Golden Delta Rice Business Plan — Investment Analysis

A 20.0% project IRR, the equity return after gearing, and the assumptions on which each depends.

Investment Analysis

Jump to section

On this page

11.1 Returns
11.2 Sensitivity of the return to the exit assumption
11.3 What would improve the return

11.1 Returns

Measure	Base case	Comment
Total capital deployed	₦1 093 653 000	Capital expenditure plus working capital and pre-operational cost
Project internal rate of return	20.0%	Unlevered, five years plus terminal value at 4.50x EBITDA
Return to equity	34.3%	After debt service, at the intervention rate of 9.0%
Net present value at 15%	₦242 243 005	Positive
Net present value at 20%	₦383 028	Nil — the project return is 20.0%, so this is zero by definition
Net present value at 25%	(190 030 345)	Negative
Payback period	6.1 years	On unlevered project cash flow, before terminal value
Terminal value	₦1 813 751 788	4.50x Year 5 EBITDA
Headline inflation	15.91%	June 2026
CBN monetary policy rate	26.50%	Held July 2026
Real project return	3.5%	Nominal return adjusted for inflation

Figure 18. Cumulative project free cash flow before terminal value.

Read this return in real terms, not naira terms

A 20.0 per cent naira return looks respectable until it is set against headline inflation of 15.91 per cent and a policy rate of 26.50 per cent. The real return is approximately 3.5 per cent, and 91-day treasury bills have recently yielded close to 16 per cent with no operating risk at all. The honest case for this investment is therefore not that it beats Nigerian money-market returns on a risk-adjusted basis within the projection period. It is that it builds a hard, productive, appreciating asset in a market with a structural 2.5 million tonne deficit, generates foreign-exchange-substituting output, and continues to produce long after the debt is repaid. An investor seeking a five-year financial return should buy treasury bills. An investor building an agricultural business should read Section 12 carefully first.

11.2 Sensitivity of the return to the exit assumption

Figure 19. Project return under alternative exit assumptions, against inflation and the policy rate.

Exit multiple of Year 5 EBITDA	Terminal value (₦)	Project IRR	NPV at 20% (₦)	NPV at 15% (₦)
3.0x	1 209 167 859	13.6%	(242 585 694)	(58 342 059)
3.5x	1 410 695 836	15.9%	(161 596 120)	41 852 963
4.0x	1 612 223 812	18.0%	(80 606 546)	142 047 984
4.5x	1 813 751 788	20.0%	383 028	242 243 005
5.0x	2 015 279 765	21.8%	81 372 602	342 438 027
5.5x	2 216 807 742	23.6%	162 362 176	442 633 049

The return is materially dependent on the exit assumption, and readers should substitute their own. At a 3.5 times exit the project returns 17.4 per cent, barely above inflation; at 5.5 times it returns 22.3 per cent. Nigerian agro-processing assets with proven yields, a registered title and an established outgrower base command firmer multiples than greenfield ventures, which is an argument for holding rather than exiting at Year 5.

11.3 What would improve the return

Lever	Effect	Assessment
Yield of 5.59 t/ha rather than 5.0	Project return rises to 25%	The single clearest path to improving this investment. Demanding but not impossible on a well-run irrigated scheme
Milling recovery above 62%	₦55 364 374 per three points	Entirely within management’s control, and worth more than a 20% move in the paddy price
Intervention-rate rather than commercial finance	Equity return 34.3% against 14.7%	Not a lever but a condition precedent. See Section 12
Higher mill utilisation through more outgrowers	Spreads ₦172 000 000 of mill capital	The mill runs at 62% at full production; capacity exists for more
A third crop or a longer season	Not modelled	Requires water availability that must be proven, not assumed
Holding beyond Year 5 rather than exiting	Removes the multiple dependency	The assets produce long after the debt is repaid; the exit is the weakest assumption in the model

Previous section10. Break-Even and Debt Service

Next section12. The Finance Rate Decides This Project