University of Nigeria Research Publications

UCHE, Remigius Iheanacho

Aut

hor

PG/MBA/93/18003

Title

A Feasibility Study and Viability Appraisal of the Establishment of a Small Scale Soap

Manufacturing Industry in Ahiazu Mbaise L. G A. Imo State

Facu

lty

Business Administration

D

epar

tmen

t

Management

Dat

e September, 1995

Sign

atur

e

A F E A S I B I L I T Y S'TUDY AND V I A B I L I T Y A P P R A I S A L

OF THE E S T A B L i S H h E N T O F k S W L L SCALE S O A P

F i N U F A C T U K I N G INDUSTRY I N AHIAZU MBAISE L . G. A .

I N 0 S T A T E .

UCHE , REMI G I U S IHEANACI-I0

P G / M B A / 5 3 / 1 8 0 0 3

DEPARTMENT OF MANAGEMENT

SCHOOL O F P O S T GRADUATE S T U D I E S

U N I V E R S I T Y O F N I G E R I A

ENUGU CAMPUS.

S E P T E M B E R , 1Y95 .

A F E A S I B I L I T Y STUDY AND V I A B I L I T Y A P P M I S A L

O F THE ESTABLISHMENT O F A SMALL SCALE SOAP

MANUFACTURING INDUSTRY I N AHIAZU MBAISE L . G.A.

IMO S T A T E .

A P O S T GRADUATE P R O J E C T WORK CONDUCTED

I N P A R T I A L FULFILMENT FOR THE AWARD O F

MASTERS DEGREE I N B U S I N E S S A D M I N I S T R A T I O N

( M B N

UCHE , R E M I G I U S IHEANACHO

P G / M B A / 9 3 / 1 8 0 0 3

DEPARTMENT O F MANAGEMENT

SCHOOL O F P O S T GRADUATE S T U D I E S

U N I V E R S I T Y O F N I G E R I A

ENUGU CAMPUS.

SEPTEMBER, 1995 .

CERTIFICATION

UCHE REMIGIUS IHEANACHO, a p o s t g r a d u a t e s t u d e n t i n t h e I

Department of Management w i t h r e g i s t r a t i o n number, PG/MBA/93/18003

h a s s a t i s f a c t o r i l y completed t h e requ i rements f o r course and

r e s e a r c h work f o r d e g r e e of asters I n Bus iness A d m i n i s t r a t i o n (MBA)

i n Management.

The work embodGd i n t h i s p r o j e c t r e p o r t i s o r i g i n a l and h a s

n o t been s'ubmitted i n p a r t ' o f f u l l f o r any o t h e r diploma o r degree

of t h i s o r any o t h e r U n i v e r s i t y .

PROF. EJU. L . IMAGA

5 SUPERVISOR. 1

DEDICATION

T h i s work i s d e d i c a t e d t o

God Almighty t o Whom what 1 am and

what 1 hope t o be 1 owe.

ACKNOWLEDGEMENT

The r e a l i s a t i o n o f eve ry ambi t ion i s a f u n c t i o n

o f s e v e r a l i n d i s p e n s a b l e f a c t o r s , bo th human and m a t e r i a l .

A s it has become a t r a d i t i o n t o show a p p r e c i a t i o n when-

e v e r one r e c e i v e s any goodwil l o r b l e s s i n g i n t h e cou r se

o f a ch i ev ing ones ambi t ion , 1 wish t o acknowledge t h e

e f f o r t s and c o n t r i b u t i o n s o f s e v e r a l i n d i v i d u a l s who

made p o s s i b l e , t h e s u c c e s s f u l complet ion o f t h i s work.

I w i l l s t a r t by g i v i n g s p e c i a l thanks and p r a i s e s

t o God Almighty f o r H i s goodness and merc ies un to me

i n t h e r e a l i s a t i o n o f t h i s s i n g u l a r o b j e c t i v e -

I wish a l s o t o exp re s s my profound g r a t i t u d e t o my

Supe rv i so r and Dean Facu l t y o f Business Admin i s t r a t i on ,

D r E . U . L . Imaga who i n s p i t e of h i s numerous a d m i n i s t r a t i v e ,

academic and p r i v a t e engagements made t h e s u c c e s s f u l

complet ion o f t h i s p r o j e c t p o s s i b l e through h i s c o n s t a n t

u s e f u l a d v i c e , s u p e r v i s i o n and c o r r e c t i o n s . H i s c o n t r i b u -

t i o n s he lped immensely i n a ch i ev ing t h e d e s i r e d q u a l i t y

and s t a n d a r d .

I a l s o e x p r e s s my s i n c e r e thanks t o my p a r e n t s ,

M r and Mrs H.I.Uche, my b r o t h e r s , C h a r l e s , Obinna, Tony,

A u s t i n , my S i s t e r s S t e l l a and Chinwe f o r be ing so n i c e

t o me always.

Let me a t t h i s j u n c t u r e pay s p e c i a l t r i b u t e t o my

jewel o f i n e s t i m a b l e v a l u e , Onyinyechi Marian f o r

remaining s t e a d f a s t , c a r i n g and l o v i n g th roughou t t h e

t r y i n g p e r i o d s . I commend h e r f o r h e r c o n s i s t e n c y and

p e r s e v e r a n c e d e s p i t e a l l odds and p r a y t h a t God w i l l

g r a n t h e r t h e o p p o r t u n i t y t o r e a p t h e f r u i t o f h e r l a b o u r .

I wish a l s o t o remember i n a s p e c i a l way some one

, who h a s - been s o n i c e t o me, a f r i e n d i n d e e d , a m o t i v a t o r ,

i n s p i r a t o r and mover o f men, Ch ie f D.I.C. Amadi who

th rough h i s numerous f i n a n c i a l c o n t r i b u t i o n s made v e r y

p o s s i b l e t h e s u c c e s s f u l comple t ion o f t h e p r o j e c t i n

p a r t i c u l a r and t h e programme a s a whole. Words a r e n o t

enough t o e x p r e s s my s i n c e r e t h a n k s and a p p r e c i a t i o n t o

him b u t p r a y t h e Almighty God t o c o n t i n u e t o b l e s s him

abundan t ly .

I am a l s o i n d e b t e d t o t h e f a m i l i e s o f Nze and Lolo

M.O.Anyanwu and M r and Mrs C h r i s Okechukwu f o r b e i n g such

wonderful f a m i l i e s . God w i l l c o n t i n u e t o b l e s s you a l l .

My s i n c e r e t h a n k s and a p p r e c i a t i o n a l s o go t o my

c o l l e a g u e s i n t h e Finance Department, M r P h i l i p ugwfi

and Chukwuma Nna j i f o r t h e i r c o n t r i b u t i o n s i n t h e f i n a n c i a l

a n a l y s i s a s p e c t o f t h i s p r o j e c t .

I rem&er a l s o i n a s p e c i a l way t h e f o l l o w i n g p e o p l e ,

P e t e r Eke, Law Onuoha, Alex Brown, Eddy H i l l y Okoro, \

Dickson Oyovwi, Joseph Akpaka (Big J o e ) , Chidi Onyemelukwe,

Ken Opara, J . C . Anene, Wi l ly Njoku (Evergreen) ,

Uwazie Anyanwu, Paschal Nj oku,Ben Obasi , Udensi Orj i

and a h o s t o f o t h e r s f o r be ing so n i c e t o me.

To a l l t h e s e people and o t h e r s n o t mentioned

he re who c o n t r i b u t e d i n one way o r t h e o t h e r towards

t h e r e a l i s a t i o n of t h i s o b j e c t i v e , 1 say thanks a

m i l l i o n t imes and God b l e s s .

REMIGIUS I . UCHE

SEPTEMBER, 1995.

ABSTRACT

The need f o r , p r o j e c t o r investment a p p r a i s a l a r i s e s

from t h e s c a r c i t y o f r m f Q s w h i c h i s a t t h e r o o t of

most o r g a n i s a t i o n a l d e c i s i o n s . The a t t a inment o f .

o r g a n i s a t i o n a l o b j e c t i v e s i s a p roces s i nvo lv ing t h e

a l l o c a t i o n of r e sou rces between money spen t i n one way t o

b e t t e r achieve one o b j e c t i v e and t h a t spen t i n ano ther

t o achieve ano ther o b j e c t i v e . Once t h i s b a s i c concept

o f resource a l l o c a t i o n i s unders tood t h e essence o f

p r o j e c t e v a l u a t i o n can then be app rec i a t ed .

S ince r e sou rces a r e s ca rce and l i m i t e d , they must

be pu t t o t h e most e f f e c t i v e use . The purpose of

p r o j e c t a n a l y s i s i s t o achieve t h i s end by making a s

su re as t h e c i rsumstances permi t t h a t t h e p r o j e c t i s

t e c h n i c a l l y sound, t h a t i t w i l l p rov ide a reasonable

economic and where a p p r o p r i a t e , f i n a n c i a l r e t u r n , t h a t

i t s o b j e c t i v e can be achieved i n some l e s s c o s t l y way.

A This ~ o r k ~ t h e ~ e f o r e , aimed a t e s t a b l i s h i n g t.he t e c h n i c a l

f e a s i b i l i t y , economic v i a b i l i t y and s o c i a l p r o f i t a b i l i t y

of e s t a b l i s h i n g a smal l s c a l e soap manufactur ing i n d u s t r y

i n Ahiazu Mbaise Local Government Area, Imo S t a t e . I n

pursuance of t h i s o b j e c t i v e , bo th secondary and primary

d a t a were used. The primary d a t a invblved t h e use o f

r e sea rch q u e s t i o n a i r e s mainly t o determine t h e m a r k e t a b i l i t y

and a c c e p t a b i l i t y of t h e p roposed p r o d u c t i n t h e a r e a .

Also f i e l d surveyswere c a r r i e d o u t t o de te rmine t h e

s u i t a b i l i t y o f t h e l o c a t i o n a l s i t e i n t e rms o f a c c e s s i -

b i l i t y and a v a i l a b i l i t y o f t h e needed raw m a t e r i a l s

and u t i l i t i e s . Secondary d a t a covered t h e r ev iew o f

r e l a t e d l i t e r a t u r e on t h e i s s u e .

I t i s p e r t i n e n t t o n o t e t h a t t h e U n i t e d N a t i o n s

I lndus l r i a l~~Deve lopment o r g a n i s a t i o n (UNIDO) fo rmat o f

p r e s e n t i n g f e a s i b i l i t y r e p o r t s was adop ted i n t h i s t e x t .

T h i s e n t a i l e d t h e market s t u d y and a n a l y s i s , m a t e r i a l s

i n p u t , l o c a t i o n and s i t e , p r o j e c t e n g i n e e r i n g i n v o l v i n g

t h e machinery and equipment and t h e t e c h n o l o g y and - .

p r o d u c t i o n p r o c e s s , manpower r e q u i r e m e n t s , f i n a n c i a l

and economic a n a l y s i s i n v o l v i n g t h e d e t e r m i n a t i o n o f

t h e t o t a l p r o j e c t c o s t , p r o j e c t e d income s t a t e m e n t ,

p r o j e c t e d cash f l o w , b a l a n c e s h e e t , r e t u r n on i n v e s t m e n t ,

payback p e r i o d e t c .

F i n a l l y , f a r r e a c h i n g recommendations were made on

t h e r e a l i s a t i o n o f t h e s t u d y o b j e c t i v e based on t h e

r e s e a r c h problems and f i n d i n g s i n t h e a r e a o f implemen- - t a t i o n .

T A B L E OF CONTENTS

C e r t i f i c a t i o n

l jedica t i on

Acknowledgement

A b s t r a c t

Table o f Conten*

L i s t Of Tables

L i s t . Of F igures

CHAPTER ONE

I n t r o d u c t i o n

Sta tement Of Problems

Sta tement Of Objec t ives /Purpose Of Study

S i g n i f i c a n c e O f S tudy

Methodology

Scope Of Study

Background In format ion On Study Area

D e f i n i t i o n Of Key Terms

CHAPTER TWO

PAGE -. ..

i

i i

iii

i v

v

v i

v i i

REVIEW OF RELATED LITERATURE - Concept Of F e a s i b i l i t y And V i a b i l i t y Appra i s a l 12-14

F e a s i b i l i t y I n d i c a t o r s 14-19

The Need For F e a s i b i l i t y And V i a b i l i t y Appra i s a l 20-21 I 1

F e a s i b i l i t y j v i a b i l i t y Appra i s a l P rocess 21-23 1 !

Stages Of P r o j e c t F e a s i b i l i t y Ana lys i s 23-28

2.6 Assess ing The D e s i r a b i l i t y Of An Investment

2.7 B r i e f H i s t o r y O f E a r l y Soap Making

2.8 Soap I n d u s t r y I n N i g e r i a

2 . 9 Problems Facing Local Manufacture Of Soap In '

N i g e r i a

2.10 N i g e r i a ' s Raw M a t e r i a l s P o t e n t i a l For Soap

Produc t ion

2 . il Importance Of Small S c a l e E n t e r p r i s e

2 . 1 2 Problems O f Small Bus iness E n t e r p r i s e s In

N i e r i a

References

CHAPTER THREE

3 . 0 RESEARCH METHODOLOGY - 3.1.1 Freambie

3.12 Research Design

3 .1 .3 D a ' t i i S e l ec t i on /Sou rce s Of Date

5.1.4 Sample S i z e And Procedures

3.1.4.1 Piiot Sample

3.1.5 Sampl.ing Method

3 .1 .6 Nature Of Data Anajkysis

3.17 R e l i a b i l i t y Of Data

References

CHAPTER FOUR --

4 . 0 DATA PRESENTATION AND ANALYSIS

4 .1 Data P r e s e n t a t i o n

4 . 2 Data Ana lys i s

CHAPTEK FIVE - THE FEASIBILITY STUDY A N D APPRAISAL %PORT

P r o j e c t Summary And Recommendations

Preamble

P r o j e c t Background/History

Market And P l a n t Capac i ty

M a t e r i a l s And I n p u t s

Locat ion And S i t e

P r o j e c t Engineer ing

P l a n t Organ i s a t ion And Overhead Cost

Manpower Requirement

Implementat ion Schedula i n g

5.10 F i n a n c i a l And Economic Eva lua t i on

5.11 S o c i a l B e n e f i t E f f e c t

6 . 0 CHAPTER SIX

6.1 Summary Of F ind ings And Conclusion

Appendix

Bib l iography

LIST OF TABLES

.4.1-4.7 A n a l y s i s Of Resea rch Q u e s t i o n a i r e s

PAGE

51-62

5 . 1 E s t i m a t e d Cos t Of Annual ... Raw M a t e r i a i s 8 1

, 5.2 Machinery And Equipment C o s t Requirement 88 . 5 . 5 P roposed Schedu le Of P r o d u c t i o n 97

5.4 Requ i red . I n d u s t r i a l Land Area 100

5 . 5 Overhead Cost Requirement (Annual) 1 0 3

5 . 6 Manpower Requirement , Cos t F o r e c a s t 107

5 .7 F o r e c a s t O f P r o j e c t lmplement&ion Schedu le 109 ,

5 . 8 Working C a p i t a l E s t i m a t e 1 1 0

5.9 E s t i m a t e O f T o t a l I n i t i a l P r o j e c t Cost 1 1 2

5 .10 E s t i m a t e d I n t e r e s t s And Bank Charges 115

5 .11 F o r e c a s t Annual D e p r e c i a t i o n 116

5.12 F o r e c a s t P r o f i t And Loss Account

5 .13 F o r e c a s t O f Cash Flow P r o j e c t i o n s

5 .14 Ba lance S h e e t P r o j e c t i o n s

5 .15 Rayback P e r i o d

LIST OF FIGURES '

2 . 1 P ro j e c t F e a s i b i l i t y Ana ly s i s Flow Char t 2 4 A

5 .1 D i s t r i b u t i o n Channel

5.2 Recommended i nven to ry Con t ro l Card

5 .3 K e t t l e For Soap Making

5.4 b a t c h Reactor For Soap -Making

5 .5 Produc t ion Flow Char t

5.6 P l a n t Layout

b. 7 O r g a n i s a t i o n a l S t r u c t u r e

CHAPTER ONE

1.1 INTRODUCTION

One o f t h e problems o f a s u c c e s s f u l i n d u s t r i a l i s a t i o n

i n deve lop ing c o u n t r i e s i s undoubtedly , t h e l a c k o f

knowledge o f how t o f o r m u l a t e a p r o j e c t i n such a way

t h a t f t s p o t e n t i a l p r o f i t a b i l i t y e i t h e r from t h e p u b l i c

o r p r i v a t e view p o i n t can be e s t i m a t e d on a f i r m b a s i s .

A p r o j e c t p a s s e s th rough many phases from t h e t ime

i t i s f i r s t i d e n t i f i e d a s p o t e n t i a l l y a t t r a c t i v e u n t i l

i t goes i n t o o p e r a t i o n . Thus, p r o j e c t s which a r e t h e

proposed s o l u t i o n s t o problems go from one phase t o

a n o t h e r a s t h e y evo lve from i d e a t o f r u i t i o n . A t any o f t h e

v a r i o u s p h a s e s , t h e t e c h n i q u e s o f p r o j e c t a p p r a i s a l s can

be a p p l i e d t o s e e whether some a s p e c t s have been o v e r -

looked , whether some more a t t r a c t i v e a l t e r n a t i v e has

been deve loped , o r whether more d e t a i l e d c a l c u l a t i o n o f

t h e c o s t s and b e n e f i t s t h a n were p o s s i b l e e a r l i e r have

made t h e p r o j e c t l e s s d e s i r a b l e t h a n ' i t appeared i n t h e

f i r s t p l a c e .

P r o j e c t a n a l y s i s c o n s t i t u t e s an i m p o r t a n t a s p e c t

o f inves tment d e c i s i o n p r o c e s s . I t s scope i s l i m i t e d t o

two t y p e s o f q u e s t i o n s . F i r s t l y , it shou ld h e l p d e c i d e if i t i s p r a c t i c a b l e and worth w h i l e committ ing r e s o u r c e s

t o a p r o j e c t . Secondly it s h o u l d a s s i s t i n d e t e r m i n i n g which

among. a group o f p r o j e c t s t o s e l e c t . p r o j e c t a n a l y s i s

2

has;, two b a s i c dimensions. F i r s t l y , t h e assessment o f

t h e chances o f i t s . s u c c e s s f u l implementa t ion and second1.y

appra i sa l . o f t h e c o n t r i b u t i o n of t h e p r o j e c t t o g iven

goa l s . These two a s p e c t s a r e r e f e r e d t o a s f e a s i b i l i t y

and v i a b i l i t y a p p r a i s a l .

F e a s i b i l i t y a p p r a i s a l i s concerned w i t h p r a c t i c ' a -

b i l i t y , whereas v i a b i l i t y r e f e r s t o t h e wor thwhi leness

of t h e p r o j e c t . The need f o r p r o j e c t o r inves tment a n a l y s i s a r i s e s

from t h e s c a r c i t y o f r e s o u r c e s which i s a t t h e r o o t o f

most o r g a n i s a t i o n a l d e c i s i o n s . The a t t a i n m e n t o f

o r g a n i s a t i o n a l o b j e c t i v e s i s a p roce s s i n v o l v i n g t h e

a l l o c a t i o n o f r e s o u r c e s between money s p e n t i n 'we way

t o b e t t e r ach ieve one o b j e c t i v e and t h a t s p e n t i n

ano the r way t o ach ieve ano the r o b j e c t i v e . Once t h i s

b a s i c concept of r e s o u r c e a l l o c a t i o n i s unders tood , t h e

e s s ence o f p r o j e c t e v a l u a t i o n can t h e n be a p p r e c i a t e d .

S ince r e s o u r c e s a r e l i m i t e d , t h e y must be p u t

t o t h e most e f f e c t i v e u s e s . The pupose o f p r o j e c t

a n a l y s i s i s t o ach ieve t h i s end by making a s s u r e a s

t h e c i rcumstances pe rmi t t h a t t h e p r o j e c t i s t e c h n i c a l l y

sound, t h a t it w i l l p rov ide a r e a sonab l e economic and ,

where a p p r o p r i a t e f i n a n c i a l r e t u r n , t h a t i t s o b j e c t i v e

cannot be ach ieved i n some l e s s c o s t l y way, and t h a t i t

f i r s i n w i t h t h e o v e r a l l o b j e c t i v e s o f t h e o r g a n i s a t i o n .

Having c o n s i d e r e d t h e v e r y impor tance o f s o a p

t o v i r t u a l l y e v e r y househo ld i n t h e i r d a i l y wash ing ,

l a u n d r i n g and b a t h i n g and t h e economic and f i n a n c i a l

b e n e f i t s o f s e t t i n g up s m a l l s c a l e i n d u s t r i e s i n o u r

r u r a l a r e a s , t h i s s t u d y h a s beon chosen t o d e t e r m i n e

and a s c e r t a i n t h e t e c h n i c a l f e a s i b i l i t y , economic

v i a b i l i t y and s o c i a l p r o f i t a b i l i t y o f e s t a b l i s h i n g a

small s c a l e s o a p m a n u f a c t u r i n g i n d u s t r y i n Ahiazu Mbaise

Local Government Area o f Imo S t a t e .

1 . 2 -- STATEMENT OF PROBLEMS

Many l a r g e and s m a l l s c a l e i n d u s t r i a l ' i n v e s t o r s

and o p e r a t o r s f a i l t o r e a l i s e t h e i r o b j e c t i v e s because

no p r o p e r f e a s i b i l i t y and v i a b i l i t y s t u d i e s were c a r r i e d

o u t . Some o f t h e s e p r o j e c t s e s p e c i a l l y s m a l l s c a l e

i n d u s t r i e s were j u s t embarked upon because o p e r a t o r s

f e e l t h e r e i s market' demand f o r t h e p r o d u c t s and t h e y

c o u l d g e t enough fund t o e x e c u t e - ? t h e p r o j e c t . E v e n t u a l l y ,

many o f t h e s e v e n t u r e s a r e a b a n d o n e d l a f t e r p l u n g i n g i n

huge amount o f money.

A p a r t from t h e problems i n h e r e n t i n t h e f o r e -

c a s t s o f f u t u r e c o s t s and b e n e f i t s , t h e ma jo r s o u r c e

o f wrong d e c i s i o n s i n p r o j e c t management and e x e c u t i o n

a r e t r a c e a b l e back t o t h e f a i l u r e t o a t t a c h r e c o g n i t i o n

t o t h e impor tance o f b o t h f e a s i b i l i t y and v i a b i l i t y

a p p r a i s a l s . Some d e v e l o p e r s Qr p r o m o t e r s , o u t o f

s h e e r ignorance o r o v e r optiinism assume f e a s i b i l i t y

o f a p r o j e c t and p roceed t o s e e k t o e s t a b l i s h v i a b i -

l i t y o n l y t o f i n d o u t , a f t e r l a b o u r o u s , t ime consuming

o r c o s t l y e x e r c i s e s t h a t tIje9- have n o t g iven any o r '

s u f f i c i e n t t h o u g h t t o f e a s i b i l i t y and a s a r e s u l t f i n d

themse lves p lunged i n t o s i g n i f i c a n t l o s s e s o r c a t a s t r o -

p h i c r e s u l t s , some e s p e c i a l l y t h o s e who have t h e money

may assume comple te f e a s i b i l i t y and p roceed w i t h t h e

r o s y e x p e c t a t i o n o f v i a b i l i t y . They e i t h e r make

incompetent and d i s t o r t e d v i a b i l i t y a p p r a i s a l t h e r e b y .

m i s s i n g t h e o p p o r t u n i t y o f d o i n g b e t t e r w i t h t h e funds

a v a i l a b l e , o r run up a g a i n s t l e g a l o r t e c h n o l o b l ~ a l

o b s t a c l e s o rexceed t h e t ime p e r m i t t e d t o e x e c u t e t h e

p r o j e c t . Some may have b l u r r e d view of b o t h f e a s i b i l i t y

and v i a b i l i t y a p p r a i s a l b u t a r e i n f a c t n o t competent

t o c a r r y o u t p r o p e r f e a s i b i l i t y and v i a b i l i t y a p p r a i s a l s .

They n o n e t h e l e s s , p roceed w i t h o u t making u s e o f compe-

t e n t p r o f e s s i o n a l s e r v i c e s and i n s o d o i n g t h e y pay a

v e r y heavy p e n a l t y i n c u r r i n g d e v a s t a t i n g l o s s e s o r i n a - t

I, dequa te r e t u r n s .

1 . 3 STATEMENT OF OBJECTIVES/PURPOSE OF STUDY -- -.

The fundamenta l o b j e c t i v e o f t h i s f e a s i b i l i t y s t u d y

i s t o a s c e r t a i n t h e t e c h n i c a l f e a s i b i l i t y , . economic

v i a b i l i t y and s o c i a l p r o f i t a b i l i t y o f e s t a b l i s h i n g a

s m a l l s c a l e soap m a n u f a c t u r i n g i n d u s t r y i n Ahiazu Mbaise

L . G . A . of Pmo S t a t e .

a d d i t i o n t o t h i s , o t h e r o b j e c t i v e s i n c l u d e :

To d e m o n s t r a t e t h e r o l e o f f e a s i b i l i t y s t u d y and

v i a b i l i t y a p p r a i s a l i n d e c i s i o n making i n i n d u s t r i a l

p r o j e c t s .

To c r e a t e awareness on t h e need f o r f e a s i b i l i t y and

v i a b i l i t y a p p r a i s a l on t h e e s t a b l i s h m e n t o f s m a l l s c a l e

i n d u s t r i a l p r o j e c t s which h a s

a t t e n t i o n i n t h e p a s t .

been g i v e n l i t t l e o r no

To i l l u s t r a t e t h e p r i n c i p l e and a p p l i c a t i o n ? o f

f e a s i b i l i t y and v i a b i l i t y s t u d y i n s m a l l s c a l e i n d u s t r i a l

p r o j e c t s .

F i n a l l y , t o make recommendations based *on f i n d i n g s

from t h e s t u d y on f u t u r e i n d u s t r i a l p r o j e c t i n v e s t m e n t ,

devel.oment o r e s t a b l i s m e n t .

1 . 4 SIGNIFICANCE OFSTUDY

T h i s s t u d y h a s f a r r e a c h i n g s i g n i f i c a n c e t o b o t h

i n v e s t o r s and d e v e l o p e r s o f i n d u s t r i a l p r o j e c t s e s p e c i a l l y

s m a l l s c a l e i n d u s t r i a l p r o j e c t p romote r s .

I t w i l l b r i n g t o f o r e t h e d e s i r e d need f o r p r o p e r

f e a s i b i l i t y and v i a b i l i t y a p p r a i s a l b e f o r e t a k i n g

i n v e s t m e n t d e c i s i o n s i n f u t u r e t o a v o i d embarking on

w a s t e f u l v e n t u r e s e s p e c i a l l y i n a r e c e s s i v e economy l i k e

o u r s .

I n t h e academic f i e l d , i t i s i n t e n d e d t o s e r v e

a s a r e f e r e n c e work t o s t u d e n t s i n t e n d i n g t o embark

on r e s e a r c h s t u d y i n t h i s a r e a i n f u t u r e .

1 . 5 METHODOLOGY

The methodology f o r t h i s s t u d y w i l l be d e s i g n e d

and e l a b o r a t e d u s i n g q u e s t i o n a i r e , o b s e r v a t i o n , o r a l

i n t e r v i e w , r e v i e w o f r e l a t e d works i n t h e p a s t .

Also t h e s t u d y o f market a n a l y s i s and a p p l i c a t i o n o f

v a r i o u s t e c h n i q u e s t o q u a n t i f y t h e v i a b i l i t y w i l l h e l p

i n making t h e r e s e a r c h more s u c c e s s f u l . The a n a l y s i s

d e r i v e d from d a t a c o l l e c t e d w i l l be u s e d i n d e t e r m i n i n g

how f e a s i b l e and v i a b l e t h e p r o j e c t w i l l b e .

Data c o l l e c t i o n w i l l be t h r o u g h b o t h p r i m a r y and

secondary s o u r c e s . P r imary d a t a w i l l i n c l u d e u s e o f

q u e s t i o n a i r e s on p o t e n t i a l consumers , o r a l i n t e r v i e w

and f i e l d s u r v e y o f t h e l o c a t i o n a l s i t e . While secondary

d a t a w i l l be c o l l e c t e d from r e l a t e d l i t e r a t u r e s , books ,

magazines newspapers and p a s t r e s e a r c h works on t h e

a r e a o f s t u d y .

1 . 6 SCOPE OF STUDY

T h i s s t u d y i s conce rned s t r i c t l y w i t h t h e f e a s i b i -

l i t y and v i a b i l i t y a p p r a i s a l o f e s t a b l i s h i n g a s m a l l

s c a l e soap m a n u f a c t u r i n g i n d u s t r y i n Ahiazu Mbaise L . G . A,

Imo S t a t e . The s t u d y i s i n t e n d e d t o r e v o l v e around t h e

7

t e c h n i c a l f e a s i b i l i t y economic v i a b i l i t y and s o c i a 3

p r c f i t a b i l i t y o f e s t a b l i s h i n g t h e smal l s c a l e i n d u s t r y .

For t h e purpose of t h i s s t udy t h e r e s e a r c h w i l l cover

mainly consumers i n t h e Local Governemnt Area whi le

t h e product proposed f o r t h e i n d u s t r y w i l l ex tend beyond

t h e s tudy a r e a . I t w i l l a l s o make recommendations

based on i t s f i n d i n g s on smal l s c a l e i n d u s t r i a l p r o j e c t

e s t ab l i shmen t i n f u t u r e .

1 . 7 BACKGROUND INFORMATION OF STUDY AREA

BACKGROUND

The Ahiazu Mbaise Local Government Area was

c r e a t e d i n 1 9 7 6 by t h e f u s i o n o f Ahiara and Ekwerazu

c l a n s o f t h e former Mbaise Local Government Area.

There a r e f o u r t e e n autonomous communities i n t h e a r e a ,

e i g h t i n Ahiara and s i x i n EKwerazu.

LOCATION

Ahiazu Mbaise Local Government Area i s bounded

on t h e n o r t h by t.he I s i a l a Mbhno and Ehime Mbano Local

Government Areas; on t h e e a s t by I h i t t e Uboma and Obowo

Local Government Areas. The a d m i n i s t r a t i v e headqua r t e r s

i s l o c a t e d a t Afor Oru.

POPULATION AND SIZE

The Local government a r e a covers an a r e a o f approxi-

mately one hundred and seven (107) square lcil.ometers,

8

and accord ing t o t h e 1991 census has a p o p u l a t i o n of

one hundred and f o r t y seven thousand (147,000) i n h a b i -

t a n t s . ' l 'his f i g u r e i s however no t a r e f l e c t i o n o f t h e

t o t a l number o f peop le i n Ahaizu Mbaise L . G . A , s i n c e a

l a r g e p r o p o r t i o n o f t h e ind igenes were r e s i d i n g o u t s i d e

t h e l o c a l governma$. a r e a a t t h e t ime o f t h e census .

The t r u e p o p u l a t i o n i s i n r h e neighbournood o f two

hundred and f o r t y thousand (240,000) based on a 2 . 5 %

annual growth r a t e o f t h e 1963 census of 118,080.

ECONOMY

AGKI CULTURE :

A m a j o r i t y o f t h e peop l e o f t h i s l o c a l government

a r e a a r e s u b s i s t e n t f a rmers . T h e i r p r o d u c t s i n c l u d e

palm o i i , palm k e r n e l , c a s sava and a l l i e d p roduc t s e t c .

The l o c a l government a d m i n i s t r a t i o n has an agro-based

s e rv i . g s c e n t r e a t t h e h e a d q u a r t e r s which servt is a s a depot

f o r d i s t r i b u t i o n o f proved s e e d s , s e e d l i n g s , f e r t ili-

z e r s e t c . The a d m i n i s t r a t i o n ma in t a in s a f i f t e e n h e c t a r e

demons t ra t ion farm a t I h i t t e Ubi. Ahiazu i s b l e s s e d w i th

l a r g e number o f . p r i v a t e fa rmers who a r e s p e c i a l i z e d i n .

p a h p i a n t a t i o n , p o u l t r y fa rmers e t c .

INDUSTRIES :

Ahiazu i s a r u r a l cum i n d u s t r i a l c e n t r e . A number

o f i n d u s t r i e s o p e r a t e a t d i f f e r e n t communities i n t h e a r e a .

9

Prominent among them a r e Dana i l s I n d u s t r i e s , and Cassa

Paper M i l l s a t ogb'e Ah ia r a , Dona Motors a t (.:Eke Ah ia r a ,

Barnax Engineer ing Company Ltd a t I h i t t e a fo rukwu and

Sep t a Shoe I n d u s t r y a t O k i r i k a Nweke. There i s a l s o a ' - .

soap and cand l e i n d u s t r y i n t h e 2oca l . government and

t h e e x p l o r a t i o n of t h e p o s s i b i l i t y o f s e t t i n g up a s p r i n g

wa t e r b o t t l i n g i ndus t ry - -ba sed on t h e wa t e r from t h e

famous Lake Nwaegbeneru at.Umununo Ih i t t e a fo rukwu .

P roposa l s have a l s o been completed f o r t h e e s t a b l i s h m e n t

o f more agro-based i n d u s t r i e s i n t h e a r e a .

COMMERCE : /

Many ind igenes o f Ahiazu L . G . A a r e migran t bus ine s s -

men and workers and r e s i d e o u t s i d e t h e l o c a l government I

a r e a . They l i v e and do t h e i r b u s i n e s s i n b i g c i t i e s

o u t s i d e t h e s t a t e and even o u t s i d e t h e coun t ry such

people r e t u r n t h e i r e a r n i n g s t o Ahiazu and have been

i n s t r u m e n t a l i n opening up c o t t a g e i n d u s t r i e s , supe r -

markets and o t h e r b u s i n e s s v e n t u r e s which a r e now ,

transfbrming Ahiazu L.G.A. i n t o an i n d u s t r i a l ne rve

c e n t r e o f t h e s t a t e .

The l o c a l government a d d i n i s t r a t i o n ha s embarked

on t h e development o f t h r e e r e g i o n a l markets namely:-

Afor-Oru, Afor-Ogbe and Nkwoala Umuokirika. The f i r s t

two have been developed a t a c o s t o f 4yer N 2 . 3 mi l l i -on .

10

The t h i r d . i s y e t t o be brought t o t h e s t a t e o f t h e

o t h e r two. There a r e a l s o o t h e r b i g marke t s i n

d i f f e r e n t p a r t s 6 f t h e l o c a l government a r e a .

The co -ope ra t i ve and Commerce Bank and t h e P rog re s s

Bank PLC a r e , t h e two Commercial Banks t h a t o p e r a t e

t h e r e p r e s e n t l y . There a r e a l s o f o u r community banks

l o c a t e d a t Afor-Oru, Afor-Ogbe) Umuokirika and Mpam

which r e n d e r f i n a n c i a l h e l p t o sma l l s c a l e i n d u s t r i a l -

i s t s and t r a d e r s i n t h e a r e a .

1 . 8 DEFINITION OF KEY TERMS

FEASIBILITY

This answers t h e q u e s t i o n ; can i t be done?, I t i s

concerned w i t h t h e p r a c t i c a b i l i t y o r p o s s i b i l i t y o f

t h e v i s u a l i s e d o r contemplated d e c i s i o n whether on

developmental pro3 e c t , p l ann ing scheme, r e s o u r c e

inves tment p roposa l e t c .

VIABILITY

While f e a s i b i l i t y answers t h e q u e s t i o n , can i t

done? , v i a b i l i t y a p p r a i s a l answers t h e complementary

q u e s t i o n ; shou ld i t be done? . V i a b i l i t y t h u s e s t a b l i s h e s

whether o r n o t i t i s worthwhile t o t a k e t h e d e c i s i o n

which has a l r e a d y been e s t a b l i s h e d as capab l e o f be ing

t aken .

INVESTMENT

The Oxford Eng l i sh D i c t i o n a r y d e f i n e s inves tment

a s t h e convers ion o f money o r c i r c u l a t i n g c a p i t a l i n t o

some s p e c i e s of p r o p e r t y from which an income o r p r o f i t

i s expec ted t o be d e s i r e d i n t h e o r d i n a r y t r a d e o r

b u s i n e s s . ' Thi s means t h a t inves tment i n v l o v e s p a r t i n g

w i t h some c a p i t a l i n e x p e c t a t i o n o f p r o f i t s o r r e t u r n

i n f u t u r e .

VALUATION -

A w r i t t e n s t a t emen t o r e s t i m a t e o f v a l u e which i s

based on a l o g i c a l a n a l y s i s o f r e l e v a n t i n fo rma t ion

reg .arding a p a r t i c u l a r p r o j e c t o r p r o p e r t y and which i s ?

a l s o made a s a t a d a t e o f i n s p e c t i o n .

APPRAISAL

An e s t i m a t e o r op in ion o f v a l u e . I t i s r egarded a s

t h e a c t o r p r o c e s s o f e s t i m a t i n g va lue . The r e s u l t i n g

op in ion o f va lue d e s i r e d from t h e a p p r a i s a l may be t r a n s -

m i t t e d o r a l l y o r i t may be fo rma l , p r e s e n t e d on w r i t t e n

form.

R E L I A B I L I T Y

Cons i s tency o f r e s u l t when an i n s t rumen t o f

measurement i s r e p e a t e d l y used.

1 2 CHAPTER TWO

2 .0 REVIEW OF RELATED LITERATURE -- This c h a p t e r c o n s i d e r s v i t a l i s s u e s r e l a t e d t o t h e

s t u d y .

2.1 THE CONCEPT OF FEASIBILITY AND VIABILITY - APPRAISAL

Broadly speak ing , f e a s i b i l i t y a p p r a i s a l i s concerned

w i t h t h e fundamental q u e s t i o n o f t h e p r a c t i c a b i l i t y

o r p o s s i b i l i t y o f t h e subJec t m a t t e r o f a proposed

d e c i s i o n be i t development sheme, inves tment p r o j e c t ,

g r a n t of l oan and s o on. I t i s r egarded a s v a r i o u s

p rocedures which could be used g e n e r a l l y by d i f f e r e n t

p r o f e s s i o n a l s i n c a r r y i n g o u t t h e i r p r o j e c t t a s k . A

success fu l . f e a s i b i l i t y a p p r a i s a l can be ach ieved i f t h e

i n t e n d i n g u s e r o f t h e t e chn ique has an i d e a o f what

f e a s i b i l i t y i s a l l abou t .

To.:::some p r o f e s s i o n a l s i n t h e p a s t , f e a s i b i l i t y

means p r o j e c t e v a l u a t i o n , market s t u d y o r m a r k e t a b i l i t y . -

a n a l y s i s . Others c a l l f e a s i b i l i t y t o mean c o s t b e n e f i t

a n a l y s i s o r economic s t u d y o f a p r o j e c f , These v a r i e t i e s

of i d e a s brought confus ion on what t h i s system o f i d e n t i t y

l a b e l l e d on f e a s i b i l i t y cou ld actuaU$mean.

Young (1970) P.337 i n t r y i n g t o c l e a r t h e confus ion

d e s c r i b e d f e a s i b i l i t y s t u d y a s : -

"That which i s r e g a r d e d a s p r o v i d i n g

i n v e s t o r s w i t h t h e l i k e l y economic

r e s u l t s o f s e l f s u s t a i n i n g r e a l e s t a t e

The economic r e s u l t s c o u l d be aimed a t by s i m p l e

comparison o f c o s t w i t h v a l u e . A w e l l conduc ted

market s t u d y w i l l g i v e an o v e r a l l i m p r e s s i o n t o a r e a s

where i n v e s t m e n t s w i l l g a i n o r l o s e t h e r e b y c r e a t i n g

an o p p o r t u n i t y f o r i n v e s t o r t o a v o i d p o s s i b l e f a i l u r e

i n t h e i r v e n t u r e s . O r whenever t h e f e a s i b i l i t y a p p r a i s a l

g i v e s p o s i t i v e s i g n , t h e r e i s an i n d i c a t i o n t h a t s u c c e s s

i n e n c o u n t e r i n g r e t u r n c a p i t a l w i l l . be p o s s i b l e .

P r o f e s s o r Ume (1977) P.42 c l e a r e d d o u b t s on t h e

a c t u a l concep t o f f e a s i b i l i t y and w r o t e ,

"PTojec t f e a s i b i l i t y h a s t o do w i t h p r a c t i c a b i l i t y

and v i a b i l i t y w i t h . t h e -:worthwhileness:'2 T h i s i n v o l v e s

th .e a c t o f c a r r y i n g o u t t e s t t o khow w h e t h e r a known

, p r o j e c t can p h y s i c a l l y be implemented t h e r e b y s e c u r i n g ,

a d e q u a t e r e s u l t . I

P r o f e s s o r Ume i n c o n c l u s i o n f u r t h e r s a i d t h a t , i 1 :

f e a s i b i l i t y a p p r a i s a l answers t h e q u e s t i o n : Can i t b e

done '

A f e a s i b i l i t y r e p o r t which i s e s s e n t i a l l y a n '

e x p r e s s i o n o f e x p e r t o p i n i o n on whether o r n o t t h e

a c t i o n i.s c a p a b l e o f b e i n g pursued may t a k e t h e form

o f a w r i t t e n r e p o r t s u b m i t t e d s e p a r a t e l y t o t h e d e c i s i o n

maker o r i n c o r p o r a t e d a s an i n t e g r a l p a r t o f a w r i t t e n

document embracing b o t h f e a s i b i l i t y and v i a b i l i t y o r i n

o f t h e form,oral a d v i c e . Tn p r a c t i c e , a f e a s i b i l i t y r e p o r t

i s o f t e n an amalgam of a number o f s u b - r e p o r t s d e a l i n g

w i t h t h e va rous f e a s i b i l i t y i n d i c a t o r s and which a r e

f i n a l l y assembled by a c o - o r d i n a t i n g p r i n c i p a l a p p r a i s e r

o r a consor t ium o f a p p r a i s e r s who have c o n s u l t e d and

i n c o r p o r a . t e d t h e i r f i n d i n g s and o t h e r c o n s u l t a n t s i n t o

an i n t e g r a l whole forming t h e f e a s i b i l i t y r e p o r t .

2 . 2 FEASIBILITY INDICATORS

A s a l r e a d y i n d i c a t e d , f e a s i b i l i t y i s concerned

w i t h t h e fundamenta l q u e s t i o n o f p r a c t i c a b i l i t y o r

p o s s i b i l i t y o f t h e v i s u a l i s e d o r contempaated d e c i s i o n be

i t on a development p r o j e c t , p l a n n i n g scheme, r e s o u r c e I

u s e and inves tmen t p r o p o s a l e t c .

Thus, i n p r o j e c t d e c i s i o n v a l u a t i o n , f e a s i b i l i t y 1

I

a p p r a i s a l answers t h e q u e s t i o n ; can i t be done? . I n o r d e r I

t o answer t h e q u e s t i o n as t o whe the r something c o u l d

be done, a number o f r e l e v a n t o r a s s o c i a t e d q u e s t i o n s

1vhj.c.h we may c a l l f e a s i b i l i t y i n d i c a t o r s .and whose

answers would add up t o t h e o v e r a l l f e a s i b i l i t y o r

non f e a s i b i l i t y of t h e p a r t i c u l a r a c t i o n contemplated,

should be asked. The q u e s t i o n s t o be asked and

answered depend upon t h e n a t u r e o f t h e d e c i s i o n t o be

made. S i m i l a r l y t h e number and p r o f e s s i o n a l background

of t h o s e who would frame o r answer t h e q u e s t i o n s a l s o

depend on what i s be ing decided.

Most f e a s i b i l i t y a p p r a i s a l s answer t h e ques t i ons

which come w i t h i n t h e s i x p r i n c i p a l c o n s i d e r a t i o n s on

t he fol lowing f e a s i b i l i t y i n d i c a t o r s m d

TECHNOLOGICAL FEASIBILITY

The f i r s t q u e s t i o n o r i s s u e which i p r o j e c t d e c i s i o n

maker and h i s p r o f e s s i o n a l a d v i s e r should concern

themselves wi th i s whether t h e p r o p o s a l , p r o j e c t o r

sheme i s capable of r e a l i s a t i o n w i t h i n t h e l i m i t s of

e x i s t i n g t echno log ica l knowledge and a v a i l a b l e l abour

fo rce and s k i l l .

Technological f e a s i b i l i t y i s no t concerned so much

wi th s o much i s s u e s a s t h e advantages of a l t e r n a t i v e

t echno log ica l methods of execu t ing t h e proposed

p r o j e c t o r scheme a s w i th t h e r a d i c a l q u e s t i o n of

whether o r no t i t i s p o s s i b l e o f r e a l i s a t i o n w i t h i n

t h e f o r e s e e a b l e f u t u r e wi th t h e e x i s t i n g and o b t a i n a b l e

s tock o f technol.ogica1 knowledge and s k i l l .

PHYSICAL FEASIBILITY

P h y s i c a l f e a $ b i l i t y c o n s i d e r s such impor ta .n t i s s u e s

a s s u i t a b i ) l i t y o f t h e s i t e and t h e c l i m a t e . " s i b e s u i t a b -

i l i t y i s a wide s u b j e c t and may be examined i n t e rms o f

s o i l s t r e n g t h , c h a r a c t e r , t o p o g r a p h i c a l c o n s i d e r a t i o n s .

P h y s i c a l f e a s i b i l i t y embraces l o c a t i o n a l f e a s i b i l i t y .

A c c e s s i b i l i t y a l s o comes i n t o i t . P h y s i c a l f a c t o r s do n o t

o n l y a f f e c t f e a s i b i l i t y o f p r o j e c t s and d e c i s i . o n s d i r e c t l y

b u t a l s o i n d i r e c t l y . For example, p h y s i c a l c i r c u m s t a n c e

may c o n d i t i o n economic f e a s i b i l i t y : . f f t h e y f o r example,

i n h i b i t t h e p r o d u c t i o n o r i m p o r t a t i o n o f any o r o f an . .'

a d e q u a t e s u p p l y o f n e c e s s a r y raw m a t e r i a l s .

ECONOMIC FEASIBILITY

Economic f e a s i b i l i t y a p p r a i s a l i s l a r g e l y c o n ~ e r l ~ e d

w i t h t h e fundamenta l i s s u e o f whe the r t h e p r o j e c t d e c i s i o n

can be t a k e n under t h e b road p r e v a i l i n g o r f o r e s e e a b l e

economic env i ronment . I t i s f o r i n s t a n c e , n e c e s s a r y a t

t h i s j u n c t u r e t o c o n s i d e r - :whether t h e known economic

r e s o u r c e s a v a i l a b l e w i t h i n t h e c o u n t r y o r o b t a i n a b l e

from s o u r c e s o u t s i d e t h e c o u n t r y can s u p p o r t t h e contemp-

l a t e d p r o j e c t o r scheme. There i s a l s o t h e need t o

c o n s i d e r a t t h i s s t a g e , t h e b r o a d i s s u e o f demand f o r

t h e p r o d u c t o f t h e p r o d u c t t h e p roposed development

i n c l u d i n g a q u a n t i t a t i v e a n a l y s i s of t h e s c a l e and p a t t e r n

i n o r d e r t o e s t ab1 i sh : the demand t r e n d .

LEGAL FEASIBILITY

Legal f e a s i b i 1 i . t ~ c o n s i d e r s t h e b r o a d l e g a l i t y

o f t h e p r o p o s a l , p r o j e c t o r scheme. For i n s t a n c e , one

s h o u l d f i n d o u t , i n r e l e v a n t c a s e s , w h e t h e r t h e town

p l a n n i n g and o t h e r r e g u l a t i o n c o n t r o l l i n g l a n d u s e and

b u i l d i n g development i n t h e a r e a i n q u e s t i o n w i l l

p e r m i t t h e a c t i o n p roposed f o r t h e s i t e and v i c i n i t y

chosen .

I n m a n u f a c t u r i n g and o t h e r b u s i n e s s e s , one s h o u l d

n o t o n l y e n s u r e t h a t t h e p r o p o s a l w i l l n o t contYauege

t h e l a w s o f t h e l a n d b u t w i l l a l s o o b t a i n t h e s u p p o r t

of t h e law where r e l e v a n t .

I n t h e s e days o f awakening, g e n e r a l e n v i r o n m e n t a l

r e s p o n s i b i l i t i e s , l e g a l c o n s i d e r a t i o n s s h o u l d n o t s t o p

a t w h e t h e r t h e main o b j e c t i v e can be a c h i e v e d w i t h i n

t h e law b u t s h o u l d e x t e n d t o whe the r t h e law w i l l p e r m i t

t h e p r o p o s a l s f o r t r e a t m e n t o r d i s p o s a l o f w a s t e s i n

a p p r o p r i a t e c a s e s .

Lega l f e a s i b i l i t y i s n o t s o much conce rned w i t h

t h e l e g a l i t y o f such i s s u e s a s t h e d e t a i l s o f t h e

v a r i o u s d e s i g n s , m a t e r i a l s and c o n s t r u c t i o n b u t e s s e n t -

i a l l y 'with b road l e g a l i t y o f t h e c o n t e m p l a t e d a c t i o n .

FINANCIAL FEASIBILITY -- F i n a n c i a l c o n s i d e r a t i o n i s no doubt 'a p a r t o f t h e

1.8

wider economic. i s s u e . I t ha s , however, been i s o l a t e d

and t r e a t e d s e p a r a t e l y h e r e i n o r d e r t o emphasize i t s . .

importance i n d e c i s i o n v a l u a t i o n of p r o j e c t s o r schemes.

P a r t of i t s g r e a t importance d e r i v e s from t h e f a c t

t h a t most development p r o j e c t s o r investment schemes

a r e c a r r i e d ou t w i th p a r t l y borrowed c a p i t a l .

Financing w i l l a l s o determine t h e t im ing , , phas ing and

s c a l e of o p e r a t i o n s . I t w i l l a l s o i n f l u e n c e t h e

marketing p o l i c y f o r t h e f i n i s h e d produc ts .

The f i n a n c i a l c o n s i d e ~ a t i o n involved a t t h e f e a s i -

b i . l i t y s t a g e i s no t so much concerned wi th such m a t t e r s

a s t h e a p p r a i s a l of t h e c o s t of funds o r t h e r e t u r n s

expected from c a p i t a l o u t l a y as it i s wi th t h e funda-

mental i s s u e of a v a i l a b i l i t y o f funds i n t h e f i r s t p l a c e :

A t t h e f e a s i b i l i t y s t a g e t h e r e f o r e , t h e f i n a n c i a l

q u e s t i o n s should be c o n f i n e d ' t o t h e b a s i c and major

i s s u e s of t h e broad e s t i m a t e s of t h e t o t a l f i n a n c i a l

requirements and t h e source of funds . I t should be

concerned wi th whether o r no t enough funds can be

mobi l i sed from any source - i n t e r n a l , e x t e r n a l , pe r sona l

borrowed, p r i v a t e , p u b l i c o r i n s t i t u t i o n a l t o execu te

t h e dec i s ion . I n hhe case o f borrowed fund, t h e r e i s

a l s o t he need t o a p p r i a s e t h e adequacy o r o therwise

of t h e s e c u r i t y which t h e borrower can o f f e r i n o r d e r

t o s ecu re loans .

SOCIO-POLITICAL FEASIBILITY

The s o c i a l and p o l i t i c a l c o n s i d e r a t i o n s i n v o l v e d i n

c e r t a i n inves tmen t o r development p r o j e c t s o r p roposaas

canno t be d i s r e g a r d e d i n feasibility a p p r a i s a l . The (:

e f f e c t s o f s o c i a l and p o l i t i c a l envi ronment and o f t r e n d s

t h e r e o f , and t h e i r r e l e v a n t t o p r u d e n t d e c i s i o n making

canno t be o v e r emphasised. S o c i a l and p o l i t i c a l e l e m e n t s

may n o t o n l y a f f e c t t h e f e a s i b i l i t y o f a p r o j e c t d i r e c t l y

b u t a l s o i n d i r e c t l y th rough t h e changes t h e y may impose

on o t h e r f e a s i b i l i t y i n d i c a t o r s . On t h i s l a t t e r p o i n t ,

war i n a c o u n t r y s u p p l y i n g r a w m a t e r i a l s f o r a p roposed

m a n u f a c t u r i n g i n d u s t r y i n a n o t h e r c o u n t r y may s e r i o u s l y

a f f e c t t h e f e a s i b l i t y o f t h e i n d u s t r i a l p r o j e c t .

Fore ign ownership o r p a r t i c i p a t i o n a a n d such i s s u e s a s

i n d e g e n i s a t i o n p o l i c y a r e some o f t h e r e l e v a n t m a t t e r s

t o c o n s i d e r under s o c i o - p o l i t i c a l f e a s i b i l i t y . P o l i t i c a l

manoeuvres can undermine t h e economic, l e g a l and

f i n a n c i a l f e a s i b l i t 3 e s o f a p r o j e c t .

I t can be b r i e f l y s t a t e d t h a t c e r t a i n p r o j e c t s

which may be f e a s i b l e on f o u r c o u n t s s t a t e d above may

n o t be a t t e m p t e d because o f t h e s o c i a l and p o l i t i c a l

i m p l i c a t i o n s which may make them t o t a l l y unaccep taBle t o

t h e p o l i t i c a l a u t h o r i t y o r s o c i e t y a t l a r g e .

2 . 3 THE NEED FOR FEASIBILITY AND VIABILITY APPRAISAL

I n many d e v e l o p i n g c o u n t r i e s o f t h e w o r l d , w a s t e -

f u l .arid u n v i a b l e p r o j e c t s have been p lunged t n t o by

i n d i v i d u a l s , g roups o r government m e r e l y b e c a u s e t h e

money c o u l d be found e i t h e r from i n t e r n a l o f e x t e r n a l

s o u r c e s . T r a g i c s i t u a t i o n s l i k e t h e s e would be a v e r t e d

by a c l e a r r e c o g n i t i o n o f t h e impor tance and need f o r

and t h e d i f f e r e n c e between f e a s i b i l i t y and v i a b i l i t y

a p p r a i s a l s of p r o j e c t s and e n s u r i n g t h a t b o t h c o u l d b e

a t t a i n e d b e f o r e d e c i s i o n s a r e t a k e n t o v e n t u r e i n t o

i n d u s t r i a l and o t h e r deve lopmenta l p r o j e c t s .

F e a s i b i l i t y and v i a b i l i t y s t u d y and a p p r a i s a l a r e s

o f v i t a l : impor tance i n t h e economic u t i l i z a t i o n o f

r e s o u r c e s . Without t h o r o u h g f e a s i b i l i t y and v i a b i l i t y

a p p r a i s a l p r e c e d i n g t h e u n d e r t a k i n g o f any l a r g e o r

s m a l l s c a l e i n d u s t r i a l p r o j e c t , t h e r e s u l t would

u n q u e s t i o n a b l y b e t h e misuse o f v a l u a b l e r e s o u r c e s i n

one way o r t h e o t h e r .

F e a s i b i l i t y and v i a b i l i t y a p p r a i s a l a l s o p r o v i d e

a r e l i a b l e - pxe-development and p r e - i n v e s t m e n t p l a n n i n g

t o o l f o r , v i r t u a l l y a l l t y p e s o f p r o j e c t s . I t s u s e i n

c o n n e c t i o n w i t h a l l p r o j e c t s and schemes, e s p e c i a l l y

i n d u s t r i a l p r o j e c t s w i l l e n s u r e t h a t o n l y v i a b l e

p r o j e c t s w i l l be fmder t aken . I t a l s o s a v e s i n v e s t o r s

t h e t r o u b l e o f spending energy, t ime , and c a p i t a l on

p r o j e c t s t h a t w i l l n o t pay o f f . I t makes f o r c l e a r ,

coheren t and comprehensive t h i n k i n g and l u c i d expos i -

t i o n of t h e essence o f dec i s ion v a l u a t i o n i f t h e two

b a s i c mmponents a r e r e a l i s e d and kep t i n p roper

p e r s p e c t i v e a l l t h e t ime. Above a l l , i t l e a d s t o a

more competent execu t ion and p r e s e n t a t i o n of p r o j e c t

d e c i s i o n .

I t i s important t h a t f e a s i b i l i t y and v i a b i l i t y - a p p r a i s a l s should be recognised and kep t i n p e r s p e c t i v e

a l l t h e t ime. For one t h i n g , it emphasizes t he g r e a t

range and complex i t i e s of e x p e r t knowledge o r e x p e r t

consu l ta%fons which should be brought i n t o many d e c i s i o n

v a l u a t i o n s i f a worthwhile r e p o r t i s t o emerge.

Secondly i t h e l p s t o emphasize and map ou t and

p r e s e n t t h e f a c t s and f i g u r e s i n a coheren t and l o g i c a l

sequence and i n so doing h e l p s remove o r minimise t h e

muddle i n t h e t h i n k i n g and p r a c t i c e o f many p r o j e c t

a p p r a i s a 3 s r s . Above a l l , i t h e l p s t o avoid i n c u r i n g

expense and c o l l o s a l l o s s e s invo lved i n ven tu r ing i n t o

an a b o r t i v e p r o j e c t .

2 . 4 FEASIBILITY AND VIABILITY APPRAISAL PROCESS

The f e a s i b i l i t y and v i a b i l i t y a p p r a i s a l p roces s i s

an o r d e r l y p recedure i n t h e development o f an e s t i m a t e

of t h e wor thwhi leness o r o t h e r w i s e o f a p r o j e c t .

To make an a p p r a i s a l i s t o s o l v e a problem. The

s o l u t i o n r e q u i r e s i n t e r p r e t a t i o n . ; i n t e rms o f money,

o f t h e i n f l u e n c e s o f econofi ic , s o c i o l o g i c a l , p h y s i c a l

and p o l i t i c a l f o r c e s on a s p e c i f l c p r o j e c t . C h a r a c t e r -

i s t i c s o f i n d u s t r i a l p r o j e c t s d i f f e r t o some e x t e n t .

T h i s however does n o t mean t h a t t h e r e i s a wide v a r i a -

t i o n i n t h e o r d e r l y p r o c e d u r e f o r s o l v i n g a p p r a i s a l

problems. The a p p r a i s a l p r o c e s s i s an o r d e r l y programme

by which t h e p r o j e c t i s i d e n t i f i e d , t h e work n e c e s s a r y

t o s o l v e t h e problem i s p lanned and t h e d a t a i n v o l v e d i s

a c q u i r e d , c l a s s i f i e d , a n a l y s k d and i n t e r p r e t e d i n o r d e r

t o t a k e a d e c i s i b n " 5

The a p p r a i s a l p r o c e s s begi-ns w i t h t h e i d e n t i f i c a t i o n

o f t h e p r o j e c t . I n o t h e r words, it begifis w i t h t h e ' , :

i d e n t i f i c a t i o n o f t h e i n d u s t r i a l p r o j e c t ? . t h a t h a s been

e a r l i e r c o n c e p t u a l i s e d . T h i s i n v o l v e s t h e i d e n t i f i c a -

t i o n o f t h e t y p e o f p r o d u c t t o b e manufac tured by t h e

i n d u s t r y , t h e raw m a t e r i a l i n p u t s , t h e t y p e o f p l a n t s

and machinery , t h e t y p e s o f s t r u c t u r e t h a t w i l l be

adequa te f o r p r o d u c t i o n and a l s o t h e s i t e t h a t w i l l be

most: s h i t s b l e f o r t h e i n d u s t r i a l p r o j e c t . The s i t e

s e l e c t i o n i s v e r y i m p o r t a n t because most. i n d u s t r i a l

: p r o j e c t s r e q u i r e p l a n t s and equipment and i f t h e s i t e i s

n o t s t a b l e enough, it w i l l pose a s e r i o u s problem:.

2 3 .

In o r d e r t o a c q u i r e r e l i a b l e i n fo rma t ion on t h e

above i s s u e s , t h e app rakse r may need t o c o n s u l t o t h e r

p r o f e s s i o n a l s . Th i s w i l l h e l p him t o e s t a b l i s h t h e

f e a s i b i l i t y of t h e p r o j e c t and t h e r e l i a b i l i t y o f t h e

i n fo rma t ion c o l l e c t e d w i Z i go a l ong way t o h e l p i n g t h e

a p p r a i s e r come o u t w i t h a more a c c u r a t e r e s u l t .

A f t e r t h e i d e n t i f i c a t i o n o f t h e p r o j e c t and a l l

i t s a t t r i b u t e s , t h e nex t s t e p i t t o c a r r y ou t a p r e l i -

minary survey. The purpose o f t h i s p r e l i m i n a r y su rvey

i s t o de te rmine t h e c h a r a c t e r , t h e scope and t h e amount

of work i t w i l l t a k e t o c a r r y o u t t h e f e a s i b i l i t y and

v i a b i l i t y s t u d i e s . Th i s w i l l i nvo lve c o l l e c t i . o n o f

d a t a and l a t e r t h e ana3ys i s o f t h e s e d a t a . E a r l y i n t h e

p r e l i m i n a r y su rvey , t h e c h a r a c t e r and amount o f d a t a

which may be r e q u i r e d i n t h e assignment shou ld be

e s t i m a t e d . Th i s w i l l depend on t h e t ype of p r j e c t be ing

app ra i s ed .

2 . 5 STAGES OF PROJECT FEASIBILITY ANALYSIS

The a n a l y s i s o f a p r o j e c t i nvo lve s a c e r t a i n number

o f s t a g e s du r ing which i t s v a r i o u s e lements a r e p r e p a r e d

and examined i n o r d e r t o r e ach d e c i s i o n s . The p r epa ra -

t i o n o f . a p r o j e c t t h e r e f o r e can be seen a s a s e r i e s

of a c t i v i t i e s cu lmina t i ng i n t h e e s t a b l i s h m e n t o f a c e r t a i n

number of s t u d i e s and documents which pe rmi t d e c i s i o n

making.

2 4 .

P r o j e c t f e a s i b i l i t y a n a l y s i s i s conducted i n a

given i n s t i t u t i o n a l frame which determines:. t S s

n a t u r e and t h e number of economic agenc ies l i k e l y t o

be i n t e r e s t e d i n i t . Thus t h e n a t u r e and sequence of

d e c i s i o n s concerning v i a b i l i t y o f t h e p r o j e c t and i t s

f i nanc ing a r e determined by v a r i o u s i n s t i t u t i o n a l p o l i c i e s I. -

a s we l l a s company o b j e c t i v e s . Also, t h e range and accu?: :

racy of in format ion neces sa ry f o r d e c i s i o n making

dur ing d i f f e r e n t s t a g e s o f a p r o j e c t depend on i t s

i nhe ren t c h a r a c t e r i s t i c s such a s s i z e , degree o f

complexity and r i s k . There fore any a t t empt t o d e s c r i b e

a t y p i c a l procedure f o r feasibility a n a l y s i s must be

gene ra l because t h e d e c i s i o n s t o be made and t h e informa-

t i o n r e q u i r e d vary among companies, i n s t i t u t i o n s and

types of p r o j e c t s .

The p roces s o f p r o j e c t f e a s i b i l i t y a n a l y s i s fo l lowing

t h e de te rmina t ion of t h e o b j e c t i v e t o be a t t a i n e d cah be i .'

d iv ided i n t o s t a g e s and s t e p s . Th is i s shown i n t h e

f i g u r e below which i l l u s t r a t e s t h e main s t a g e s and

corresponding flow of t ypes of s t u d i e s needed t o e v a l u a t e

t h e p r o j e c t .

For t h e purpose o f c l a r i t y i n - p r e s e n t a t i o n , no

feedback loops a r e shown on t h e f e a s i b i l i t y a n a l y s i s

f low c h a r t . For example, i f t h e market a n a l y s i s i s

I IDEAS F y S T U D Y ]

I IS INFORh!AL ANALYSIS FAVOl?f \BLE' I

L .I Y E S , N O

I5 P R E F C A S l B l L l T l TERhllNATE

I ? PREFEAS!BIL ITY

/ I ANALYSIS F A V O R A B L E ?

Y E S , .-

NO < -- .-

; ? L A N F E A S I B I L I T Y ANALYSIS I___ _] 1.-

i I S h l A R K E T AIJALYSIS T A V O R A D L E '

YES

i 7ERb';itJATE CONDUCT T E C t i N I C r l . 4rJALYSIS I i J 1 ! . - -

I FAVORP.ELE?

FAVORABLE?

- AYALYSIS N E C E S S l r R Y ?

CONDUCT SOCIAL. P R O F I T A B I L I T Y ANALYSIS

1

ANALYSIS FAVORABLE? -1

unfavourab1.e t h e d a t a may i n d i c a t e t h a t t h e o b j e c t i v e s

o f t h e s t u d y s h o i ~ l d be r e - d e f i n e d ( t h a t is ,pcle ' f ine t h e

p r o d u c t ) r a t h e r t h a n t e r m i n a t e t h e p r o j e c t .

Also t h e f e a s i b i l i t y a n a l y s i s f low c h a r t i n d i c a t e s

t h a t t h e m a r k e t , t e c h n i c a l and Othe r s t u d i e s s h o u l d b e

conduc ted i n a c e r t a i n o r d e r which i s n o t a lways a p p l i c a b l e .

B e f o r e examining t h e st.@ges o f a p r o j e c t f e a s i b i l i t y

a n a l y s i s , i t s h o u l d b e emphasized t h a t t h e method and t h e

accompanying s t u d i e s d i s c u s s e d below a r e s u g g e s t e d f o r m a t s ,

s i n c e no s t a n d a r d s e x i s t .

According t o F y f f e and C l i f t o n ( 1977 ) P . 4 , e v e r y

f e a s i b i l i t y a n a l y s i s i s d i f f e r e n t , t a i i l o r e d t o t h e s u b j e c t

a r e a a s w e l l a s t o t h e p o t e n t i a l aud ience . However, t h e

b a s i c documents u s u a l l y n e c e s s a r y f o r p r o j e c t a n a l y s i s

have been i d e n t i f i e d . The ' na tu re o f t h e s e p r o j e c t s m a y

d i c t a t e t h a t one o r more o f t h e s e documents be g i v m m o r e

emphasis o r be o m i t t e d .

IDENTIFICATION STATE - The s t a r t i n g p o i n t o f a p r o j e c t a n a l y s i s i s t h e

e s t a b l i s h m e n t o f t h e o b j e c t i v e t o he a t t a i n e d . T h i s

o b j e c t i v e may be t o p rove t h a t i t i s p o s s i b l e and d e s i r a b l e

t o add a p i e c e o f equipment t o t h e e x i s t i n g p l a n t ; t o

manufac tu re a c e r t a i n a p r o d u c t o r group o f p r o d u c t s o r

t o u t i l i z e c e r t a i n r e s o u r c e s .

According t o Fyf fe and C l i f t o n ( 1 9 7 7 ) p . 4 , i d e a s f o r

new p r o d u c t s o r d i v e r s i f i c a t i o n TOT a company c a n be

g e n e r a t e d i n an i n f o r m a l and spontaneous manner from

cus tomers , d i s t r i b u t o r s c o m p e t i t o r s , s a l e s p e o p l e and

o t h e r s o r t h e entrepreneurl : . ,can r e l y on a s y s t e m a t i c p r o c e s s

o f i d e a s g e n e r a t i o n .

For t h e p l a n n e r , t h e p r o d u c t i d e a is- more l i k e l y t o ;

s tem from a s u r v e y o f e x i s t i n g i n d u s t r y s e c t o r a l o r

i n t e r - i n d u s t r i a l a n a l y s ' i s , a r e a r e s o u r c e s u r v e y o r market

s t u d i e s . The prop,osed p r o j e c t may deve lop a s a r e sponse

t o a need t h a t appea red w i t h i n t h e framework o f i n d u s t r i a l

development p l a n n i n g .

PRE-SELECTION 'STAGE -.-- . .-

I n t n e p r e - s e l e c t i o n s t a g e , a d e c i s i o n must b e made

a s t o whether i t i s a d v i s a b l e t o examine i n d e t a i l t h e

- f e a s i b i . l i t y o f t h e p r o j e c t and i f s o t h e y d e f i n e t h e scope C'

and e s t i m a t e t h e c o s t o f subsequen t s t u d i e s . Both t h e

e n t r e p r e n e u r and p l a n n e r want t o e n s u r e t h a t t h e p r o j e c t

i s o f s u f f i c i e n t i n t e r e s t i n t h e t e c h n i c a l economic p l a n e

t o j u s t i f y an i n d e p t h s t u d y , t h a t i s , t h a t a f e a s i b l e

s o l u t i o n can be a n t i c i p a t e d . The r e s u l t s g a t h e r e d o r

o b t a i n e d d u r i n g t h e p r e - s e l e c t i o n s t a t e a r e o f t e n compiled

i n t o a p r e - f e a s i b i l i t y s t u d y . To p e r m i t d e c i s i o q o n t h e

2 7

merit of the project, the pre-feasibil i ty study s h o u l d i n c l u d e

f o l l o w i n g : -

A 1 d e s c r i p t i o n o f t h e market ( e s t i m a t e o f consumption

t r e n d s , p r e s e n t s u p p l y , p r i c e )

An o u t l i n e o f m a n u f a c t u r i n g p r o c e s s and i n f o r m a t i o n

c o n c e r n i n g a v a i l a b i l i t y o f main p r o d u c t i o n f a c t o r s

(main ly raw m a t e r i a l s ) .

An e s t i m a t e o f n e c e s s a r y i n v e s t m e n t and c o s t o f

o p e r a t i o n .

An approximate e s t i m a t e o f profidt i .

S t a t e m e n t o f a n t i c i p a t e d ma jo r problems and r i s k s .

ANAY LSIS STATE

A t t h e a n a l y s i s s t a g e , t h e v a r i o u s a l t e r n a t i v e s

i n m a r k e t i n g , t e c h n o l o g y and o t h e r c o n s i d e r a t i o n s must

be s t u d i e d and t h e f i n d i n g s w i t h s u p p o r t i n g d a t a p r e s e n -

t e d i n a s y s t e m a t i c form. For a p a r t i c u l a r p r o j e c t ,

t h e r e may b e more t h a n one p o s s i b l e t e c h n o l o g y t o eva-

l u a t e and such f a c t o r s a s p l a n t s i z e , c a p i t a l a v a i l a b i l i t y ,

raw m a t e r i a l s a v a i l a b i l i t y and l a b o u r s k t l l s and

a v a i l a b i l i t y need t o b e c o n s i d e r e d . The a n a l y s i s o f ; t h e

f e a s i b i l i t y o f a p r o j e c t can be conducted a t d i f f e r e n t

l e v e l s o f e f f o r t w i t h r e s p e c t t o t i m e , budge t and p e r s o n n e l ,

depending on t h e c i r c u m s t a n c e s . A comple te s t u d y c o n t a i n s

a market , t e c h n i c a l and f i n a n c i a l a n a l y s i s and i s r e f e r r e d

t o a s an economic' f e a s i b i l i t y s t u d y . I n some c a s e s ,

such a d e t a i l e d s t u d y i s n o t nece s sa ry . For example,

if t h e p r o j e c t o u t p u t has a confirmed buye r , then an

i ndep th market a n a l y s i s i s n o t r e q u i r e d . I n some

i n s t a n c e s , a p a r t i a l s t u d y o f t h e market o r o f t h e

t e chno log i e s s a t i s f i e s t h e d a t a ' r e q u i r e m e n t s f o r

d e c i s i o n making.

To permi t a d e c i s i o n on t h e m e r i t o f t h e p r o j e c t

t h e r e f o r e , t h e p r o j e c t f e a s i b i l i t y a n a l y s i s shou ld

i n c l u d e marke t , t e c h n i c a l , f i n a n c i a l and s o c i a l

p r o f i t a b i l i t y a n a l y s i s .

2 .6 ASSESSING THE DESIRABILITY OF AN INVESTMENT

I t i s impor t an t , a f t e r a p r o j e c t has been

adjudged f e a s i b l e and v i a b l e , t o c a r r y o u t a v i a b i l i t y

t e s t i n order:.to a s s e s s t h e c o s t s and b e n e f i t s t h a t a r e

l i k e l y t o a cc rue t o t h e i n d i v i d u a l i nves to r , . and t h e

s o c i e t y a s a whole. Th i s t a s k r e q u i r e s ' a n e x p e r t

s k i l l , knowledge and expe r i ence on t h e p a r t o f t h e

a p p r a i s e r because a s l i g h t mis take e i t h e r by omission

o r commission, may r e s u l t i n a p r o j e c t which i s v i a b l e

appear ing non-v iab le a t a f i r s t look . I t shou ld however

be no t ed t h a t t h i s p r e l i m i n a r y t e s t i s n o t an end i n

i t s e l f . I t i s r a t h e r a means t o an end. There a r e

o t h e r more s o p h i s t i c a t e d methods o r t e chn iques o f

a r r i v i n g 'at t h e v i a b i l i t y o r o the rw i se o f a p r o j e c t .

I n a s s e s s i n g t h e d e s i r a b i l i t y of an inves tment

o r i n c a r r y i n g ou t t h e p r e l i m i n a r y v i a b i l i t y t e s t ,

t h e computat ion o f t h e expec ted c o s t s and b e n e f i t s

i s r e q u i r e d . I t i s a l s o impor tan t t h a t t h e s e c o s t s

and b e n e f i t s be e s t i m a t e d a s a c c u r a t e l y a s p o s s i b l e ,

Th i s may c a l l f o r t h e a s s i s t a n c e o f some o t h e r p r o f e -

s s i o n a l s such a s economists and market a n a l y s i s .

I n a deve lop ing coun t ry l i k e o u r s , i t i s a l i t t l e more

d i f f i c u l t t o a c c u r a t e l y compute t h e expec ted c o s t s

and b e n e f i t s o f an i n d u s t r y p a r t l y due t o l a c k of

adequate d a t a and a l s o due t o t h e non-ex i s tence o f

comparablest i f6 I n s i t u a t i o n s where few comparables

e x i s t s , they a r e u s u a l l y l o c a t e d i n t h e same a r e a .

With t h e i n fo rma t ion a v a i l a b l e t o him, t h e

a p p r a i s e r goes on t o conduct a profitability t e s t .

The p r o f i t a b i l i t y t e s t i s a measure o f r a t i o between

p r e s e n t va lue o f expec ted income f low and t h e i n v e s t -

ment o u t l a y .

2 . 7 BRIEF HISTORY OF EARLY SOAP MANUFACTURING

Soap had been known f o r many y e a r s now. According

t o P l i n y t h e E l d e r , t h e phoen i c i ans p r epa red soap from

goa t s t a l l o w and wood a shes i n 600 B . C and sometime

30

use i t a s an a r t i c l e o f b a r t e r w i th t h e Gauls. The c e l t s ,

who produced t h e i r soap from animal f a t s and p l a n t s

ashes named t h e product t t ~ a i p o " 8 from which t h e word

soap was der ived .

The importance of soap f o r c l ean ing and washing was

then no t recognised u n t i l t h e second cen tu ry a f t e r C h r i s t ,

t h e Greek p h y s i c i a n , Galen, mentioned i t a s a medicat ion

and a means of c l ean ing t h e body.

Ea r ly soap makers p robably used ashes and animal

f a t s . Simple wood o r p l a n t ashes con ta in ing potassium

carbona te were d i s p e r s e d i n wate r and f a t was added t o

t h e s o l u t i o n . The mixture was then b o i l e d , ashes being

added again and aga in as t h e wate r evaporated. During

t h i s p r o c e s s , t h e f a t t y a c i d s could then r e a c t wi th t h e

a l k a l i ca rbona tes of t h e p l a n t ash t o form soap. This

method p r e v a i l e d u A t i l t he end o f t h e middle ages when

s l aked lime came t o be used t o c a m s t i c i s e t h e a l k a l i

ca rbona te . Through t h i s p r o c e s s , chemical ly n e u t r a l

f a t s could be s a p o n i f i e d e a s i l y w i th t h e c a u s t i c s o l u t i o n .

People i n N i g e r i a had prepared t h e i r soap from

t h e a v a i l a b l e technology found i n t h e i r l o c a l i t i e s . There was no gene ra l way of making soap i n t hose days

Black Soap was t h e most form of soaps made i n t hose days ,

even a s a t p r e s e n t . They a r e made mainly from wood ashes

31

e s p e c i a l l y from t h e bunches which c o n t a i n t h e palm o i l

f r u i t s . When t h e palm o i l f r u i t s have been removed,

t h e remai.ning bunches a r e b u r n t i n an open f i r e u n t i l

t h e y a r e reduced t o a she s . These a shes w i l l t h en

s e r v e a s po tass ium ca rbona t e .

The potass ium ca rbona t e (ashes ) w i l l t h e n be p l a c e d

i n a l a r g e pan and mixed w i t h wa t e r s o a s t o o b t a i n

p a s t y subs t ance . The con t en t i s t hen b o i l e d a f t e r palm

o i l has been added. The palm o i l s e r v e s a s form o f o i l .

S a p o n i f i c a t i o n t a k e s p l a c e a s t h e c o n t e n t s o f t h e pan

con t i nue t o b o i l f o r s e v e r a l hours . A f t e r s a p o n i f i c a t i o n ,

t h e c o n t e n t s form a p a s t y b l ack subs t ance which i s t h e

soap.

2 . 8 SOAP INDUSTRY I N NIGERIA

Soap p roduc t i on i s an a r e a where import s u b s t i t u t i o n

has reached an advanced s t a g e i n N ige r i a . However,

c o n s i d e r i n g t h e s i z e o f t h e Niger ian p o p u l a t i o n and t h e

n a t u r e o f soap a s a n e c e s s i t y , t h e r e l a t i v e l y l a r g e and

i n c r e a s i n g ou tpu t o f l o c a l soap p roducuers have n o t been

adequate t o remove t h e need f o r soap i m p o r t a t i o n . O f f i c i a l

s t a t i s t i c s has shown t h a t t h e r e a r e we l l over one hundred

soap p roducers i n t h e coun t ryw9 , t h e s e however d i d n o t

i n c l u d e o t h e r unknown i n d i v i d u a l p roducers found i n

many p a r t s o f t h e coun t ry .

Among t h e s e soap p r o d u c e r s , Lever B r o t h e r s , P . Z .

I n d u s t r i e s , A . J . Seward and A s s o c i a t e d I n d u s t r i e s L td .

a r e t h e o n l y major s o a p p r o d u c e r s w i d e l y knownin

t h e c o u n t r y . They accoun t f o r a b o u t 7 5 % o f t o t a l l o c a l

p r o d u c t i o n . The o t h e r soap p r o d u c e r s a r e r e l a t i v e l y

s m a l l e n t e r p r i s e s employing l e s s t h a n f i f t y (50) p e o p l e .

A s a m a t t e r o f f a c t , most o f them a r e no more t h a n a

c o t t a g e o r backyard i n d u s t r i e s u s i n g l a b o u r i n t e n s i v e

o r e n t i r e l y manual p r o d u c t i o n t e c h n i q u e s . Except f o r

v e r y few, t h e i r p r o d u c t s a r e h a r d l y known beyond t h e i r

immediate market zone and c e r t a i n l y n o t beyond t h e i r

s t a t e o f l o c a t i o n .

2 . 9 PROBLEMS FACING LOCAL MANUFACTURE OF SOAP I N

NIGERIA.

Soap i n i t s v a r i o u s forms i s one o f t h e b e s t b a s i c

n e c e s s i t i e s o f normal h e a l t h y l i f e . Thus e i t h e r f o r

body wash ing , l a u n d e r i n g o r t h e g e n e r a l c l e a n i n g o f

t h e human env i ronment , no s i n g l e i n d i v i d u a l can do f o r

l o n g w i t h o u t soap .

B e f o r e t h e appea rance o f whitemen on o u r s h o r e s ,

o u r p e o p l e have deve loped t h e a r t ( o r s c i e n c e ) o f soap

making. However, 2 i k e o t h e r a s p e c t s o f o u r c u l t w e ,

t r a d i t i o n and t e c h n o l o g y , n a t i v e s o a p making i s a d y i n g

o c c u p a t i o n . Today t h e b u l k o f o u r demand f o r s o a p i s

met from t h e p roduc t s o f f a c t o r i e s o r e s t a b l i s h m e n t s

u s i n g modern p roduc t i on f a c i l i t i e s and t e chn iques .

A t f i r s t , t h i s demand was met by impor t s , b u t o v e r t h e

f i v e decades o r s o , modern soap making was i n t roduced

i n N ige r i a and ha3 been g a i n i n g ground e v e r s i n c e

The s h o r t a g e o f f o r e i g n exchange and t h e r e s u l t i n g

r e s t r i c t i o n on i m p o r t a t i o n o f c e r t a i n raw m a t e r i a l s

r e q u i r e d f o r p roduc t i on w i l l impa i r t h e a b i l i t y o f

e x i s t i n g l o c a l p roduc t i on t o expand ou tpu t s i g n i c a n t l y

and a l s o d x s ~ ~ u r a g e t h e e n t r y o f p r o s p e c t i v e p roduce r s .

The p r e s e n t economic d i f f i c u l t i e s have impa i red t h e

a b i l i t y o f 4 o c a l p roducers t o expand p roduc t i on a t t h e

r a t e r e q u i r e d due t o i n f l a t i o n and h igh c o s t o f equ ip-

ments and m a t e r i a l s f o r p roduc t i on .

2.10 NI GERIA' S RAW MATERIALS POTENTIAL FOR SOAP PRODUCTION

The major raw m a t e r i a l s r e q u i r e d f o r t h e p roduc t i on

o f soap a r e t a l l o w , palmkernel o i l , palm o i l , c u a s t i c

soda , sodium s i l i c a t e , magnessium s u l p h a t e perfume,

c o l o u r i n g a g e n t s , packaging m a t e r i a l s and chemical

additives l i k e t i t a n i u m e t c . As can be obse rved ,

upwards of 80% of t h e raw m a t e r i a l s i n c l u d i n g palm o i l ,

palm k e r n e l o i l and packaging mate . r i a l s a r e capab le

o f be ing produced l o c a l l y .

S e v e r a l y e a r s a f t e r , N i g e r i a has r e c e n t l y j o ined

o t h e r a i l producing c o u n t r i e s i n e s t a b l i s h i n g pe t roche -

mica l p l a n t s . Pet ro leum c o n s t i t u t e s t h e major sou rce

( 9 0 % ) of o r g a n i c compounds i n t h e wor ld today.

The e s t a b l i s h m e n t o f a f u n c t i o n a l pe t rokhemica l

i n d u s t r y o f a roma t i c and o l e f i n based complexes w i l l

r e v o l u t i o n a l i s e t h e soap i n d u s t r y . i n N i g e r i a .

With t h e p r o v i s i o n o f l o c a l raw m a t e r i a l s f o r o u r

soap i n d u s t r i e s complemented w i t h adequate e n g i n e e r i n g

s e r v i c e s , t r a i n e d pe r sonne l and r e g u l a r supp ly of b a s i c

u t i l i t i e s , t h e soap i n d u s t r y can q u i c k l y f i l l t h e

yawning gap between t h e supp ly c a p a c i t y o f t h e f a c t o r i e s

and t h e p o p u l a t i o n demand.

When t h e i r o n and s t e e l i n d u s t r y commences o p e r a t i o n s

f u l l y , and t h e pe t rochemica l i n d u s t r y ach ieves e s t a b l i s h -

ment, t hen t h e machinery manufac tu re r s may become more

i n t e r e s t e d i n f a s h i o n i n g more s imple mach iner ies l o c a l l y ,

and f u r t h e r enhance t h e p r o s p e c t s of t h e s u r v i v a l and

r e v i t a l i s a t i o n o f soap i n d u s t r y i n N ige r i a .

2 . 1 1 IMPORTANCE OF SMALL SCALE ENTERPRISE

The importance o f s m a l l s c a l e e n t e r p r i s e t o t h e

growth o f economy cannot be over-emphas i z e d .

Commenting on t h e s p e c i f i c importance t o t h e

economic development o f t h e c o u n t r y , 0 k o r i e l 0 s t a t e d

t h a t t h e sma l l s c a l e e n t e r p r i s e s p rov ide employment on

a l a r g e s c a l e and t h e r e f o r e make t h e p o s s i b i l i t y o f

e q u i t a b l e d i s t r i b u t . i o n o f n a t i o n a l income more r e a l i s -

t i c . He added t h a t by c r e a t i n g more employment oppo r t -

u n i t y t h e y h e l p i n m o b i l i s i n g c a p i t a l and human r e sou rce s

t h a t would o the rw i se be l e f t i d l e .

Another importance s t a t e d was t h a t o f removal o f I

r e g i o n a l im.ba.2ance by r educ ing t h e r u s h t o t h e few

developed c e n t r e s o f t h e c o u n t r y , t h u s h e l p i n g i n

checking r u r a l urban m i g r a t i o n and t h e a s s o c i a t e d

problem of unplanned u r b a n i s a t i o n .

11 I n ano the r p u b l i c a t i o n , Ogaga s t r e s s e d t h a t

t h e e x i s t e n c e o f sma l l s c a l e bus ine s s p rov ide s

c o n s i d e r a b l e s o l u t i o n t o t h e imbalance o f payment problem

becuase of t h e i r l e s s dependence on impor ted i n p u t s

t h e r e . by reduc ing t h e demand p r e s s u r e on f o r e i g n exchange

e a r n i n g s .

Another importance o f sma l l s c a l e e n t e r p r i s e s l i e s

i n t h e f a c t t h a t some f u n c t i o n s a r e more e x p e r t l y

performed by sma l l b u s i n e s s . Th i s enab l e s them t o

c o n t r i b u t e t o t h e succe s s o f l a r g e bus ine s s .

all"'^ s t r e s s e d a n o t h e r importance o f sma l l I I

s c a l e b u s i n e s s concern a s source o f i nnova t i on . Me

main ta ined t h a t new s e r v i c e s a r e o f t e n i naugu ra t ed by I

sma l l b u s i n e s s owners who p e r c e i v e t h e need f o r such

s e r v i c e s .

Many economis t s have compounded t h e v a l u e s i n h e r e n t

i n economic c o m p e t i t i o n . When monopoly r e p l a c e s compet i -

t i o n , t h e cus tomer i s a t t h e mercy o f t h e monopo l i s t

because t h e monopo l i s t can s e t an e x h o r b i t a n t p r i c e ,

w i t h h o l d a t e c h n o l o g i c a l development , e x c l u d e new

c o m p e t i t o r s o r o t h e r w i s e abuse h i s p o s i t i o n o f power.

Smal l b u s i n e s s e n t e r p r i s e s encourage c o m p e t i t i o n i n t h e

economy.

To t h i s , A l b e r t " l3 opined t h a t t h e e x i s t e n c e o f

many h e a l t h y b u s i n e s s f i r m s i n an i n d u s t r y c o n s t i t u t e s

b a r r i e s a g a i n s t monopoly.

A11spp"14 saw s m a l l b u s i n e s s o p e r a t i o n a s a means o f

s e l f employment f o r o l d e r p e r s o n s , p h y s i c a l l y hand ica -

pped p e r s o n s and m i n o r i t y groups who f i n d i t d i f f i c u l t

t o obB.ainzgainfu1 employment e l s e w h e r e .

F i n a l l y , t h e impor tance o f s m a l l s c a l e e n t e r p r i s e

i n t h e promotion o f economic development cannot b e over-

emphasized. A~co.rdiag.@ ~ k w a e z e ~ ~ l ~ , s m a l l s c a l e e n p t e r p r i s e s

a r e a l e g i t i m a t e and v i a b l e compon.ent i n any s t r a t e g y . . f o r reconstruct^^^ .; t h e economy.

2.13 PROBLEMS OF SMALL SCALE ENTERPRISES I N N I G E R I A

There a r e s e v e r a l problems m i l i t a t i n g a g a i n s t s m a l l

s c a l e e n t e r p r i s e s i n N i g e r i a . Fa r t h e purpose o f t h i s

s t u d y , a r e a s v i t a l t o t h e t e x t w i l l be c o n s i d e r e d - h e r e .

37

In h i s p u b l i s h & d . . - a r t i c l e , O j iako" l4 s t a t e d t h a t

one problem o f sma l l s c a l e b u s i n e s s i s t h e l a c k o f

s t r a t e g i c p lann ing . Th i s problem i s b e t t e r conceived

a s l a c k of management a b i l i t y . I n most s m a l l s c a l e

b u s i n e s s , t h e e n t r e p r e n e u r i s a one man management team.

Top l e v e l d e c i s i o n t o g e t h e r w i t h a l l t h e l e s s e r t a s k s

o f management. That t h e a s s i s t an t cannot accomplish

devolve on t h e e n t r e p r e n e u r . Unfo r tuna t e ly t h i s r e q u i r e s

a d i v e r s i t y o f t a l e n t s and no i n d i v i d u a l has s u p e r i o r

a b i l i t y i n a l l a r e a s o f management. Sound p l ann ing

p r ecedes s o u n d decis ion 'making most sma l l b u s i n e s s s e e

p l ann ing a s a luxury which cou ld be a f f o r d e d on ly by

a l a r g e c o r p o r a t i o n .

"Even when t hey p l a n t h e tendency i s t h a t

t hey concern themseves on ly w i t h s h o r t term

p l a n wh i l e t h e y shy away from long term p l a n s 11 1 T

According t o George ice"'^, t h e l a c k o f t h e u s e

o f modern method o f g a t h e r i n g and a n a l y s i n g d a t a cons-

t i t u t e s a weak p o i n t i n t h e sma l l b u s i n e s s s t r a t e g i c

p l ann ing e f f o r t .

Another problem i s t h a t o f poor f i n a n c i n g a s viewed

by Kar l ~ e s ~ e r " ' ~ ' Th i s problem i s i n t h r e e dimensions

- t h e need f o r s t a r t - u p c a p i t a l , working c a p i t a l and

expansion c a p i t a l . Long term c a p i t a l i s a p a r t i c u l a r

need of sma l l concerns . Th i s c a p i t a l i s ob t a ined by

p e r s o n a l inves tment 'or by long term borrowing. Borrow-

i n g l a r g e sum of money t o be p a i d back over a p e r i o d

o f y e a r s i ~ s d i f f e r e n t f o r sma l l f i r m s because o f t h e

l i m i t e d acce s s t o c a p i t a l market .

0shunbiy i20 a l s o saw t h e key problem f a c i n g most

sma l l b u s i n e s s i n N i g e r i a a s t h a t o f l a c k of f i nance ;

" Whether f o r t h e e s t a b l i s h m e n t of new

i n d u s t r i a l o r t o c a r r y o u t expansion p l a n s

t h e i n a b i l i t y t o a t t r a c t f i n a n c i a l c r e d i t

has , s t i f f l e d t h e growth o f t h i s subsec to r " 21

I n h i s v iew, commercial banks which were expec ted

t o be t h e launch-pad' f o r t h e development o f sma l l s c a l e

i n d u s t r i e s th rough t h e p r o v i s i o n s o f l oans have f a i l e d

t o g i v e adequa te suppo r t t o them. S t i f f c o l a t e r a l

s e c u r i t y demanded by banks o f t e n means t h a t sma l l s c a l e

i n d u s t r i a l i s t s around t o meet t h e s e p r o v i s i o n s conseq-

u e n t l y l o s i n g t h e chance t o o b t a i n l oans .

Banks on t h e i r own p a r t have argued t h a t t h e y a r e

d i s cou raged t o l end t o t h i s s u b s e c t o r s i n c e many po ten-

t i a l and e x i s t i n g sma l l and medium s c a l e e n t e r p r e n e u r s

draw up f e a s i b i l i t y r e p o r t s t h a t a r e n o t v i a b l e , l a c k

manager ia l s k i l l s and do n o t mainta, in adequate f i n a n c i a l

o r a ccoun t i ng r e c o r d s about t h e i r b u s i n e s s .

The nex t s e r i o u s problem f a c i n g sma l l s c a l e

i n d u s t r i a l i s t s i s t h e d i f f i c u l t y i n unde r t ak ing p roduc t ,

p roce s s and market r e s e a r c h . Th i s d i f f i c u l t y a r i s e s

p r i n c i p a l l y from t h e demands f o r money and s p e c i a l i s e d

t a l e n t s n e c e s s a r y t o conduct r e s e a r c h . The e n t e r p r e n e u r

i s most o f t ime handicapped i n t h e s e a r e a s o f demands

i t a l s o t a k e s t h e t ime and a b i l i t y o f someone t o keep

a b r e a s t of developments i n methods, p roce s s and p roduc t s .

Th i s d i f f i c u l t y i n unde r t ak ing market r e s e a r c h may make

t h e advent and t h e u s e f u l n e s s o f v i a b l e market i n fo rma t ion

remain l ong unknown t o t h e smal l i n d u s t r i a l i s t s . The

problem of r e s e a r c h i s l e s s t r u e o f b i g b u s i n e s s because

it i s has t h e nece s sa ry c a p i t a l and t r a i n e d e x p e r t s t o

under take p roduc t and market r e s e a r c h on a l a r g e s c a l e .

The l a s t probSem o f c o n s i d e r a t i o n i s t h e e f f e c t

o f government p o l i c i e s and r e g u l a t i o n some o f which

b r i n g d i s t o r t i o n s i n t h e s t r u c t u r e and management o f

t h e s e b u s i n e s s . According t o Ke i th ~ a r s d e n " ? ' , smal l

e n t e r p r i s e s w i l l t h r i v e i f t hey a r e economical ly e f f e c i e n t

w i thou t t h e p l e t h o r a o f government i n t e r v e n t i o n s .

REFERENCES

1. G. I . M. Young: " F e a s i b i l i t y S t u d i e s v v : The Appra i s a l

J o u r n a l Vol. 38 Chicago: American

Real E s t a t e I n s t i t u t e , 1970

2 . John A. Ume; F e a s i b i l i t y And V i a b i l i t y Appra i s a l

Onib ino je P u b l i s h e r s , 1 9 7 7 p.42.

3 . I b i d

4 . I b i d

5 . George L. Schu t i : . The Appra i s a l P roce s s : New York, 1953.

6 . M.O. Kayode The A r t o f P r o j e c t E v a l u a t i o n ;

Ibadan U n i v e r s i t y P r e s s , 1979.

7. Encyclopaedia B r i a n i c a , Vol. 1 6 , 15 th E d i t i o n 1973p.915.

8. I b i d

9 . Fede ra l O f f i c e o f S t a t i s t i c s , Lagos 1993.

10. N . N . Okor ie ; Small S c a l e Bus ine s s ; I t ' s Impact on

N i g e r i a Economy. Ododuma B

J o u r n a l No. 8 , 1982. p .9 .

11. H . P . Ogaga: Encouraging Small S c a l e E n t e r p r i s e s ;

. . Bus iness Time. A p r i l 1 7 , 1986. p.13

1 2 . P. Ha l l y Small Bus iness Ventures , 2nd E d i t i o n

( C a r l i f o r n i a ; Wedsworth P u b l i s h i n g

Company, 1983).

13. K.J .Alber t S t r a i g h t Talk About Small Business 2nd

E d i t i o n Englewood C l i f f ; N . J . P r e n t i c e

H a l l I nc . 1980. p.61.

1 4 . M.Allsopp

15 G . C . Akkwaeze

16. O.F. Oj iako

1 7 . G , Roger

18. G.H. Rice

19. K . H . Vesper

20 0. O s h

2 1 . Kei th Marsden

S u r v i v a l I n Business E n t e r p r i s e s ;

London, Mercury House Inc . 1975.p.17

Small S c a l e I n d u s t r i e s And NAtional

Development ; -. Development ---- Outlo& Vol. 1

N O . 10 Lagos, A p r i l 1987. p.10

Problem of Small S c a l e E n t e r p r i s e s I n

N ige r i a .The Business A d m i n i s t r a t o r ; ---

Vo1.15 (UNN Enugu), 1987. p.40

A p r a c t i c a l P lann ing For Small B s i n e s s ;

Harward Business Review Vo1 .42 No. 5 , 1964. --- .... -----~-

S t r a t e g i c Dec i s ion Making I n Small

Bus iness ; J o u r n a l o f General Management ; - Y P - - . .

V01.9. 1980. p .63.

New Venture s t r a t e g i e s 3 rd E d i t i o n -- ----' - Englewood C l i f f s N . J . P r e n t i c e H a l l

Inc . 1981 p.58.

"Ensuring S u r v i v a l Of Small S c a l e

I n d u s t r i e s " , Bus iness Times A p r i l 1 0 , -~-- ---

1989. p .10

Problems Of Small Bus iness : Ododuma

Bus iness J o u r n a l No. 1 7 1983 p .41 -.-. ----.

CHAPTER THEE

3 .0 RESEARCH - METHODOLOGY, DATA PRESENTATION ANALYSIS

3 . 1 . 1 PREAMBLE

Every r e s e a r c h work must have an o b j e c t i v e o the rw i se

t h e r e s e a r c h i s a was te o f money and e f f o r t . The

o b j e c t i v e i n t u r n must have way(s) o f a r r i v i n g a t i t

and t h i s i s i n f a c t what t h i s c h a p t e r s eeks t o a ch i eve .

The methodology f o r t h i s was des igned and e l a b o r a t e d

u s ing q u e s t i o n a i r e on p o t e n t i a l consumers,oral i n t e r v i e w ,

f i e l d su rvey o f t h e l o c a t i o n a l s i t e and review o f

r e l a t e d works i n t h e p a s t . Also t h e s t udy o f market a n a l y s i s

and a p p l i c a t i o n o f v a r i o u s t echn iques t o q u a n t i f y t h e

v i a b i l i t y w i i l h e l p i n making r e s e a r c h more s u c c e s s f u l .

About 80% o f t h e d a t a was based on secondary sou rce .

3.12 RESEARCH DESIGN

1 According t o Osuala , s c i e n t i f i c problems can be

so lved o n l y on t h e b a s i s o f d a t a and a major r e spons i a

b i l i t y of t h e i n v e s t i g a t o r i s t o s e t up a r e s e a r c h

de s ign capab l e o f p rov id ing t h e d a t a n e c e s s a r y t o t h e

s o l u t i o n o f t h i s problem. Research de s ign i nvo lve s

t h e t e chn ique and p rocedure f o r c o l l e c t i o n , c o l i a t i o n

and a n a l y s i s o f d a t a . Th i s i n c l u d e deve lop ing r e s e a r c h

ins t rument and sampling p l a n .

According t o ~ o t l e r ' (1980) , r e s e a r c h de s ign

a l s o i n c l u d e s a sampl ing p l a n which c a l l s f o r f o u r

d e c i s i o n s

Sampling Q n i t - That answers t h e q u e s t i o n , who

i s t o be surveyed.

Sampling S i z e - How many peop le shou ld be surveyed.

Sampling Procedure - How shou ld t h e responden ts

be chosen.

Means o f Contact - How shou ld t h e s u b j e c t be

con t ac t ed .

A l l t h e s e were t aken c a r e o f i n t h e body o f t h i s

c h a p t e r . I t shou ld be n o t e d t h a t t h e sampling u n i t f o r

t h i s s t u d y i s t h e u s e r s o f t h e p roduc t t o be produced.

3.1.3 DATA SELECTION/SOURCES OF DATA

The d a t a f o r t h e research:?were c o l l e c t e d th rough

two s o u r c e s ;

( a ) Primary Source

(b) Secondary Source.

PRIMARY SOURCES

Primary d a t a c o n s i s t s o f o r i g i n a r i l y c o l l e c t e d

d a t a f o r t h e s p e c i f i c purpose a t hand. The n a t u r e o f

t h i s s t u d y demands t h a t t h e p r imary d a t a nsed shou ld be

gene ra t ed th rough t h e fo l l owing ways : - (a ) Q u e s t i o n a i r e on p o t e n t i a l consumers

(b) Ora l I n t e rv i ew

( c ) F i e l d su rvey of l o c a t i o n a l s i t e and e x i s t i n g

f a c t o r i e s and machine f a b r i c a t o r s .

QUESTIONAIRE

S ince q u e s t i o n a i r e a l lows t h e respondent t o e x p r e s s

h i s / h e r op in ion i n w r i t i n g and because o f t h e number o f

consumers and t h e t ype o f d a t a needed, t h e r e s e a r c h

made use o f t h e q u e s t i o n a i r e . The r e s e a r c h employed '

bo th open ended and c l o s e d q u e s t i o n s . Open ended

q u e s t i o n s r e q u i r e t h e respondent t o t h i n k ou t t h e answers

h i m s e l f . I n c l o s e d q u e s t i o n s , cho i ce o f a l t e r n a t i v e s

were p rov ided t o responden t from which he chos= ?- t h e

o p t i o n he gmsPde.nd. . app rop r i a t e .

INTERVIEW

Having known t h a t n o t a l l i n fo rma t ion a r e r e co rded*

t h e r e s e a r c h e r made u se o f i n t e r v i e w t o supplement t h e

d a t a ga the r ed through q u e s t i o n a i r e . S t a f f o f t h e l o c a l

government concerned were i n t e rv i ewed on t h e a r e a s

r e l a t e d t o t h e s tudy, , These i n c l u d e t h e i n d u s t r i a l

p o l i c y o f t h e l o c a l gove rnemen t ' t he i r e f f o r t towards and

s u p p o r t i n g i n d u s t r i a l developments i n t h e area ,genera l

4 5

background i n fo rma t ion on t h e s t u d y a r e a .

FIELD SURVEY

S ince t h i s s t u d y i s on t h e f e a s i b i l i t y a p p r a i s a l

on e s t a b l i s h m e n t o f an i n d u s t r i a l p r o j e c t , f i e l d

su rvey t o determine t h e topography and u t i l i t i e s o f

t h e l o c a t i o n a l s i t e becomes nece s sa ry . Th i sprov ided t h e

r e s e a r c h e r t h e on-the-spot assessment o f t h e s i t e t o

de te rmine i t s t e c h n i c a l f e a s i b i l i t y .

SECONDARY DATA

According t o ~ o t l e r ~ (1980) , secondary d a t a a r e

t h o s e t h a t a l r e a d y e x i s t somewhere, having been c o l l e c t e d

f o r a n o t h e r purpose . With r e g a r d t o t h i s , t h e research'lzr

c o l l e c t e d t h e secondary d a t a f o r t h i s work from p a s t

works and p u b l i c a t i o n s on f e a s i b i l i t y a n d v i a b i l i t y

a p p r a i s a l , books on s m a l l s c a l e manufac tu r ing , soap

p roduc t i on , j o u r n a l s , magazines, newspapers e t c . The

c o l l e c t i o n o f most socondary d a t a were made p o s s i b l e

by r epea t ed v i s i t t o t h e v a r i o u s l i b r a r i e s i n c l u d i n g

t h a t o f t h e U n i v e r s i t y o f N i g e r i a Enugu Campus, t h e

Na t i ona l l i b r a r y of N i g e r i a i n Enugu and Owerr i ,

Na t i ona l Archives Enugu, M i n i s t r i e s o f Finance And

Economic Planning and Commerce and I n d u s t r i e s , Enugu.

3.14 SAMPLE SIZE AND PROCEDURES

I n s e l e c t i n g t h o s e e l e m e n t s from which t h e

i n f o r m a t i o n were t o be c o l l e c t e d , t h e r e s e a r c h e r d i d

n o t aim a t u s i n g t h e whole p o p u l a t i o n , r a t h e r t h e

r e s e a r c h e r u s e d a p r o p o r t i o n o f t h e p o p u l a t i o n by t a k i n g

a sample o f t h e s t u d y a r e a and b a s e d t h e c o n c l u s i o n

about t h e whole p o p u l a t i o n on t h e i n f o r m a t i o n c o l l e c t e d

from t h e sample.

N a t u r a l l y , i f t h e r e s e a r c h e r were t o u s e t h e t o t a l

p o p u l a t i o n o f Ahiazu Mbaise, i t would invo1,ve a huge

amount o f moeny, e n e r g y , t ime and w i t h o u t any s p e c i a l

r e s u l t t h a n t h e one p r o v i d e d by a w e l l d e s i g n e d sample

o f t h i s p o p u l a t i o n .

Thus, t h e r e s e a r c h e r t o o k a p r o p o r t i o n o f p o p u l a t i o n

o f Ahiazu Mbaise which h a s t h e c h a r a c t e r i s t i c s o f t h e

p o p u l a t i o n . The r e s e a r c h e r i s 95% c o n f i d e n t t h a t h i s

f i n d i n g s w i l l be a c c u r a t e and t h e t o l e r a b l e e r r o r i s

w i t h i n t h e r a n g e o f 5%. Hence t h e r e s e a r c h e r de te rmined

4 t h e sample s i z e u s i n g Freund and Wi l l i ams model ,

where n = :Sample S i z e

p= P o s i t i v e r e s p o n s e

q = Nega t ive r e s p o n s e 9

z'= Conf idence l e v e l - 2 e = Limit.::of t o l e r a b l e e r r o r .

4 7

3 .1 .4 .1 P I LOT SAMPLE

To determine t h e sample s i z e , a p i l o t survey was

conducted. The whole a r e a was d iv ided i n t o f o u r ( 4 )

zones - Ahiara E a s t , Ahiara West, Ekwerwu E a s t ,

Ekwerazu West and a p i l o t sample of t w e l v e ( l 2 ) , t h r e e

(3) each , were d i s t r i b u t e d t o t h e p o t e n t i a l consumers

i n t h e zones. This was given t o them i n form of

q u e s t i o n a i r e s t o f i l l . , Based on t h i s , t h e r e s e a r c h e r

d iscovered t h a t t e n (10) ou t of t h e twelve (12) consumers

responded p o s i t i v e l y whi le t h e o t h e r two ( 2 ) responded

n e g a t i v e l y . The i r reasons being t h a t t hey do n o t t a k e

a c t i v e p a r t i n buying d e c i s i o n of t h e proposed product

Hence,

P o s i t i v e response i s 10

Negative response i s 2

Percentage of p o s i t i v e response i s 10 = .83 o r 83% E.' Percentage of n e g a t i v e response i s 2 . . . . , = . 1 7 o r 1 7 %

That i s

Therefore n = z2 (pq)

3.15 SAMPLING METHOD

The r e s e a r c h e r used t h e s t r a t i f i e d sample and random

sampling methods. Here , s t r a t i f i c a t i o n invo lved . d i v i d i n g

t h e e n t i r e p o p u l a t i o n o f Ahiazu M b a b i n t o homogeneous

p a r t c a l l e d s t r a t a . The p o p u l a t i o n o f t h e a r e a was g o t

from t h e l o c a l government s e c r e t a r i a t and t h e 1 9 9 1 census

f i g u r e was used. Based on t h i s , t h e a r e a was d i v i d e d

i n t o f o u r zones a s i n d i c a t e d e a r l i e r f o r e a sy and b e t t e r

coverage and t h e two hundred and seven teen (217) q u e s t i o n -

a i r e s were admin i s t e r ed randomly th roughout t h e f o u r zones.

3.16 NATURE OF DATA ANALYSIS

The n a t u r e o f d a t a a n a l y s i s employed i n t h i s s t u d y

i s p u r e l y d e s c r i p t i v e . Primary and s imple s t a t i s t i c a l

meth'ods were used f o r example pe r cen t ages of t o t a l r e sponse s .

Deductive r ea son ing r e l e v a n t t o t h e s t u d y , o b j e c t i v e were

a l s o used. Note shou ld be made t h e r e f o r e t h a t t h i s

a n a l y s i s i s a t t a c h e d t o and based on t h e framework w r i t t e n

i n t h e p r ev ious c h a p t e r s .

3.17 RELIABILITY OF DATA

I n t h e a n a l y s i s of t h e d a t a c o l l e c t e d f o r t h e

r e s e a r c h , t h e r e s e a r c h e r b e l i e v e s t h a t t h e d a t a a r e

r e l i a b l e , c o n s i s t e n t and exper imentab le s u b j e c t t o

e x t e r n a l i n f l u e n c e and t o t h e l i m i t a t i o n s o f t h e s t udy .

NOTES ON CHAPTER THREE

(1) Osuala E . C -. I n t r o d u c t i o n t o Research Methodology;

2nd E d i t i o n , Awka. Af r i c ana F. F.B.

P u b l i s h i n g , 1987.

( 2 ) P h i l @ K o t l e r : P r i n c i p l e s o f MArketing; Englewood C l i f f s ,

New J e r s e y . P r e n t i c e H a l l I nc . 1980. p.145.

( 3 ) I b i d p. 146.

( 4 ) J .E .Freund And F. J. Wi l l i ams ; Modern Business

s t a t i s t i c s * 2nd E d i t i o n , M a r s h a l f i e l d

Massachus t t es ; Pitman P u b l i s h i n g Inc .

1970, p.170.

CHAPTER FOUR

4 . 0 DATA PRESENTATION AND ANALYSIS

4 . 1 PREAMBLE: I n t h i s c h a p t e r , t h e pr imary d a t a f o r

t h i s s t u d y a r e p r e s e n t e d and a n a l y s e d .

The s t u d y examined t h e consumer o v e r a l l a t t f t u d e

towards t h e p roduc t of t h e proposed p r o j e c t . As e a r l i e r

i n d i c a t e d i n t h e p r ev ious c h a p t e r , t h e s imple pe r cen t age

o f response method 'has . adopted i n t h e p r e s e n t a t i o n

and a n a l y s i s .

The a n a l y s i s covered response and r e s u l t s o b t a i n e d

th rough t h e use o f q u e s t i o n a i r e s and t h e f i e l d s t udy .

conducted on t h e s i t e o f t h e proposed p r o j e c t .

A t o t a l o f two hundred and seven teen (217) ques t ionak

i a r e s were d i s t r i b u t e d t o soap consumers i n t h e a r e a a s

de termined from t h e sample s i z e . Out 0.i t h i s number only

two hundred (200) were r e t u r n e d showing 92.2% response .

Of t h e two hundred t e t u r n e d s i x cou ld n o t pa s s t h e r e s e a r c h -

e r s v a r i o u s r e l k a l b i l i t y and v a l i d i t y t e s t s and were

t h e r e f o r e r e j e c t e d f o r improper c o n p l e t i o n l e a v i n g t h e

number o f va1id: 'and accep t ed q u e s t i o n a i r e s t o one hundred

and n i n e t y f o u r (194) .

4.2 PRESENTATION AND ANALYSIS

4 . 2 . 1 Q u e s t i o n a i r e s : : The two hundred (200) q u e s t i o n a i r e s

r e t u r n e d from t h e 217 admin i s t e r ed responden ts were

f u r t h e r c l a s s i f i e d on t h e b a s i s o f s ex , Age, M a r i t a l

s t a t u s , Educa t iona l q u a l i t f i c a t i o n , occupa t ion , Income

g rou f iu se of p r o d u c t s , r e a c t i o n s t o ' p r i c e , q u a l i t y of

t h e proposed p roduc t , adver t i sement response r a t e ,

adver t isement media i n f l u e n c e , p l ace o f purchase and

sugges ted improvement. We s h a l l p i c k on each of t h e

above c l a s s i f i c a t i o n s , t a b u l a t e each and analyst3 t h e i g

responses .

CLASSIFICATION OF RESPONDENTS ACCORDING TO SEX

TABLE 4 . 1

SEX ( NO. OF RESPONSES I PERCENTAGE RESPONSE %

Ma1 e

Female

T o t a l 4 1 9 4 i 100% ========== . . . . . . . . . . . . . . . . . . . . . . ........................

From t h e ahoue t a b l e , 7 4 o r 38.1% of t h e respond-

e n t s were male whi le 120 o r 61.9% were female. This

shows t h e presence of more women than men p r e s e n t l y a t

home and t h e t a r g e t o f t h e r e s e a r c h e r a t t h e r e a l people

involved i n t h e purchase o f t he product .

CLASSIFICATION OF RESPONDENTS ACCORDING TO AGE

TABLE 4.2

AGE; ,GROUP: I IN YFm

Under 20

21: - 29

30 - 39

40 and 'above

TOTAL ---------- ----------

4U.E ESPONDENTS

14

1 0 ..

20

30

74 --------. .--------.

% OF MALE RESPONDENTS

18.9

13.5

10.3

15.5

FEMALE RESPCNDENT:

b OF E b f W E RESPONDENTS

TarM RESPCNSE

The d a t a above i n d i c a t e t h a t o u t of:th,e,7!kmale responden ts :

1 4 were below 20 y e a r s , 1 0 w i t h i n t h e age range o f 2 1 and 29,

20 w i t h i n t h e age range o f 30 and 39 and 30, 40 y e a r s and

above. Out of t h e 120 female r e sponden t s , 20 were below

20 y e a r s , 25 w i t h i n t h e age range o f 2 1 and 29 y e a r s .

30 w i t h i n t h e age range 30 and 39 y e a r s and 40 yeare:,and

ahdve.

We can deduce from t h e d a t a t h a t a g r e a t e r pe r cen t age

o f r esponden ts were from t h e age bragk8ts 3@'-ye'ars'-and above. . ~ 1 _.4 - . _...I L _ - ., .

Thi s e x p l a i n s t h a t t h e g r e a t e r p o p u l a t i o n a t home a r e middle

aged and e l d e r l y peop le as t h e you ths have d e s e r t e d t h e

v i l l a g e s i n s e a r c h o f means of l i v e l i h o o d . Secondly , peop le 6

w i t h i n t h e s e ages a r e w i l l i n g t o g ive i n fo rma t ion on t h e

p roduc t .

5 3

CLASSIFICATION OF RESPONDENTS ACCORDING MARITAL STATUS

TAR LE

MAR I TAL

STATUS

S i n g l e

Married

RESPONDENT % ESPONDENT

MALE

% TOTAL '% TOTAL

RESPONSE

12.9 49 25.3

The a a b l e above i n d i c a t e t h a t 24 males and 25 females

respondent a r e s i n g l e adding up t o 49 s i n g l e r e sponden t s ,

wh i l e 50 male and 95 female responden ts a r e r e q u i r e d adding

up t o 1 4 5 mar r i ed responden ts . Thus we had more of t h e

. marr ied responden ts t h a n unmarried ones .

A t o t a l r e sponse o f 165 was r e c o r d e d which shows

t h e degree t o which many N i g e r i a n s concea l t h e i r income.

StudiLes have shown t h a t most men h a r d l y make t h e i - r

incomes known t o t h e i r i n v e s . However t h e h i g h e s t number

of r e s p o n d e n t s income group i s i n between W4000 and

W7000 and above w i t h about 1 2 . 1 % i n d i c a t i n g no

knoweldge o f any f i x e d income t o them. T h i s h i g h e s t

number from t h e h igh income group i n d i c a t e t h e a v a i l a b i l i t y nf

p u r c h a s i n g power f o r t h e p r o d u c t .

CLASSIFICATION OF RESPONDENTS ACCORDING T O OCCUPATION

TABLE 4.6

OCCUPATION ( NO OF RESPONDENTS

Employed

S e l f Employed

P e n s i o n e r

TOTAL ....................

PERCENTAGE

Employees o t h e r w i s e r e f e r e d t o a s w h i t e c o l l a r j o b b e r s

( P u b l i c S e r v a n t s , t e a c h e r s and employees of p r i v a t e

companies) fa'rm t h e h i g h e s t s h a r e of o c c u p a t i o n g roup ings

w i t h 75 .7%. They a r e fo l lowed by t h e s e l f employed group,

mostljr t r a d e r s and t e c h n i c i a n s and then p e n s i o n e r s . S i n c e t h e

q u e s t i o n a i r e were randomly a d m i n i s t e r e d on e n l i g h t e n e d c l a s s ,

i t i s n o t s u r p r i s e t o f i n d t h e l a r g e s t number a f r e s p o n d e n t s

i n t h e employee group.

140

40

5

75.7

21.6

2.7

185 100% .................................... ------- .................................................................

RESPONSE ON THE BRAND OF BAR SOAP USED

TABLE 4.9 - BRAND OF SOAP . . . .

Truck

Duck

Key

Othe r s (Any A v a i l a b l e )

I

I !

N.O. OF RESPONDENTS

40

PERCENTAGE

The r e s p o n s e s from t h e t a b l e above show t h a t 40

r e s p o n d e n t s s a i d t h a t t h e y u s e t r u c k soap,30 , Duck s o a p , 20 "

Key soap w h i l e t h e r emain ing 100 do n o t have any p a r t i c u 1 . a ~

b r a n d , i n d i c a t i n g t h a t t h e y a r e p r e p a r e d t o p a t r o n i s e any

b rand o f ba.r soap a v a i l a b l e a t t h e i r d i s p o s a l . The r e s p o n s e

o f t h i s h i g h e s t number shows t h a t t h e r e i s market f o r

t h e proposed p r o d u c t as t h e y a r e e x p e c t e d t o p a t r o n i s e it

t o o i f b rough t t o t h e i r r e a c h .

ON HOW OFTEN THE RESPONDENT USE BAR SOAP -

Very o f t e n

O c c a s s i o n a l l y

Not a t a l l

TABLE 4 .10

TOTAL 192 100% ------------------ ....................... ...................... ------------------ ....................... ......................

RESPONSE N O OF RESPONDENTS 1 PERCENTATE

The d a t a from t h e t a b l e above show t h a t abou t

88.5% o f t h e r e s p o n d e n t s u s e b a r soap v e r y o f f e n ,

1 0 . 4 % o c c a s i o n a l l y and meagre 1.1% c l a i m t h e y do n o t u s e

b a r soap a t a l l . The h i g h r e s p o n s e of p c o p l e t h a t t h e y use

b a r soap r e g u l a r y i s a n o t h e r i n d i c a t i o n t h a t t h e demand

and t h e market f o r t h e proposed p r o d u c t i s t h e r e . On

t h e whole a t o t a l 0.f 192 r e s p o n s e s were g o t .

ON ESTIMATE OF MONTHLY EXPENDITURE ON BAR SOAP CONCUMTION

Do:-.no t know 46 -

TARLE 4 .11

The above shows t h a t a t o t a l o f 192 r e s p o n s e s were

r e c o r d e d on t h e e s t i m a t e o f monthly e x p e n d i t u r e on soap

PERCENTAGE ESTIMATE

consumption. 52 r e s p o n d e n t s c l a i m t h e y spend abou t W600,

N O OF RESPONDENTS

4 6 N500, and 46 c l a i m t h e y do n o t know t h e e x a c t amount

t h e y spend on soap consumption. The above re sponses

i n d i c a t e s an ave rage monthly e x p e n d i t u r e o f about W500

by r e s p o n d e n t s i n d i c a t i n g t h e l e v e l A "5 emand and consumption

of t h e p r o d u c t .

ON WHO MAKES THE BUYING DECISION IN THE HOUSEI-{OLD

The wi f e

TABLE 4 . 1 2

The husband

RESPONSE

The d a t a above show t h a t 190 responses were c o l l e c t e d .

100 s a i d t h a t t h e wife makes t h e buying d e c i s i o n whi le 40

NO OF RESPONDENTS

claimed i t i s t h e husband, t h e remaining people c h i m anybody..

PERCENTAGE

can dec ide e s p e c i a l l y on consumer i tem l i k e soap. The

d a t a i n d i c a t e s t h a t soap can be bought by anybody a v a i l a b l e

i n t h e household when needed.

TABLE 4.13 - .

ON WHAT INFLUENCES THE BUYERS DECISION

BASIS NO OF RESPONDENTS PERCENTAGE

Brand l o y a l t y

P r e v a i l i n g P r i c e

Qua l i t y Uf Product

Nothing - TOTAL .................................................................

7

192

3 . 7

100% .................................................................

60

The above t a b l e show t h a t a t o t a l 1 9 2 r e s p o n s e s were

c o l l e c t e d on what i n f l u e n c e s t h e buying d e c i s i o n o f

r e s p o n d e n t s . 30 r e s p o n d e n t s show t h a t t h e y a r e brand

l o y a l , 1 L O c l a i m t h a t t h e p r e v a i l i n g p r i c e d e t e r m i n e s , 35 s a y

t h e y c o n s i d e r q u a l i t y w h i l e 7 s a i d n o t h i n g i n f l u e n c e s t h e

d e c i s i o n t o buy a p a r t i c u l a r p r o d u c t . The h i g h e s t number

on t h e p r e v a i l i n g p r i c e i s an i n d i c a t i o n o f t h e h a r d economic

c o n d i t i o n o f t h e c o u n t r y . I t a l s o show how s e n s i t i v e

b u y e r s a r e t o t h e p r i c e o f p r o d u c t s .

Supermarkets

Local Markets

P r o v i s i o n S t o r e s

ON WHERE RESPONDENTS BW-;THEIR SOAP r

TABLE 4 . 1 4

A t o t a l o f 194 r e s p o n s e s were c o l l e c t e d . The d a t a

above show t h a t 17.58 o f t h e r e s p o n d e n t s buy t h e i r soap

from t h e s u p e r m a r k e t s , 33.5% from t h e l o c a l market w h i l e

4 9 % buy from t h e p r o v i s i o n S t o r e s n e a r t o them.

PERCENTAGE BUYING OUTLET NO OF RESPONDENT

ON HOW RESPONDENTS 'CONSIDER P R E S E N T P R I C E O F S O A P

TABLE 4 .15 I I

RESPONSE I NO O F RESPONDENTS 1 PERCENTAGE

Very h i g h I 6 5 I 33.5

Modera t e ly h i g h

The d a t a above i n d i c a t e t h a t 65% o f t h e r e s p o n d e n t s i:?.?.

c l a i m t h a t t h e p r e s e n t p r i c e i s v e r y h i g h , 95 s a i d t h a t

i t i s m o d e r a t e l y h i g h w h i l e 34 r e s p o n d e n t s d i d n o t q u a r r e l

w i t h t h e p r i c e which t h e y c l a i m i s a f f o r d a b l e t o them.

The h i g h number o f r e s p o n d e n t s i n d i c a t i n g t h a t t h e p r e s e n t

_ . - - p r i c e i s h i g h i s a l s o a n i n d i c a t i o n o f t h e h a r s h economic .- -

c o n d i t i o n i n t h e c o u n t r y and i t s e f f e c t on t h e a v e r a g e

consumer. P r i c e o f t h e p r o p o s e d p r o d u c t s h o u l d t h e r e f o r e

be f i x e d s l i g h t l y bedow t h e p r e v a i l i n g p r i c e i n t h e

Yes

marke t . ON WHETHER P R I C E I N C R E A S E A F F E C T THE BUYERS D E C I S I O N

TABLE 4.16

TOTAL

RESPONSE NO O F RESPONDENTS PERCENTAGE

A t o t a l o f 190 responses were r e c o r d e d on whether

t h e i n c r e a s e i n p r i c e a f f e c t s t h e buyers d e c i s i o n .

68.4% o f t h e r e s p o n d e n t s answered p o s i t i v e l y w h i l e

31.6% o f t h e r e s p o n d e n t s s a i d t h a t i n c r e a s e i n p r i c e

do n o t a f f e c t t h e i r d e c i s i o n t o buy a p a r t i c u l a r p r o d u c t .

ON WHETHER ADVERT1 SEMENT OF A PRODUCT INFLUENCES BUYERS

DECESION. , ..

TABLE 4.17

RESPONSE I NO OF RESPONDENTS I PERCENTAGE

Yes

The t a b l e above show t h a t a t o t a l o f 192 responses

Do n o t l i s t e n t o a d v e r t

were r e c o r d e d on t h e i n f l u e n c e o f a d v e r t i s e m e n t on t h e

buyers d e c i s i o n . 80 r e s p o n d e n t s i n d i c a t e d t h a t t h e y a r e

80

i n f l u e n c e d by a d v e r t i s e m e n t w h i l e 85 r e s p o n d e n t s s a i d

t h e y a r e n o t i n f l u e n c e d by a d v e r t i s e m e n t . 2 7 i n d i c a t e d

41.7

2 7

t h a t t h e y do n o t l i s t e n t o a d v e r t i s e m e n t .

1 4 . 0

On t h e improvement consumers w i l l e x p e c t on t h e new

brands o f soap t o be i n t r o d u c e d i n t h e market i n f u t u r e

s e r i e s o f s u g g e s t i o n s were made. While some r e s p o n d e n t s

s u g g e s t e d an improvement on t h e q u a l i t y of t h e p r o d u c t

t o meet an a c c e p t a b l e s t a n d a r d and compete : f a v o u r a b l y

6 3

w i t h impor ted o n e s , o t h e r s s u g g e s t e d a r e d u c t i o n i n

t h e p r e v a i l i n g market p r i c e o f t h e p r o d u c t .

4 . 3 SUMMARY OF QUESTIONAIRE ANALYSIS

From t h e d a t a c o l l e c t e d t h r o u g h t h e q u e s t i o n it

c o u l d be deduced t h a t t h e p roposed p r o d u c t i s an impor t -

a n t househo ld n e e d w i t h a v e r y h i g h p r e s e n t and f u t u r e

demand. The d a t a i n d i c a t e d t h a t v i r t u a l l y e v e r y house-

h o l d u s e Soap d a i l y e i t h e r f o r body c l e a n i n g o r f o r

washing. The d a t a a l s o r e v e a l e d t h a t consumer a c c e p t a n c e

o f t h e p roposed p r o d u c t w i l l be f a v o u r a b l e s i n c e t h e

q u a l i t y i s e x p e c t e d t o be h i g h and t h e p r i c e v e r y . .

modera te and a f f o r d a b l e by m a j o r i t y o f t h e consumers i n

t h e a r e a . The s e n s i t i v e n a t u r e o f p r i c e and q u a l i t y t o

consumers were n o t e d d u r i n g t h e d a t a c o l l e c t i o n .

There were a l s o s u g g e s t i o n s on t h e improvement e x p e c t e d

i n t h e p roposed p r o d u c t which i n c l u d e h i g h q u a l i t y

and moderate p r i c e . A l l t h e s e w i l l h e l p i n d e s i g n i n g -.

a n ' a c c e p t a b l e f e a s i b i l i t y r e p o r t on t h e p r o j e c t .

4.4 SUMMARY OF FINDINGS ON FIELD SURVEY

The f i e l d s u r v e y conduc ted which was a n o t h e r s o u r c e

o f p r i m a r y d a t a r e v e a l e d t h e f o l l o w i n g : -

(1) The s i t e f o r t h e p r o j e c t h a s enough l a n d f o r

p o s s i b l e expans ion i n t h e f u t u r e .

The s i t e h a s s u i t a b l e a c c e s s t o a m a j o r highway

Ehime - Mbaise-Okpala Road.

I t h a s a l o c a t i o n s t r a t e g i c a l l y p l a c e d f o r t h e

d i s t r i b u t i o n o f p r o d u c t s b o t h t o t h e l o c a l con-

sumer and p o s s i b l e e x p o r t m a r k e t s

The s i t e l e n d s i t s e l f t o s u i t a b l e g r a d i n g and

..a.r? il;l a g ~ . F i n a l l y , t h e s i t e h a s t h e needed u t i l i t i e s l i k e

power, a s t h e s i t e i s hooked t o t h e n a t i o n a l g r i d and

w a t e r t o s u p p o r t t h e f a c t o r y .

CHAPTER FIVE

PROJECT SUMMARY AND RE COMEENDAT1 ONS

THE PROJECT

T h i s s t u d y was c a r r i e d o u t t o de te rmine : t h e market -

i n g , t e c h n i c a l f e a s i b i l i t y , f i n a n c i a l and commercial

v i a b i l i t y o f e s t a b l i s h i n g a s m a l l s c a l e soap m a n u f a c t u r i n g

i n d u s t r y i n Ahiazu Mbaise L o c a l . Government Area , Imo S t a t e .

SPONSOR --- The s p o n s o r o f t h e p r o j e c t i s t h e Local Governement

A d m i n i s t r a t i o n .

INVESTMENT COST

The t o t a l i n v e s t m e n t c o s t f o r t h e p r o j e c t i s

e s t i m a t e d a t W2,417,100 made up a s f o l l o w s : -

F ixed A s s e t s C a p i t a l Investmemt = W1,950,000

I n i t i a l Working C a p i t a l (Yr .1) = 302,000

P r e - i n v e s t m e n t

5 % C 0 n t i n g e n . c ~

TOTAL

FINANCING PLAN

P r o v i s i o n - - 115,100

The e n v i s a g e d f i n a n c i n g ar rangement i s a s fo&lows : - Owners E q u i t y

Term L,oan 1 ,000 ,000 11.37%

417,100 O v e r d r a f t 17 .26%

TOTAL

PROFITABILITY

The pro-ject promises t h e fo l l owing n e t p r o f i t a f t e r

t a x f o r p r o j e c t e d f i v e y e a r s p e r i o d : -

RETURN ON EQUITY -

YEAR

RETURN ON TOTAL INVESTMENT

YEAR

1

% RETURN

% RETURN

PAYBACK PERIOD

The payback p e r i o d f o r t h e p r o j e c t i s two y e a r s

and t h r e e months ( 2 y r s and 3 months) .

T h i s s t u d y shows t h a t t h e p r o j e c t i s t e c h n i c a l l y

f e a s i b l e and commercia l ly v i a b l e . On t h i s b a s i s t h e

f o l l o w i n g recommendations towards t h e r e a l i s a t i o n o f

t h e p r o j e c t a r e ,made.

(1.) The implementa t ion o f t h e p r o j e c t s h o u l d be p u r s u e d

w i t h o u t much w a s t e o f t ime . T h i s w i l l h e l p t o

e l i m i n a t e c o s t i n c r e a s e s which may a f f e c t i n p u t

f i g u r e s used i n t h e s t u d y . I t w i l l a l s o r educe t h e

chances o f occurence o f any changes i n t h e economy

t h a t might a f f e c t t h e r e a l i s a t i o n o f t h e p r o j e c t .

( 2 ) Adequate s t o c k o f raw m a t e r i a l s s h o u l d be c a r r i e d

a t a l l t i m e s s o a s t o a v o i d p r o b l e m s - t h a t might

a r i s e a s a r e s u l t o f i r r e g u l a r s u p p l i e s . F ive

( 5 ) p e r c e n t p r o v i s i o n i n p r i c e h a s been recommended

a n n u a l l y t o t a k e c a r e ' o f i n f l a t i o n a r y changes.

(3) Q u a l i f i e d p e r s o n n e l s h o u l d be employed t o work f o r

t h e p r o j e c t . A t e n (10%) p e r c e n t i n c r e a s e i n wages

h a s been recommended a s from t h e t h i r d y e a r o f

com~nerc ia l o p e r a t i o n .

High q u a l i t y p roduc t shou ld be aimed a t by t h e

p r o j e c t t o e n a b l e i t compete f a v o u r a b l y w i t h

e x i s t i n g ones i n t h e market:

A p p l i c a t i o n shou ld be made t o i n s t i t u t i o n a l

i n v e s t o r s and inves tment banks f o r f i n a n c i a l

a s s i s t a n c e t o e n a b l e t h e p r o j e c t t a k e o f f .

THE FEASIBILITY REPORT

PREAMBLE

I n t h e b r o a d e s t s e n s e , e v e r y r a t i o n a l d e c i s i o n t o make

a new inves tment i s p receded by an i n v e s t i g a t i o n o f t h e

f e a s i b i l i t y o f t h e p r o j e c t , whether o r n o t t h i s i s c a r r i e 2

o u t i n a fo rmal manDer. The l a r g e r t h e p r o j e c t and

t h e g r e a t e r t h e i n v e s t m e n t , t h e m r c f o r m a l i z e d t h e

inves tment . Assurance i s needed t h a t t h e market

e x i s t s o r can be deve loped , t h a t raw m a t e r i a l s can be

o b t a i n e d , t h a t s u f f i c i e n t l a b o u r s u p p l y i s a v a i l a b l e ,

t h a t l o c a l s e r v i c e s v i t a l t o t h e p r o j e c t a r e a t hand

and t h a t t h e o v e r a l l c o s t s f o r p l a n t equipment , l a b o u r

and raw m a t e r i a l s i n p u t s w i l l be a c e r t a i n o r d e r .

Most i m p o r t a n t l y , i t must be de termined t h a t introme w i l l

exceed c o s t s by a margin s u f f i c i e n t t o make t h e p r o j e c t

f i n a n c i a a t t r a c t i v e . 9 However, i f t h e p r o j e c t i s s m a l l , t h e . s t u d y format

may be q u i t e i n f o r m a l . Perhaps t h e r e wil l . be no formal

s t u d y a t a l l and l i t t l e accumula t ion o f a c t u a l d a t a .

None the less , t h e f e a s i b i l i t y c a l c u l a t i o n s wi l l . have t o b e

computed and eva l .ua ted even i f i n an in fo rmal manner,

b e f o r e t h e u l t i m a t e s t e p o f a c t u a l inves tment i s t a k e n .

There a r e d i f f e r e n t ways of p r e s e n t i n g f e a s i b i l i t y

r e p o r t . However, f o r t h e purpose o f t h i s p r o j e c t t h e

Uni ted Nat ions I n d u s t r i a l Development O r g a n i s a t i o n

(UNIDO) formag f o r p r e s e n t i n g f e a s i b i l i t y r e p o r t i s

adopted h e r e .

5 . 2 PROJECT BACKGROUND AND HISTORY

The government of Ahiazu Mbais h a s been anxious

t o e x p l o i t a meaningful development o f t h e s m a l l s c a l e

i n d u s t r i e s i n t h e a r e a . I t r e c o g n i s e s t h a t a s e r i o u s

e f f o r t i s needed t o upgrade t h e s t a n d a r d o f l i v i n g i n t h e

a r e a th rough t h e encouragement of manufac tu r ing i n

a d d i t i o n t o t r a d i n g which ..' , i s t h e s o u r c e o f l i v e l i h o o d

of g r e a t e r p e r c e n t a g e o f ' t h e p o p u l a t i o n .

The v a r i o u s and p r e v i o u s a d m i n i s t r a t i o n s i n t h e

loca l . government have i n t h e p a s t made s e v e r a l e f f o r t s

t o s e t up small. s c a l e i n d u s t r i e s i n t h e a r e a i n l i n e

w i t h t h e F e d e r a l Government p o l i c y on rural i n d u s t r i a l i -

s a t i o n . The e s t a b l i s h m e n t of a s m a l l s c a l e soap

i n d u s t r y i n t h e a r e a has been on t h e l i s t o f p r o j e c t s

earmarked f o r e x e c u t i o n by t h e l o c a l government

a d m i n i s t r a t i o n . The technol .ogica1 e f f e c t of a soap

i n d u s t r y on t h e socio-economic s i t u a t i o n of t h e l o c a l

government i n g e n e r a l i s immense and i n c l u d e s t h e

i n c r e a s e i n t h e number o f s k i l l e d workers i n t h e l a b o u r

f o r c e through employment and t m i n i n g i n t h e i n d u s t r y .

I t i s a l s o economica l ly and p o l i t i c a l l y d e s i r a b l e f o r ,

N i g e r i a t o produce soap s i n c e s h e h a s t h e l o c a l raw

m a t e r i a l s a t home.

The economy i s no l o n g e r e n j o y i n g t h e bonanza

c r e a t e d by t h e o i l boom. I t has slumped w i t h t h e d rop

i n o i l revenue. S i n c e one o f t h e economic t r a n s f o r m a -

t i o n b rough t about by t h e o i l boom was t h e urban b a s e d

c o n c e n t r a t i o n o f s e r v i c e s and c o n s t r u c t i o n e n t e r p r i s e s ,

t h e r u r a l a r e a s were &rained. . + o f l a b o u r . Consequen t ly ,

t h e r e was d e p r e c i a t i o n o f development o f s e l f s u s t a i n i n g

p o t e n t i a l s . The r e s u l t was an i n c r e a s i n g d r a i n on t h e

e x t e r n a l r e s e r v e s t o f i n d even b a s i c food r e q u i r e m e n t s

o f t h e i n c r e a s i n g p o p u l a t i o n . There was t h e r e f o r e

d r a i n s i n t h e r e s e r v e t o meet t h e i n c r e a s i n g h i g h

import p r o p e n s i t y f o r t h e c a p i t a l goods, raw m a t e r i a l s

and consumer i t ems . To stem t h i s , t h e government

i n t r o d u c e d v a r i o u s c r i s i s management and economic

p o l i c i e s r a n g i n g from t h e s t r u c t u r a l Adj.ustment Progamme

t o t h e Fore ign Exchange Markets .

71

The ba s i c . j d i i l o sophy of t h e s e schemes i.s t o r e v e r t

t o c o n s i d e r a b l e s e l f r e l i a n c e by knc rea s ing l o c a l p roduc t -

i on . . Th i s approach i s i n t e n d e d t o reduce t h e l e v e l o f

unemployment which had h i t even t h e g r adua t e and p o s t -

g radua te l e v e l s . The i n d u s t r i a l i m p l i c a t i o n o f t h e s e

f e a t u r e s i n t h e p n o m y - i s t h e r e f o r e t o r e d i r e c t t h e

p roduc t i on r e s o u r c e s o f t h o s e s e c t o r s t h a t a r e c o s t

e f f e c t i v e i n t h e convers ion o f l o c a l raw m a t e r i a l s i n t o

immediate o r f i n a l p r o d u c t s .

P r a c t i c a l l y , a l l f i r m s i n t h e manufactur ing s e c t o r

have under taken programmes d i r e c t e d a t l o c a l sou rc ing

o f t h e i r m a t e r i a l s i n p u t . A soap i n d u s t r y ha s 95% l o c a l

raw m a t e r i a l i n p u t .

The j u s t i f i c a t i o n o f t h i s p r o j e c t i s based on t h e

fo l l owing f a c t o r s : -

- The i n c r e a s i n g need and demand f o r soap a s an impor tan t

household need bo th f o r cleaning t h e body and f o r

washing.

- The need t o d i v e r s i f y t h e revenue base o f t h e l o c a l

government.

- The need t o c r e a t e employment o p p o r t u n i t t e s f o r t h e

indige.nes o f t h e a r e a .

- The a v a i l a b i l i t y o f a b r i g h t inves tment c l i m a t e i n

t h e a r e a of soap manufactur ing.

- The a v a i l a b i l i t y o f u t i l i t i e s l i k e power a s t h e l o c a l

government i s a h e a d y hooked t o t h e n a t i o n a l g r i d

and wa t e r ' f o r i n d u s t r i a l and domest ic purposes .

- There i s a l s o a v a i l a b i l i t y i n l a r g e q u a n t i t y o f t h e

major raw m a t e r i a l s i n t h e a r e a .

The execu t i on o f t h e p r o j e c t i s i n t ended t o l a s t

f o r one yea r .

5 . 3 MARKET AND PLANT CAPACITY

THE PRODUCT: SOAP

This i s a cleansing agen t d i s c r i b e d chemica l ly a s

an a l k a l i me t a l s a l t o f a l ong carbon cha in monocarboxylic

a c i d r e p r e s e n t e d by sedium myristate(NaCODO13 H 2 9 ) .

CH2 CH2 CH2 CH2 CH2 CH2 Carboxyla te

The hydrocarbon p o r t i o n i s hydrophobic and t h e

Carboxyla te p o r t i o n i s h y d r o p h i l i c .

The p roduc t can be used i n many ways. I t can be

used f o r c l e a d n g human body, washing p l a t e s , p o t s and

o t h e r househoad equipment, f a b r i c s and f l o o r s . Hence

i t can be used i n househo lds , r e s t a u r a n t s . , h o s p i t a l s ,

l aundry f i r m s e t c .

5 .3 .2 MARKET

According t o Imaga ( 1 9 9 4 ) p.603, t h e environment

i n which b u s i n e s s o p e r a t e s i s known a s market . ' I t i s

h i g h l y i n f l u e n c e d by t h e buyers and s e l l e r s b a h a v i o u r s , prod-

u c t o f f e r e d by t h e s u p p l i e r s , t h e i r p r i c e s and q u a n t i t y ,

p o l i t i c a S l e g a 1 and a d m i n i s t r a t i v e r e s t r i c t i o n s .

The e n t i r e l o c a l government a r e a and s t a t e w i l l b e

t aken a s t h e p r imary market zone f o r t h e p r o d u c t . The

p roduc t w i l l n a t u r a l l y f i n d pre-empt ive o p t i o n among

t h e l o c a l s . T h e r e f o r e , t h e market f o r t h e p r o d u c t w i l l

comprise t h e i n d i v i d u a l households and s e r v i c e o r g a n i s a t i o n

w i t h i n t h e l o c a l government and i t s e n v i r o n s . I n o t h e r

words, t h e p r o d u c t w i l l o f f e r p r i m a r i l y t o r e s i d e n t s

o f Ahiazu Mbaise and second ly o t h e r p a r t s o f t h e s t a t e .

Thus, a l l u s e r s o f soap i n t h e s e a r e a s c o n s t i t u t e t h e

market f o r t h e p r o d u c t .

5 . 3 . 3 MARKET DEMAND STUDY

The e s t i m a t e o f demand canno t be e a s i l y e v a l u a t e d

b o t h f o r l o c a l and i n d u s t r i a l u s e s . However, w i t h t h e

p r o l i f e r a t i o n o f l a u n d r y and d r y c l e a n i n g f i r m s , i n c r e a s e

i n b i r t h s w i t h reduced i n f a n t m o r t a l i t y , soap w i l l a lways

be i n demand. I t need a l s o be s a i d t h a t t h e p r o d u c t can

be used b o t h a s a t o i l e t soap and l a u n d r y soap going by

r e s u l t s from t h e r e s e a r c h conducted, i t i s t o b e perfumed

a n d s o h a s a u n i q u e m a r k e t n i c h e . A l l consumers o f t h e

p r o d u c t c o n s t i t u t e t h e t o o l f o r t h e p r o d u c t .

7 4 Obvious ly , t h e p r o d u c t h a s c o m p e t i t o r s l i k e

T r u c k - s o a p , Duck. s o a p , Key soap b o t h i n b a r and t a b l e t

forms a s i n d i c a t e d i n t h e r e s u l t o f t h e market r e s e a r c h

conducted . However, t h e o n l y d i f f e r e n c e i s i n t h e

f a c t t h a t t h e p r o j e c t p r o d u c t can n o t o n l y be used on

c l o t h e s b u t can a l s o b e used a s t o i l e t s o a p b e c a u s e

it i s perfumed.

The market s i t u a t i o n i s such t h a t t h e p r o j e c t w i l l

be more t h a n a d e q u a t e l y accomodated w i t h i n t h e a v a i l a b l e

d o m e s t i c m a r k e t . The market i s more t h a n enough t o

a b s o r b t h e p r o d u c t s w i t h i n a downstream i n d u s t r i a l i s e d

Ahiazu Mbaise Loca l Government Area. I t can a l s o f i n d

market i n n e i g h b o u r i n g s ta tes ,but on a n a t i o n a l s c a l e ,

t h e p r o d u c t w i l l n o t make any s i g n i f i c a n t impact on

t h e s u p p l y market .

The p l a n t w i l l i n i t s f i r s t y e a r o f o p e r a t i o n

produce one s i z e o f p r o d u c t t y p e s . I n consequence o f

t h i s d i s t i n - c t f e a t u r e , a segment o f t h e market i s

e x p e c t e d t o b e cove red . T h i s d i f f e r e n t i a t i o n i n

p r o d u c t s i s advan tageous becuase i t a l l o w s f o r d e e p e r

p e n e t r a t i o n i n t o t h e marke t .

5 . 3 . 4 . CURRENT DEMAND I

The c u r r e n t demand f o r t h e p r o d u c t ( soap) i s v e r y i

h i g h a s v i r t u a l l y e v e r y househo ld and o r g a n i s a t i o n i n

t h e a r e a i n d i c a t e d t h e y u s e s o a p d a i l y i n body c l e a n i n g

and washing. A s e a r l i e r i n d i c a t e d , t h e p r o l i f e r a t i o n

of l a u n d r y and d r y c l e a n i n g f i r m s h a s made t h e demand f o r

s o a p c u r r e n t l y v e r y h i g h . The marke t s i z e e s t i m a t e i s

f o r o v e r twen ty thousand (20,000) househo ld p r e s e n t l y . ,

The annua l e s t i m a t e d e x p e n d i t u r e on t h e a v e r a g e p e r house-

h o l d on t h e p r o d u c t i s c u r r e n t l y p u t a t o v e r f i v e hundred

n a i r a (W500) a s i n d i c a t e d i n t h e r e s u l t o f t h e r e s e a r c h

conducted . The market s i z e i t t h e n aimed a t by m u l t i p l y -

i n g t h e e x p e n d i t u r e by number o f h o u s e h o l d s . Hence

marke t s i z e i s 20,000 x 500 = W10,000,000 c u r r e n t l y .

5 .3.5 MARKET SHARE ESTIMATE

Market s h a r e i s t h e p r o p o r t i o n o f t h e t o t a l market

which t h e p romote r s hope t o c o n t r o l when t h e b u s i n e s s i s

e s t a b l i s h e d . The s h a r e o f t h e market becomes t h e s a l e s

f o r e c a s t . E s t i m a t i o n o f market s h a r e w i l l a s s i s t i n

p r o d u c t p l a n n i n g . The d e t e r m i n a t i o n o f t h e f o l l o w i n g

- E s t i m a t e d marke t f o r p r o d u c t T i n t h e i n d u s t r y

- The number o f c o m p e t i t o r s ( t h r e e i n number p l u s

t h e p r o d u c t , making f o u r 4 ) .

The marke t s h a r e i s e s t i m a t e d by d i v i d i n g t h e

market f o r t h e p r o d u c t by t o t a l number o f c o m p e t i t o r s

5 . 3 . 6 MARKET GROWTH POTENTIALS/FUTURE DEMAND

Fu tu re demand i s e x p e c t e d t o be h i g h a s t h e

p o p u l a t i o n i s e x p e c t e d t o grow w i t h an i n c r e a s e i n t h e

demand f o r soap. With t h e e x p e c t e d i n c r e a s e i n t h e

p r o l i f e r a t i o n o f l a u n d r y and d r y c l e a n i n g f i r m s .

i n c r e a s e i n b i r t h s w i t h reduced i n f a n t m o r t a l i t y

soap w i l l always be i n demand. There a r e v a l i d r e a s o n s

t o e x p e c t improvement i n t h e growth of t h e i n d u s t r y .

Th i s w i l l l e a d t o growth o f t h e n a t i o n a l economy and

t h e r e b y i n c r e a s e t h e Gross Domestic Product .

5 . 3 . 7 SALESPLAN AND MARKETING

P r o j e c t e d s a l e s i s p u t a t 2 5 % o f t h e market s h a r e .

S i n c e t h e p r o d u c t s w i l l be new t o t h e market i t i s

c o n s i d e r e d s t r a t e g i c t o s t a f t a t t h a t r a t e .

5 . 3 . 8 PRICING POLICY

The p r i c i n g p l o i c y w i l l be market de termined.

The o p e r a t i o n c o s t w i l l be i n e f f i c i e n t s i n c e it may

end up w i t h a low p r i c e o r p r i c e t h e p r o j e c t e d p roduc t

o u t o f t h e market . I n o t h e r words i n f i x i n g t h e p r i c e ,

it w i l l be i n accordance w i t h t h e c o m p e t i t o r s p r i c e .

T h i s i m p l i e s t h a t t h e p r i c e o f t h e p r o d u c t w i l l compete

f a v o u r a b l y w i t h t h a t o f o t h e r c o m p e t i t o r s t o avo id

p r i c e war and l e s s s a k s ,

The advantages o f t h e fo l low-the-market p r i c i n g

method i s favoured f o r 5hese r e a s o n s

- S i n c e t h e p r o d u c t i s new t o t h e marke t , t h e p r i c e

i s n o t expec ted t o d e v i a t e much from p r i c e s

p r o s p e c t i v e consumers a r e used t o ; ! - Higher t h a n t h e p r e v a i l i n g market p r i c e may encourage I

unwanted c o m p e t i t i o n . Hence p r i c e s s e t shou ld p u t

o f f c o m p e t i t o r s from e n t e r i n g t h e f i e l d a s much a s

p o s s i b l e .

The p r o d u c t p r i c e w i l l f i r s t a d o p t . . t h i s method

and t h e n i n c r e a s e t h e p r i c e a s demand i n c r e a s e s . The

p roduc t s t r u c t u r e , q u a l i t y s p e c i f i c a t i o n s and c o m p e t i t i v e

p r i c e s s h o u l d p r o v i d e t h e means o f a c h i e v i n g t h e d e s i r e d

market p e n e t r a t i o n s i n c e t h e immediate c o m p e t i t o r s a r e

n o t e x t r a l o r d i n a r i l y fo rmidab le . The p r i c e p e r b a r o f

t h e soap t o be produced i s p u t a t N=40.

5 . 3 . 9 MARKETING STRATEGY

The marke t ing s t r a t e g y f o r t h e p r o d u c t o f t h e

proposed p r o j e c t i s t o s e l l t h e p r o d u c t s th rough d i s t r i -

b u t o r s t o b e a p p o i n t e d and p a r t l y d i r e c t t o r e t a i l e r s

e s p e c i a l l y on major marketdays i n t h e a r e a th rough

salesmen. Subsequen t ly , a t t e n t i o n w i l l be f o c u s s e d on

expansion of t h e market a r e a t o encompass nea rby towns.

D i s t r i b u t i o n i s by way of a d i r e c t supp ly t o f u l f i l l

o r d e r s on long. d u r a t i o n c o n t r a c t o f s a l e s b a s i s .

Promot ional p r a c t i c e s w i l l a l s o be by d i r e c t d e a l i n g s

w i t h i n which r e q u i r e d p roduc t s p e c i f i c a t i o n s a r e r e c o n c i l e d

and matched wi th , p roduc t i on s c h e d u l l i n g programmes.

5 .3 .10 DISTRIBUTION SYSTEM

The d i s t r i b u t i o n system f o r t h e proposed i n d u s t r y ' s

p roduc t s w i l l be th rough t h e f o l l owing c h a n n e l s ;

- Driver/Salesman t o l o c a t i o n depo t s s i t u a t e d i n

d . i s t r i c t s i n pr imary t a r g e t s t o u l t i m a t e consumers.

- Driver/Salesman t o r e t a i l e r s . i n major market .

- D i r e c t t o d i s t r i b u t o r s appo in ted by t h e company. - - ur ive r iSa lesman t o major p r o v i s i o n s t o r e s .

These d i s t r i b u t i o n channel i s i n l i n e w i t h responses

from p o t e n t i a l consumers du r ing t h e r e s e a r c h conducted.

Th i s i s i l l u s t r a t e d t h u s : -

Lot

Con J/

sumers Consumers J. P r o v i s i o n s t o r

4 Consumers

To f a c i l i t a t e d i s t r i b u t i o n , fairly used pick-up van w i l l

be r e q u i r e d .

79

5 .3 .11 ADVERTISEMENT AND PROMOTION

Though responses from p o t e n t i a l consumers i n d i c a -

t e d t h a t adver t i sement do n o t i n f l u e n c e t h e i r buying

d e c i s i o n , t h e r e s e a r c h e r used deduc t i ve r ea son ing t o

e s t a b l i s h t h e importance o f adver t i sement and promotion

e s p e c i a l l y f o r new p r o d u c t s . S ince t h e volume w i l l

i n i t i a l l y be s m a l l and becuase o f t h e n a t u r e o f t h e

t a r g e t marke t , i t i s cons ide r ed t h a t h a n d b i l l s be

used. Also p u b l i c add re s s system i s t o be i n s t a l l e d

on t h e p ick-up van f o r a d t e r t i s e m e n t and promot ional

purposes .

For hand b i l l s , 1 ,200 hand b i l l s w i l l be p r i n t e d

and d i s t r i b u t e d t o r e t a i l e r s and consumers. The c o s t

o f t h e hand b i l l . w i l l b e p u t a t @000

5.3.12 PLANT CAPACITY

The p roduc t i on p l a n c o n s i d e r s e s t i m a t e s t o ach ieve

d e s i r e d s a l e s c a p a c i t y . The p roduc t i on p l a n t f o r t h i s

p r o j e c t ha s t h e p r o j e c t e d c a p a c i t y o f producing 200 b a r s

o f soap d a i l y g iven a p r o j e c t e d t o t a l of 60,000 b a r s t o

be produced i n 300 working days i n t h e f i r s t y e a r o f

o p e r a t i o n a t 7 0 % i n i t i a l c a p a c i t y u t i l i z a t i o n . is

planned t o o p e r a t e a one s h i f t working sys tem o f e i g h t

hours d a i l y excep t on Sa tu rdays and Sundays. The l e v e l

8 0

o f a c t i v i t y i n t h e p l a n t w i l l be g r a d u a t e d i n o r d e r t o

promote g r a d u a l e n t r y i n t o t h e m a r k e t , a l l o w t ime f o r

t h e development o f n e c e s s a y s k i l l and a l s o t i m e t o h a n d l e

problems a s s o c i a t e d w i t h p r o d u c t i o n p l a n t s .

5 . 4 MATERIALS INPUT -. --- -- I n t h e manufac tu r ing o f s o a p , t h e p n y s i c a i and

chemica l c h a r a c t e r i s t i c s o f t h e f i n i s h e d p r o d u c t s depend

d i r e c t l y on t h e raw m a t e r i a l s employed i n t h e , p r o d u c t i o n s .

DTf fe ren t k i n d s o f r a w m a t e r i l a s a r e employed i n t h e

p r o d u c t i o n . However, t h e p r i n c i p a l raw m a t e r i a l s t h a t a r e

recommended f o r OSe i n t h e p roposed i n d u s t r y a r e palm

o i l ( b i e a c h e d ) , palm k e r n e l o i i and t h e chemica l components

and a d d i t i v e s i n c l u d e c a u s t i c s o d a (sodium h y d o x i d e ) ,

c a u s t i c p o t a s h , p h o s p h o r i c a c i d , sodium c a r b ~ n a t e , sodium

c h l o r i d e ( s a l t l , per fumes and c o l o u r i n g ma t t e - r .

Most o f t h e s e raw m a t e r i a l s a r e s o u r c e d l o c a l l y .

Palm o i l and palm k e r n e l o i l a r e produced i n v e r y l a r g e

q u a n t i t y i n t h e a r e a . While palm o i l w i l l be p r o v i d e d

t h r o u g h t h e ADA PALM N I L L a t Umuogu, ~ b o k ~ b a i s e and

n e a r b y l o c a l m a r k e t s , t h e palm k e r n e l o i l w i l l be o b t a i n e d

b o t h from t h e palm k e r n e l o i i M i i l i n Nguru Mbaise and

o t h e r l o c a l p a l n k e r n e l e x t r a c t i o n Mills w i t h i n t h e l o c a l

government.

The chemica l a d d i t i v e s can b e o b t a i n e d i n ma jo r

s u r r o u n d i n g towns l i k e Aba, Owerri o r even Enugu from

i m p o r t e r s o f t h e s e p r o d u c t s . . On t h e whole abou t 95%

of t h e raw m a t e r i a l s f o r soap p r o d u c t i o n a r e s o u r c e d

l o c a l l y . The sum o f W540,OOO have been p r o j e c t e d f o r

t h e p r o v i s i o n o f raw m a t e r i a l s f o r t h e f i r s t y e a r o f

o p e r a t i o n .

A b u f f e r p r o v i s i o n i s made t o a b s o r b t h e shock o f

f l u c t u a t i n g demand o f p r o d u c t and s u p p l y o f raw m a t e r i a l s .

I t i s e n v i s a g e d t h a t two ( 2 ) months raw m a t e r i a l needs

w i l l be adequa te . See s c h e d u l e f o r raw m a t e r i a l s c o s t

i n T a b l e ' S . 1 . The u n i t c o s t o f raw m a t e r i a l s p e r b a r i s

p u t a t W9.00.

TABLE 5 .1

ESTIMATED COST OF RAW MATERIALS ANNUALLY

Year o f Commercial

o p e r a t i o n s

E s t i m a t e d Cos t o f "Raw

M a t e r i a l s (W)

540,000

647,986

680,386

758,910

937,753

NOTE: 5 % a n n u a l i n c r e a s e i n c o s t i s recommended t o t a k e c a r e

o f i n f l a t i o n a r y r a t e .

5 . 4 . 1 INVENTORY CONTROL SYSTEM

An invef l tory system f o r raw m a t e r i a l s used i n

p roduc t ion i s recommended f o r p roper c o n t r o l o f raw

m a t e r i a l needs. Th is w i l l i nvo lve( t h e use o f b i n ca rds .

This c a r r i e s such in format ion as t h e name of t h e i t em,

s tock number and re 'order p o i n t . Addi t ions and s u b s t r a c -

t i o n s t o t h e inven tory a r e recorded. This w i l l enab le

management t o e a s i l y a s s e s s t h e a v a i l a b l e and needed.

Informat ion such a s p r i c e , amount a r d e r e d b u t no t r ece ived ,

s p e c i f i c a t i o n s , l o c a t i o n s i n s t o c k room e t c a r e a l s o

recorded f o r e a s y - m a t e r i a l handl ing a d m i n i s t r a t i o n .

The recommended inven to ry ca rd w i l l look t h u s : -

Fig. 5.2

ITEM I REORDER POINT

IN

DATE AMOUNT

ORDE R AMOUNT STOCK CONTROL

OUT

DATE AMOUNT BALANCE

5 .5 LOCATION ANDSITE

The proposed soap manufactur ing i n d u s t r y i s t o

be l o c a t e d n e a r t h e loca l governmeht headqua r t e r s a t

Afor-Oru on a 3 a c r e l and provided by t h e l o c a l

government a d m i n i s t r a t i o n f o r such purpose , The

- s i t e commands good; access road t o t h e a s p h a l t e d

Ehime- Mbaise - Okpala road l i n k i n g t h e s i t e t o t h e

commercial town of Aba, Por t -Harcour t , Owerri t h e

s t a t e c a p i t a l and Umuahia t h e c a p i t a l o f Abia S t a t e .

The s i t e t hus p rov ides easx - acces s t o major commer-

c i a l a r e a s . The l o c a t i o n i s w e l l a p p r o p r i a t e i n

terms of good acces s roads f o r supply of needed raw

m a t e r i a l s and f o r evacua t ion o f f i n i s h e d p roduc t s .

No problem of t r a n s p o r t a t i o n o f goods and pe r sona l

a r e t h e r e f o r e envisaged.

During t h e f i e l d survey conducted on t h e s i t e

by t h e r e s e a r c h e r , t h e fo l lowing obse rva t ions were

made : - - The s i t e have enough land f o r p o s s i b l e expansion

of a c t i v i t i e s and s e r v i c e s .

- The s i t e have s u i t a b l e access t o major highway.

- I t has a l o c a t i o n s t r a t e g i c a l l y p l aced f o r t h e

d i s t r i b u t i o n of p roduc ts both t o t h e l o c a l

consumer and probable expor t markets .

- I t l ends i t s e l f t o s u i t a b l e g rad ing and dra inage.

- F i n a l l y , i t has p r o v i s i o n f o r power and w a t e r

s u p p l y t o ' s u p p o r t t h e f a c t o r y .

5 .5 .1 UTILITIES

The u t i l i t i e s r e q u i r e d f o r t h e f a c t o r y o p e r a t i o n

i n c l u d e e l e c t r i c i t y and w a t e r s u p p l y . Water i s o b t a i n a -

b l e l o c a l l y t h r o u g h t h e b o r e h o l e s i t u a t e d n e a r t h e l o c a l

government h e a d q u a r t e r a t Afor - Oru -0gbe r o a d . There

a r e e x i s t i n g t a p s b e i n g s u p p l i e d w a t e r from t h e b o r e h o l e

i n t h e s i t e . A p r o v i s i o n i s t h e r e f o r e made f o r t h e

c o n s t r u c t i o n o f a 10 ,000 l i t r e o v e r head t a n k f o r w a t e r

s t o r a g e a t t h e f a c t o r y s i t e . The c o s t i s p u t a t W35,OOO.

Though t h e p roposed s i t e i s a l r e a d y hooked t o t h e

n a t i o n a l g r i d which w i l l s e r v e a s a major s o u r c e o f

power t h e r e i s a l s o a 50 KVA g e n e r a t i n g s e t a t t h e l o c a l

government l ieadquar te rs which i s e x p e c t e d t o be l i n k e d

t o t h e f a c t o r y s i t e t o meet t h e power n e e d s o f t h e

f a c t o r y i n c a s e s o f o c c a s s i o n a l power c u t s from t h e

p u b l i c power s u p p l y sys t em a s p r e s e n t l y e x p e r i e n c e d .

5 .6 PROJECT E N G I N E E R I N G

5 .6 .1 MACHINERY AND EQUIPbENTS

When t e c h n o l o g y s e l e c t i o n and P l a n t c a p a c i t y d e c i s i o n

has been comple ted , it i s e s s e n t i a l t o make d e c i s i o n

a b o u t t h e r i g h t machinery and equipment t o b e s e l e c t e d .

The equipments and machinery r e c t ' ,?nded f o r t h e p r o -

d u c t i o n w i l l work f o r a p e r i o d o ve y e a r s w i t h o u t

any a n t i c i p a t e d breakdown and i n t e r u p t i o n i n t h e

p r o d u c t i o n p r o c e s s . 0

A p r o c e s s a n a l y s i s has been comple ted and t h e f o l l w i n g A

p r o d u c t i o n equipment s e l e c t e d and recommended f o r t h e

proposed p l a n t ;

( a ) Soap Mixer: Here two t y p e s , t h e k e t t l e and t h e

b a t c h r e a c t o r f o r soap making a r e recommended. These

equipments a r e s e l e c t e d because o f t h e f u l l b o i l e d p r o c e s s

o f t h e b a t c h p r o c e s s o f p r o d u c t i o n adop ted f o r t h e f a c t o r y .

A b r i e f d e s c r i p t i o n o f t h e two equipments a r e g iven below.

( i 1 K e t t l e : Th i s i s c y l i n d e r i c a l w i t h cone bot tom - equ iped w i t h d e l i v e r y p i p e s f o r f a t , w a t e r , l y e , b r i n e

and n i g r e . A swinging s u c t i o n o r ' skimmer1 p i p e

o p e r a t e d from t o p i s i n s t a l l l e d t o p e r m i t d r a i n i n g o f f

t h e c o n t e n t s t o any d e s i r e d l e v e l and i n t h e bo t tom,

a n o t h e r l i n e i s p rov ided f o r wi thdrawing t h e r e s i d u e

l e f t f o r skim ming. The k e t t l e i s u s u a l l y l a g g e d '

t o conse rve h e a t . Open s team c o i l s i n t h e cone s e c t i o n

supp ly h e a t a g i t a t e t o t h e c o n t e n t s .

The k e t t l e i s shown below:- K e t t l e f o r soap

makinq by t h e f u l l

bo i l ed . p r o c e s s .

KEY : - 1 - Steam. i n l e t f o r t h e p e r f o r a t e d steam c o i l .

2 Steam f o r a g i t a t i o n .

3 - Swing p i p e f o r pumping ou t t h e soap

4 - Run o f f f o r l y e l i q u o r and g l y c e r i n e l i q u o r

( i i ) The second type i s t h e Batch Reactor . I t i s

c y l i n d e r i c a l t ank wi th a base f o r d i r e c t h e a t i n g . From

t h e base o f c y l i n d e r through t h e f i r e box i s connected

a p ipe f o r removal o f t h e l ye . The equipment has a mech-

a n i c a l a g i t a t i o n system f o r mixing t h e c o n t e n t s of t h e

soap dur ing t h e p rocess . I n t h e ca se , t h e source o f

hea t aan be c o a l , f i rewood o r t h e l i k e . I f coa l o r

firewood i s t o be used, an exhaus t p ipe i s provided a t

t h e o t h e r s i d e o f t h e h e a t i n g base t o remove t h e exhaust

gases . The equipment i s shown below;

Bgtch Reactor

f o r Soap Making .

KEY : - 1 - Mechanical A g i t a t o r

2 - Soap tank

3 - Heat base

4 - Opening f o r hea t

S U P P ~ Y 5 '- Pipe f o r removing l y

6 - Tap.

Fig . 5.4 '

;8:7

Any of t h e mixers d e s c r i b e d above can be used i n t h i s

p r o j e c t .

Other equipments recommended f o r p roduc t i on a r e : - - The 38cm by 5.5cm s t e e l soap mould t h e dimension o f

t h e soap mould was determined u s i n g t h e s t a n d a r d

s p e c i f i c a t i o n s o f b a r and l aundry saops .

- C u t t e r f o r c u t t i n g t h e soap mould i n t o a p p r o p r i a t e

s i z e s .

- The s tamping machine f o r i n s c r i b i n g t h e brand name.

A l l t h e equipments a r e des igned and f a b r i c a t e d

l o c a l l y and does n o t i nvo lve any i m p o r t a t i o n . They a r e

l o c a l l y a v a i l a b l e and ea sy t o o p e r a t e . They can a l s o

be s e r v i c e d and r e p a i r e d l o c a l l y by l o c a l f a b r i c a t i n g

e x p e r t s . In fo rmat ion on t h e a v a i l a b i l i t y o f t h e s e

equipments can be g o t from t h e chamber o f Commerce,

M i n i s t r y o f I n d u s t r i e s and Technology and P r o j e c t

Development I n s t i t u t e .

I n a d d i t i o n t o t h e p roduc t i on equipments , t h e

fo l l owing o f f i c e equipments a r e needed:-

- F u r n i t u r e s

- E i g h t C e i l i n g Fans

- One a i r c o n d i t i o n e r

- One pick-up van

A breakdown of f u r n i t u r e s i s a s f o l l ows : -

3 Executive t a b l e s

3 Execu t ive Cha i r s

2 Ordinary c h a i r s

2 Padded long chakrs .

TABLE MACHINERY AND EQUIPMENT COST REQUIREMENT

PRODUCTION EOUIPMENT COST ESTIMATE

Soap Mixer

Soap Mould

C u t t i n g Machine

Stamping Machine 5,000

Motor Vehic le 250,000

O f f i c e Equipments

E igh t C e i l i n g Fans

One A i r c o n d i t i o n e r

One F i l l i n g Cabinet 20,000

Fu rn i t u r e s ,

I n s t a l l a t i o n 4

T o t a l Equipment and I n s t a l l a t i o n c o s t . ------ -,W45Q*QQQ---- -------

5.6.2 TECHNOLOGY AND PRODUCTION PROCESS:

The technology t o be adopted i n t h e p roduc t i on p r o c e s s

i s s imple and does n o t i nvo lve s o p h i s t i c a t i o n c o n s i d e r i n g

t h e t ype of equipments s e 2 e c t e d e a r l i e r . .

The product i .on p r o c e s s i t s e l f i s t h e sequence

of o p e r a t i o n s , moves and i n s p e c t i o n s by which raw

m a t e r i a l s i n p u t a r e conver ted i n t o f i n i s h e d p r o d u c t s

r eady f o r t h e consumer. For t h i s p r o j e c t , t h e b a t c h

p r o c e s s o f soap making i s s e l e c t e d . The main r e a s o n s

f o r s e l e c t i n g t h i s p r o c e s s a r e a s foll .ows: -

- I t o f f e r s f l e x i b i l i t y of o p e r a t i o n

- I t does n o t i n v o l v e s o p h i s t i c a t i o n b o t h i n

equipments and t echno logy .

The b a t c h p r o c e s s a s p e c t o f soap manufac tu r ing

i s o f f o u r k i n d s : -

( a ) F u l l k e t t l e b o i l e d p r o c e s s

(b) Semi k e t t l e b o i l e d p r o c e s s

( c ) Cold p r o c e s s s a p o n i f i c a t i o n

(d) J e t p r o c e s s s a p o n i f i c a t i o n

Out o f t h e s e f o u r k i n d s , t h e f u l l k e t t l e b o i l e d

p r o c e s s i s s e l e c t e d and recommended f o r t h i s p r o j e c t .

T h i s p r o c e s s i s p r e f e r r e d t o t h e o t h e r t h r e e because it

produces h igh g rade soap u n l i k e o t h e r s t h a t produce

l e w g rade soap. The p r o c e s s i s b r i e f l y d e s c r i b e d i n

t h e n e x t page .

FULL KETTLE R O O I L E D PROCESS

I n t h i s method, s a p o n i f i c a t i o n i s c a r r i e d o u t

s imply by c h a r g i n g t h e p r o c e s s e d o i l o r f a t t o t h e r e a c t o r ,

h e a t i n g t o 90 - 9 5 ' ~ , add ing o f r e f i n e d c a u s t i c I

soda s o l u t i o n u s u a l l y 35% c o n c e n t r a t i o n o r o t h e r

s u b s t i t u t e ( p o t a s h ) i n t e r m i t t e n t l y ' d u r i n g t h e c a u s e

o f r e a c t i o n and s t i r r i n g u n t i l t h e r e a c t i o n i s over .

S a t u r a t e d sodium c h l o r i d e s o l u t i o n ( b r i n e )

35% (W/V) Nacl i s u s u a l l y used i n t h e s a l t i n g o u t

o p e r a t i o n .

T h i s p r o c e s s s u p p l i e s comple te ly s a p o n i f i t a d

n e u t r a l soap c o n t a i n i n g approx imate ly 30% w a t e r ,

a compos i t ion which when h o t can be pumped t o v a r i o u s

f i n i s h i n g o p e r a t i o n s such a s : -

- Removal o f l y e

- Washing change

- S t r o n g change

- F i t t i n g change.

The advan tages f o r u s i n g t h i s method a r e : -

(1) I t produces h i g h g rade soap and i s used i n l a r g e

s c a l e p r o d u c t i o n .

( 2 ) I t p r o v i d e s f l e x i b i l i t y o f o p e r a t i o n .

(3) I t i s n o t h i g h l y mechanised, r e q u i r i n g low s k i l l e d

l a b o u r

( 5 ) Can be changed from one formula t o a n o t h e r w i t h o u t

t h e reworking o f s u b s t a n t i a l q u a n t i t i e s o f soap .

The u n i t o p e r a t i o n s ( p h y s i c a l changes) and u n i t

p r o c e s s e s (chemical changes) a r e a s f o l l o w s : -

- S a p o n i f i c a t i o n

- ' Sepa ra t ion

- Washing

- Re-Saponif i c a t ion

- F i t t i n g

- Moulding and packag ing

These o p e r a t i o n s and p r o c e s s a r e d e s c r i b e d below: -

SAPONIFICATION: I n t h i s o p e r a t i o n s , s a p o n i f i c a & i o n

i s - . c a r r i e d o u t by c h a r g i n g t h e r e f i n e d palm k e r n e l

o i l t o t h e r e a c t o r ( S a p o n i f i e r ) h e a t i n g t o 90-9.S0c,

add ing of r e f i n e d c a u s t i c soda s o l u t i o n u s u a l l y 35%

o r o t h e r s u b s t i t u t e (Potash) i n t e r m i t t e n t l y d u r i n g t h e

c o u r s e o f r e a c t i o n and a g i t a t i n g u n t i l t h e r e a c t i o n

i s o v e r . The m i x t u r e i s b o i l e d t o g e t h e r e a t a t e m p e r a t u r e

o f abou t 1050C

9%' A v igorous chemical r e a c t i o n t a k e s p l a c e and a

g r e a t d e a l o f h e a t i s gene ra t ed . The r e s u l t i n g t u r b u l e n c e

causes t h e mass o f l i q u i d t o s w e l l and heave. The mass

g r a d u a l l y t h i c k e n s o r e m u l s i f i e s a s t h e c a u s t i c soda

r e a c t s wi th o i l t o produce soap and g l y c e r o l . Water

and b r i n e a r e u s u a l l y added t o keep t h e mix tu re manageable

Towards t h e end o f t h e p r o c e s s , t h e c o n t e n t s a r e b o i l e d

up t o en su re t h a t no pocke t s o f o i l o r a l k a l i remain

i s o l a t e d . A t t h e conc lus ion o f t h e p roce s s a l l t h e o i l

and a l k a l i have been conver ted i n t o soap mixed.r.with a

p r o p o r t i o n o f b r i n e and g l y c e r o l .

SEPARATION PROCESS: In S e p a r a t i o n o f g l y c e r o l from

soap ( s a l t change) , t h e p a s t y b o i l i n g mass i s t r e a t e d

w i th h o t s t r o n g b r i n e . Cbntents o f t h e k e t t l e s a l t ou t

o r s e p a r a t e i n t o an upper l a r g e t h a t i s a curdy mass o f

impure soap and a lower l a y e r t h a t c o n s i s t s o f an aqueous

s a l t s o l u t i o n wi th t h e g l y c e r o l d i s s o l v e d i n i t . Thus,

t h e b a s i s o f g l y c e r o l removal i s t h e s o l u b i l i t y o f g l y c e r o l

and i n s o l u b i l i t y o f soap i n s a l t s o l u t i o n .

A f t e r t h e i n t r o d u c t i o n o f t h i s s a l t s o l u t i o n t h e

c o n t e n t s o f t h e k e t t l e i s al lowed t o s t a n d f o r 3 - 4

hours t o a l low complete s e p a r a t i o n o f t h e two phase s ;

t h e s l i g h t l y a l k a l i n e s a l t s o l u t i o n termed spen t soap l y e ,

i s d ra ined o f f through t h e t a p . A t t h e bottom of t h e

k e t t l e l e av ing impure soap i n molten form.

WASHING OPERATION: Here, t h e washing ope ra t i ons a r e

c a r r i e d ou t f o r t h e purpose of f u r t h e r removing g l y c e r o l

from t h e soap mass. A f t e r t h e removal of t h e l y e from

t h e s a l t change, t h e g ra ined soap i s b o i l e d wi th open

steam and wate r i s added u n t i l t h e mass i s i n a smooth

homogeneous cond i t i on . B o i l i n g i s cont inued and s a l t

i s added showly t o g r a i n ou t t h e soap.

The b o i l i n g mass i s expanded s e v e r a l t imes t o t h e

top of t h e k e t t l e wi th open system. This ensures

thoroughly mixing and maximum washing f o r g l y c e r o l

recovery. The steam i s shu t o f f and t h e k e t t l e al lowed

t o s e t t l e f o r s e v e r a l hours . A f t e r removing t h e f i r s t

wash l y e from t h e bottom of t h e k e t t l e , t h e g ra ined

soap i s given a second wash f o r t h e purpose of r e c o v e r i n g

more g l y c e r o l . Th is i s handled i n t h e same manner a s

t h e f i r s t wash desc r ibed e a r l i e r .

RE-SAPONIFICATION: In t h i s s t a g e of o p e r a t i o n , t h e

soap i s s u b j e c t e d t o a strongchange i n o r d e r t o conver t

t o soap any o i l o r f a t which was no t s apon i f i ed dur ing

t h e s a p o n i f i c a t i o n o r k i l l i n g change. In t h e t r e a t m e n t ,

s t r o n g c a u s t i c soda i s used and i s u s u a l l y run i n t o k e t t l e

and b o i l e d wi th t h e soap f o r a long t ime, about an hour .

94

The soap which i s n o t s o l u b l e i n t h e a l k a l i n e l i q u o r ,

a c q u i r e s a g r a i n y s t r u c t u r e , No recovery o f g l y c e r o l

i s aceqmplifked i n t h i s s t a g e . The a l k a l i r i c h l y e i s

run o f f a f t e r s e t t l i n g and used i n t h e s a p o n i f i c a t i o n

s tRge o f a new b o i l .

A f t e r t h i s o p e r a t i o n , t h e soap i s g iven one o r more

s a l t wa t e r washes t o reduce t h e f r e e a l k a l i c o n t e n t

o f t h e soap mass p r e p a r a t o r y f o r t h e f i n i s h i n g o p e r a t i o n .

Th i s o p e r a t i o n i s o p t i o n a l depending on t h e e f f i c i e n c y

o f t h e r e a c t o r and t h e raw m a t e r i a l s used. A f t e r t h i s

o p e r a t i o n , ' t h e two p roduc t s o f s a p o n i f i c a t i o n , soap

and g l y c e r o l a r e f u l l y s epa ra t ed . F u r t h e r t r e a t m e n t s

@nd performed t o b r i n g them t o t h e i r b e s t u s e f u l ends .

FITTING OPERATION (PURIFICATION STAGE) : Thi s i s t h e

f i n a l s t a g e of n e a t soap manufacture . I t s e r v e s t h e

dua l purpose o f r enok ing . , i m p u r i t i e s from t h e soap mass

and p e r m i t t i n g t h e p roduc t i on o f a f i n a l p roduc t"hav ing

t h e composit ion r e q u i r e d o r d e s i r e d .

T h i s s t a g e r e q u i r e d oons ide r ab l e s k i l l and shou ld

be hand led i n such a manner a s t o produce a h i g h y i e l d

o f n e a t soap and r e l a t i v e l y s m a l l amount o f n i g r e .

The impur i t ke s go i n t o t h e n i g r e upon t h e s e t t i n g o f t h e

f i n i s h e d soap.

A f t e r t h e l a s t wash l y e i s removed, t h e f i n a l

' f i t 1 t o t h e n e a t - s o a p i s begun. The curd c o n t a i n s

t o o much s a l t and o r c a u s t i c , so. it i s b o i l e d up and

sma l l q u a n t i t y o f wa t e r i s g radua l lyadded and b o i l e d

i n t o t h e d e s i r e d f i t . The c o n t e n t s of t h e r e a c t i o n

a r e a l lowed t o s e t t l e f o r 2 - 4 days by which t ime

t h e y w i l l have r e s o l v e d i n t o t h r e e l a y e r s - a t h i n

da rk n i g r e l a y e r i s formed between t h e upper l a y e r n e a t

soap and lower l a y e r ( n i g r e l y e ) .

A f t e r s e t t i n g , t h e upper n e a t l a y e r a l s o c a l l e d

k e t t l e soap which i s of most c o n s t a n t composit ion about

(70% soap and 30% wa te r ) i s withdrawn wh i l e s t i l l h o t

through t h e swing p i p e o r kimmer and pumped t o s t o r a g e

o r r e l a y t anks f o r f u r t h e r p r o c e s s i n g i n t o b a r s o r

t a b l e t s . Pumping i s s topped when t h e swing p i p e r eaches

t h e n i g r e l a y e r a t t h e bottom of t h e k e t t l e .

LAUNDRY SOAP: I n p roduc t i on o f household b a r soap o r

l aund ry soap , t h e n e a t soap i s d r i e d f u r t h e r . I n t h i s

p r o c e s s i n g , t h e pu re n e a t soap i s pumped from s t o r a g e

t ank i n t o cou t che r where a d d i t i o n s o f perfuiiies.',

c o l o u r i n g ( agen t s ) m a t t e r and s m a l l q u a n t i t y o f i n o r g a n i c

b u l d e r s a r e made. I t t h en runs i n t o f rames , t h a t i s ,

r e c t a n g u l a r s t e e l mould wi th removable ends and s i d e s

i n which it c o o l s and s e t i n t o s o l i d . When t h e soap

has been s o l i d i f i e d , t h e frames a r e removed by means

o f s t e e l w i r e s , t h e s l a b o r mould i s now c u t i n t o b a r s

and t a b l e t s which i s f i n 3 l l y stamped and packed.

PRODUCTION FLOW CHART

C U T T I N G

I N T O BARS

S T A M P I N G r+l

RAW MATERIALS i

PACKAGING ?

9 S O A P M I X I N G

PRODUCT I

& t -

t

1 . d

Figure 5.5

-4'

F I N A L F I N I S H E D

S O A P MOULD

6

5.6 .3 PRODUCTION SCHEDULE

The p r o d u c t i o n s c h e d u l e i s a s p e c i f i c manufac tu r -

i n g programme which i n v o l v e s p r o d u c t i o n f o r s a f e t y s t o c k

and r e f l e c t s e f f o r t s - :..to, o p e r a t e a t p l anned c o n s t a n t

p r o d u c t i o n r a t e . I t forms t h e b a s i s f o r a n a l y s i s

a n d , c o s t e s t i m a t i n g . A s e a r l i e r i n d i c a t e d , t h e proposed

p l a n t w i l l run a one s h i f t , e i g h t hours s c h e d u l e

p roduc ing a n ave rage o f two hundred (200) b a r s o f h i g h

g rade perfumed soap p e r day f o r t h e p r o j e c t e d 300

working days r e s u l t i n g t o t h e p r o d u c t i o n o f 60,000 b a r s

o f soap i n t h e f i r s t y e a r o f o p e r a t i o n . The p l a n t

i s e x p e c t e d i n i t i a l l y t o o p e r a t e a t abou t 70 p e r c e n t

o f i n s t a l l e d c a p a c i t y and a t % a i n s i t s maximum p r o d u c t i o n

l e v e l i n t h e f i f t h y e a r .

The proposed s c h e d u l e o f p r o d u c t i o n a l l o w s f o r a

g r a d u a l b u t p r o g r e s s i v e a b s o r p t i o n o f t h e e s t i m a t e d

p r o d u c t annua l ave rage s u p p l y gap - a p r o c e s s which i s

expec ted t o e n s u r e a g r a d u a l b u t s y s t e m a t i c improvement

on t h e p r o d u c t q u a l i t y and s a l e s network.

TABLE 5 . z THE PROPOSED SCHEDULE OF PRODUCTION

NO. OF 1 P I O ~ J $ C ~ ~ ~ s !LJTPVT SHIFT

YEAR OF PRODUCTION

1

2

3

4

5

I I

CAPACITY USAGE

70%

80%

80%

85%

100%

5.6.4 BUILDING NEEDS AND CIVIL WORKS

C o n s i d e r a t i o n i s g iven t o s t r u c t u r a l needs o f

t h e i n d u s t r y . I t i s recommended t h a t t h e b u i l d i n g s

f o r t h e p r o j e c t w i l l b e b u i l t w i t h r e i n f o r c e d c o n c r e t e

and cement b l o c k . The p r o d u c t i o n and s t o r a g e s e c t i o n s

w i l l have h i g h bays and adequa te columns f o r s u p p o r t .

The p r o d u c t i o n f l o o r w i l l be g iven s p e c i a l f l o o r i n g

t o s u p p o r t t h e p r o d u c t i o n equipment p l a n t . The r e s t

p a r t o f t h e p l a n t w i l l u se normal l i v i n g and o f f i c e

s p e c i f i c a t i o n s . The sum of W1.5m h a s been s e t a s i d e

f o r t h e b u i l d i n g needs . T h i s amount w i l l a l s o c o v e r

laAd development and c o n s u l t a n c y f e e s .

5 . 6 . 5 SPACE REQUIREMENTS

T h i s h v o l v e s t h e p r o d u c t i o n , o f f i c e and o t h e r

s e r v i c e r e q u i r e m e n t s .

PRODUCTION SPACE REQUIREMENTS

I n t h e p r o v i s i o n o f s p a c e , c o n s i d e r a t i o n h a s been

g iven t o expans ion p o s s i b i l i t i e s . The p r o d u c t i o n space

requ i rements i n c l u d e a l l space d i r e c t l y used i n t h e

p r o d u c t i o n . I t i n c l u d e s : - - Work S t a t i o n Areas

- S t o r a g e Areas.

( i )

( i i )

99

Work s t a t i o n Areas; This w i l l cover t h e a c t u a l

space occupied by machines and o t h e r p roduc t ion

equipments i n t h e f a c t o r y . The a r e a requirement

p r o j e c t e d i s pu t a t s i x t y f i v e (65) square metres .

S torage Areas: The s t o r a g e a r e a i s d iv ided i n t o

two s e c t i o n s . Warehouse f o r raw m a t e r i a l s and

s t o r e s f o r f i n i s h e d p roduc t s . Es t imate o f space

requirements f o r s t o r a g e i s p u t a t f o u r t y - f i v e

( 4 5 ) square metres .

5.6.5.2 OFFICE AND SERVICE SPACE REOUIREMENTS

( i ) Adminis t ra t ion : The p l a n t w i l l have admin is t ra tTve

o f f i c e . Th is w i l l accomodate t h e General Manager,

Adminis t ra t ive Manager, two s u p e r v i s o r s f o r

p roduc t ion and market ing, Accounts -of f ice r .

Est imated space r e q u i r e d f o r t h x s i s pu t a t t h i r t y

(30) square met res .

( i i ) P rov i s ion w i l l be made f o r a customer s e r v i c e

f a c t o r y depot. Est imated space i s twenty (20)

square metres .

( i i i ) P l a n t Se rv i ce s : This w i l l i n c lude space p r o v i s i o n

f o r shower, l a v a t o r y , t o i l e t . Space e s t i m a t e i s

pu t a t f i f t e e n (15) square metres .

U t i l i t y space And P r o t e c t i o n : Th i s i n c l u d e s

Space f o r c a r p a r k , f r o n t l oad ing , w a t e r t ank

and open cou r tya rd . Es t imated space r e q u i r e d e n t

i s p u t a t one hundred (100) square me t r e s .

TABLE 5 . 3 REQUIRED INDUSTRIAL LAND AR

CAP I TAL ITEMS

- Fac tory S i t e compris ing Produc t ion /

Worksta t ion Area, Warehouse f o r raw

m a t e r i a l s , Water S to r age t a n k , Area

f o r f u tu r eexpans io n and o f f l o a d i n g -

a r e a .

- Other b u i l d i n g s Comprising main

a d m i n i s t r a t i o n b l o c k , p l a n t s e r v i c e s

c a r p a r k s , s t o r e f o r f i n i s h e d goods

and l o a d i n g a r e a .

NOTE: The above l a n d a r e a i n c l u d e t h e a r e a f o r f u t u r e - I

expansion o f i n d u s t r i a l a c t i v i t i e s on t h e 3Lacre

l a n d p rov ided f o r i n d u s t r i a l purposes by t h e l o c a l

a d m i n i s t r a t i o n .

5.7 PLANT ORGANISATION AND OVERHEAD COST

5.7.1 PLANT ORGANISATION

T h i s i nvo lve s t h e g e n e r a l arrangement o f t h e

p roduc t i on and s t o r a g e and f r e e f low o f p roduc t i on

m a t e r i a l s . an'd pe rsonne l . The p l a n t w i l l be l a i d

o u t i n such a manner t h a t i t w i l l be i n l i n e w i th

t h e p roduc t i on p r o c e s s e s s and t echno logy adopted f o r

t h i s p r o j e c t .

A s e a r l i e r i n d i c a t e d , t h e p l a n t w i l l be d iv ided

i n t o p roduc t i on a r e a which w i l l comp?i%e t h e w o r k s t a t i o n

a r e a and t h e s t o r a g e a r e a , r e q u i r e d s p e c i f i c a t i o n

f o r t h e s e have e a r l i e r been given i n t h e space r e q u i r e -

ments t a b l e .

The s t o r a g e a r e a w i l l be d i v i d e d i n t o two made

up of raw m a t e r i a l s and f i n s i h e d goods s t o r e s . The

s t o r a g e a r e a w i l l be capab le of ho ld ing a h igh

pe r cen t age o f a l l t h e needed n e c e s s a r y raw m a t e r i a l s

t h e f i n i s h e d produc ts . t h e o t h e r hand, t h e

p roduc t ion a r e a w i l l -~onvenient ly ' . : accommodate t h e

machinery and equipments f o r p roduc t ion and a l s o a l low

enough space f o r f r e e movement o f pe r sonne l , goods and

maintenance.

Personnel w i l l be a s s igned i n r e l e v a n t a r e a s .

PLANT LAYOUT

b I

Raw M a t e r i a l s 1

S t o r e i

/n d

L.

Figure: 5 .6

I

Off l oad ing Area

w I i

Fin ished Goods

S t o r e

4 4

Product ion Area

Machinery & Equipments b

i

Parking And

Loading Area. 4

And Peronnel * I

4

K

10'3

5 .7 .2 OVEFWEAD COST

T h i s i n v o l v e s t h e c o s t o f runn ing t h e p l a n t . I t

w i l l cover t h e c o s t o f p r o v i d i n g c e r t a i n f a c i l i t i e s

p rov ided f o r runn ing t h e pZant l i k e t e l e p h o n e , e l e c t r i -

c i t y , w a t e r e t c .

The t o t a l overhead c o s t r equ i rement i s shown below:-

TABLE 5 . 5

OVERHEAD COST REQUIREMENT (ANNUAL) - I

ITEM I COST (W)

V e h i c l e Maintenace And F u e l i n g

Veh ic le I n s u r a n c e And R e g i s t r a t i o n

E l e c t r i c i t y

Water Supply

Fac to ry S u p p l i e s (Car tons )

S a n i t a t i o n Fee

Bus iness Premises

Contingency

Miscelaneous

NOTE: Th i s f i g u r e i s r e l e v a n t f o r t h e f i r s t one y e a r o f

o p e r a t i o n . A 5% annual i n c r e a s e i s assumed t o p r o v i d e

f o r r i s i n g c o s t o f l i v i n g .

5.8 MANPOWER REQUIREMENTS

This e v a l u a t e s t h e manpower needs of t h e p r o j e c t .

The s t a f f s t r e n g t h , S ~ X V and wage p l a n and t h e i r

i n d u s t r i a l f unc t ions were a l s o t aken c a r e o f he re . Th is

w i l l be ana lys6d i n two p a r t s o f t h e management team

and personne l requivements. I t a l s o decr ibeds an

o r g a n i s a t i o n a l s t r u c t u r e t h a t i n d i c a t e s ., t h e command

h i e r a r c h y t h a t should be most e f f i c i e n t i n running t h e

o r g a n i s a t i o n e f f e c t i v e l y . I

5.8.1 MANAGEMENT TEAM: To ensu re t h e success o f an

i n d u s t r i a l p r o j e c t , p roper a t t e n t i o n must be given t o

t h e importance of management. Management can be def ined

a s t h e sum t o t a l of t h e p o l i c y d e c i s i o n s t h a t a f f e c t

t he f u n c t i o n s of an o r g a n i s a t i o n . I f t h e d e c i s i o n s

a r e c o r r e c t and taken a t t h e r i g h t t ime , management

i s s a i d t o be e f f i c i e n t . But where d e c i s i o n s a r e wrong

o r t aken a t t h e wrong t ime , management may become

i n e f f i c i e n t .

The management team f o r t h i s p r o j e c t wi l l compr i se

t h e General Manager, t h e Admin i s t r a t i ve and Personnel

Manager, t h e two S u p e r v i s i o r s a n d . t h e Technica l s t a f f

and t h e c o u n c i l l o r incharge of f i nance and economic

planning. The i r d u t i e s . w i l l i n c lude : - - Advise t h e General Manager on new t ech iques f o r

maximum f a c i l i t i e s u t i l i z a t i o n .

i05

- Provide u s e f u l in format ion on imLproved produc t ion

methods . - Formulate a p p r o p r i a t e p o l i c y g u i d e l i n e s i n l i n e w i th

t h e l o c a l a d m i n i s t r a t i ons requirements .

- P r o j e c t t h e company i n t h e f o r e f r o n t of s i m i l a r

i n d u s t r i e s i n t h e course o f t h e i r r o u t i n e engagements.

They should meet q u a r t e r l y and be p a i d remuneration

based on an as reedpercen tage of p r o f i t a f t e r t ax .

5 . 8 . 2 PERSONNEL REQUIREMENTS: The p l a n t w i l l i n t h e

f i r s t yea r of commercial ope ra t i on employ t h e s e r v i c e s o f

t h e fo, l lowing pe r sonne l s .

- General Manager

- Administrative/Personnel Manager

- Superv i sors

- Technical S t a f f

- Accounts O f f i c e r

- Driver Salesmad?

- Depot Sa l e s l ady

- Factory workers.

5 .8 .3 J O B DESCRIPTION AND QUALIFICATION

( i ) General Manager:- He i s t h e c h i e f execu t ive o f t h e

industr?:. He should pos se s s a B.Sc. i n p roduc t ion Engineer ing

wi th a t l e a s t f o u r y e a r s co:gnate manager.ia1 exper ience .

He w i l l be r e s p o n s i b l e f o r t h e day t o day running of t h e

p l a n t . He w i l l d i r e c t and c o n t r o l t h e f u n c t i o n s of o t h e r

members o f t h e management who w i l l r e p o r t d i r e c t l y t o

him. He i s r e s p o n s i b l e t o t h e management team wh6 makes

recommendation t o t h e chairman.

ADMINISTRATIVE/PERSONNEL MANAGER: He should be r e s p o n s i b l e

f o r t h e gene ra l a d m i n i s t r a t i v e and personne l requirements

of t h e i n d u s t r y . He should posses a H N D / B . S C i n Business

Adminis t ra t ion wi th t w ~ y e a r s cognate exper ience . He

should r e p o r t t o t h e General Manager.

SUPERVISORS: They w i l l be two i n number and w i l l s upe rv i se

t h e p roduc t ion and s a l e s r e s p e c t i v e l y . The Supe rv i so r

f o r s a l e s w i l l co -ord ina te s a l e s o f t h e f i n i s h e d p roduc t s

whi le t h e product i n s u p e r v i s o r w i l l oversee t h e f u n c t i o n s

o f t h e f a c t o r y workers and o v e r a l l p roduc t ion p roces s .

They should pos se s s a HND/B.Sc i n r e l e v a n t a r e a s wi th

two y e a r s cognate exper ience . They r e p o r t t o t h e General

Manager.

T E C H N I C A L STAFF:- W i l l s ee t o t h e t e c h n i c a l and mainte-

nance of t h e p roduc t ion equipments. He should pos se s s

a B.Sc/HND i n Mechanical Engineer ing and w i l l l i a s e wi th

p roduc t ion s u p e r v i s o r and r e p o r t t o t h e General Manager.

ACCOUNTS DFFICER: W i l l be r e s p o n s i b l e f o r t he genera l

accounts o f t h e indust r* . He w i l l r e c e i v e and make

payments on beha l f of t h e o r g a n i z a t i o n and r e p o r t d i r e c t l y

t o t h e General Manager. He should pos se s s a B.Sc/HND

i n accounts .

DRIVER/SALESMAN: W i l l be r e s p o n s i b l e t o t h e d e l i v e r y o f

t h e f i n i s h e d goods t o p o t e n t i a l customers and consumers.

He i s expec t ed t o c a r r y t h e p roduc t s t o t h e major

markets i n t h e a r e a f o r d i r e c t s a l e s t o t h e f i n a l

consumers. He shou ld pos se s s a minimum of WASC and a l s o

an. ' E l g rade d r i v i n g l i c e n c e w i t h f o u r y e a r s d r i v i n g

expe r i ence . He w i l l r e p o r t t o t h e s a l e s s u p e r v i s o r .

DEPOT SALES LADY: Should be r e s p o n s i b l e f o r s a l e s a t t h e

f a c t o r y depot . She shou ld be c h a r i s m a t i c and pos se s s a

minimum of WASC o r GCE. She should r e p o r t d i r e c t l y t o

t h e S a l e s Supe rv i so r .

FACTORY WORKERS: These a r e t h e a c t u a l peop le invo lved

t h e d i r e c t p roduc t ion . They shou ld p o s s e s s t h e WASC o r

Primary S i x C e r t i f i c a t e and w i l l r e p o r t d i r e c t l y t o t h e

p roduc t i on Supe rv i so r .

TABLE 5.6

Admin/Personnel Manager 3 , 500 1 42,000

MANPOWER REQUIREMENT COST FORECAST

Supe rv i so r s

Accounts O f f i c e r

DESIGNATION

General Manager

NO

1

, . Technica l S t a f f

Dr iver lSalesman

Depot S a l e s l a d y

Fac to ry Workers

TOTAL

( W ) MONTHLY SALARY

5,000

3

1

. . ."lo

( W ) ANNUALSALARY

60,000

2,800

1 ,000 , . , . ' ." .. .. . '

Pi18,700

33,600

12,000 . . 108',000

Pi357,600

NOTE: This f i g u r e i s r e l e v a n t f o r t h e f i r s t $wo-yeir of - commercial ope ra t i on . Ten (10) pe rcen t i n c r e a s e i n

s a l a r y i s recommended'in t h e t h i r d y e a r o f o p e r a t i o n .

5 . 8 . 4 . . -- ORGANISATIONAL STRUCTURE: The o r g a n i s a t i o n a l

s t r u c t u r e i n d i c a t e s t h e h i e r a r c h y t h a t should be adopted

f o r t h e most e f f i c i e n t way of running t h e o r g a n i s a t i o n

e f f e c t i v e l y . A s e a r l i e r i n d i c a t e d t h e General Manager i s

t h e ch i e f execu t ive and d i rec t s . ':and c o n t r o l s t h e a f f a i r s

of t h e o r g a n i s a t i o n . Below t h e General Manager a r e , t h e ; '

Admin/Personnel Manager, t h e Supe rv i so r s , Accounts o f f i c e r .

Driver/S&lesman, S a l e s l a d y , t e c h n i c a l s t a f f and f a c t o r y

workers.

F ig .5 .7

THE ORGANISATIONAL STRUCTURE

General Manager

Technical S t a f f LC 1 s u p e r v i s o r I ( Superv i sor I

I 4 i

Accounts

O f f i c e r z

1 Sa le s I I

t r *

Admin/Personnel

Manager v

( produc t ion I

1 11

Driver /Sa les Man

Depot

L

5.9 . IMPLEMENTATION SCHEDULE

The implementa t ion s chedu l e i n c l u d e s a l l t h e a c t i v i -

t i e s invo lved i n t h e p r o j e c t work and t h e worked o u t

p e r i o d f o r a ch i ev ing them. I t i s a work p l a n f o r a ch i ev ing

t h e complet ion o f t h e p r o j e c t w i t h i n t h e s e t t ime frame.

The implementa t ion schedu le i s a s o r t o f guide i n p r o j e c t

implementa t ion .

Fo reca s t o f p r o j e c t implementa t ion schedu le f o r t h e

proposed p r o j e c t i s shown below.

TABLE 5 . 7

FORECAST OF PROJECT IMPLEMEYTATI ON SCHEDULE ,

1. Bu i ld ing C o n s t r u c t i o n l 1 Long term I

PROGRAMME OF SOURCE OF

PROJECT IMPLEMENTATION

ESTIMATED

FUND

C i v i l Eng ineer ing Works

DURATION

2 . Purchase o f Machinery

And Equipment And t h e i r

I n s t a l l a t i o n

Loan

Long term , Loan

3 . S t a f f Recuitment

1 2 months

Equ i t y C a p i t a l I 2 months

4 . Purchase of Raw

M a t e r i a l s

* F i r s t month o f t h e fo l l owing yea r .

5. T e s t P roduc t i on I

NOTE: The p r o j e c t implementa t ion i s e s t i m a t e d t o l a s t f o r - o w - yea,x.

Equ i t y And r ,

S h o r t te rm Loan

1 month

2 months

1

* S t a r t up o f Commercial Opera t ion

iio 5 . 1 0 WORKJNC CAPITAL

The working c a p i t a l e s t i m a t e i s based on t h e manufac t -

u r i n g programme and on t h e e x p e r i e n c e o f an i n d u s t r y o f

s i m i l a r o p e r a t i o n s i n t h e s t a t e . Owkn-g..to r i s i n g c o s t

o f l i v i n g we have p r o v i d e d f o r an e s t i m a t e d 5 % a v e r a g e

annual i n c r e a s e i n working c a p i t a l a s from t h e second

y e a r o f commercial o p e r a t i o n and p r o d u c t i o n . The r e a s o n

f o r u s i n g s h o r t p e r i o d s s t o c k i s t o a v o i d s a d d l i n g t h e

.Fh. p r o j e c t w i t h heavy working c a p i t a l i n i t i a l l y s i n c e t h e ;, -7 -, , .

, - 7 , -: p r o j e c t from my p r o j e c t i o n s , s t a r t s t o g e n e r a t e : i t s own&v&nue.

r i g h t from t h e f i r s t y e a r o f commercial o p e r a t i o n s .

S e c o n d l y , most o f t h e raw m a t e r i a l s r e q u i r e m e n t s

o f t h e p roposed f a c t o r y c o u l d b e s o u r c e d l o c a l l y .

TABLE 5 . 8

WORKING CAPITAL ESTIMATE ( W '000)

taw m a t e r i a l s 2 months

; t o c k

;tack o f Work i n P r o -

:ess 2 days v a l u e o f

tnnual s a l e s

;tack o f f i n i s h e d

p o d s 1 week o f t o t a l

m n u a l s a l e s

Deb to r s : 1 4 days v a l u e o f t o t a l annua l s a l e s

L__I

YEAR 0

YEAR i

-3mJ-

16

56

1 1 2

YEAR

YEAR ii

130

19

69

134

YEAR iii

136

2 0

70

140

YEAR i v

152

2 2

78

156

YEAR

76-

27

96

192

S a l a r y And wages f o r 1 I I two months

I

Less C r e d i t o r s : 1 5 days

s tock of raw m a t e r i a l s 2 7 3 2

Net To ta l 302 355

Inc rease In working

c a p i t a l - 5 3

5.11 FINANCIAL ANALYSIS

F inanc i a l a n a l y s i s p l a y s an important r o l e i,n t h e p roces s not

of t h e p r o j e c t a p p r a i s a l which shows whether or,,the p r o j e c t

i s f i n a n c i a l l y v i a b l e and p r o f i t a b l e i n t h e given soc io -

economic environment. The f i n a n c i a l in format ion i s u s u a l l y

enough t o i n t e r e s t p o t e n t i a l i n v e s t o r s who, once they have

been i d e n t i f i e d can be provided wi th more d e t a i l e d d a t a

t a i l o r e d t o t h e i r needs. The in format ion con ta ined i n

t h e f i n a n c i a l a n a y l s i s can be used t o determine i f t h e

p r o j e c t shows an accep tab l e l e v e l o f commercial p r o f i t a b i l i t y .

For t h e purpose of t h i s p r o j e c t , t h e f i n a n c i a l a n a y l s i s

w i l l cover t h e fo l lowing a r e a s : -

( i ) Es t imate o f t o t a l p r o j e c t c o s t .

( i i ) P ro j ec t ed Income Sta tement .

( i i i ) P r o j e c t e d Cash Flows Sta tement .

( i v ) P r o j e c t e d Balance Sheet .

(v) Return On Investment

( v i ) Payback Per iod .

TABLE 5.9

5 . 1 1 . 1 ESTIMATE OF TOTAL PROJECT COST (INITIAL)

The p r o j e c t e d i n i t i a l t o t a l p r o j e c t c o s t covers

t h e fo l lowing i tems :-

ITEMS OF EXPENDITURE ESTIMATED COST (W) . Bui ld ing and C i v i l works 1,500,000

Machinery And Equipments 450,000

Pre- investment Cos t s 50,000

Working C a p i t a l ( 1 yea r ) 302,000 1 P a r t T o t a l W2,302,000

P lus 5% contingency p rov i s ion 115,100

Grand T o t a l W2,417,100

The t o t a l e s t ima ted c o s t o f i n i t i a l investment s t a n d s

a t W2,417,100. Consider ing t h e reasonable cont ingency

p r o v i s i o n made a v a i l a b l e , i n t h e investment f o r e c a s t , we

b e l i e v e t h e r e w i l l be no s p i l l over i n t h e a c t u a l c o s t o f

t h e p r o j e c t .

5 . 1 1 . 2 FINANCING PLANS FOR INITIAL INVESTMENT COST

In working ou t t h e f i n a n c i n g p l a n f o r t h e proposed

p r o j e c t . We a r e guided by t h e requirements o f many

i n s t i t u t i o n s i n t t h e coun t ry which p rov ide medium and I

long term loans . The promoters ' of t h e prefect cou ld

r a i s e a substant .5~1 p a r t o f t h e i r l o a n requ i rements ' f o r

t h e ven tu r e from t h e N ige r i an Bank f o r Commercedi and

I n d u s t r y (NBCI). ' The NBCI does n o t i n s i s t on any h i g h

c a p i t a l gea r i ng r a t i o and r ecogn i s e s t h e f a c t t h a t i t

i s t h e e f f e c t t h a t t h e g e a r i n g has an t h e p r o j e c t s

p r o f i t a b i l i t y and l i q u i d i t y t h a t i s impor tan t and n o t

t h e gea r i ng p e r s e . The NBCI i s t h e r e f o r e p r epa red t o

c o n s i d e r any c a p i t a l g e a r i n g p r o p o s i t i o n submi t t ed t o i t

on i t s m e r i t .

The p r o j e c t i n i t i a l c o s t o f W2,417;100 w i l l be

f i n a n c e d - a s f o l l ows : -

Equ i t y - - Wl,OOO,OOO

Long term loan=W1,000~000 .

Shor t te rm loan'=W417,100

EQUITY SHARE: The t o t a l proposed e q u i t y s h a r e o f t h e

p r o j e c t s t a n d a t W1,000,000. This w i l l be used t o

f i n a n c e Pre - inves tment c o s t , s t a f f r e c r u i t m e n t and p a r t l y

t h e f i x e d a s s e t s inves tment .

SHORT TERM LOAN: The s h o r t t e rm l o a n i s p u t a t W417,000,

cou ld be secured from t h e N ige r i an Bank f o r Commerce

and I n d u s t r y . Th i s w i l l f i a n c e t h e working c a p i t a l and

cont ingency p r o v i s i o n .

LONG TERM LOAN: The long t e rm loan e s t i m a t e d a t W1,000,000 J

i s t o be p rov ided a l s o by t h e N ige r i an BtZriIc f o r Commerce

and I n d u s t r y . The long term l o a n i s expected t o f i nance

p a r t l y t h e machinery and equipment, bu i ld i -ng needs and

o t h e r r equ i rements f o r t h e proposed f a c t o r y .

In view o f t h e compara t ive ly low i n v e s t m e n t , r i s k s

a s s o c i a t e d w i t h t h e p r o j e c t , we c o n s i d e r t h i s f i n a n c i a l

s t r u c t u r e s a t i s f a c t o r y and we hope it w i l l be a c c e p t a b l e

t o i n s t i t u t i o n a l i n v e s t o r s p a r t i c u l a r l y t h e N B C I t h a t

w i l l be approached by p r o j e c t sponsors f o r l aon c a p i t a l .

The long term loan i s proposed t o be s ecu red w i t h e x i s t i n g

a s s e t s o f t h e c l i e n t and a d d i t i o n a l f i x e d a s s e t s t o be I acqu i r ed by same. - 5.11,3 LOAN REPAYMENT: Repayment o f long term loan - w i t h i n a 5 - y e a r p e r i o d on equa l annual i n s t a l m e n t s w i t h

one y e a r moratorium and a y e a r l y i n t e r e s t charge o f 2 1 %

i s recommended. Th i s cou ld be an a c c e p t a b l e l end ing

i n t e r e s t r a t e by development banks l i k e N B C I i n t h e preferred ,

s e c t o r s o f t h e c o n t r y ' s economy. The o b j e c t i v e unde r ly ing

t h e proposed f i v e - y e a r repayment p e r i o d i s t o enab l e

t h e p r o j e c t acqu i re \ ' adequa te f i a n c i a l r e s o u r c e s n e c e s s a r y

f o r growth. The one y e a r moratorium proposed covered

t h e e s t i m a t e d b u i l d i n g c o n s t f x c t i o n pe r i od .

TABLE 5.10

ESTIMATED INTERESTS AND BANK CHARGES

YEAR INTEREST PRINCIPAL CAPITAL OUTSTANDING W ' 000 W '000 W'OOO

5.11.4 DEPRECIATION

The d e p r e c i a t i o n method used i s l i n e a r d e p r e c i a t i o n 1

over a p e r i o d equa l t o t h e e s t ima ted l i f e o f a s s e t : Twenty

(20) y e a r s f o r b u i l d i n g and C i v i l works, f i v e (5) y e a r s

f o r machinery and equipments f o u r (4) y e a r s f o r motor

v e h i c l e ( f a i r l y used)' and f i v e ( 5 ) y e a r s f o r pre- investment

c o s t . Tota l d e p r e c i a t i o n i s pu t a t W187,500. Asse t s w r i t t e n

o f f and cons idered no longe r s e r v i c e a b l e could be renewed f o r

f u r t h e r ope ra t i ons . But pre- investment c o s t s which do n o t

g e n r a a l l y c o n s t i t u t e a r e c u r r e n t i tem of expendi tu re i n

investment p r o j e c t s such a s t h i s p a r t i c u l a r p r o j e c t may r e q u i r e

no f u r t h e r p rov i s ion a f t e r t h e wr i t t ng -o f f . . pe r iod .

Table 5 .11

FORECAST ANNUAL DEPRECIATION I

B u i l d i n g s And C i v i l Works

CAPITAL ITEM

Machinery And Equipments

ANNUAL DEPRECIATION(W)

Motor Veh ic le

T o t a l I W187,500

Pre - inves tment Cost

5 .11 .5 PROJECTED INCOME STATEMENT (PROFIT AND LOSS ACCOUNT)

The f o r e c a s t o p e r a t i n g s t a t e m e n t o f t h e p r o j e c t f o r

t h e f i r s t f i v e y e a r s o f o p e r a t i o n i s shown below.

10 ,000

The f o r e c a s t t r a d i n g account was based on t h e proposed

s c h e d u l e o f p r o d u c t i o n o f t h e r e l e v a n t p r o d u c t s a t

t h e average e s t i m a t e d p r i c e o f W40. An average annual

i n c r e a s e o f 5 % i n t h e s e l l i n g p r i c e i s f o r e c a s t a s from

t h e second y e a r o f o p e r a t i o n t o match w i t h a p o s s i b l e

e s t i m a t e d cor respond ing r i s e i n t h e c o s t s o f t h e

n e c e s s a r y i n p u t .

FORECAST PROFIT AND LOSS LOSS ACCOUNT BASED ON THE PROPOSED

TABLE 5.12 PRODUCTION SCHEDULE , ( W ' 000) ,

I I I I I

S a l e s o f soap a t

average p r i c e o f W40

ESTIMATED INCOME FROM OPERATIONS

I 1 1 I 1

T o t a l Gross S a l e s 1ncorne12,400 1 2,879 1 3,023 1 3,366 14,

YEAR 1

Opera t ing Costs

Raw m a t e r i a l s

S a l a r i e s And Wages

Overhead Expenses

- 5.11.6 CASH FLOW PROJECTIONS

This s t a t emen t p r o v i d e s u s e f u l i n fo rma t ion r e g a r d i n g

YEAR 11.

T o t a l Opera t ing Cos t s

P r o f i t Before Tax

Less Company Income Tax

a t 30%

Net p r o f i t

l i q u i d i t y p o s i t i o n o f an e n t e r p r i s e ? I t shows changes

I

540

357

163

occur ing i n t h e cash p o s i t i o n o f an e n t e r p r i s e over a p e r i o d

1

YEAR 111

Finance Bank Charges (21%

I n t e r e s t on term l a a n i 507

Dep rec i a t i on 187

o f t ime. I n o t h e r words, it d e p i c t s whether o r n o t i n t e r n a -

647

557

171

1,756

643

193

450

l l y gene ra t ed funds a r e s u f f i c i e n t t o meet o b l i g a t i o n s ,

YEAR:.rv

269

187

1,634

1 ,244

373

871

working c a p i t a l r equ i rements and payment o f d iv idened t o

Y s

680

393

180

1,l

2 ,

1,

1 ,678

1 ,345

403

942

s h a r e h o l d e r s .

758

432

189

326

1,764

1 ,601

4 80

1 , 1 2 1

198

187 1 187

TABLE 5 *'I3

FORECAST OF CASH

SOURCE OF FUNDS -

Commercial Bank

Overdra f t

Long term loan

Equi ty C a p i t a l

Deprec ia t ion

Net P r o f i t

T o t a l

App l i ca t i on Of Fur

Repayment o f Long

term loan

Inc rease In Work-

i ng C a p i t a l

Investment

Inc rea se o r

LOW PROI

YEAR 0 ACTUALS

1 4 7

1000

1000

In Funds Available1 - Tota l

Cash Surp lus

Opening Balance I Closing Balance I 5 . 1 1 . 7 PROJECTED BALANCE SHEET

YEAR 11 YEAR 111 I YEAR I '

The ba lance s h e e t p r e s e n t s t h e f i n a n c i a l p i c t u r e o f t h e

company a t a p a r t i c u l a r p o i n t i n t ime which c o n s i s t s of i t s

a s s e t s a s w e l l a s l i a b i l i t i e s .

TABLE 5.14

BALANCE SHEET PROJECTION AS AT 31ST I

FIXED ASSETS

Bu i ld ing & C i v i l Works 1 500

T o t a l Gross Fixed

Asse t s 1950

Less Cumulative

p 1 1 1 7 7

De r e c i a t i o n

Net Fixed Asse t s 1773

Pre- inves tment Cost

Less Dep rec i a t i on 1 0 I I

Net Pre- inves tment cos ts1 40 I I

Current Asse t s I I M a t e r i a l S tock a t Cost

i n c l u d i n g work i n Pro-

g r e s s & Stock o f f i n i s h e d

Produc t s .

Opera t ing ba lance broughC

forward. I - -

Cash kt hand & i n bank I 1 1426

Accounts Rece ivab le I 1 1 1 2

T o t a l Cur ren t Asse t s I 1 1718

T o t a l Asse t s 3531

Long Term L i a b i l i t i e s

Equi ty 1000

CEMBEI

YEAR 11

W ' 000

1500

450

!:;R 1 YF? 1 YE? ,

W'OOO W'OOO W'OOO

R e t a i n e d E a r n i n g s

Long t e rm Loan

T o t a l Long Term

L i a b i l i t i e s

C u r r e n t L i a b i l i t i e s

S h o r t t e r m o v e r d r a f t

Accounts p a y a b l e

Repayment o f Long Term

Lo an

Net P r o f i t

T o t a l L i a b i l i t i e s

C u r r e n t R a t i o

D e b t - E q u i q R a t i o

Quick(Acid Test3 R a t i o

5 .11 .8 RATES OF RETURN'. ON INVESTMENTS

R a t e s o f ~ t u ? ? l on i n v e s t m e n t i s c a l c u l a t e d u s i n g t h e

fo rmula beLow: -

Net P r o f i t x 100 - C a p i t a l 1

RATES OF RETURN :

1st Year = 18.62%

2nd Year = 36.04 '

3rd Year = 38.97%

4 t h Year = 46.38%

5 t h Year = 63.519

Average r a t e o f r e t u r n on inves tment i s t h e r e f o r e 40.7%

5.11.9 PAYBACK PERIOD

The payback p e r i o d o f t h e c a p i t a l employed i s s h o w n

below.

From t h e above, t h e payback p e r i o d f o r t h e p r o j e c t

TABLE b.15

( W ' 000)

i s p r o j e c t e d t o be two (2) y e a r s and t h r e e ( 3 ) months.

5.11.10 RETURN ON EQUITY

The r e t u r n on e q u i t y is c a l c u l a t e d u s i n g t h e formula :

INITIAL INVESTMENT

2417

1912

56

YEAR

0

1

2

3

INFLOW

-

505

1351

2270

RATES OF RETURN

Year 1

Year 11

Year 111

Year I V

Year V

Average r a t e of r e t u r n on equityemployed f o r t h e

f i r s t f i v e yea r s of o p e r a t i o n i s 3 2 . 3 %

5.12 ECONOMIC AND SOCIAL BENEFIT TO BE DERIVED

The p r o j e c t a p p r a i s a l p roces s a l s o looked a t t h e

economic b e n e f i t s and impact of t h e p ro jec t ,wi th a. view t o

s ee ing whether o r n o t t h e p r o j e c t w i l l make any improvement

on t h e socio-economic c o n d i t i o n . 6 ~ the a r e a .

The economic and s o c i a l b e n e f i t s t o be de r ived from

t h e p r o j e c t i nc lude t h e fo l lowing .

5 .12.1 CONTRIBUTION BY THE PROJECT TO GROSS DOMESTIC

PRODUCT

The b e n e f i t s t o be de r ived from t h e p r o f i t a r e

immense. The e x t e n t o f t h e n a t i o n a l economic b e n e f i t may

be seen from t h e p r o j e c t s e s t ima ted d i r e c t c o n t r i b u t i o n of

we l l over W15,000,000 ( f i f t e e n m i l l i o n ) t o t h e Gross Domestic

Product ion i n t h e f i r s t f i v e y e a r s of ope ra t i on . I t a l s o

. c o n t r i b u t e s more than W800,OOO ( e i g h t hundred thousand n a i r a )

t o Gross C a p i t a l Formation f o r t h e same pe r iod .

5.12.2 PROFITS EARNED BY PROJECT PROMOTERS/SPONSORS

Equi ty i n v e s t o r s and common s h a r e s o f t h i s p r o j e c t

s t a n d t o e a r n a t o t a l e s t i m a t e d Gross sumo~460,000 a s

d iv idedd i n t h e f i r s t f i v e y e a r s o f opena t ion w i t h

r e a sonab l e l i q u i d i t y r e s exyes .

5.12.3 TAX PAID BY THE P R ~ E C T

A t o t a l sum o f W2,108,533 (over two m i l l i o n and

hundred thousand n a i r a ) i s t o be p a i d t o t h e government

a s company t a x ove r t h e f i r s t f i v e y e a r s o f o p e r a t i o n .

Other t a x e s such a s income t a x t o be p a i d by t h e p r o j e c t

employees and t a x on d iv idends (when d e c l a r e d ) f o r t h e

same p e r i o d would s u b s t a n t i a l l y i n c r e a s e t h e government

t a x revenue.

5.12.4 MORE EFFECTIVE UTILISATION OF NIGERIAN LABOUR (EMPLOYMENT EFFECT)

The p r o j e c t i s expec ted t o employ 1 8 ( e igh t een )

NIger ian p e r s o n n e l , t h e r e b y h e l p i n g t o reduce t h e unemploy-

ment f i g u r e i n t h e coun t ry i n g e n e r a l . Goss remunera t ion

o f t h e l a b o u r t o be employed by t h e p r o j e c t du r ing t h e

f i r s t f i v e y e a r s o f o p e r a t i o n i s expec ted t o t o t a l

W2,017,221 (ove r two m i l l i o n n a i r a ) .

5.12.5 STIMULATION OF OTHER INDUSTRIAL EFFORTS :

The n e t cash income gene ra t ed by- t h e p r o j e c t i n

form o f t a x e s , d i v i d e n d s , wages and s a l a r i e s s h a l l

most c e r t a i n l y be s p e n t i n t h e purchase o f goods and

s e r v i c e s . The n e t e f f e c t o f such p u r c h a s e s wou1.d be

t h e s t i m u l a t i o n o f o t h e r p r o d u c t i o n a c t i v i t i e s .

The magnitude o f t h e p r o d u c t i o n would depend on t h e

r e t e v a n t income m u l t i p l i e r .

CHAPTER SIX

6.0 SUMMARY AND CONCLUSION

The need f o r p r o j e c t o r investment a n a l y s i s a r i s e s

from t h e s c a r c i t y of r e sou rces which i s a t t h e r o o t o f

most o r g a n i s a t i o n a l d e c i s i o n s . The a t t a inmen t o f

o r g a n i s a t i o n a l o b j e c t i v e s i s a p rocess i nvo lv ing t h e

a l l o c a t i o n of r e sou rces between money spen t i n one way t o

b e t t e r achieve one o b j e c t i v e and t h a t spen t i n ano the r

t o achieve ano ther o b j e c t i v e . Once t h i s b a s i c concept of

resource a l l o c a t i o n i s unders tood , t h e assence o f p r o j e c t

e v a l u a t i o n can t hen be a p p r c i a t e d .

S ince r e sou rces a r e s c a r c e and l i m i t e d , t hey must be

p u t t o t h e most e f f e c t i v e use . The purpose of p r o j e c t

a n a l y s i s i s t o achieve t h i s e.nd by making a s s u r e a s t h e

c i rcusmtances permit t h a t t h e p r o j e c t i s t e c h n i c a l l y sound, t h a

it w i l l p rov ide a reasonable economic and whew a p p r o p r i t e ,

f i n a n c i a l r e t u r n , t h a t i t s o b j e c t i v e cannot be achieved i n

some l e s s c o s t l y way. This purpose i s deemed t o have be-en

achieved by t h i s s tudy .

I n v e s t o r s a r e u s u a l l y concerned wi th t h e o v e r a l l

performance of t h e i r company. There a r e may measures of

corpora te -per formance b u t t h e a b i l i t y t o gene ra t e p r o f i t

i s t h e most r e a d i l y used. The p r o f i t a b i l i t y i n d i c a t e d i n

t h e s tudy g ive f a i r l y conducive answer t o how e f f e c t i v e l y

t h e ope ra t i ons of t h e p r o j e c t based on t h e f o r e c a s t c a p i t a l

investment and annual o p e r a t i n g r e s u l t s w i l l be. The

percen tage r a t e s o f Teturn on investment a r e h ighe r

t han t h e p ~ o j e c t e d growth r a t e o f N i g e r i a ' s Gross

Domestic product a t c u r r e n t market p r i c e . They a r e a l s o

h ighe r t han t h e p r e s e n t l end ing r a t e , t h i s makes t h e

p r o j e c t very v i a b l e . The schedule o f cash flow a l s o shows

a very h e a l t h y cash p o s i t i o n f o r t h e p r o j e c t . The s u r p l u s

ba lances s a t i s f y t h e l oan repayment, t h e o v e r d r a f t

r e t i r e m e n t , working c a p i t a l needs a s we l l a s t h e dividend

repayment when dec l a r ed . The p r o f i t and l o s s account

and t h e ba l ance r shee t p ro j ec tddns a l s o show a very h e a l t h y

f i n a n c i a l p i c t u r e f o r t h e f i r s t f i v e yea r s of t h e p r o j e c t .

From t h e fo regoing a n a l y s i s , t h e p r o j e c t can be s a i d

t o be p r o f i t a b l e and indeed v i a b l e .

I t i s a l s o very s a t i s f a c t o r y t h a t t h e p r o j e c t i s

t e c h n i c a l l y f e a s i b l e t o c o n t r u c t and ope ra t e a t t h e

l o c a t i o n earmarked f o r i t . The environment i s very

conducive wi th t h e a v a i l a b i l i t y o f needed u t i l i t i e s and

raw m a t e r i a l s i npu t f o r t h e s u c c e s s f u l ope ra t i on o f t h e

p r o j e c t . A ' b r i g h t f u t u r e f o r t h e p r o j e c t i s f u r t h e r

evidenced i n t h e d a t a c o l l e c t e d .

The market ing s t r a t e g y adopted should ensure t h a t ,

p roduc t ion schedule i s kep t a t d e s i r e d l e v e l s t o enhance

quick b ~ e a k e v e n . A s e a r l i e r i n d i c a t e d , t h e r e i s s t r o n g

f e e l i n g t h a t t h e p r o j e c t i s f i n a n c i a l l y i i a b l e a s can

be e s t a b l i s h e d from gene ra t ed accoun t i ng s t a t emen tS . and

s e n s i t i v i t y a n a l y s i s . Th i s p r o j e c t i s c apab l e o f g e n e r a t i n g

enough cash i n i t s r o u t i n e o p e r a t i o n s t o meet a l l t h e

company1 s f i n a n c i a l o b l i g a t i o n s i n a d d i t i o n t o making

s i g n i f i c a n t p r o f i t s f o r t i s promoters .

The NERFUND and N B C I whose o b j e c t i v e s a r e t o a s s i s t

sma l l and medium s c a l e e n t e r p r i s e s i n o b t a i n i n g medium t o

long term loans through some p a r t i c i p a t i n g f i n a n c i a l

i n t e r m e d i a r i e s may be approached f o r l oan a t lower i n t e r e s t

r a t e s t han i s a v a i l a b l e from conven t i ona l banking

t r a n s a c t i o n s .

F i n a l l y , t h e a n a l y s i s o f t h e f i n a n c i a l i m p l i c a t i o n s

of t h e p r o j e c t have some s i g n i f i c a n t e f f e c t s ' i n e n a b l i n g u s

r e ach d e c i s i o n . I t i s c r y s t a l c l e a r t h a t t h e i n t e r e s t s

of bo th t h e owners and c r e d i t o r s a r e w e l l p r o t e c t e d a s

evidenced by t h e v a r i o u s encouraging r a t e s computed. The

p r o j e c t i s t h e r e f o r e recommended w i thou t r e s e r v a t i o n t o

f i n a n c i a l i n s t i t u t i o n s f o r fihanciB;1. a s s i s t a n c e a s w e l l

a s ko p o t e n t i a l sponsors and i n v e s t o r s .

A P P E N D I X 5, --

DEPARTMENT O F MANAGEMENT

Tel: 332091 Ext. 42

21st Junc;1995 ..................................................... DATE

TO WKOM IT MAY CONCERN ---

The above~nnmed is an MBA student in t h e department

o f ~ n n & e r n e n t , U n i v e r s i t y -of' Nigeria, E a u p Cnmpus.

He&&ia undertaking Renear& work i n odmection w i t h

h i s b e * H13A dissertation. . . . ...

We request that you please g ive h im/heryour m~xirnum

. . ce-operat ion,

OUESTIONAIRE

APPENDIX I 1

Dear Respohdent ,

CONSUMER QIJESTIONAI RE

The q u e s t i o n s below a r e f o r a r e s e a r c h work on t h e

e s t ab l i shmen t of a sma l l s c a l e soap manufactur ing i n d u s t r y

i n Ahiazu Local Government Area w i t h s p e c i a l emphasis on

household consumption o f soap. The q u e s t i o n a i r e i s

i n t ended t o p rov ide answers on t h e b e s t way o f meet ing

t h e need and demand o f p o t e n t i a l consumers o f t h e p roduc t .

I hope your answer t o t h e s k r q u e s t i o n s w i l l be o f

g r e a t h e l p t o me i n t h e seseach ;

You a r e n o t expec ted t o w r i t e your name on t h i s pape r .

I w i l l be v e r y g r a t e f u l i f you w i l l answer t h e s e q u e s t i o n s

o b j e c t i v e l y . You a r e ve ry f r e e t o exp re s s your op in ion

where you do n o t have cho i ce among t h e a l t e r n a t i v e s p rov ided .

Thanks f o r your expec ted co -ope ra t i on .

Yours f a i t h f u l l y ,

INSTRUCTION

P l e a s e , t i c k 'X' i n t h e space - /-[ prov ided f o r answers

SECTION A: PERSONAL DATA

130

Male /'-/ Female - 7'-[

Age: (a ) Under 20 y r s - / (b) 21-29 y r s /.-/

M a r i t a l S t a t u s : Married - /--/ S i n g l e - 7

Educa t iona l Q u a l i f i c a t i o n : ( a ) S t anda rd S i x and below - // - .-

(b) School C e r t i f i c a t e and below - / / (c)NCE and above - /

Income p e r annum: ( a ) W1200-W3900 -. // (b)W1000-~6900/-

Tc) W7000 and above // (d) No Fixed Income // 7 -

P l a c e o f Residence: ( a ) Within t h e L . G . A . // (b) Outs ide -.

t h e L . G . A L7

Occupation: I n d i c a t e a s a p p r o p r i a t e .

SECTION B :

I n which zone o f t h e L . G . A . do you l i v e i n .

(a) Ahiazu Ehs t 7 (b) Ahiazu West // (d) Ekwerazu - - Eas t // (d) Ekwerazu West /7 - -

Do you u se soap Yes J , No 17 -

Which brand o f b a r soap do you use p r e s e n t l y

How o f t e n do you use b a r soap (a ) Very o f t e n - // (b) Occas iona l l y ';r--fCc) Not a t a l l /-/' - \ Es t ima t e your monthly expend i t u r e on soap consumption

What do you p r e f e r most i n your brand o f b a r soap ( a ) The

c o l o u r - /7 1b)Degree o f foaming - // ( c ) Q u a l i t y 17 (d) P r i c e /7 -

7 . Who makes t h e buying d e c i s i o n i n t h e household (a) Myself

/-7 (b) my w i f e /7 (c ) my husband, 7-{(d) Anybody // - - - - 8. What in f luences . your buying d e c i s i o n

( a ) Brand l o y a l t y - //, (b) P r e v a i l i n g p r i c e - /j/

( c ) Q u a l i t y o f product - If (d) Nothing - //

9. Where do you u s u a l l y buy your soap

(a ) Supermarkets // (b) Local markets - // (c ) P r o v i s i o n

s t o r e s /7 -

10. What i s your buying b e h a v i o u r l i k e r ega rd ing q u a n t i t y

(a).::Bklk:-purchase - / , (b) S i n g l e purchase when needed

/7 - 11. How do you c o n s i d e r t h e p r e s e n t p r i c e o f your b rand of

soap ( a ) ve ry h i g h /7 (b) Mollerately h igh /7 (c ) Af fordab le - I-/'

1 2 . Does i n c r e a s e i n p r i c e a f f e c t your d e c i s i o n t o buy a product

( a ) Yes / No /7

(13) Would you c o n s i d e r t h e p r i c e o f l o c a l l y manufactured soap

a s a r e f l e c t i o n o f i t s q u a l i t y

1 4 . Does adver t i sement o f a p roduc t i n f l u e n c e your buying

d e c i s i o n o f t h a t p a r t i c u l a r p roduc t

(a) Yes - // (b) No / / (c ) Do n o t l i s t e n t o a d v e r t i s e -

ment 7 - 7 -

15. I f y e s , which media i n f l u e n c e s you (a ) Radio - //

(b) T e l e v i s i o n ' 7 7 (c) Newspapers - /'-/ (d) Hand b i l l -- .. .

16. P l e a s e sugges t any improvement you w i l l expec t i n new

brands of soap t o be i n t roduced i n t h e market i n

f u t u r e .

BIBLIOGRAPHY

A l b e r t , K . J ; S t r a i g h t T a l k About Smal l B u s i n e s s ;

2nd E d i t i o n Englewood C l i f f s ; N . J.

P r e n t i c e H a l l I n c . 1980.

Al s sop , M: S u r v i v a l I n B u s i n e s s E n t e r p r i s e s , ;

London Mercury House I n c . , 1975.

C l i f t o n , S. David

J n r . And Fyf fe ,F .

David: P r o j e c t F e a s i b i l i t y A n a l y s i s , . .. A Guide

To P r o f i t a b i l i t y New Ven tu res . Georgia

I n s t i t u t e o f Tech. A Wiley I n t e r s c i e n c e !

P u b l i c a t i o n , 1977.

Encyc lopead ia Bri ta inicai . Vol. 1 6 , 1 5 t h E d i t i o n 1973.

Ezeanyagu, J . E : P r a t i c a l Guide To P r e p a r a t i o n o f F e a s i -

b i l i t y S t u d i e s ; A s t u d e n t Companion

U N E C , 1994.

Freund, J . E . And

Wi l l i ams F . J :

H a l l y , P:

Imaga E . U . L :

Kayode, M.0:

K o t l e r , P h i l i p :

Modern B u s i n e s s S t a t i s t i c s ; 2nd E d i t i o n

M a r s h a l l f i e l d , M a s s a c h u s e t t e s , Pi tman

P u b l i s h i n g I n c . , 1990.

Smal l B u s i n e s s Ven tu res : 2nd . E d i t i o n

- C a r l i f o r n i a Wedsworth P u b l i s h i n g Co.198

Theory And P r a c t i c e Of P r o d u c t i o n

Management; A f r i t r a d e I n t e r n a t i o n a l

L i m i t e d , Lagos, 1994.

The A r t o f P r o j e c t E v a l u a t i o n ; Ibadan

U n i v e r s i t y P r e s s .

P r i n c i p l e s o f Market ing\ , Englewood C l i

New J e r g y . P r e n t i c e H a l l I n c . 1980.

Oshubiyi , 0 :

Osuala E . C :

R ice , G . H :

Ensur ing S u r v i v a l Of Small S c a l e

I n d u s t r i e s ; Business Times; A p r i l 10,1989. -

I n t r o d u c t i o n To Research Me thodo lo~y -- 2nd E d i t i o n , Awka. Af r i c ana FEB. Pub l i - I V - s h i n g 1987.

S t r a t e g i c ' Decis ion Making I n Small 3 9

Business" J o u r n a l Of General Management - 5 9

Vol. 9 , 1980. - Roger, G : "A P r a c t i c a l P lann ing For Small Business"

'H:av-~ard Bus iness ne-view, Vol. 4 2 No 5 , i 7

1964. 5

Schutz L.GWrSe: The Appra i s a l P r o c e s s ; New York 1953 19

Umeh A . John: F e a s i b i l i t y And V i a b i l i t y A p p r a i s a l ;

0nibon0,j.e P u b l i s h e r s , 1977. 6

UNIDO: 7

?The S t a g e s Of P r e p a r a t i o n And Implemen- - t a t i o n o f I n d u s t r i a l P r o j e c t s 1 ' ; I n d Q s t r i a l . 7

i s a t i o n And P r o d u c t i v i t y B u l l e t i n No 1 9 , - New York, 1973. 2

Vesper K . H . New Ventures S t r a t e g i e s ; 3 rd E d i t i o n

Englewobd~ C l i f f s N . J . P r e n t i c e H a l l Inc . 2, 1987. 3 -

Young G . 1 . M : " F e a s i b i l i t y S tud i e s " , The Appra i s a l

J o u r n a l Vol. 38, Chicago, American Real

E s t a t e I n s t i t u t e 1970.