 80,240 tons of fresh kenaf plant per year, the plant will run

three shifts of 12 hours per day for 300 days in a year. The kenaf processing plant is not

envisaged to achieve full capacity utilization in one year; therefore, for realist production

programing, the capacity utilization of the plant in terms of raw materials and end product output

will be spread over a medium term of five years. The production programme is scaled to

accommodate plans for small scale (2m jute bags), Medium scale (3m jute bags) and Large Scale

( 5 million jute bags)

Table 43 : Small Scale ( 2m jute bags)

Years 2018 2019 2020 2021 2022


Supplied fresh kenaf plants (tons) 25,000 35,000 45,000 55,000 76.575

Processed dried retted kenaf fiber ( tons) 1,950 2,550 2,750 2,800 3,000

Estimated Jute Sacks Output (millions) 500,000 1.1m 1.5mm 1.7m 2.0m



Table 16 above presents the production program for small-scale kenaf fiber processing and jute

sacks production plant. It is expected that the plant will commence operation at a 50 percent

capacity utilization level and gradually improve up to 100 percent in a five-year time line. The

expected supply of fresh kenaf plants for the various levels of capacity utilization is intended to

ensure that there are no idle capacities left unutilized which will render plant management

inefficient. The associated dried retted fiber supply from the fresh kenaf plants are also indicated

in the table with an ultimate 76,5705 supply of kenaf fresh plants which will yield the ultimate

2m jute sacks per annum at maximum capacity utilization point.

Table 44: Scalable Production Programmes Plan over Five years ( medium scale= 3m

bags)

Years 2018 2019 2020 2021 2022


Supplied fresh kenaf plants (tons) 40,000 55,000 70,000 75,000 80,240


Estimated Jute Sacks Output (millions) 1.5m 2.0m 2.2m 2.8m 3.0m

Source: Consultants calculations and estimates.

Table 17 above shows the production programme and Raw material and output plan for a

medium scale jute sack production plant with an estimated output of 3m jute sacks at full

capacity utilization a year. The associated required raw material supply of kenaf fresh plants and



retted dried fresh fiber are also indicated against the various capacity utilization levels of

operation and estimated output of jute bags. The maximum capacity installed utilization will be

achieved at end of the five years on annual basis depending on demand dynamics and domestic

economic conditions.

Table 45: Capacity Utilization Schedule for Large Scale Jute Sack Plant (5million)

Years 2018 2019 2020 2021 2022


Supplied fresh kenaf plants (tons) 80,000 120,000 200,000 350,000 520,000


Estimated Jute Sacks Output (millions) 2.5m 3.0m 3.2m 4.5m 5.0m

Table 18 above shows the production programme and raw material and end product projections

for a large scale kenaf industrial processing and jute sack production plant. The estimated large

scale processing plant at the beginning will be operating at 50 percent capacity and gradually

improve over the years till 2022 when the full capacity utilization is expected to be achieved.

The projected end product output will be 5m jute sacks annually and will be achieved by the end

of 2022.



5.7 ORGANIZATIONS AND MANAGEMENT

The organization and management of the industrial plant is critical to its success. The scope of

the jute sack processing plant and the legal structure determines the type of management to put in

place for successful delivery on the strategic business of objectives of the investment.

5.7.1 Legal Structure of Jute Sack Production Firm.

The legal structure of the Kenaf processing and jute sack production firm will be a limited

liability company with a board, management and staff. The reporting line of authority flows from

staff to management and then ultimately to Board in that order.

5.7.2 Board of Directors

A critical success factor in setting up a Jute Sack production firm requires a strong and

transparent corporate governance structure to ensure transparency in its operations. A major

prerequisite for a strong management system is the composition of the board of directors. For

effective management of the envisaged kenaf farm, there will be clearly demarcated functions

between the Board and the Management of the firm The Board of directors are people who have

equity stake in the firm and possess the following qualities:

i. Credibility and proven industry experience and expertise in their chosen fields of

endeavor.

j. The constitution and size of the board must follow extant regulatory prescriptions



k. A fair mix of various industrial experiences such as agro business, engineering,


efficient and effective running of the farm business is assured.

5.7.3 Management Team

g. The management Team will be comprised of the Chief Executive Officer/ Managing

Director and three departmental Managers. The hiring of the management team must be

based on the following criteria:

h. Sound management training and experience

i. Clear roles and pre-set key deliverables for each manager to enable performance

monitoring

j. Proven ability to act purposefully with minimal supervision in achieving the corporate

goals of the firm.

a.Chief Executive Officer ( CEO)/ MD

The role of the CEO is to oversee the management of the Production plant on day to day basis.

Coordinates various activities at the departmental levels and ensure that the corporate objective

of the firm is achieved. The CEO/MD must have a first degree in any of the management

sciences such as Accounts, Economics, management, or social sciences. Possession of an MBA

or higher degree will be an added advantage. He/she must have at least 5 years cognate

experience in managing production in related fields. He/ She reports to the Board of Directors



a. Production Manager

The function of the production manager is to manage the production department with the specific

tasks of ensuring that the machines efficiently run on daily basis and ensure that the production

line is not constantly maintained. His or Her duty will also include supervision of the machine

operators and general supervision and inventory of all products out of the production line. The

qualification for production manager should be first degree in Engineering and 5 years’

experience in managing production lines. A higher Degree will be an added advantage.

b. Manager (Administration)

The role of the Manager in charge of administration would be to oversee the financial,

personnel and general administration in the company. The qualification of the Manager in

charge of administration would be a first degree in social science or management such as

accounts, economics, or management. He or she should have at least 5 years of cognate

experience in managing production related concerns in the past.

c. Marketing Manager

The marketing manager will oversee sales, marketing development, promotional and public

relations activities of the production firm. The need to develop new markets and ensure steady

supply of the company’s products in the market is key to the operational sustainability of the

firm. The marketing manager should possess at least a first degree in marketing or related fields

with at least 5 years of cognate experience in marketing products in the consumer value chain.

An MBA or higher degree in the social sciences will be an added advantage.



Fig 20: Proposed Organogram of the kenaf Jute Sack Production Firm.

. .

d. Other Personnel



Production Dept.

( Manager )

Administration Dept

( Manager)

Marketing Dept.

Manager

Production

Engineers

Skilled Machine

operators

Electricians

Unskilled labour

Production clerk

Record keepers

Accountants

Personal officers

Secretaries /ICT staff

Cashiers

Store keeper

Drivers

Cleaners

Messengers

Guards

Sales men

Whole sale and retail

Distributors

Market development

personal

Advertisers

Promotional activities

Company Secretary

and legal adviser

Units

Maintenance

Production

Supervision

Units

Accounts

Personnel

General Administration

Units

Sales

Market Development

Public Relations



Under each department are units that have specific functions to perform. These units will be

headed by unit heads that will be reporting directly to the manager. Other personnel in each unit

are as follows: Production Department- Maintenance and production engineers,, skilled machine

operators, Electricians, unskilled labour, production clerk and production line record keepers.

The Administration department have other personnel to include, accountants, personnel officers,

secretaries/ICT operators, store keepers, drivers etc. The Marketing department has sales men,

wholesale and retail distributors and market development officers etc.

5.7.4 Scalable Manpower Requirement Schedule for Different Plant Sizes

The manpower requirements have been schedule to reflect the different levels of industry

capacity of the proposed Jute Sack Production industry. There are three main capacity levels

namely, small scale which is proposed to produce 2m jute Sacks annually; the medium scale

designed to produce 3m Jute sacks and the large scale with the capacity to produce 5m sacks

annually.



Table 46: Scalable Manpower Requirement Schedule- Management Staff

Managerial Staff

Requirements

Small Scale Medium Scale Large Scale

Plant Production Capacities 2M 3M 5M

A. Management Job Titles

Overall Manager CEO 1 1 1

Production Manager Production 1 1 1

Admin Manager Administration 1 1 1

Marketing Manager Marketing 1 1 1

Total 4 4 4

Table 47: Scalable Manpower Requirement Schedule- Production Department Staff

Staff Requirements Job Titles Small Scale Medium Scale Large Scale


Production Dept.

Maintenance Engineers Production engineers 1 2 4



Machine Operators Production line operators 6 8 12

Electricians Electrical experts 2 4 6

Unskilled labour Services staff 3 4 6

Production clerk Input and out records 2 3 4

Total 14 21 32

Table 48: Scalable Manpower Requirement Schedule: Administration Department Staff



Administration Dept.

Accountant Chartered Accountant 1 1 2

Secretary / ICT Staff Office Secretary 2 2 3

Cashiers Finance Office 2 2 6

Store keeper Store officers 2 3 4

Drivers Office and Executives 4 6 8



Cleaners Office/ Premises cleaners 3 4 6

Messengers Office messengers 2 4 6

Security Guards Factory Guards 4 6 8

Table 49: Scalable Manpower Requirements Schedule- Marketing Department Staff



Marketing Dept.

Sales men Product sales officer 3 4 2

Wholesale distributors Distribution of products 6 6 6

Retail distributors Distribution agents 5 8 10

Market Development

Personnel

Promotional activities 3 4 6

Total 17 22 24



5.8 MARKETING STRATEGY

The projected market for jute sacks in Nigeria put at about 10,000 tons translating into about

500,000,000 million pieces of jute sacks in the a few years. Currently, all the jute sacks used in

Nigeria are imported and the synthetic fiber bags in use are produced by Agro Sacks Nigerian

limited produces the synthetic fiber bags in use and some are imported. The marketing strategy

for the proposed jute sacks firm in Nigeria will be to segment the market and target the evolving

huge demand for jute sacks in Nigeria.

5.8.1 Segmented Market for Jute Sacks in Nigeria

a. The Cash Crop export Market

The cash crop export market in Nigeria holds huge promise for jute sacks demand on a

sustainable basis. Currently, Nigeria needs jute bags for the export of cocoa, cashew nuts, sesame

seeds, Beni seed, cotton, and Soya beans. The combined requirement for jute sacks for packing

these cash crops has been estimated to be about 15 million sacks annually. For instance, Nigeria

exports about 3.5 million tons of cocoa annually requiring about 450,000 jute sacks annually.

The projected increase in agricultural exports given the current regimes focus on making the

agricultural sector the main driver for the diversification of Nigeria’s economy could see cash

crop exports quadruple between 2018 and 2022. Targeting this market provides an opportunity

for the proposed jute sack factory to exploit and increase their market share in the near future.

b. The Market for local Rice and Beans Sacking.



The second market for jute sacks in Nigeria is the sacking need for locally produced rice.

Currently Nigeria consumes 7 million metric tons of rice and imports over 80 percent of the

domestic consumption requirement. The policy initiatives on rice production have so far seen

Nigeria produce about 2.7 million, representing 49 percent self-sufficiency in rice production

annually. The sacking need for local production of rice is still depends on synthetic sacks either

locally produced by AGRO Sacks limited or imported jute sacks. Rice sacking in Nigeria is a

growing market that could be exploited by the Jute Sacks manufacturing plant.

c. Market for flour milling and Cocoa Sacking.

Flour millers in Nigeria currently rely very heavily on the use of synthetic fiber sacks for their

sacking needs. Most of the synthetic fiber sacks are provided by Agro Sacks Nigeria limited

and the huge number are also imported for that purpose. With the establishment of jute sacks

industry in Nigeria, the market for flour milling sacking and other related food processed

products like wheat flour, semolina, semolina and plantain flour could become very promising

markets for jute sacks that is considered healthy and environmentally friendly since it is

proven to be bio-degradable.

d. Market for Shopping Bags

With the rise in shopping Malls, it is obvious that the demand for shopping bags is on an

increase in the past decade. The increasing direct investment in shopping malls and the rise in

the middle class that form the bulk of the consuming public in Nigeria, the demand for



shopping bags will be increasing with time. Therefore, the market for shopping bags remains

a veritable one for jute sacks manufacturing companies to be exploited.

5.8.2 PRICING STRATEGY

a. Pricing: The strategy to penetrate the identified markets for jute sacks will be achieved by a

pricing strategy that makes locally produced jute sacks cheaper than imported ones. It is

important to note that the price of imported jute sacks relate to exchange rates and import

duties. Therefore, the price of imported jute bags are more likely to be higher than locally

produced ones for the reasons that most inputs into local production are locally sourced at

relatively cheaper prices. In the pricing strategy of the jute sacks firms, this must be

explored to deliver products that will be competitive both domestically and internationally.

b. Quality Products: The jute sacks manufacturing firm can significantly cut into the existing

market for imported sacks by producing quality products able to compete with imported

brands. This will be achieved by employing efficient methods and relatively cheap available

labour in the market.

c. Proximity of Plant to Existing Market or Raw Material source: Another important

element of mix marketing that will enhance the market share of jute sack manufacturing

firm is to locate their plant near market hubs. Two hubs could prove very useful in this

circumstance; first, either the firm is located near the source of raw materials to reduce cost

of transportation which will feed into the unit cost of the produced sacks and make them



cheaper than imported ones; Second, the firm can be located near the market for finished

products to enhance market access at lower transportation cost of finished products.

d. Niche Marketing: Otherwise known as micro-marketing is a marketing strategy that

concentrates enormous efforts on a small but specific market segment. Therefore, the ability

of the jute sacks producing firm to survive the fierce price war that will ensue with

importers would require carefully defining a small but specific well identified segment of

the market through which the firm can gain entry into the market by identifying the specific

needs of such a niche market and deliberating designing products that satisfy their needs.

There is the possibility that such markets are either ignored or poorly addressed by

competing firms. The marketing philosophy of being a big fish in a small pond rather than

being a small fish in big pond is aptly applied in niche marketing for effect.

5.8.3 COMPETITION STRATEGY:

The major competitors in the market for jute sack products are as follows:

a. AgroSack Nigeria limited – makers of synthetic fiber Sacks in Nigeria

b. Jute Sack Importers – currently dominating the market for jute sacks

c. Big Shopping Malls – Currently producing branded shopping bags for their

customers.

Developing an effective competition strategy for jute sack manufacturing starts with the

identification of competitors in the market place and the competitive advantage the old over



others playing in the market space. The second strategy would be to identify the strengths and

weakness of the competitors using SWORT Analysis (Strengths, Weaknesses, Opportunities and

Treats)

5.8.4 MARKET DEVELOPMENT:

To sustain their competitive advantage, the jute sacks firm must address the issues of market

development. The strategies to be adopted for market development include:

a. Advertising- to showcase the quality and price advantage of their products have over others

and to reach out to new customers who ordinarily may not have known the availability of the

product in the market.

b. Promotional Activities: Sponsorship of the special events will act to bring the presence of the

firm to targeted markets for recognition. Therefore such promotional activities as raffle draws;

auctions and Sales will establish a psychological bond between the product and the consumers.



5.9 FINANCIAL STUDY AND FEASIBILITY

5.9.1 Introduction

This section presents the results of the financial Study and feasibility of the setting up a Fiber

processing plant for the production of jute bags at commercial levels for profit. The financial

study starts with the outlining the budgets for fixed and variable inputs, manpower requirements

and full financial forecasts featuring the summary of financial needs, the application of loan and

owners funds, income statements, Cash flow projections and balance sheet construction and

analysis. The concluding sections of the financial study features the evaluation metrics of the

investment using important financial ratios such as rate of return on investment, rate of return on

sales, breakeven point analysis and payback period schedules.

5.9.2 Summary of Financial Needs

The funds for financing a medium scale kenaf processing plant for the production of Jute bags

will be deployed as working capital for investments in fixed assets such as building a production

plant (with offices, waste treatment facility and packing lot), machinery and equipment. Part of

the funds will also serve for the procurement of variable inputs such as retted kenaf fiber, salaries

and wages, trucks for delivery of both retted fiber, plant maintenance and other sundry variable

expenses that could be repaid through short term cash returns during the business’s next full

operating cycle, generally one year. The Growth capital will be sourced based on the prospects

of increase in the profits of the business and to be repaid over several years. In the long term,

equity capital could be raised from investors who desire to take the risk in return for profit and



dividends. The details of application of the funds are presented in the subsequent subsections

dealing with the specifics of the financial feasibility.

5.9.3 Sources of funding the Business

The critical purpose of any business plan is for sourcing investible funds from willing investors

either from promoters and backers such as banks or equity investors. The funding outlay for the

business of establishing and operating a medium scale kenaf processing and Jute Sack

production plant is estimated to cost about at six hundred and fifty million (N650,000,000). The

funding is expected to come from the following sources:

d. 40 percent (N260million) from owners’ equity

e. 60 percent (N390 million) from bank loans

f. Equity capital could be included in the future when the prospects of the firm warrants

sourcing of diversified growth funds.

The distribution of sources of funding could be changed depending on the relative cheapness of

each source and accessibility. For instance, owners’ equity does not attract interest payments as it

serves as Angel capital for the investment. On the other hand, loans from banks are a debt that

attracts interest payments and amortization over time, while equity investment attracts dividends

subject to profits made by the firm. The importance of a business plan is essentially to convince

backers that there are prospects of profit and sustainability in the business to warrant their

investment.

5.9.4 Vision and Mission Statements

The purpose is to inspire promoters to set objectives and to keep their focus on achieving them

on a sustainable way. For this business, the vision would be:



e. Mission Statement

To be a key industry player in the production and sale of Kenaf Sacks for bagging agricultural

products and other uses for domestic and export markets in Nigeria in the next five years.

f. Vision Statement

To energize the industrial integration of kenaf production value- chain to anchor the

development of Nigeria’s Agro – Industrial Complex for economic diversification and

sustainable growth.

5.9.5 Budget Keys for Financial Analysis and Projections


presented below:

Fig 21: Budget Assumptions for Financial Analysis and Projections

The information in the box is meant to guide budgeting and financial projections of the

investment. From technical analysis done, the I hectare yield of retted fiber is 20 tons, while the

Average yield of kenaf retted fiber is 20 tons per hectare

Average Sale price of a ton of retted Fiber is N4,000 @N400/$1.

1.125 tons of retted Fiber produces 750 kenaf jute Sacks

2 million kenaf Sacks will require 3,000 tons of retted fiber to produce

Unit production price for Jute Sack = N480.00

Average Sale price for a kenaf jute Sack = N1,200.00



average sale price for one ton of retted fiber is N360,000 at N400/ $1. 1. 125 tons of retted

kenaf fiber produces about 750 jute Sacks at the N480 production cost. The estimated selling

price for a jute sack is N80.00 at current market price and exchange rates.

5.9.6 Jute Sacks Projected Demand, Market Share and Sales ( 2018 -2022)

The corporate objective of the business is to capture average of 10.0 percent market share (at full

capacity Utilization) of the total jute sack market in Nigeria in the next five years. The market

potential for jute sacks is estimated that demand for produce packaging bags in Nigeria will hit

about 5,000 tons per annum which translates into 500,000,000 million Jute sacks per annum and

projected to rise to 10,000 tons in 2020 which will be about 1 billion sacks per annum ( IARTA

2010). However these projections are dependent on the level of agricultural sector development

and domestic manufacturing that will require increased locally produced products to feed

supermarkets demand for shopping bags. Notably, these projections show that a huge demand

and supply gap exist to accommodate several jute sacks manufacturing firms in Nigeria that

guarantees sustainable market for their products.



Table 50: Actual and Projected Demand for Jute Sacks, Market Share and Sales (2018-

2022)Error! Not a valid link.Note: The yellow colored section is Actual, while the green

colored section is forecasts

Table 50 above indicates that currently, about 1.5 million jute sacks are demanded monthly in

Nigeria that translates into 18 million sacks annually. By 2018, the projected annual demand for

jute sacks is put at 33.6 million and at 5 percent market share; the firm will be in a position to

sale about 1.68 million sacks per annum. By 2022, and at full capacity utilization production, the

firm will control 10 percent of the market share translating into 7.68 million-jute agro bagging

sacks.

5.9.7 Budgets, Full Financial Projections and Analysis

The budget for jute sacks processing and production project presents a detailed plan that outlines

future expectations in quantitative production outlay and associated costs. Therefore the purpose

for this business plan is to give formality to the planning process production and sale of the

proposed jute sacks production plant. The budget also serves the purpose of communicating the

plan to investors and promoters of the business. Ultimately, the process of preparing a budget is

very critical in business planning, especially when projecting for the future. In this section the

full budgets and financial projections to determine the profitability or otherwise of the

investment in the production of Jute sacks is presented starting with the financial analysis and

schedules of variable and fixed inputs and their associated costs estimates.

5.9.8 Budget of Fixed and Variable Input Requirements and Costs



Jute Sacks production requires fixed cost used to procure fixed assets whose expenditures do not

change as production changes in the short to medium term. These costs are made up of the

following items:

Table 51: ESTIMATED FIXED CAPITAL INPUTS AND COSTS


A THE PRODUCTION PLANT

1 Land Procurement (5,000 square meters) N12,000.00 per M2

N60,000,000.00

2 A medium sized Kenaf Jute Sacks Production

Plant

N160,000,000.00

Sub-Total N220,000,000.00

3 Depreciation @5% N11,000,000.00


3 Softening Machine $27,000.00@N400/1$ N10,800,000.00

4 Carding Machines $15,000@ N400/$1 N6,000,000.00

5 Drawing Machine $12,000 @N400/$1 N4,800,000.00

6 Spinning Machine $35,000@N400/1$ N14,000,000.00

7 Beaming Machine $10,000@N400/1$ N4,000,000.00

8 Weaving Machine $42,000/N400/1$ N16,800,000.00

9 Yarn Cutting Machine and accessories $8,000/N400/1$ N3,200,000.00



10 Cutting Machines and accessories $20,000/ N400/1$ N42,240,000.00

11 Printing Machines $14,500/ N400/1$ N5,800,000.00

12 Stitching Machines and accessories $9,650/ N400/1$ N3,860,000.00

13 Official Cars (5 number) N25,000,000 each N120,000,000.00

14 Furniture and Office Equipment N13,000,000.00 N13,000,000.00

14 Cost of Plant Installation/Test Run and

Maintenance

N6,000,000.00 N6,000,000.00

Total N470,500,000.00

15 Depreciation@ 10% N47,050,000.00


Table 52: ESTIMATED VARIABLE INPUT COST


Quantity

Total Cost (30 hectares)

RAW MATERIALS

2 Kenaf Retted Fiber ( for Yarn

Production)

4000 tons/N400 per

ton

N16,000,000.00

3 Energy (electricity bill and

Diesel)

100,000liters @N145 N1,450,000,.00

4 Chemicals for softening fiber 500 tins @ 2,000/tin N1,000,000.00

Raw Material preservation

chamber and its maintenance

N500,000.00 N500,000.00



5 Ware House Maintenance N1,200,000.00 N1,200,000.00

6 Other Auxiliary Inputs /

miscellaneous expenses

N2,500,000.00 N2,500,000.00

Total N22,650,000.00

Table 53 Schedule of Manpower Requirements and Labour Costs: Management Staff


1 CEO 1 N 250,000 X12 N3,000,000.00

2 Production Manger 1 N150,000 X12 N1,800,000.00

3 Manager (Administration) 1 N150,000X12 N1,800,000.00

4 Manager (Marketing) 1 N150,000 X12 N1,800,000,00

5 Manager (Plant Maintenance) 1 N150,000X12 N1,800,000.00

SUB-TOTAL 5 N4,320,000.00

Table 54: Staff Requirements: Production Department


1 Production Engineers 2 N120,000 X12X2 N2,880,000.00

2 Maintenance Engineers 2 N120,000.00 X12 X2 N2,880,000.00



3 Electricians 3 N80,000.00 X12X3 N2,880,000.00

4 Production Clerk 2 N60,000 X12X2 N1,440,000

5 Unskilled labour hands 4 N40,000X4 N1, 920,000.00

SUB-TOTAL N12, 000,000.00

Note:

Table 55: ADMINISTRATION DEPARTMENT STAFF BUDGET




3 Finance Officers/ Cashiers 2 N30,000.00 X12X2 N720,000.00

4 Store keepers 2 N30,000.00X12X3 N1,080,000.00

5 Drivers 4 N30,000.00X12X4 N1,440,000.00

6 Cleaners 3 N20,000.00X12X3 N720,000.00

7 Messengers 2 N20,000.00X12X2 N480,000.00


SUB-TOTAL N8,760,000.00




S/N Manpower Requirement Number Monthly Salary/

Wages

Annual Total

1 Sales men/ women 4 N30,000.00X12X2 N720,000,000.00

2 Retail outlets Staff 4 N30,000.00X12X2 N720,000.00

3 Whole Sale outlets 6 N40,000 X12 X6

4 Advertisement budget 4 slots N500,000.00 X4 N2,000,000.00

5 Promotional Activities/ Event

sponsorships and endorsements

N3,000,000.00 N3,000,000.00

Sub-Total N6,440,000.00


Table 57: Jute Sack Cost of Production, Revenue and Profit Estimates

PRODUCTION (QUANTITY AND COST)

Items

Quantity of jute Sacks

Produced

Unit

cost

Total Cost Estimated Profit

FIBER

PRODUCTION

2,000,000.00 N30/

per

sack

N60,000,000.00 N160,000,000.00

Less

N60,000,000.00

SALES ( QUANTITY AND PRICE)



Quantity Sold Unit

price

Total Revenue

RETTED FIBER

SALES

2, 000,000 bags N80.00

per

bag

N160,000,000.00

TOTAL PROFIT

(Projected Annual)

N100,000,000.00

Note: Unit production price is N30.00 while selling price is estimated at N80.00 per bag.

Note: Basic Assumptions for Preparation of Financial Statements








5. 10 FINANCIAL STATEMENTS ANALYSIS

5. 10.1 INCOME STATEMENT

TABLE 58: Estimated Income Statement: Profit and Loss Account Projections 2018-2022


2018 2019 2020 2021 2022

Sales N160,000,000.00 N120, 000, 000.00 N78,850,000.00 N234, 785,459.00 N325, 896,123.00


Gross Profit N100,000,000.00 N98,500,000.00 (N39,606,500.00) N136, 445,459.00 N213,396,123.00

OPERATING EXPENSES:


Yarn Production N8,000,000.00 N12,000,000.00 N14,678,432.00 N15, 890,234.00 N18,359,423.00

Chemicals for softening fiber N500,000.00 N600,000.00 N467,324.00 N534,897.00 N603,987.00

Raw material preservation N500,000.00 N530,000.00 N340,450.00 N389,234.00 N457,238.00

Energy Consumption cost ( electricity and

fuel/diesel)

N1,500,000.00 N1,700,000.00 N2,123,980.00 N2,500,000.00 N2,768,678.00



Production facility maintenance N2,500,000.00 N2,630,000.00 N1,600,000.00 N1,789,345.00 N1,900,678.00

Pre-Paid Insurance N2, 000,000.00 N1,800,000.00 N1, 530,000.00 N1,432, 556.00 N1,320,345.00

Bank Service Charge N124,000.00 N140,000.00 N160,345.00 N278,457.00 N245,678.00

Total Operating Expenses

N44,084,000.00 N52,145,210.00 N56,746,091.00 N65, 849, 155.00 N74,006,864.00

Net income from Operations N6,863,500.00 N46,352,790.00 (N17,139,591.00) N70,596,304.00 N139,389,259.00

Other Revenues and Expenses

Sales of processed core fiber N24,000,000.00 N26,459,312.00 N15,007,878.00 N23,567,432.00 N25,987,560.00

Expenses for processing Core fiber (N3,000,000.00) (N 7,000,000.00) (N10,000,000.00) (N13,521,789.00) (N15,890,321.00)

Interest Expenses (22%) (N1,800,000.00) (N2,100,000.00) (N2,300,000.00) (N3,240,542.00) (N4,256,690.00)

Net Income before Tax N26,063,500.00 N63,703,102.00 (N36,898,622.00) N129,640,358.00 N207,555,574.00

Less: Income Tax ( 30%) N7,819,050.00 N8,540,890.00 0 N13,457,234.00 N14,567,982.00

Net Income N18,244,450.00 N62,848,212.00 (N36,898,622.00) N116,183,116.00 N192,987,592.00

Note: The production, sales and revenue estimates is governed by capacity utilization levels specified in production planning section.



5.10.2 CASH FLOW STATEMENT ANALYIS

Table 59: ESTIMATED CASH FLOW STATEMENT – 2018-2022



ACTIVITIES

CASH INFLOWS

From Customers N80, 000,000.00 N120, 000, 000.00 N78,850,000.00 N234, 785,459.00 N325, 896,123.00

LESS: Accounts Receivable (N23,623,252.00) (N35,545,000.00) (N15,649,232.00) (N63,234,997.00) (N98,286,799.00)

Revenues from sale of other Kenaf biomass N21,000,000.00 N26,459,312.00 N15,007,878.00 N23,567,432.00 N25,987,560.00

TOTAL N124,623,252.00 N182,004,312.00 N109,507,110.00 N321,587,432.00 N450,170,482.00

CASH OUTFLOWS

Cost of Goods Sold N29,052,500.00 N21,5000.000.00 N118,456,500,000.00 N98,340,000.00 N112,500,000.00

Inventory N16, 678,324..00 N36,346,769.00 N26,484,174.00 N46,869,376.00 N68,821,776.00

LESS: Accounts Payable (N22,467,921.00) (N28,989,267.00) (N25,678,903.00) (N53,960,174.00) N55,213,443.00




Yarn Production N8,000,000.00 N12,000,000.00 N14,678,432.00 N15, 890,234.00 N18,359,423.00

Chemicals for softening fiber N500,000.00 N600,000.00 N467,324.00 N534,897.00 N603,987.00

Raw material preservation N500,000.00 N530,000.00 N340,450.00 N389,234.00 N457,238.00

Energy Consumption cost (electricity and fuel/diesel) N1,500,000.00 N1,700,000.00 N2,123,980.00 N2,500,000.00 N2,768,678.00

Production facility maintenance N2,500,000.00 N2,630,000.00 N1,600,000.00 N1,789,345.00 N1,900,678.00


Bank Service Charge N124,000.00 N140,000.00 N160,345.00 N278,457.00 N245,678.00


Net Cash Flow from Operating Expenses (N27,218,831.00) (N96,768,276.00) (N117,857,566.00) (N137,231,957.30) (N103,630,662.32)



Cost of Jute Sack Processing Plant and Offices (N46,000.000.00) N18,000,000.00 N42,000,000.00 N22,000,000.00 N32,000,000.00

Purchase of Machinery and Equipment (N100,440,000.00) N112,482,000.00 N98,820,000.00 N109, 234,000.00 N104,964,000.00

Total Cash flow from Investing Activities (N162, 440,000.00) (N144,482,000.00) (N158,820,000.00) (N147,234,000.00) (N144,000,000.00)




ACTITIVITIES



Total Cash flow from financing Activities (N182, 000,000.00) (N119,500.000.00) N140,000,000.00 N120,000,000.00 N120,000,000.00

Net increase in Cash and Cash Equivalents N19,560,000.00, N121,750,276.00 (N6,267,434.00) N164,465,957.30 N127,630,662.32



5.10.3 BALANCE SHEET STATEMENT

Table 60: Estimated Balance Sheet For Jute Sack Production ( 2018-2022)


ASSETS

Short- term Assets

Cash N19,560,000.00, N121,750,276.00 (N6,267,434.00) N164,465,957.30 N127,630,662.32

Accounts Receivable N23,623,252.00 (N35,545,000.00) (N15,649,232.00) N63,234,997.00) (N98,286,799.00)

Allowance for bad debts N5,652,765.00 (N6,547,790.00) N2,454,280.00 N4,289.845.00 N5,347,645.00

Inventory N16, 678,324..00 N36,346,769.00 N26,484,174.00 N46,869,376.00 N68,821,776.00



Long Term Assets




Land Lease/ Purchase N16,000,000.00 N14,000.000.00 N18,000,000.00 N16,000,000.00 N8,000,000.00

Industrial Plant and Offices Construction N46,000.000.00 N18,000,000.00 N42,000,000.00 N22,000,000.00 N32,000,000.00

Machinery and Equipment N100,440,000.00 N112,482,000.00 N98,820,000.00 N109, 234,000.00 N104,964,000.00


Total Long Term Assets N157,118,000.00 N158,030,200.00 N179,943,000.00 N179,378,356.00 N209,425,345.00



LIABILITIES


Accounts payable (N22,467,921.00) (N28,989,267.00) (N25,678,903.00) N53,960,174.00) N55,213,443.00

Provision for Taxation N23,760,000.00 N26, 702,981.80 N16,782,876.90 N19,215,521.96 N12,341,075.32

Loan payable (Amortization +

interests@22%)

N108,000.000.00 N12,700,000.00 N95,160,000.00 N95,160,000.00 N17,160,000.00





Total Loans Payable N131,760.000.00 N67,500,000.00 N65,500,000.00 N135,340,000.00 N65,500,000.00

Total Liabilities N102,987,921.00 N164,092,098.00 N193,121,779.00 N343,675,695.96.00 N225,214,518.00

OWNERS EQUITY




Total liability and Owners’ Equity N192,915,655.00 N360,515,035.00 N211,393,252.00 N453,948,680.00 N408,714,518.32




This section evaluates the financial viability of investing in kenaf fiber processing and jute sack

manufacturing business in Nigeria. The evaluation further determines the feasibility of the

projects or otherwise in the context of the economic and agro- industrial transformation and

diversification of the Nigerian economy. In order to accomplish this task, the following financial

ratios are used to determine the profitability and sustainability of the investment as presented

below.

5.11.1 Rate of Return on Total Investment

The rate of return on investment is also known as the accounting rate of return and focuses on

accounting net operating income rather than on financial statements. The rate of return is

calculated based on estimated revenue that will be generated by the investment from where all

the projected expenses are associated.


Total Revenue

= 58,105,000 X 100

160,000,000

= 36.31 %.

5.11.2 Rate of Return on Sales








more vulnerable the company is to adverse economic conditions in the market.

RRS = Profit before Tax x 100

Total Sales

= 50,947,500 X 100

80,000,000

= 63.68 %

5.11.3 Break- Even Analysis





BEP = Fixed Costs


= 470,500,000

40-11.325

= 1,640,000 bags



5.11.4 Recommendations

The location of fiber processing and kenaf jute sack production plant will be determined by

proximity to market for agricultural products, raw materials access and transportation facilities.

Therefore, two major locations are recommended; namely, Abeokuta in Ogun state and Kano

states where there are demand for agro sacks given the huge agricultural cash crops production in

this two locations. The plant will also take advantage of proximity to fiber production in states

such as Ekiti, Osun, Lagos and Oguns, while Kano plant will leverages on kenaf production in

Nasarawa, Kano, Katsina, Benue and Abuja. The rail transportation facility in these two

locations will make the movement of both finished products and raw materials more cost

effective and efficient.

5.11. 5 Conclusion

The feasibility study and modern business plan for kenaf processing to Jute Sack Production in

Nigeria feature the review and overall economic and industry survey for kenaf development in

Nigeria with the conclusion that the prospects of kenaf development was very feasible.

Circumstances that led to the failure of initial attempt at kenaf development in Nigeria was

extensively discussed and solution proffered to avoid mistakes in the future. The motivation for

the current renewed interest in kenaf development was anchored on the governments’ interest in

reposition agriculture as the backbone for its economic transformation and industrialization

strategy.



Extensive review of the results of the market research indicated that the market for kenaf bye

products in Nigeria was quite robust. In addition, the Nigerian agronomic conditions favour

commercial production of the kenaf and the environmental conditions for its survival in Nigeria,

as cash crop was quite favorable.

The prospects for investment in the kenaf value chain of kenaf seed production, kenaf fiber

production, kenaf fiber processing and most especially the focus of this study which is the

production of Jute Sack in Nigeria was quite encouraging. The financial Analysis of investment

in these value chains returned very positive results and the report therefore recommends that

investors have the opportunity to record positive returns in their investment in kenaf value chain

development in Nigeria.



References

Burnside , O. C and J. H. Williams 1968 “Weed Control methods for kinkaoil, kenaf and

sunn crotalaria”; Agron J 60: 162-164

Central Bank of Nigeria (CBN) 2013 Statistical Bulletin

Chin Hu Chang 2013, Bio based Research

Cook, C. G. M. V. Hickman, C. L . Webber, J. W. Sij and A. W. Scott1992 Fungicide

treatment effects on kenaf seed germination and stand establishment. Ind. Crops

Production 1: 41-45.

Crane, J. C and J. B Acuna 1945 Effects of plant Spacing and time of planting on seed yield

of kenaf Agron 37: 969-77

Dempsey, J. M 1975 “ Fiber Crops” The University Presses of Florida, Gainesville, Florida

Dryer, J. F. 1967 “ Kenaf Seed Cultivars. First Conference on kenaf for pulp . Gainesville,

Florida, USA

FAO Statistics ( 2014)

FAO Statistics (2015)

Higgins, J.J. and G. A. White, 1969, Effects of plant populations and harvest date on stem

yield and growth components of kenaf in Maryland. TAPPI 52(11); 667-668.

Joyner, J.F. and F. D Wilson. 1967 Effects of Row spacing and time of planting on seed

yield of kenaf, Kenaf conference process Palm Beach Florida, p. 105-118.

Institute of Agricultural Research and Training Ibadan 2014 Kenaf and Jute Improvement

Programme

Kenaf Producers, Processors and Marketers of Nigeria ( Keppman) 2017 A Concept Note

for kenaf value Chain Development: An urgent Need for Conducting a Stakeholders

Workshop.

Killinger , G. B. 1969. Kenaf (Hibiscus cannabis L.) a multi –use crop. Agon. J. 61: 734-

736.

National Bureau of Statistics, NBS 2014,

National Bureau of Statistics, NBS 2015



Oloruntoba, K. D., Indagawa, R. A., Joaoso, M. A. and Ibrahim, H. D ( 2015) Strategies for

Resuscitating the Production of Jute Sacks in Nigeria, Science and Journal

publications

Orsenigo J. R. 1964 Weed Control in kenaf. Proceedings International kenaf Conference

2.177-187.

Raw Materials Research and Development Council ( RMRDC) 2005 Annual Report

Toole, E. H., V. K Toole, and E. G. Nelson, 1960 Preservation of hemp and kenaf seeds.

USDA Tech. Bul 1215, Washington D.C

University of Kentucky College of Agriculture, Food and Environment 2005 kenaf

Corporative Extension Services

Webber CL 1999 Effect of kenaf and soybean rotations on yield components in J. Janick

(ed) Perspectives on new crops and new uses, Ashs Press Alaxandria, VA. USA.

World Economic Outlook (WEO) 2016 International Monetary Fund, Washington D. C.

Wilson, F. D 1965 Evaglades 41 and Everglades 71; two new cultivars of kenaf for the

fiber and seed, Florida Agr. Extensions Sta, Cir. S- 168.





Documents

Model Feasibility Study and Business Plan for Kenaf ... feasibility study and business plan for kenaf processing to “jute sacks” production in nigeria ... 4.6.7 manpower requirement