Financial and Economic Appraisal of Irrigated Rice Enterprise: Capital Budgeting Approach

Abstract

The need to ensure the viability and sustainability of agricultural investments in Nigeria, particularly in Niger State, juxtaposed with the national agricultural policy goal of food security attainment, demands that proposed agricultural investments are well appraised and designed. This article therefore determined the financial and economic viability and sustainability of irrigated rice enterprise in Kawo Irrigation Site in Kotangora, Niger State, Nigeria. The methodology was based on the economic theory of utility maximization cum profit motive. To achieve these objectives, the capital budgeting tools of discounted cash flow, net present value, financial and economic internal rate of returns were used. The results showed that the estimated NPVs were positive, while the IRR were higher than the opportunity cost of capital under the two scenarios considered; implying that irrigated rice enterprise will be financially viable to enhance the net returns to farmers, while generating positive externalities to the agriculture sector of Niger State and Nigeria in general. The sensitive analysis revealed that the financial and economic internal rate of returns were more sensitive to changes in irrigated rice yields under both scenarios analysed. The study concluded that irrigated rice production will be financially and economically profitable and sustainable in the site and thus, recommended investment on irrigated rice intensification, premised on the adoption of improved agricultural inputs and associated technologies.