Investment Analysis of Small Scale Private Forest Plantation Development in Ogun State, Nigeria

Abstract

Forest plantation development has the capacity of increasing wood supply and stemming the pressure on natural forest in Nigeria. However, forest under public institution control has not been sustainably managed due to rate of forest resources exploitation and inadequate funding of forestry projects. Hence, this paper examines private investment in forest plantation development with a view to encourage and alert potential private investors on feasibility and benefits of forest plantation development. Measures such as Net Present Value (NPV), Benefit Cost Ratio (BCR), Internal Rate of Return (IRR), Annual Equivalent Value (AEV), Land Expected Value (LEV), Return on Investment (ROI) and Discounted Payback Period (DPBP) were used to analyse the cash flow statement of the investment. The study revealed that small scale Tectona grandis plantation of 0.4 ha with 12 year rotation had NPV of ₦1,096,118.00, BCR of 2.62, IRR of 35.30%, AEV of ₦208,262.42 ha-1, LEV of ₦1,608,350.84 ha-1, ROI of 162% and DPBP of 5.6 years.  The results showed that investment in small scale forest plantation development is profitable going by the economic returns indices. It is recommended that private forest plantation development should incorporate multiple land use systems in order to increase economic returns and reduce the payback period.