Financial analysis of fuelwood production from woodlots in the savannah transition zone of Ghana

2018

English

Fuelwood production undoubtedly contributes to deforestation in Ghana although this industry is the source of over 50 percent of energy for cooking in households as well as the service and processing industries in the country. Over dependence on fuelwood from natural forest estate and trees on farmlands threatens its sustainability and livelihoods in the long term. Fuelwood production from managed woodlots/plantations ensures a sustainable supply of raw material. However, there is limited knowledge on its economics. This paper entails an ex-ante analysis of the profitability of fuelwood production from on-farm smallholder woodlots of mixed native and exotic species (Acacia-Neem-Cassia-Anogeissus-Mahogany) integrated with food crops (yam, maize, and cassava). Using Senna siamea (Cassia) as a test species, input-output data involving costs and revenues were collected and subjected to financial cost-benefit analysis. Results indicate that fuelwood production from woodlots was profitable returning an NPV of GH¢1,787.00, B/C ratio of 1.17 and IRR of 40.42 percent at a market discount rate of 22 percent over 25 years. Profitability is quite sensitive to increases in production costs and quite stable to decline in wood yield up to 75 percent, although this returns marginal profit. A multipurpose 5-year rotational woodlot system is proposed to ensure sustainable supply of fuelwood in smallholder systems. This also allows for intermittent crop production for household food and cash needs. The B/C ratio and NPV values indicates that profitability could increase three times at a lower discount rate of 10 percent. Energy intervention programs to support sustainable fuelwood production would need to support beneficiaries with loans at lower interest rates, at least 10 percent to encourage widespread adoption.

Obiri, B. D.; Peprah, T.; Nunoo, I.; Obeng, E. A.; Aguilar, F. X.; Opuni-Frimpong, E.