CEDVS/NBTE
TRAINING MANUAL FOR ND11
MAY, 2015
INTRODUCTION
A training manual in Entrepreneurship and life skills curriculum is not a novel concept. In many
ways, this manual is not novel either. Like other products available, this manual contains training
topics and typical areas of life skill training such as creativity, problem solving and social skills,
money management, employability, etc. Furthermore, it relies on common teaching strategies such
as experiential, enquiry, modeling and role-playing. Despite the similarities, this manual deviates
from many other skills training manuals in the following ways:
1. This manual is specifically designed for success in life endeavors. It is assumed that people have
participated in a training programme to learn other skills and become more independent. The training
plans in this manual can provide advanced training for those people who are preparing to go to work,
and thus need further training to be successful on the job as well as for those who plan to work for
themselves in an enterprise.
2. The manual contains reviews and recommendations for using other life skills training materials
available in the market.
3. The manual suggests plans designed to teach skills and attitude rather than to provide general
knowledge. It is too common for a training programme to present information and test the
comprehension of that information using exercises. Here the emphasis is on hands-on approach. For
example, it is important that students practice opening and operating a bank account instead of
finding the words "banking" in a word find activity.
4. The manual incorporates the benefits of the Internet in training skills. In addition to providing a
wealth of information on handling enterprises, it is a great resource for life skills information.
As access to the Internet becomes common in institutions of higher education, trainers will be able
to get information for training and teach students to get their own information to help them in their
daily routine.
Learning to learn is the greatest benefit that should be derived from this course. Throughout the
manual, the student is encouraged to gain self confidence and develop personal dreams based on
perceived opportunities/local needs that should be followed up through critical thinking, analysis
and focused planning to develop a plan of action for its eventual realization. It is pointed out that a
plan is worth nothing until it is faithfully implemented.
There are many wonderful training packages that use video, computer, and other stimulating
materials. The problem with these materials is that they are expensive and sometimes the usefulness
is questionable. This manual includes recommendations about using games as a veritable training
material. For those institutions that cannot afford the best materials available, the curriculum is
designed to provide solid training curricula independent of any product available on the market. This
ensures that lack of resources will not keep people from the training they need.
COURSE CODE: EEd 216
Course Title: Practice of Entrepreneurship
INTRODUCTION
This course is designed to equip the student with necessary entrepreneurial skills for selfemployment. The course builds on EEd 116 but with emphasis and focus on entrepreneurial skills
acquisition and development. The theoretical exposures given in EEd 116 provide a strong foundation
for the practical aspects of entrepreneurship. Entrepreneurship lies indeed in doing and not in
talking. It is expected that students will be made to take active interest in at least one area of
entrepreneurial activities before graduation. The course will involve practical field trips to selected
industrial set ups and further exposure to actual industrial environment through:
(a) Industrial visits to companies in the immediate community
(b) Engaging in Community development efforts to affect their immediate
environment/community (Social entrepreneurship and demonstration of Social
Responsibilities)
(c) Industrial Attachment for experiential learning
(d) Mentorship
(e) Use of Industrialists/entrepreneurs as guest lecturers
(f) Identification and development of Small Scale Business Centre as Laboratory.
(g) Setting up of various Business Clubs and extracurricular activities
GENERAL OBJECTIVES:
1. Know techniques for generating business ideas as well as for identifying and assessing
business opportunities
2. Know how to evaluate a business idea for developing an enterprise
3. Know methods of product/service selection
4. Understand the process and procedure for starting an Enterprise
5. Know the operational techniques in managing an Enterprise
6. Understand the various existing industries and support agencies in Nigeria
7. Appreciate the role of commercial and development banks in small and medium scale
industries development
8. Understand the role of personal savings and portfolio investment in National Economic
Development
TOPIC 1:
TECHNIQUES FOR GENERATING BUSINESS IDEAS AS WELL AS FOR IDENTIFYING AND
ASSESSING BUSINESS OPPORTUNITIES
INTRODUCTION:
Potential entrepreneurs require guidance on how to generate business ideas. They are also expected
to identify, assess and utilize business opportunities to their advantage. It is against this background
that effort is made in this section to guide potential entrepreneurs to generate business ideas and
exploit available business opportunities. At the end of this module students should be able to identify
business opportunities using SWOT Analysis. In addition they should learn how to conduct market
survey and select the most viable business venture and set up a small business enterprise.
1.
Business Opportunity;
Business opportunity is an attractive investment idea or proposition that provides the possibility of
a return for the investor/risk taker. Such opportunities are presented by customer requirements
and lead to the provision of a product or service which creates or adds value for its buyer or end
user.
Nigeria is a land of vast and rich human and natural resources with exceptional opportunities for
full development. There are creative, innovative and profitable possibilities which offer a range of
opportunities for the young people with the zeal to develop their skill and also driven by
achievement motivation.
There are diverse opportunities in the following areas for the imaginative, creative, inventive and
innovative minds:
 Stone and Mineral based industry
 Chemical and Allied industry
 Petroleum industry both upstream and down stream
 Mechanical and metallurgical industry
 Electrical industry
 Electronic industry
 Forest based industry
 Agro-based Allied industries
 Rubber based industry
 Leather industry
 Water Resources based opportunities
 Service Industry
 Miscellaneous activities such as Pharmaceutical, Paper processing etc.
Activity: Students should use the strength, weakness opportunities and threats (SWOT) model to
identify opportunities around them.
Process of exploring opportunities
Processing opportunity is a favourable challenge posed by the environment which may lead an
entrepreneur to enjoy differential advantages such as profits, survival, potentials etc. It is just a set
of business conditions waiting to be perceived and conditioned by someone. Dynamic prospecting for
environmental opportunities may lead an entrepreneur to start producing a new product, install a
new method of production, open up a new market, discover a new source or uses of raw materials,
reorganize an existing enterprise etc.
Nigerian business environment is saturated with lots of challenging opportunities. Opportunities are
not in short supply, rather, entrepreneurs capable of capitalizing on existing business or of creating
new ones are in short supplies.
Opportunities are always ever there waiting to be plucked. To take advantage of them, someone must
hunt or prospect for them, perceive, capture and realize them. In the words of Carlin (1965),
“Opportunity offers itself to men in direct proportion to their ability, will for action, power
of vision, experience and knowledge of business”
The ability of an individual to create money-making ideas and/or designs, formulate processes/
product/service, is the greatest single power he possesses. Money making requires that opportunities
be identified, selected, captured, capitalized and realized by organization to pursue what is captured;
retain the organizations; maintain them and sustain their growth and success. Willing entrepreneurs
must go through the following process in order to capture attractive investment opportunities, take
advantage and make a success of them.
a) Recognize needs for running a venture:
A venture must be fully recognized. The very propelling influence, need, motive or drive that is
responsible for the entrepreneur’s eventual mindset to want to run a venture.
b) Conduct self – approval:
Define your values, competitive strength, behavior, resources and other capabilities (personal
capability analysis). Prospective entrepreneurs must analyse themselves and see if they possess
the occupational, professional and entrepreneurial competence needed to run an enterprise being
contemplated. Capability and value assessments are technically referred to as “enterprise or
company profile”
c) Scan the environment and industry.
This will enable the entrepreneur to understand the force, institutions and actors that are
currently and potentially germane to organization’s activities and performance.
Environment of business may be domestic or international, immediate or remote, external or
internal, absolute or comparative.
To understand the environment, the following are paramount:
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Environmental scanning
Environmental forecasting
Organizational adaptation to environmental changes.
d) Analyze Business ideas/opportunities: Possible business idea/opportunities should be
analyzed to enable the venturer to determine the interest or otherwise of the idea/opportunity and
capability and competence or the financial viability of the project; technical or production prefeasibility of the project; marketing, commercial or economic viability of the project as well as
social desirability. Investment appraisal of the project(s) or ideas may be conducted first, through
a pre-feasibility study which highlights the prospect of the project(s) and second through a
comprehensive feasibility study that provides critical, technical, economic, and financial and
management of the project(s).
e) Select the best idea/opportunity/project. This stage is an investment decision stage. Criteria
for accepting or rejecting the project, called selection factors, are put in place. Such selection
factors may be objective (quantitative) or subjective (behavioral, qualitative or judgmental).
f) Capture/implement the idea/project; the business ideas are bodies of thought and reflections
about the nature and structure of business and what should then be the guiding principles on
which to build the business. It guides the direction of the enterprise; idea tells the entrepreneur
what to do and what not to do. For the contemplative entrepreneur not to remain a dreamer, he
has to be on the alert to start something. He must have courage and self confidence in his ability
to run and manage an enterprise. The first step of the implementation process is to start with a
comprehensive business plan, which marshals, allocates and deploys resources needed for the
actualization of the business.
Evaluate success: Activity: Analyze a case of an enterprise which is not more than three years – five
years old.
Business Opportunities (using SWOT Analysis)
Opportunities occur when people discover a problem of some kind that can be helped with
product/services, or when people decide they have certain needs or want to satisfy.
Opportunities may also arise from change. Entrepreneurial activity itself causes change to occur as
well.
Sources of opportunities could also be an observed demand and supply gap arising from society’s
needs and function, growing and evolving economies and economic niches, technological change,
social change, demographic change, political changes such as war, tariff and embargoes or artificial
scarcities. Other conditions that may create opportunities include shortages, surpluses, price
response, and shifts in demand.
Students should be assisted to identify, evaluate, select and capture opportunities which can be
operated, managed and realized as successful ventures (counseling services). Young entrepreneurs
need assistance through advice, not only in the areas of profitable investment identification and
selection, but also in the field of management, technical know-how, project evaluation, financing,
location of suitable sources of appropriate technology, establishment of enterprise services, growth
alternatives and adjustments to boundary threats. Assistance in the above areas helps the
entrepreneur to establish profitable ideas, capture, activate and actualize them. It helps the
entrepreneur uncover his interest and abilities through expert assessment of environment, industry
and capabilities of the entrepreneur.
SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) will enable the student mirror
himself in relation to identification and assessment of business opportunities. Strengths are his
stronghold, Weaknesses imply shortcomings, and Opportunities are possible areas of exploitation
while Threats are those things that are cogs in the wheel of progress, such as competitors.
Exercise
i. Group students to scan their environment for possible business
Each group to report its findings
opportunities.
ii. Guide students on a visit to a close-by trade fair or market.
Students should prepare a summary of the products/services on
display.
iii. Give students assignment to watch television or listen to radio
advertisements
at home and compose a newspaper article assessing; the intended target
audience, attention-getting values that were visible, product information given,
etc. Students to brainstorm and prepare a concept web of opportunities that
might arise from these advertisements. Students to debate whether ideas create
opportunities or vice versa.
iv. Analyze a case involving identification of opportunities and ideas.
v. Students to role play a variety of daily life situations that can provide
introduction to identifying opportunities and Ideas.
an
Process of Conducting a Market Survey in Order to Establish Demand/Supply Gap;
A market for a business is all the people within a specific geographical area, who need a product or
service and are willing and able to buy it.
You may have an excellent product or service to offer to the public; however you have to determine
whether there are enough customers willing to buy your product or service on a regular basis. The
price of the product or service must give you an adequate margin of profit to allow you to survive and
further develop the business.
For new entrepreneurs, the process of conducting a market survey involves the following steps;
(1) Defining objectives of the market survey and specifying what information is required.
(2) Working out the details of the study, such as;
 Identifying sources of obtaining information.
 Time and cost involvement for the study.
 Methodology to be used in gathering information.
 Developing a plan of action.
(3) Selecting samples and deciding what contacts and visit should be made.
(4) Preparing questionnaire and plans for surveys and interviews.
(5) Collating and analyzing data.
(6) Preparing a report of findings.
Exercise:
Guide students to conduct a market survey and prepare a detailed report. State uses of the survey.
Process of Business Idea Generation
Definition: A business idea is the response of a person or organization to solving an identified
problem or to meeting perceived needs in the environment (markets, community, etc)
A business idea is a pre – requisite for a successful business venture. Good business ideas result
from effort and often creativity of the entrepreneur.
Finding a good idea is the first step in transforming the entrepreneur’s desire and creativity into a
business opportunity.
Sources of good business ideas: There are several sources of good ideas. To be successful in
generating or finding one, however, the entrepreneur needs to keep his/her mind and eyes open and
be alert to opportunities. An idea however good, is only a tool at the end of the day. It needs to be
developed and transformed into a viable business opportunity.
Sources of business ideas include:
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Hobbies/interests
Personal skills and experience
Franchises
Mass media (news papers, magazines, TV, internet etc)
Exhibitions
Surveys
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Complaints
Brainstorming
Creativity
Reasons for generating business ideas:
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Business idea generation is a sine-qua-non ((inevitable) for business.
Ideas are generated to respond to market needs
Ideas are also generated to respond to changing fashions and requirements.
In order to stay ahead of competition
To be in tune with latest technology so as to do things better.
In response to product life cycle
In order to spread risk and allow for failure.
Exercises
1. Do the nine dot exercise. Ask students to connect the nine dots with four
straight, continuous lines.
2. Do the creative square exercises as another example of creativity in action
3. Provide solutions and explanations to the two exercises?
TOPIC 2:
EVALUATE A BUSINESS IDEA FOR DEVELOPING AN ENTERPRISE
Introduction:
In developing a business idea there is a need for potential entrepreneur to adopt a carefully moderated
and intelligent approach. It is against this background that an attempt is made under this section to
guide potential entrepreneur to be more careful by examining and evaluating every step in the course
of developing and establishing business enterprise. At the end of this module students should be able
to prepare a preliminary project proposal, explore Internet for company profile, product catalog,
product information, etc; as well as conduct a modest business plan on a selected venture. Students
should present the plan to a panel of successful entrepreneurs for assessment.
Concept of Business Plan;
Planning is a process that never ends for business. It is extremely important in the early stages of
any venture when the entrepreneur will need to prepare a preliminary business plan.
There are different types of plans that may be part of any business operation. These include financial
plans, marketing plan, human resource plan, production plans, sales plans etc. Plans may be short
term or long term or may be strategic or operational. Whatever the type of plan or the function, plans
have one important purpose; to provide guidance and structure to management in a rapidly changing
market environment.
A business plan on the other hand is a written document prepared by the entrepreneur that describes
all the relevant external and internal elements involved in starting a new venture. It is often an
integration of functional plans such as marketing, finance, manufacturing and human resources. It
also addresses both short term and long term decision making for the first three years of operation.
Thus, the business plan, or road map, answers the strategic questions of where am I now? Where am
I going? And how will I get there? Potential investors, suppliers and even customers will request or
require a business plan.
Process of preparing preliminary project proposal;
Structure of a Preliminary Project Proposal
This should be structured according to the following key headings, keeping each section as brief as
possible. If a heading is not relevant to the project, simply ignore the unrelated heading.
1. Background: in this section, establish the context of the project by giving an account of the
problem it is trying to address.
2. State of the art: give an overview of existing and emerging technology in the field, including
an account of rival technologies and a comparison of the advantages and disadvantages of the
various options.
3. Proposal: give an overview of the proposed project and the approach, i.e. the activities which
will be undertaken to achieve the project objectives. Clearly establish the research element or
novelty component in the proposal.
4. Consortium: give an overview of the proposed manpower and establish the required ability to
carry out the project successfully (e.g. skills, competencies, etc.)
5. Objectives and Deliverables: Identify (1) the objectives and (2) the deliverables of the proposed
project.
6. Competitiveness: if applicable, establish the competitiveness or advantages of the proposed
solution compared to other solutions, whether these already exist or are still being researched.
7. Cost: give an overview of the project cost (including start-up cost and working capital
requirements).
8. Impact: this section should include:
a. Markets and Uses: identify possible uses and markets for the deliverables of the project.
b. Benefits and Beneficiaries: identify the beneficiaries of the project’s results (e.g. the
project participants, the general public, third parties) and the manner in which they will
benefit.
c. Roadmap: give an indication regarding what further steps, effort, costs and timeframes
are necessary before tangible benefits can be realised from the deliverables or results of
the project (unless these are realised within the lifetime of the project).
d. Spillover Benefits: identify any secondary benefits of the project (e.g. facilitating
participation in funding programmes, improving Malta’s ranking, strengthening Malta’s
reputation in a particular area, etc.)
9.
Other Issues
If applicable, briefly identify any gender, ethical or legal issues that may be connected with the
proposed project.
Process of preparing a detailed business plan;
The meaning of a business plan has earlier been discussed. Reasons for writing a business plan were
also highlighted. Stages of writing a business plan are: After deciding to go into business, before
starting the business and when updating is required.
Business plans can be written for retail business, wholesale business, service business,
manufacturing and any other type of business.
Business plans are written by prospective business owners or support agency.
A business plan is written by :
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Identifying all the questions that could be asked about the business.
Determining what further information needs to be gathered to answer all the questions.
Obtaining all the necessary information.
Comparing various alternatives
Making a decision on each question.
A business plan should:
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Have a good appearance
Provide an index
Provide a summary
Number each copy
Be signed to show who is submitting it.
Depend on the nature of the business.
Before preparing a business, plan, research should be done in the areas of customers, competitors
and suppliers.
A business plan should be organized to carry a cover page, table of contents, executive summary,
business description, Marketing plan, organizational plan, operational plan, financial plan and
appendices.
EXERCISES
I. 1. Distribute sample Venture/Business plan to students; students to examine the plans and
make their notes and observation, with respect to its function, importance, mission and
purpose.
II. 2. Divide students into groups of five or more. Each group to plan an event such as wedding,
concert, anniversary, athletics, picnic, school dance, debate, quiz, graduation etc. Let them
identify problem areas. Discuss problem areas with the students; let them know that an event
is somewhat like a venture. If it is not well planned, it may end up with serious problems that
are difficult to solve when the event is actually taking place. Let them realize at what point
their venture will never work and should be abandoned. They should also know that they may
choose to proceed, abandon or modify their venture after the planning framework has been
completed. It is better to halt a project before large amounts of time and resources have been
expended on something that cannot succeed. Students should know that the single most
important factor in beginning a successful venture is careful panning. Many things can go
wrong, but careful planning can prevent many of them from happening. Students should also
know that sometimes a venture might seem like a good idea before the careful planning stage.
Some problems however, may be imminent which cannot be solved. The best course of action
may be to abandon the venture and lose just the planning time.
III. 3. Students to assume that they are investors with a large amount of money to invest. Many
venture plans have been presented for their consideration. Let them suggest criteria to use to
pick the best plan. They should know if they do not do a good job, they stand a very good
chance of losing a lot of money.
IV. 4. Prepare a model business plan on a selected venture.
Outline of a business plan
1. Title: Feasibility study Report on ………………………………………..
Commissioned by………………………………………………………
2. Project consultants ……………………………………………………
3. Table of contents:
Page
a) Executive Summary
b) The Report
c) Project Background
d) Objective of study
e) Project description and
f) Loan advancement
g) Promoter
h) Location
Market and marketing plan
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Potential customers
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Competition
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Pricing
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Sales Tactics
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Advertising and Promotion
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Distribution.
Technical Feasibility and management plan:
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Factory
Machinery
Overhead charges
Packaging materials
Raw materials Manpower and Labour costs.
Financial Projection/Feasibility:
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Organization
Overview on capital requirement
Financial plan
Projected cash flow
Projected profit and loss account
Projected balance sheet
Break-even analysis
Source and application of funds
Plan:
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Assessment of
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Schedules:
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Form of ownership
Identification of partners/Principal shareholders
Authority of Principals.
Management team background
Roles and responsibilities of members of organization
Risk:
Evaluate weakness of business
New technologies
Contingency plans.
12 months projected sales
12 months projected purchase
Fixed Assets and depreciation schedule
Profitability index.
Exercises
1. Present a hypothetical business plan to students; Let them analyze it
bringing out clearly:
 Strengths and weaknesses in terms of available resources,
expectations of the planners (are they realistic).
 Anticipated opportunities and threats that can be seen both
internally and externally.
 Develop goals for the venture including timeliness. Both long term
and short term goals may be identified.
 In the light of the strengths, weaknesses and environmental issues
identified, develop operating objectives and operating plans.
2. Present copies of annual reports of several organizations to students. Let
them study them and compare the relationship between marketing
expenditures and sales. This experience may help students to gain a sense
of the costs needed to obtain revenue.
3. Group students. Each group to prepare a comprehensive business plan
for their selected hypothetical venture. Each group to take their proposal
to a financial institution to determine if their financial plans are realistic
and viable. Upon returning from their research, the groups may confer
with each other about the implication of the findings for the venture plans.
Students should also share their experiences about their findings.
4. Students should list a set of principles or criteria that financial Institutions
apply to ventures to determine the viability of a financial plan, and use
them as a basis to self-assess their financial plans
TOPIC 3:
METHODS OF PRODUCT/SERVICE SELECTION
Introduction
The need to guide potential entrepreneurs regarding how to go about selecting the right type of
product can not be over-emphasized as it is quite crucial for their future survival. The point is that
choosing the wrong type of product or service delivery could easily lead to business failure which
would be disastrous to a potential entrepreneur. Hence, an attempt is made in this section to guide
entrepreneurs to go for an effective way of selecting the right type of product or service. At the end of
the module students should be able to analyze a given case in product selection; select a product and
prepare a feasibility report on a modern business and evaluate the viability, using CBA (Cost Benefit
Analysis) methodology. They should also be able to generate venture idea on selected exportable
product obtained from the web.
Product /Service;
Meaning of product/service
1. A transformed input via a throughput or the resulting output secured through the
conversion of selected inputs in a transformation process (systems definition).
1. Any producible, manufacturable or serviceable items altered from the original state to a
desired advanced state thereby creating specific values or objectives for its producers and
users.
2. Anything that can be offered to a market for attention, acquisition, use or consumption
(marketing definition).
3. A bundle o f complex tangible and intangible attributes or benefits. Such
attributes/benefits include durability, finish, image, colour, packaging, repair service, etc
(marketing definition)
Exercises: Based on the definitions, students should classify product based on method of production,
nature of output, nature of market.
Nature And Characteristics Of Product /Services:
Product is an outcome of input-transformation-output. Where inputs are men, methods,
materials, money and machines, transformation is the production process where the forms of
raw materials are changed into semi-finished products which output is the final product/goods.
Products/services must provide functional utility to the consumer. The functional/performance
characteristics may be in terms of weight, liability, size, maintainability or operating effectiveness.
Products or services must:
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Be capable of advancing the “profitability and survival” goal of the organization; and
Satisfy a want
Product Selection Criteria:
When a new product is to be acquired / produced, a company usually uses a defined product
evaluation and selection process. Very early in the process, a list of relevant selection criteria is
compiled and distributed to sales force. Later on, the criteria list is used to compare the various
product offerings and create a shortlist with products selected for further evaluation.
Early in the product evaluation and selection process you would identify products that are expected
to meet the market requirements. This is not as easy as it sounds, since the number of innovative
products is overwhelming. Sometimes, it is difficult to cut through the thicket of vendor marketing
messages and carve out the substance of what a product really does and when to use it.
I refer here to the bottom-up growth idea, as the top-down ones are usually rooted in well structured
(and expensive, even if done internally) market researches and validated through formal yearly
strategic
planning
session.
For the bottom-up ideas, after the ideas have been collected, the funneling process begins. An
"expert" team analyzes the ideas from a product technology and manufacturability
standpoint; and then check the result against the Voice of Customers tools (i.e. web site, claims,
reports from the sales force and technical assistance staff, etc.). The ideas that pass through the
"expert judgment" in terms of product technology, manufacturability and compliance to Expressed
Customer Needs will go through a further technical analysis by the product development department.
If the PD Dept. states that yes the idea is really feasible from a technical standpoint, then they are
analyzed in terms of economics (costs to make the product, investments required, etc.). In parallel, a
market analysis is done: how many sales in how many years at what price. Finally, the financials are
calculated and priority rank is done based on those parameters. Here it is very important to use
multiple criteria, as otherwise the highest NPVs will overcome the others...and this is risky as the
NPV Volatility is not calculated (in other words, the bigger developments will throw out the smaller
ones, but because the bigger are also more difficult to sell, hence the calculated NPV is inherently
more volatile than for smaller developments).
The parameters we consider in the funneling process are:
- Compliance to Expressed Customer Needs/Claims (Y/N)
- Fit with Strategic Imperatives (Y/N)
- Feasibility of development concept (H/M/L)
- Manufacturability (Y/N)
- Time to develop the engineered concept (H/M/L)
- Needs for Qualified Internal Resources (H/M/L/N)
- Needs for External Capital Investments (H/M/L/N)
- Expected Contribution Margin (H/M/L)
- NPV
- NPV Volatility Estimate (H/L)
- IRR
- Payback time
Key Factors Associated with Product Selection:
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Infrastructure;
Technology;
Availability of raw material;
Government Policy/Regulation;
Legal aspects of business;
Once a product has been selected for production, there is need for further analysis of some key
factors to determine how production will proceed and what legal requirements and licenses must be
met. Below are some of these factors that must be investigated.
Processing Activities:
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Description of the process showing simplified flow charts indicating comprehensive material
and energy requirements;
 Consideration of alternative processes and justification for the chosen process;
Firm Size and Production Schedules:
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From market studies, indication of demand for the product
Consideration of availability of inputs and possibility of importation of raw materials (where
necessary)
 Consideration of the start up and technological know-how.
Machines and Equipment:
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Machines and equipments layout
Specification of the machinery and equipment required, indicating rated capacities of each.
Source of supply of machinery and equipment (indicating whether local or foreign) and
including costs and terms.
 Comparative analysis of alternative machinery and equipment in terms of cost, reliability,
maintainability and local technical expertise.
Project Location (Infrastructure and Utility Analysis):
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Map showing project location
Desirability of location in terms of distance from the source of raw materials, market and other
factors
 Desirability of location in terms of infrastructures and utility supply.
 Comparative study of different locations indicating advantages and disadvantages;
Raw Materials:
 Description and specifications relating to physical, mechanical properties
 Current and prospective cost of raw materials, including sources of materials
 Local availability, continuity of supply all year round, and prospect for importation.
Waste Disposal:
 Description and quantity of waste to be disposed of
 Description of the chosen waste disposal method and cost
 Comparison with other methods to indicate cost benefits
 Compliance with legal requirement with regards to environmental impacts
Environmental Impact Studies:





Description of the environment of the project location.
Description of the project needs and processing technologies
Prediction of impact of the waste products and processing activity on the environment
Mitigation measure to treat impacts
Residual impacts and further studies to treat such residual impacts
Manpower Requirements:
 Skilled and unskilled labour requirement
 Technical and managerial staff requirement
 Training needs assessment and training schedules
 Proposal on remuneration including fringe benefits
Venture Idea Generation;
The starting point of being an entrepreneur and developing a new venture is the identification of the
basic product or service being offered. This part of the venture creation process is perhaps the most
difficult to actualize. The origin of the new product/service idea is usually internally generated
through research and development, other sources of new ideas could be through creative problem
solving. A wide variety of techniques can be used to obtain the new product idea. Whichever way it
occurs, a sound idea for a new product/service, if properly evaluated, is essential to a successful
launch of a new venture.
Some of the sources of new ideas include consumers, existing companies, distribution channels,
Government, R&D, Hobbies/interests, Personal skills/experience, franchises, mass media,
Exhibitions, surveys, complaints, Brainstorming, creativity etc.
Even with a wide variety of sources available, coming up with an idea to serve as the basis for a new
venture can still be a difficult problem. The entrepreneur can use several methods to help generate
and test new ideas, including focus groups, brainstorming and problem inventory analysis.
Steps Involved in Preliminary Screening;
Every project has uncertainties. The nature of the uncertainties can be expressed in the form
of assumptions which must be valid but which cannot be directly controlled. Assumptions
can be the most critical factors in a development project. Many projects fail because planners
make unrealistic assumptions or forget to define and examine the implicit assumptions they
are making.
It is impossible for a project manager to control all the factors which can affect a project.
There are always social, political, technical, economic, physical, and other factors beyond the
project manager's control that are necessary for successful achievement of project objectives.
To have confidence in the design of a project, one must define, at each level, all the conditions
necessary to reach the next level of objectives. These conditions include hypotheses
(predictions), which are internal to the project, and assumptions (conditions), which are
external to the project. After identifying the assumptions affecting the project, one can deal
with them in a way that increases the probability of success.
Development projects involve important objectives and scarce resources, so we must examine
whether our predictions in the project design are valid. Before we begin the project, we want
to be confident that we can achieve our objectives. We must, therefore, carefully examine
what we are assuming about factors outside our control that could be detrimental to
achieving our objectives. We identify those factors in the "assumption column" of the Project
Design Chart at the same level with the objective they influence.
After identifying as many critical assumptions as possible with the information at hand, they
can be looked at more closely and defined more specifically.
In a rice production project, for example, "adequate rainfall" is obviously necessary. Project
planners and managers need more guidance, however, if they are to assess the validity of
this assumption. How much rainfall is adequate? We must know how much rain is required
and when it should fall. If we find that the rains must begin in May and last through October,
with a monthly average of 12 inches, the next step is to find out if it is reasonable to expect
this level and pattern of rainfall. If review of the climate records in the region shows that for
eight of the last twenty years rainfall was less than 8 inches for the months of June and July,
our assumption of adequate rainfall would not be valid.
If our assumptions are likely to be invalid, we have several options to consider. First, we
could continue with the project "as is" and accept the lower probability of success. Second,
we could examine if there is some way to modify the project to overcome the weak
assumption. In the rice production example, perhaps an irrigation system could be included
in this (or another) project to bring a sufficient supply of water to the crops. Finally, if there
are insufficient resources to develop an irrigation system, the project could be abandoned
because it is unworkable - thus averting project failure before large amounts of time and
resources are expended.
Different Steps in Preparing Pre-feasibility Study;
A Management Approach to Feasibility Study
In recent years, project feasibility study has become an increasingly detailed and technical
set of procedures practiced by highly trained economists and engineers. And yet very often
these procedures seem irrelevant to the practical people designing and managing projects.
Why? Perhaps it is because these procedures ignore some of the most important questions.
What do practical project designers need to know in order to have confidence in potential
projects? Essentially they need to know (1) if the proposed project will really achieve its
objectives; (2) how they can improve the likelihood and level of its impact; (3) whether there
is a less expensive way to achieve the same results; and (4) whether, all things considered,
the benefits justify the costs.
Will The Project Succeed? How Can It Be Improved?
The most important question concerns the plausibility of the suggested project design.
Managerially useful feasibility studies begin with this question. And the most effective of
these studies treat project plausibility not merely as a question but as a challenge. In other
words, such studies don't simply ask "Will it succeed?", they ask "How can we make it
succeed?" They take an active, not a passive, role in project design.
Feasibility study, by itself, cannot increase a project's likelihood of success. What it can do
is substitute risk (known probability of failure) for uncertainty (lack of information) and
suggest practical measures for reducing the risk by modifications to the project design. In
other words, it can provide us with information on how likely our project is to succeed and
how we can increase that likelihood. As managers, we must learn to demand nothing less of
feasibility analysts.
Projects are theories about the world. If we do certain things, we expect certain results will
occur. And if these results do occur, we believe they will have certain impacts.
Analysis of Assumptions
Potential feasibility questions exist wherever there are sources of uncertainty - i. e., wherever
we are unsure of "facts" or "effects". These "facts" are the assumptions and the "effects" are
the hypotheses.
How do we go about analyzing assumptions?
Most importantly, make sure all of the important assumptions are identified. To do this, ask
yourself, skeptics, and as many others as possible, to describe the factors which could
prevent the project from reaching its objectives. In essence, the question is "What, beyond
my direct control, could cause this project to fail?" The answers to that question are the
assumptions.
It may be helpful to group the assumptions by type:
- market factors
- cost factors
- financial factors
- political factors
- technical factors
- cultural and social factors
- geological/climatic factors
- managerial factors
To gain a clearer idea of what these factors include, consider how some of the following
questions might come out of an investigation into these factors.
Market Factors - Do people have disposable income available at the time when the product
is for sale? Is there a MARKET that can be reached and served profitably? What is the likely
price (considering seasonal swings) ? What are the quality and quantity dimensions?
Cost Factors - What are all the major initial costs involved in production? What are the
important recurring costs? How much is the labor cost likely to be?
Financial Factors - Are there sources of affordable credit in the community? Is there a plan
for control of group money? Is the cash flow sufficient?
Political Factors - Does the government support the general idea? What are the licenses and
inspections needed? Is the activity legal?
Technical Factors - Is the technology easy to maintain? Are spare parts readily available?
Is the scale appropriate? Is the level of risk appropriate? Are the inputs readily available?
Cultural and Social Factors - Does it help one group by hurting another? Does the project
"fit" the culture? Is the level of risk acceptable?
Climatic Factors - Does the project hurt the environment? Does it use already dwindling
natural resources?
Managerial Factors - What are the training requirements? Is there a sufficient, available
labor force?
The type of assumptions chosen for analysis will determine the type of feasibility study
needed to investigate them.
Then, identify the assumptions most appropriate for analysis. Out of the long list of
assumptions, how do you choose the correct ones to study? We suggest a simple two criteria
basis for selection-importance and uncertainty.
To begin, ask of each assumption whether it seems truly essential for achieving project
success. If its influence seems more or less incidental, forget about it. If the assumption is
judged to have high potential influence, then ask yourself how uncertain project designers
are about the likely performance of that assumption. Only where assumptions are important
and insufficiently understood is detailed investigation worthwhile.
Arrange data collection efforts to provide the information you need. The data collected on
assumptions should reduce the uncertainty of project designers about the following:
- whether key assumptions are likely to hold true or not;
- what the effects on project success would be if any of the key assumptions did not hold
true;
- what means are available to managers to influence or avoid dangerous assumptions.
If assumptions are unimportant (i.e., low impact) or very probable, they should not affect
project design or selection. When assumptions have high impact and low probability, we have
a danger signal. If we can redesign the project to affect the assumption, we may wish to go
ahead. Otherwise, we would be well advised to suggest that the project be abandoned in
favour of something more promising.
Technical Analysis: (Evaluate adequacy of infrastructural facilities for product selection;
Identify the relevant technology available for the selected product; and Evaluate sources and
adequacy of raw materials for the selected product;)
Product:

Description of the product including specifications relating to their physical, mechanical and
chemical properties;
 Uses of the products.
Processing Activities:

Description of the process showing simplified flow charts indicating comprehensive material
and energy requirements;
 Consideration of alternative processes and justification for the chosen process;
Firm Size and Production Schedules:


From market studies, indication of demand for the product
Consideration of availability of inputs and possibility of importation of raw materials (where
necessary)
 Consideration of the start up and technological know-how.
Machines and Equipment:



Machines and equipments layout
Specification of the machinery and equipment required, indicating rated capacities of each.
Source of supply of machinery and equipment (indicating whether local or foreign) and
including costs and terms.
 Comparative analysis of alternative machinery and equipment in terms of cost, reliability,
maintainability and local technical expertise.
Project Location:




Map showing project location
Desirability of location in terms of distance from the source of raw materials, market and other
factors
Desirability of location in terms of infrastructures and utility supply.
Comparative study of different locations indicating advantages and disadvantages;
Project Layout:
 Description of project layout showing building and facilities.
 Types of buildings and estimated cost
 Land improvements such as access road, drainages, etc
 Type of supplementary utilities and cost.
Raw Materials:




Description and specifications relating to physical, mechanical properties
Current and prospective cost of raw materials, including sources of materials
Local availability, continuity of supply all year round, and prospect for importation.
Evaluate the sources and adequacy of the raw materials needed to sustain viable production
of the selected product(s).
Waste Disposal:
 Description and quantity of waste to be disposed of
 Description of the chosen waste disposal method and cost
 Comparison with other methods to indicate cost benefits
 Compliance with legal requirement with regards to environmental impacts
Environmental Impact Studies:
 Description of the environment of the project location.
 Description of the project needs and processing technologies
 Prediction of impact of the waste products and processing activity on the environment
 Mitigation measure to treat impacts
 Residual impacts and further studies to treat such residual impacts
Manpower Requirements:


Skilled and unskilled labour requirement
Technical and managerial staff requirement
 Training needs assessment and training schedules
 Proposal remuneration including fringe benefits
The process of technical analysis must answer the following questions.
o
o
o
o
o
o
o
o
o
What should be produced, when should it be produced and what quality standards
should be attained?
What is the most appropriate technology in terms of product quality, reliability and
operating conditions?
Are the project and its technology environmentally and socially acceptable?
Are all related government regulations and policy guidelines met in the implementation
of this project?
Are required materials and other inputs reliably available?
Is the available labour pool adequate for the project; if not, is it possible to train workers
as required?
Where should the project be located?
What is the implementation plan and how much time is required?
What are the costs of investment, implementation and operation?
Effects of Government Policy and Regulations on the Selected Product;
Your business may need permits and other licences before you can start. The licensing rules are
different depending on the type of business that you are setting up. These are examples of the sort
of licenses you might need, and where to apply for them:
The Abuja Environmental Protection Board, (AEPB) is in the process of setting up formal licence
requirements for certain kinds of businesses, especially those business that may affect the
environment. While the plans have reached advanced stage, they have not yet been finalized. Your
Counselor will keep you updated on the development.
Food businesses (such as restaurants, catering services, snack bars, bottled or packaged drinking
water etc) as well as businesses dealing with drugs formulation, repackaging and distribution need
a licence from NAFDAC.
Businesses dealing with children, such as nurseries or daycare centres, are licensed by the Abuja
Board of Education.
Land related businesses (Certificate of Occupancy) or if you are planning on applying for a piece of
land for business purposes you will do that at Abuja Geographic Information Service (AGIS)
Whatever your business is, your Counselor will be able to tell you whether any special licences are
needed. The CAC and NAFDAC promise short processing time, but you should still allow enough time
for them to process your application. You will not be able to start your business without NAFDAC
licenses, if you are in the food, drug and cosmetics industry.
Legal Aspects of Business on Product Selection
In Nigeria different regulations apply to different products. The entrepreneur is advised to consult
his/her lawyers and/or technical services provider for guidance. Below are some of the common
regulations that must be met – environmental impact report and certification, NAFDAC registration,
copyright and trademark law, etc.
Environmental Impact Analysis (EIA)
In citing your project in a location, it is important to analyze the impact of the production operations
on the immediate/surrounding environment. It is essential that for any identified negative effect
designs for corrective actions and or mitigation must be incorporated in the project implementation
strategy. The EIA process must take account of the following:
Socio-Cultural Factors
• Community Structure
• Traditional Cultural Habits and Customs
• Historic Sites
• Religious and Social Services
• Recreation
• Housing
• Internal and External Relations
• Protection of Vital Natural Resources
Social Infrastructure
• Education
• Sanitation
• Health
• General Well-Being (Diseases, Physical Safety, Population Density, Etc)
Emissions
• Liquid Waste
• Solid Waste
• Air Pollutants (Gases, Dust, Fumes, Vapours)
• Noise and Vibrations
• Odours
• Chemical Reactants (Producing Colours, Odours, Poisons)
• Hazardous Substances
Health Risks and Hazards
Health Risk to Workers and Staff
Increase of Already Existing Risks
Risk of Accidents Affecting Social and Natural Environment (During Construction and
Operation, After Closing Down Operations, During Transportation of Hazardous Substances)
Degradation of Social Structures
•
•
•
• Migration
• Displacement of Human Habitation
• Displacement of Economic Activities
• Disruption of Culture-Specific Social Relationships and Infrastructures
• Deterioration of General Living Conditions
Degradation of Natural Resources
• Direct and Indirect Damage to Natural Water Resources
• Damage to Land Resources
• Uneconomic Use of Nonrenewable Natural Resources
• Damage to Plant Populations
• Disruption of Interlinked (Balanced) Ecosystems
• Displacement, Extinction of Species
REGULATION AND REGISTRATION OF FOOD AND DRUGS:
The National Agency for Food and Drug Administration and Control (NAFDAC) is the government
regulatory body responsible for food and pharmaceutical products manufacturing, importation,
advertisement and distribution in Nigeria under the provision of the government of Nigeria Decree 19
of 1993 and its accompanying guidelines. No food item may be imported, advertised, sold or
distributed in Nigeria unless it has been registered by NAFDAC.
NAFDAC was established to protect and promote public health by ensuring wholesomeness, quality
and safety of food and drug consumed in Nigeria.
The main strategy employed by the agency for the enforcement of Nigeria’s food law is the process of
product registration. Contravention of the provision of existing food law is subject to prosecution and
punishment, as specified in the code. NAFDAC appears to have become more active and more
stringent in enforcing existing food law, but primarily to protect local producers. In theory, any food
item not registered with NAFDAC is not legally importable.
General Requirements
NAFDAC regulation requires food labeling to be informative and accurate. The following are NAFDAC’s
minimum labeling requirements;
1. A product brand name or common name must appear in bold letters.
2. A complete “location” address of the manufacturer showing country of origin must be
provided on the product label.
3. The production “batch” number, date of manufacture and expiry date must be indicated.
4. Net content, specifying essential ingredient in metric weight for solid, semi solid and aerosols
and metric volume for liquids.
5. Ingredient must be noted by their common names in order of their prominence by weight
unless the food is standardized, in which case the label must include only those ingredients
which the standard makes optional.
6. Food additives and colours must be declared on the label. Spices, flavours and colours may
be listed as such, without naming the specific material; but any artificial colour or flavour
should be identified as such.
7. Labeling should be in English. If it is in another language, an English translation must be
shown on the label or package insert (where applicable).
8. NAFDAC registration number must be included on the product label.
Registration
In January 2003, NAFDAC increased its fees for registration, vetting and documentation for all
imports. The fee for registering each product was increased to 750, 000 Naira about ($6, 000) up from
10, 000 Naira ($100) in 2002.
Additionally, NAFDAC Requires that:
1. No applicant will be allowed to register a food product in more than one name.
2. Where different flavours of the same food are produced, each flavour will have to be registered
separately.
3. Major supermarket operators or importer can import mixed container loads of high value
product (HVP) under NAFDAC Global Moratorium of Supermarkets (GMS) and other
specialties required by hotels, fast food, chain and international organizations, firms
participating in the programme are routinely inspected by the agency.
COPYRIGHT AND TRADE MARK LAW
The Nigerian Standards Organization is responsible for issuing patents, trademarks and copyright.
Once conferred, a patent conveys the exclusive right to make, sell, use a product or to apply a patented
process. The trademark Act of 1965 governs the registration. A trademark grants the holder the
exclusive right to use the registered mark for a specific product or class of product.
Statutes which govern intellectual property regulation in Nigerian include the copyright Act of 1988
(amended in 1992). Copyright law makes counterfeiting, exporting, importing, reproducing,
exhibiting, performing or selling any work, without the permission of the copyright owner a criminal
offence.
The Nigerian government’s lack of institutional capacity to address Intellectual Property Right (IPR)
issues is a major constraint to enforcement. Patent and trademark enforcement remains weak and
judicial procedures are slow and subject to corruption. Companies rarely seek trademark or patent
protection because they generally perceive Nigerian enforcement institution as ineffective.
Nonetheless, recent government efforts to curtail IPR abuse have yield results. The Nigerian Police
work closely with the Nigerian copyright commission in enforcing the copyright law.
TOPIC 4:
STOCK CONTROL BASICS
What is Stock Control?
Stock means all the products your business has for sale. Stock is also all the raw materials or parts
your business keeps and uses to make products or provide services
Stock Control means:






Receive your stock
Record your stock
Store your stock
Arrange your stock
Check your stock
Re-order your stock
Importance of Stock Control
It helps you to:







Keep the right goods and materials that customers want and that your business needs
Stock goods that sell quickly
Keep the right amount of stock -not too much nor too little
Prevent stock from being misplaced
Keep your stock in good and orderly condition
Prevent stock from being lost through theft or breakage
Re-order stock at the right time in the right quantity
Some useful guidelines for better Stock Control are:





Keep the right amount in stock
Stock goods that sell quickly
Arrange and display your stock well
Check your stock regularly
Keep stock cards.
Stock Cards
Keeping stock cards means writing down:


All stock that comes in to your business
o you get an order of goods or materials
o you accept goods back from a customer and the goods can be sold again
o you finish making a product, ready for sale
All stock that goes out of your business
o You sell goods or materials, for cash or on credit
o You use up materials to make products or provide services
o You throw away goods or materials that are broken, damaged or spoilt in any
other way
o Goods or materials are stolen
Importance of Stock Cards




They
They
They
They
tell
tell
tell
tell
you
you
you
you
what goods or materials you have sold or used
how much of the goods or materials you have sold or used
when the goods or materials were sold or used
how much of the goods or materials you have in stock
Information of Stock Cards can be used to find out





What Stock sell fast
What Stock to re-order
When to re-order
How much to re-order
If any stock is missing
When you make your own stock cards, you can use cards, a hard cover book, an exercise book, loose
pages in a file, or anything else that suits your business. You can also use your SIYB forms
Make sure your cards are correct and up-to-date. A stock record which is not up-to-date gives you
incorrect information and you may make wrong decisions in your business.
NOTE: RE-Order level: Is the number of units you estimate you need until you get new stock. When
your stock falls to the re-order level, it is time to order more.
To work out the re-order level, you need to know or estimate;



How long it takes between ordering and receiving or collecting the new stock
How much you expect to sell or use while you wait for the new stock
How much extra stock you may need, e.g. you sell more goods or use more materials
than you estimated, the delivery is late or the supplier is out of stock.
Work out and write down the maximum stock level for the goods you sell slowly and very quickly. The
maximum stock level is the most number of units you estimate you should have in stock at any time.
This prevents overstocking so the business' money is not tied up in unsold stock. This will prevent
cash flow problems.
STOCK-TAKING
Is a system of physically counting and writing down all the stock in your business on a stock-taking
list.
Importance of Stock-taking





It helps to find out if stock is missing and how much is missing
Finds out if any stock damaged or in bad condition
Finds out which goods sell quickly and which sell slowly
Finds out which materials and parts you use a lot of and which you use less of
Finds out when to re-order, if you do not keep stock cards
Steps to follow to do Stock-Taking:





Make sure your stock is well arranged
Prepare your stock-taking list
Count the stock and write down the quantities on the stock-taking list
Copy information from your stock cards with the stock-taking list
Write the correct quantities on your stock cards
Think of your own business and decide


How often you should do stock-taking
What day and time you should do stock-taking
Useful information from Stock-Taking to improve your business






Receiving your stock
Recording your stock
Storing your stock
Arranging your stock
Checking your stock
Re-ordering your stock
STOCK MANAGEMENT
It means the controlling of the incoming and outgoing stock.



Stock cards help you to manage your stock better
Understand the principles of stock card
Understand the principles of stock-taking
Stock management answers questions like:








What does the same item cost from different supplies?
What should my mark-up be to be competitive?
What do I need to order and when?
How do I work out sales value of products if I do not have stock cards for those specific
products
What is the total sales value of all my products? How does this value compare with
actual cash?
What is the sales value of my losses? How can I recover this value though my other
sales? Can I increase my mark-up to cover this loss?
Is it profitable for my business to get insurance to cover losses?
Is it worthwhile to hire a security firm to protect my stock?
Contents on stock card:





Product
Direct material cost per item
Selling price
Re-order level
Maximum stock level
STOCK CARD
1.
2.
3.
4.
5.
Product: Unique Natural Honey, 750ml
Direct Materials Cost per Item: N546
Selling Price: N670
Re-order level: 15 bottles
maximum Stock level: 30 bottles
Date
Details
Stock
In
Out
Balance
1/3
B/F
19
2/3
Sold
3
16
4/3
Sold
2
14
5/3
Sold
1
13
8/3
Sold
4
9
9/3
Broken
2
7
11/3
Sold
3
4
12/3
Bought
12/3
Sold
4
24
15/3
Sold
3
21
17/3
Sold
3
18
19/3
Sold
4
14
23/3
Sold
3
11
24/3
Sold
4
7
24
28
TOPIC 5:
PROCESS AND PROCEDURE FOR STARTING AN ENTERPRISE
INTRODUCTION:
An attempt is made in this section to guide potential entrepreneurs regarding the steps to adopt in
the course of starting and operating their proposed business enterprises. At the end of this module,
students should be able to identify the procedure as well as the documentations required for
registering different types of business ventures in Nigeria. They should also understand the important
elements in an Article and Memorandum of Association.
Main Features of the Companies and Allied Matters Act (CAMA) 1990 and the Subsequent
Amendments;
Main features of CAMA 1990: - The Company and Allied Matters Act (CAMA) is divided into parts A,
B and C.
PART A
This part deals with incorporated companies: the procedure of incorporating companies, the function
of corporate affairs commission (CAC), types of companies, composition of the companies, inflow and
outflow of capitals in a company, types of meetings, merger and acquisition of companies and the
winding up of companies.
PART B
Part B deals with business name: which business name is registerable and unregisterable?
PART C
Part C defines incorporated trustees. Incorporated trustees are non profit organization. It deals with
the procedure of incorporation, function and composition of incorporated trustees.
Functions of the Corporate Affairs Commission (CAC) Under the Companies and Allied Matters
Act 1990;
The functions of the commission as set out in section 7 of the Companies and Allied Matters Act
include the following:




To administer the Act, including the regulation and supervision of the formation, incorporation
management and winding up of companies.
To establish and maintain companies registry and offices in all the states of the federation
suitability and adequately equipped to discharge its functions under the Act or any law in
respect of which it is charged with responsibility;
Arrange and conduct an investigation into the affairs of any companies where the interests of
the shareholders and the public demand;
To undertake such other activities as are necessary or expedient for giving full effect to the
provision of the Act.
The commission also registers Business Names and Incorporated Trustees as well as provides wide
range of ancillary services.
Legal Structure of Business;
Business is the totality of the economic and commercial life of a nation. It is an organization whose
purpose lies outside the business itself (to create customers).
It may also be understood as a productive activity geared toward the realization of objectives such as
profitability, customer creation, growth, survival and satisfaction of owners, workers, consumers,
management and competitors.
Business could be carried on as a small, medium or large scale enterprise. It could be carried on as
domestic or international business. It could also be publicly or privately owned. In Nigeria, legal forms
of business are sole proprietorship, partnership and companies.
Sole Proprietorships are one-man businesses. The owner provides the capital, takes decision and
assumes all risk. They are the most common.
The partnership is an Association of two or more persons carrying on business with a view to making
profits through the pursuit of lawful objective.
In Nigeria, the number of people to form an ordinary partnership must not exceed twenty while in the
case of banking; the number must not exceed ten persons. The people forming the association are
called partners. They agree from the start what capital each brings to the business, specific functions
each will perform and how profits will be shared. These conditions are embodied in the partnership
“deed”. The partnership agreement or deed clearly specifies the right and duties of partners and
privileges of such partners.
The limited liability company (corporation) is an “artificial being, invisible, intangible and existing
only in contemplation of law”. Being a mere creation of the law, it possesses only the properties which
the charter of its creation confers upon it either expressly or as incidental to its very existence. The
company has the right to acquire, own and sell property, sue and be sued.
In Nigeria, company formation and operations are secured through company incorporation in
accordance with the company Act 1968 and the CAMA 1990, and its subsequent amendment in 2004.
There are two types of company formation in Nigeria; private companies and public companies.
A private company is composed of a minimum of two and maximum of fifty members. A public
company on the other hand has a minimum of seven members with no upper limit.
The following documents are required by the Corporate Affairs Commission (CAC) Registrars of
companies before incorporation of a company;


Articles and Memorandum of Association
A list of persons who have consented to become directors with their written consents to
act as such (not required for private companies).
 Notice of situation/location of registered office (within 14 days).
 A statement of authorized share capital
 A statutory declaration that all the requirements for registration have been complied with.
If the registrar is satisfied that all is in order, he will issue “certificate of incorporation”. A private
company can commence operation with this certificate. However, a public company may have to
receive in addition “a trading certificate” before it can commence business.
Factors to be considered in Naming a Business;
It is important that each business has a distinct name different from others. This is because it has to
be its own identity and uniqueness.
Many factors are usually considered in naming a business. Such factors include among others;
1) The nature of the business to be undertaken
2) The type of goods/services to be produced and offered to the public
3) The environment of the business
4) The name should comply with the necessary requirements of the CAC
5) The name has to be attractive/ appealing
6) The name should be easy to relate with.
Exercise;
Students should brainstorm to come up with additional factors.
The Procedure and Requirements for Registration of A Business Name;
A business name is the name or style under which any business is carried on whether in partnership
or otherwise. A business name will be rejected by CAC if;

It is found to be identical with or similar to any registered trade mark or to a name by
which any firm, company or individual has already been registered as a corporate entity
under part A of the CAMA 1990 or part B as the case may be.
 It is found to be deceptive or objectionable in that it contains a reference direct or
otherwise to any personage, private or institution, or it is likely to mislead the public as
to the nationality, race or religion of the person(s) by which the business is wholly
owned.
 A business name would not be registered if it contains the word “national, government,
municipal, state, federal or any other word which imports or suggest that the business
enjoys the patronage of the federal, state or local government.
 Contain the word “co-operative” or its equivalent in other language or any abbreviation
thereof or contain the word “chamber of commerce, building society, guarantee, trustee,
investment, bank, insurance or any other word of similar connotation”.
Registration of a business name requires among other things, the submission of a statement in
writing, on the prescribed forms, signed by the appropriate persons and containing the following
particulars:








The business name, or if the business is carried on under two or more business name, each
of those business names;
The full address of the principal place of business, and every other subsidiary place of
business.
The general nature of the business;
In respect of registration of a firm, the present forenames and surnames, nationality, ages,
sex, occupation and the corporate name and registered office of such corporation which is a
partner.
The date of commencement of the business whether before or after coming into the operation
of the 1990 Act.
Passport photographs duly certified in the prescribed manner in the case of sole
proprietorships or firms consisting only of individuals.
Professional certificates in cases of sole proprietorships or firms intending to carry on any
professional business.
Submission of tax clearance certificates for at least three years.
CAC may request for additional information and supporting documents in the cases of a firm or an
individual carrying on business on behalf of another individual, firm or corporation whether as
nominee, as trustee and in the case of a firm or individual carrying on business as general agent for
another entity overseas and not having a place of business in Nigeria.
The Procedure and Requirements for Incorporating a Business;
Procedures and Requirements for Incorporation of a Business include:
1) Consulting a legal practitioner to prepare all the necessary incorporation documents as
itemized in topic 3
2) Filing the documents with the CAC
3) Payment of all the necessary fees
4) Issue of certificate of incorporation and a trading certificate (in the case of a public limited
company).
The Reasons for the Existence of Registered Business Names and Companies;
Reasons for the Existence of Registered Business Names
1)
2)
3)
4)
5)
To avoid conflicting names
For easy identification
For purpose of product classification/identification
To maintain standards of product and services.
To maintain customer loyalty.
Exercise:
Students to further brainstorm on the reasons for existence of registered business names.
Various Agencies Responsible For Issuance of Licenses and Permits
Licenses are official documents showing that permission has been given to do, use or own something.
In Nigeria, licenses and permits relevant to enterprises are issued by the following organizations:
Organization
Certificate/Licence/Permit
1.
National Agency for Food and Drugs
Administration and Control (NAFDAC)
Foods and Drugs
2.
Nigerian Police
Fire Arms
3.
Export Processing Zones (EPZ)
Finance
4.
Nigerian Investment Promotion Commission
(NIPC)
Tax Concessions/Pioneer
Status
5.
Nigerian Immigration Service
Expatriate Quota
6.
Nigerian Institute for Standards (NIS)/ Standard
Organization of Nigerian (SON)
Certificate for Standards
(Quality Control)
7.
Nigerian Export Promotion Council (NEPC)
Certification relating to
exports
8.
NACCIMA/Ministry of Commerce
Certificate of Origin
9.
National Office for Technology Acquisition and
Protection (NOTAP)
Intellectual Property
10.
Ministry of Environment
Location Permit
11.
Federal Inland Revenue Services (FIRS) and
Board of Internal Revenue (BIR)
Tax /VAT Certificates
12.
State/Federal High Court
Stamp Duty
13.
National Copy Right Commission (NCRC)
Patents, Trade Marks,
Designs, Copyright, etc
TOPIC 6:
BUSINESS PLANNING BASICS
What is Planning?
Planning means thinking and working out what to do about something before it happens. For
business, planning means thinking about and working out what to do in the future to improve your
business.
For example:





What goods or materials you need
How much is needed
Where to buy the goods or materials
How much the goods or materials will cost
When you need the goods or materials.
Planning also entails forecast i.e. your expectation in the future.
A business forecast makes you think of sales, costs, profit and cash flow are likely to be in the future.
Importance of Business Planning







It
It
It
It
It
It
It
helps prevent problems
helps to know how well the business will do
helps to show which part of the business needs improvement
shows the bank how well your business can expect to do in the future
helps to know the cash flow in and out of the business you expect
can help your business better
can also help solve problems
Useful Business Plan:
 Sales and Costs Plan:
 Sales and Costs plan help your business make profit
 It helps make forecast of sales and costs for each month
 It shows how much profit to be expected the next year
 A Cash Flow Plan:
 It ensures that the business does not run out of cash at anytime
 It can be used to work out in advance how much cash will come into and go out
of your business each month
Making Business Plan





Make your plans as simple as possible
Choose the most suitable period for your plans e.g. plans for three months or a year
plans
Divide the plans into months; it helps to know and compare the activities of each month
and use whether the business is going as planned.
Make plans before you need to use them: Do not wait until you need a plan, finished
with the one you made before you begin the next plan
Look for information
To make a Sales and Costs Plan for your Business:






Forecast indirect costs for each month of next year such as rent, transport, stationery,
electricity and water, indirect labour, licenses, insurance, maintenance of equipment,
depreciation etc.
Forecast direct material cost per item
Forecast direct labour cost per item
Forecast sales for each month of next year
Calculate total direct material costs for each month of next year
Complete your sales and cost plan
In order to make a Forecast




Get information about last year
Analyse the past
Get information about the next year
Forecast for next year
Fill in your Sales and Costs Plan to calculate what your gross and net profit are likely to be for next
year
To fill in your plan, get information from;




Forecasts of indirect sales
Forecasts of sales
Forecast of total direct material costs
Forecast of total direct labour costs
Use Sales and Costs Plan to improve your Business:
At the end of each month:



Compare your sales and costs plan with your records and look for differences
Find out why there are differences
Work out what to do
Note:
1. If you are a retailer or wholesaler, you do not have any direct labour costs. Include all your labour
costs under indirect costs.
2. If you are a manufacturer or service operator, direct labour costs are what the business pays to
employee who work to make the products or services.
To Forecast Sales, remember the Four Ps
Product:



Did you sell the products or services your customers wanted?
Which products sold well? Why?
Which product did not sell well? Why?


How did you set your prices last year?
Were your customers willing to pay the prices you set?
Price:

Were your prices high enough to give your business a profit?


Is your business in a good place?
Did you sell your products or services to direct customers or to retailers
or wholesalers?
Did this increase your sales?
Place:

Promotion:



How did you promote your products or services last year?
Did you advertise to promote your products? Did you get any publicity?
Did you improve your skills as a salesperson? Which type of promotion gave the
highest sales?
A CASH FLOW PLAN
A cash flow plan is a forecast which shows you how much cash you expect to come in and go out of
your business each month. The Cash Flow Plan helps you make sure that your business does not
run out of cash at anytime.
To make a Cash Flow Plan, forecast Cash in
and Cash out of your business each month. Use your Sales and Costs Plan to forecast the amounts.
Steps to make a Cash Flow Plan:






 Cash at the start of the month
 Cash in from sales
 Any other cash in
 Total cash in
 Cash out for direct material costs
 Cash out for direct labour costs
 Cash out for indirect costs
 Cash out for planned investment in equipment
 Any other cash out
 Total cash out
 Cash at the end of the month
Fill in the amounts for each month on your Cash Flow Plan.
Use your Cash Flow Plan to see if your business is likely to have cash at the end of
every month.
Check every month to see if the amount of cash you have in your business is the same
as the
mount you forecast in your plan.
Make a Cash Flow Plan for a period that suits your business.
Make a new Cash Flow Plan before the old Cash Flow Plan runs out.
TOPIC 7:
OPERATIONAL TECHNIQUES IN MANAGING AN ENTERPRISE
Introduction:
Potential entrepreneurs need to fully understand certain guidelines regarding the smooth running of
business enterprises if they are to manage them successfully. These operational techniques for
managing an enterprise are treated in this section. Students should be able to draw an organogram
for any SME. They should understand the communication process in an enterprise as well as the
function areas of business and in particular the importance of good record keeping practice.
Meaning of management and manager
Management is described as the process of getting things done through people in an effective and
efficient manner.
1. Management can be used to refer to a group of people, performing managerial tasks and
functions. The term is used collectively to include all the individuals in that group. For instance,
a group of people often referred to as the “management” of the organization.
2. Management is a process: As a process, management is viewed as involving some specific
activities or function, and it is the collective performance of the function that is referred to as
management. In other words, carrying out specific actions is recognized as management.
3. Management is a set of activities undertaken by one or more persons in order to coordinate the
activities of others in the pursuit of ends which could not be achieved by any one person.
[Donnelly, Gibson and Ivancevich (1975:10)].
Management can be more scientifically defined as the coordination of all the resources of an
organization through the process of planning, organizing, directing and controlling in order to attain
organizational objectives” – Nwachukwu (1988:4)
From the above definitions, management could be seen as the performance of those activities that
enhance effective utilization of human and material resources with the aim of achieving organizational
goals. The activities are planning, organizing, directing and controlling.
Therefore, while management is the art of getting things done through people, managers are
responsible for achieving organizational goals by arranging for others to perform whatever tasks may
be necessary and not by performing the tasks themselves. Managers are organization members who
are assigned primary responsibility of carrying out the management process.
A manager is a hired hand saddled with the responsibility of planning, organizing, integrating
activities of others in an organization. A manager is an agent of an organization who works in
accordance with the goals of an employer. His motives centre on the attainment of organizational
goals and objectives. He works and ensures effective and efficient use of organizational resources to
achieve the set goals.
The Functions of Management and a Manager;
Function of management or management functions are the functions that are performed by
managers. The performance of management functions separate management from other employees
and shareholders in an organization. A manager is a manager by virtue of the performance of the
functions of management. The key functions of management are planning, organizing, leading
(directing) and controlling.
The derivative functions of management are:

Setting of objectives






Forecasting
Formulating and implementing policies
Decision making
Leading
Motivating
Communicating.
The functions of a manager on the other hand include:







Provision of a clear direction for the organization
Ensuring that the organization serves its basic purpose, which is the efficient provision of
goods and services.
Management design and maintain the stability of the organization’s operations.
Managers choose the strategies needed to keep an organization adapting in a controlled way
to its changing environment.
Managers ensure that the goals of the organization are achieved.
Managers serve as the information link between the organization and its environment.
As formal authorities, managers are responsible for the operation of the organization’s status
system and serve as symbol of the organizational activities.
Management Structure For An Enterprise;
Organizational structure is the framework of jobs and departments that directs the behavior of
individuals and groups toward achieving the organizations objectives. It is the network of
relationships between the various positions and position holders in the organization. The
organizational structure is a blue print or model indicating how people and jobs are combined in an
organization. The organizational structure provides an orderly arrangement among functions so that
the organization’s objectives can be accomplished effectively. An organizational structure should be
considered with the organization’s plan. There is no single best structure for an organization. The
challenge of managers is to design the best structure for a specific organization that facilitates the
achievement of the organization’ objectives.
The organizational structure can be horizontal or vertical; it can also be formal or informal.
Typical Example of Management Structure:
1) Vertical Structure:
Chairman Board/of Directors
General Manager/CEO
Top Management Team
Middle/Lowest Level Management
2) Line organization: Line organization/Authority
Example of a line authority:
Rector
a)
Dean/Bursary/Registrar
HODs (line manager)
Staff
3) Horizontal structure:
Departmentalization by function (functional structure)
GM
Marketing
Production
Finance
Marketing
Researc
Engineering
Administration
Finance
Planning
b)
Departmentalization by territory (Geographical structure)
GM
Western
Region
c)
Northern
Region
Southern
Region
Eastern
Region
Departmentalization by customers (Customer structure)
GM
Customer
d)
Industrial Sales
Military Sales
Departmentalization by Process (Process structure)
GM
Punch Process
Welding
e)
Drilling
Departmentalization by Product:
GM
Baby Foods
Toiletries
Beverages
Hot Drink
f)
g)
Matrix structure
Committee Organization
Communication in the management of an enterprise connotes the flow of information or authority
among individuals in the organization.
In selecting a structure for an enterprise, it is expected of a manager to evaluate the relative
advantages/disadvantages of preferred structure.
The teacher/facilitator should analyze the various structural patterns listed above showing clearly
the relationships and flow of authority. Charts are necessary for this exercise.
Exercise
Students should practice drawing different organizational charts from the simple to the most complex.
They should decide which is suitable for small enterprise.
Planning, organizing, staffing, leading and controlling were identified by Henri Fayol, as managerial
activities. Planning is to foresee and provide by examining the future and drawing up the plan of
action.
Planning is the first of the series of functions that managers perform. It entails a mental picture of
what the organization is to be, what the organization should achieve, when it should be achieved,
who is to ensure it is achieved and how the objectives are to be achieved.
Planning is the process by which managers establish goals and design methods by which the goals
are to be achieved. Planning includes all activities that lead to the definition of objectives and to the
determination of appropriate courses of action to achieve these objectives.
Planning is a process by which mangers examine their internal and external environments, ask
fundamental questions about their organizations’ purpose, and establish enterprise mission, goals,
and objectives. It includes all the activities that lead to the definition of objectives and to the
determination of appropriate course of action to achieve those objectives.
Planning is important in many respects:





It provides sense of direction to the organization
Provides the organizations with objectives to be achieved.
Helps to minimize cost as trial and error in operations and management are avoided.
Helps to manage uncertainty.
Enhance the spirit of togetherness.
All other management functions hinge on planning for their execution. Without plans, managers
cannot know they should organize people and resources or what they need to organize. Without a
plan, they cannot lead with confidence or expect others to follow.
There are different types of plans such as strategies, policies, rules, procedures, programme, budgets,
etc. The various levels of planning are strategic planning, tactical planning and contingency planning.
Organizing: Organizing involves building up the dual structure, material and human, of the
enterprise. It involves identifying, mobilizing and utilizing resources to achieve the set
plans/objectives. Tasks are divided into jobs, authority is delegated, appropriate basis for
departmentalization of jobs is determined and the optimum number of jobs in each department is
decided.
Staffing: Staffing involves finding the right people, with the right skills, abilities, and fit, who may be
hired or are already working for the company (organization) or may be working for competing
companies.
In the knowledge economies, where talent becomes the new capital, this discipline takes on
added significance to help organizations achieve a competitive advantage in each of their
market places.
"Staffing" can also refer to the industry and/or type of company that provides the functions
described in the previous definition for a price. A staffing company may offer a variety of
services, including temporary help, permanent placement, temporary-to-permanent
placement, long-term and contract help, managed services (often called outsourcing),
training, human resources consulting, and PEO (Professional Employer Organization)
arrangements, in which a staffing firm assumes responsibility for payroll, benefits, and other
human resource functions.
Leading: Directing is the process of commanding which means building together, unifying and
harmonizing all activity and effort. Personnel are encouraged to make their maximal contributions
towards the attainment of the organizations’ goals. In directing, a manager must motivate, lead and
communicate so that objectives can be achieved at the least cost.
Controlling: Controlling ensures that everything occurs in conformity with established rule and
expressed command. Controlling is the process of ensuring that actual activities conform to planned
activities. It is used to evaluate actual performance, to compare actual performance to goals, and then
to take action on the difference between performance and goals.
Management has many control methods at its disposal. Management must therefore decide which
method is appropriate in different situations.
Managements should be able to establish a control process which can be summarized into four steps;
 Establish standards and methods of measuring performance.
 Measure the performance.
 Determine whether the performance matched the standard
 Take corrective action.
Control can be strategic, managerial or operational.
BASICS OF MARKETING
Whoever engages in business, whoever embarks on entrepreneurial tasks will - knowingly or
unknowingly - engage in marketing. Looking at this subject historically, we can state that whenever
people engaged in business, they also engaged in marketing. Some aspects of marketing have over
the years changed rather dramatically. The current understanding of marketing, its philosophy and
science, is not very old and gained momentum only after the end of World-War II, more particularly,
in the fifties and thereafter. But as late as the sixties, many world-wide important enterprises offering
exclusive products or services, and operating on monopolistic grounds, neither recognized the need
nor really needed to engage in what we today consider marketing activities. It was enough to have
good quality products or services, offer them at reasonable prices, and go out and sell. Selling alone
was considered to be the actual marketing activity.
In the late sixties, the seventies and the eighties this changed, gradually at first, but with and ever
increasing momentum. Quality products and services in the historical sense were no longer all that
customers were looking for. Design, innovation and support became more and more important. More
manufacturers, more distributors and increasing buying power changed the ‘market-place’.
Globalization of markets set in, and new and more sophisticated management instruments were
needed to help manufacturers, distributors and entrepreneurs to stay in business and grow with
growing markets and all of this despite ever-increasing competition and fighting over market shares.
Marketing, therefore, means much more now than just selling, the latter being just one - although an
important one - of the marketing instruments, which entrepreneurs have at their disposal.
Market Segmentation
Any market primarily consists of people, (e.g cassava and cassava products market). It consists of
buyers who differ in one or many characteristics. They differ in their geographic, demographic and
psychological needs, and in their behavioural characteristics. It is a huge market that one
entrepreneur cannot effectively and competitively serve, given his limited resources. Instead of
marketing cassava and cassava products to everyone in the market, the entrepreneur needs to
concentrate his/her efforts on one of the segments of the market in which the products have the
greatest potential appeal.
For this, the customers or prospects - have to be grouped into segments consisting of homogeneous
group in order to be able to address them with messages which are target-group oriented. Good
market segmentation is a must for any successful marketing approach.
Marketing Strategy
The target markets and segments identified and the marketing objectives established serve as the
bases for the development of an appropriate marketing strategy.
Marketing strategy is defined by Philip Kotler as "the basic approach that a business unit will use to
achieve its objectives, consisting of broad decisions on target markets, marketing positioning and
mix, and marketing expenditure levels."
The marketing strategy should cover major marketing tools, as shown in the following example:
Price:
Price of your product must be competitive in the market
Distribution: Preferably direct selling to potential users, but may also use stores as retail
outlets/orders takers, providing direct delivery to buyers.
Advertising:
Develop an advertising campaign directed at the target audience, and supporting the
positioning strategy; emphasize the quality of your product and the quantity you can
supply. Use the most appropriate media, obtaining information on media
effectiveness from publicity agencies, other entrepreneurs or even competitors. Do
not spend money without first informing yourself.
Promotions:
Consider which promotional activities are most appropriate to your market.
Promotions usually have a good rate of return on investment, but one can reach only
a limited number of people. They therefore must be well targeted. Good examples are
customer discounts, trade fairs, seminars, etc.
Publicity:
Develop good public relations with the professional buyers who may exert strong
influence on industrial users. Set aside adequate funds for such activities.
Personal
Selling:
Follow up customer leads with a personal presentation of the product, emphasizing
again the product positioning. Encourage professional buyers by, for example, giving
them the incentive of a certain percentage of the selling price.
Market Research
Conduct a market survey in selected areas among those identified users, to find out their intentions
with
regards
to
volume
of
purchase
monthly.
All of these activities cost money. Prepare everything well and get all the information you need before
you take any decision. Well-targeted and well-prepared campaigns pay rich dividends; poorly
prepared advertising and promotional activities are like throwing money away.
Marketing control
To ensure that marketing activities are implemented according to the marketing plan, the
entrepreneur has to constantly monitor such activities. To monitor means to see to it that the
company has not deviated from the plan. In cases where there are deviations, the entrepreneur
decides on corrective measures.
The entrepreneur has to evaluate the company's performance vis-à-vis marketing objectives set at the
start of the planning period. He needs to carry out some types of marketing control like the annualplan control, the profitability control, and others.
In the annual-plan control, the entrepreneur monitors the current marketing effort and results to
ensure that sales and profit goals will be achieved.
In the profitability control, the entrepreneur assesses the profitability of the product in terms of
shape and color, market segment served, channels used, and the amount and quality of services
rendered to clients.
The results of marketing control are then used as inputs for marketing plan for the next planning
period.
HOW TO SELL
Marketing and selling involve a two-way flow of information. The market (customers) needs
to know all about cassava and cassava products and the producers need to know all about
the customers. Tile producers provide information to the customers through promotion,
advertising and direct conversations. Customers express their likes and dislikes and in this
way the producers learn about their customers’ needs. Up to now the focus has been on the
preparation for an actual selling situation. You have learned about the market (customer
needs related to market segments) and also about some ways of promoting your products
before an actual sale. Below is a step-by-step of selling.
Warming Up
A meeting with a customer should begin with a so-called warming up stage. This stage applies
regardless of where the meeting takes place. In many cultures it is part of being polite. The
conversation can be light and general, or more personal if the customer and producer know
each other or have friends in common or business contacts. An example would be to ask the
customer where he grew up or went to school. In some cultures it is polite to mention a
mutual friend or contact person known to both parties. The warming up period enables each
party to relax and relate to the other. If a relationship of mutual respect has been established,
communication is easier. The main topic, that is, cassava and cassava products, will only
come into the conversation when both parties are relaxed and ready. The length of the
warming up stage varies from country to country.
Opening
When both parties feel at ease with each other, the discussion moves on to business. The
customer expresses his interest and needs and the producer introduces his products. Usually
the salesperson is prepared and knows the information he wants to give to the customer. If
the salesperson is nervous at first, it is a good idea to practice a short introductory talk before
meetings. Below are some tips in opening the sale conversation:
- Find out what the general needs of the customer are - why has he come to you?
- Give general information on the products, stressing the advantages.
- Show pictures and start asking questions about the specific needs of the customer.
- The producer should lead the conversation, but encourage the customer to express his
needs and ask questions.
- During the conversation take note of any information the customer provides and adapt your
opening to the customer’s needs.
Discussion
The needs of the customer should be the centre of the conversation, with the customer doing
most of the talking and the producer most of the listening. When appropriate, more
information can be given during the conversation about the products and their advantages.
Generally it does not pay to criticize competitor products. Most successful businesses focus
rather on their own products. Some businesses even instruct their salespersons never or
hardly ever to mention the competitors’ products. If the customer asks about the competitors’
products, however, it is good to provide information in a fair and truthful way.
Honesty is the best policy! Exaggerating the benefits of a product will result in the customer
having very high expectations which cannot be met and this could lead to problems at a later
stage.
When the customer criticizes products or objects to a certain aspect, this can be dealt with
by listening and discussing the subject in an honest way. If it is a real problem, it may be
wise to admit that this is so, but to point out other advantages that apply to that customer’s
needs.
In some cases the customer will ask about prices right at the beginning of the discussion. If
at all possible, politely delay discussing prices until the advantages of your products have
been explained and some pictures shown. At the beginning of the first meeting the customer
probably does not know any details about your products and still needs to be persuaded
about their advantages.
Summarizing
Summarizing the customer’s own comments and repeating them to the customer is a
technique that clarifies the situation, your understanding of it and reinforces positive aspects
brought up in the discussion.
Trial Close
The producer does a trial close when he feels that the customer has decided to buy his
product. It is an attempt to close the selling transaction and finalize the sale. A trial close
should not be attempted too early in the selling process as this could cause the sale to be
lost. It tests the customer’s reaction, but if the reaction is not favorable then it is wise to
continue the discussion and perhaps clear any doubts the customer may have. Often the
customer will need time to think about the matter and the discussion may be continued at a
later date. A trial close may be done a few times, but care should be taken not to make the
customer feel that he is being put under too much pressure.
The Close
If the trial close is successful, that is, if the customer agrees to buy a specific product, the
transaction has been made. This usually involves a brief summary of what is needed and the
purchase conditions, ending with a definite order.
PRODUCTION
Production is that part of the business which is responsible for turning raw materials into
goods with the help of workers and equipment. The shape, quality and quantity of the
produced goods should meet customer needs. The production costs should be kept as low as
possible. Specific production tasks include:
• Organisation of the workshop (who produces what, how much, where and when). Trained
workers are an expensive and precious resource. It is important to select persons who are
the most suited for a specific job and to train them until they are as skilled as possible in
their work. They should be motivated and well-treated because; output will be higher in a
good working atmosphere. Their work should be organized in an efficient way to help
reduce operation costs.
• Quality control: well-known high quality is the best propaganda for your products.
• Organisation of the stock.
• Operation and maintenance of the equipment.
PRODUCTIVITY IMPROVEMENT FACTORS
Productivity improvement is not just doing things better: more importantly, it is doing the right things
better. This section aims to identify the major factors, or “right things”, which should be the main
concerns of productivity programme managers. Before discussing what to tackle in a productivity
improvement programme, it is necessary to review the factors affecting productivity.
The production process is a complex, adaptive, on-going social system. The inter-relationships
between labour, capital and the socio-organisational environment are important in the way they are
balanced and co-ordinated into an integrated whole. Productivity improvement depends upon how
successfully we identify and use the main factors of the socio-production system. It is important, in
connection with this, to distinguish three main productivity factor groups:
- job-related;
- resource-related;
- environment-related.
Since our main concern here is the economic analysis of managerial factors rather than productivity
factors as such, we suggest a classification which will help managers distinguish those factors which
they can control. In this way, the number of factors to be analysed and influenced decreases
dramatically. The classification suggested here is based on a paper by Mukherjee and Singh.
There are two major categories of productivity factors:
The external factors are those which are beyond the control of the individual enterprise and the
internal factors are those within its control.
To deal with all these factors we require different institutions, people, techniques and methods. For
example, any performance improvement drive which plans to deal with external factors affecting the
management of the enterprise must take such factors into consideration during the planning phase
of the programme, and try to influence them by joining forces with other interested parties.
Thus it can be clearly seen that the first step towards improving productivity is to identify problem
areas within these factor groups. The next step is to distinguish those factors which are controllable.
Factors which are external and not controllable for one institution are often internal to another.
Factors external (macro-productivity factors) to an enterprise, for example, could be internal to
governments, national or regional institutions, associations and pressure groups. Governments can
improve tax policy, develop better labour legislation, provide better access to natural resources,
improve social infrastructure, price policy, and so on, but individual organisations cannot.
A general classification of the three main groups of macro-productivity factors is shown in figure 1
below
Macro-productivity factors
Structural
adjustments
Natural
resourses
Government
&
Infrastructure
Figure1. Main macro-productivity factors
Factors external to an enterprise are of interest to that enterprise because an understanding of them
can motivate certain actions which might change an enterprise's behaviour and its productivity in
the long run. However, for now we shall concentrate on internal factors that an entrepreneur should
manage for growing his enterprise.
INTERNAL FACTORS OF ENTERPRISE PRODUCTIVITY
Since some internal factors are more easily changed than others, it is useful to classify them into two
groups: hard (not easily changed) and soft (easily changed). The hard factors include products,
technology, equipment and raw materials, while the soft factors include the labour force,
organisational systems and procedures, management styles and work methods. This classification
helps us build priorities - which factors can easily be dealt with and which factors require stronger
financial and organisational interventions. A brief description of some key aspects of each internal
factor follows.
HARD FACTORS
Product
Product factor productivity means the extent to which the product meets output requirements. “Use
value” is the amount that the customer is prepared to pay for a product of given quality. “Use value”
can be improved by better design and specifications. Many companies around the world fight a
constant battle to incorporate technical excellence into marketable products. Breaking down the walls
between research, marketing and sales has become a major productivity factor. For example, leading
Japanese companies continually redesign products which are on the market. Product “place value”,
“time value” and “price value” refer to the availability of the product at the right place, at the right
time and at a reasonable price. The “volume factor” in particular gives us a better notion of the
economies of scale through increased volume of production. Finally, the cost-benefit factor can be
enhanced by increasing the benefit for the same cost or by reducing the cost for the same benefit.
Plant and equipment
These play a central role in a productivity improvement programme through:
- good maintenance;
- operating the plant and equipment in optimum process conditions;
- increasing plant capacity by eliminating bottle-necks and by corrective
measures;
- reducing idle time and making more effective use of available machines
and plant capacities.
Plant and equipment productivity can be improved by attention to utilisation, age, modernization,
cost, investment, internally produced equipment, capacity maintenance and expansion, inventory
control, production planning and control, and so on.
Technology
Technological innovation constitutes an important source of higher productivity. Increased volume of
goods and services, quality improvement, new marketing methods, etc., can be achieved through
increased automation and information technology. Automation can also improve materials handling,
storage, communication systems and quality control.
During the past 25 years, considerable productivity increases have been realized through the use of
automation and current developments in information technology suggest great improvements to
come. Significant examples of the application of this technology are the development of automatic
downtime recording systems and automatic lubrication systems which have reduced the idle time of
men and machines, and reduced overtime expenditure. New technology is normally introduced as a
result of such productivity improvement programmes as fighting obsolescence, process design, R &
D and the training of scientists and engineers.
Materials and energy
Even small efforts to reduce materials and energy consumption can bring remarkable results. These
vital sources of productivity include raw materials and indirect materials (process chemicals,
lubricants, fuels, spare parts, engineering materials, packing materials). Important aspects of
materials productivity include:
- material yield: output of useful product or energy per unit of material
used. This is dependent upon selection of the right material, its quality,
process control and control of rejects;
- use and control of wastage and scraping;
- upgrading of materials by initial processing to improve utilisation in the
main process;
- use of lower grade and cheaper materials;
- import substitution;
- improving inventory turnover ratio to release funds tied up in
inventories for more productive uses;
- improved inventory management to avoid holding excessive stock;
- developing sources of supply.
SOFT FACTORS
People
As the principal resource and the central factor in productivity improvement drives, the people in an
organization all have a role to play - as workers, engineers, managers, entrepreneurs and trade union
members. Each role has two aspects: application and effectiveness.
Application is the degree to which people apply themselves to their work. People differ not only in
their ability but also in their will to work. This is explained by a law of behaviour: motivation decreases
if it is either satisfied or blocked from satisfaction. For example, workers may do their jobs without
working hard (no motivation), but even if they did work to their full capacity they would not be
satisfied (motivation is blocked from satisfaction).
In order to stimulate and maintain motivation, the following few factors should be considered:
A set of values conducive to higher productivity should be developed in order to bring about changes
in the attitude of managers, engineers and workers.
Motivation is basic to all human behaviour and thus to efforts in productivity improvement.
Material needs are still predominant, but this does not mean that non-financial incentives are not
effective or have no place. Workers' success in increasing productivity should be reinforced
immediately by rewards, not only in the form of money, but also by improving recognition,
involvement and learning opportunities, and, finally, by the complete elimination of negative rewards.
If management can plan and execute effective incentive schemes, then the result is invariably a
significant improvement in productivity. Wage incentives must always be related to the amount of
change accomplished.
It is also possible to improve productivity by eliciting co-operation and participation from workers.
Labour participation in goal-setting, for example, has been quite successful in many countries.
Human relations can be further improved by reducing the complexity of communications procedures
and by minimising conflicts. Labour productivity can be tapped only if management encourages
workers to apply their creative talents by taking a special interest in their problems and by promoting
a favourable social climate.
Standard of performance plays an important role in productivity. It should be set at a high but
realisable level. Management expectations of high performance need to be considerably raised in
many cases. However, standards should always be achievable to maintain confidence and the “will to
do”.
The “will to do” is affected by job satisfaction which managers can enhance by making jobs
interesting, challenging and bigger, more worth while and self-contained. Job enrichment and job
enlargement can influence job satisfaction and motivate higher productivity.
The second factor in the role played by the people involved in a productivity drive is effectiveness.
Effectiveness is the extent to which the application of human effort brings the desired results in
output and quality. It is a function of method, technique, personal skill, knowledge, attitude and
aptitude - the “ability to do”. The ability to do a productive job can be improved through training and
development, job rotation and placements, systematic job progression (promotion), and career
planning.
To summarise, the following key approaches, methods and techniques can be used to improve labour
productivity: wages and salaries; training and education; social security - pensions and health plans;
rewards; incentive plans; participation or co-determination; contract negotiations; attitudes to work,
to supervision and to change; motivation to higher productivity; co-operation; organisation
development; improved communications; suggestion systems; career planning; attendance; turnover;
job security; etc.
Organization and Systems
The well-known principles of good organisation such as unity of command, delegation and span of
control, are intended to provide for specialisation and division of work and co-ordination within the
enterprise. An organisation needs to be dynamically operated and led towards objectives and must
be maintained, serviced and reorganised from time to time to meet new objectives.
One reason for the low productivity of many organizations is their rigidity, they fail to anticipate and
respond to market changes, ignore new capacities in the labour force, new developments in technology
and other external (environmental) factors. Rigid organisations lack good horizontal communication.
This slows down decision-making and inhibits delegation of responsibility close to the point of action,
encouraging inefficiency and bureaucracy.
Compartmentation according to professional groups or functions also inhibits change. For example,
the decision-making steps may have been designed for a particular existing technology, for a definite
product or service mix. Things have now changed, but procedures have survived because managers
want to minimize change. No system, however well designed, is efficient in all situations. Dynamism
and flexibility should be incorporated into the system design in order to maximize productivity.
Work methods
Improved work methods, especially in developing economies where capital is scarce, technology
intermediate and labour-intensive methods dominant, constitute the most promising area for
productivity improvement. Work methods/techniques should aim to make manual work more
productive by improving the ways in which the work is done, the human movements performed, the
tools used, the workplace laid out, the materials handled and the machines employed. Work methods
are improved by systematically analyzing present methods, eliminating unnecessary work and
performing the necessary work more effectively with less effort, time and cost. Work study, industrial
engineering and training are the main tools of improving work methods.
Management styles
There is a view that in some countries management is responsible for 75 per cent of productivity
gains, because management is responsible for the effective use of all resources under enterprise
control. One productivity expert and consultant to many leading Japanese companies believes that
as much as 85 per cent of the quality and productivity problems in United States industry are
common problems of the system that lie within the province of management, not the individual
worker, to correct.2 There is no perfect management style. Effectiveness depends upon when, where,
how and to whom a manager applies a style. Management styles and practices influence
organisational design, personnel policies, job design, operational planning and control, maintenance
and purchasing policies, capital cost (working and fixed capital), sources of capital, budgeting systems
and cost control techniques.
Figure 2 summarizes the main productivity factors internal to an enterprise.
INTERNAL PRODUCTIVITY
FACTORS
HARD FACTORS
SOFT FACTORS
PRODUCT
PEOPLE
PLANT AND EQUIPMENT
ORGANISATION & SYSTEMS
TECHNOLOGY
WORK METHODS
MATERIALS & ENERGY
MANAGEMENT STYLES
Figure 2 Model of internal productivity factors
Source: Adapted from S. K. Mukherjee and D. Singh, 1975, p. 93.
This model serves as a checklist for identifying the most promising productivity areas for management
analysis, planning and intervention.
Principles of Record Keeping, Auditing and Financial Management
The specific record a company needs depends on a number of factors: such as the type of
business, the company’s goals, management needs and interests, and cost factors. A basic
record keeping system, whether on paper or an off-the-shelf computer software programme,
should be simple to use, easy to understand, reliable, accurate and consistent, and designed
to provide information on a timely basis. Your accountant can develop the entire system
most suitable for your business needs and train you in maintaining these records on a regular
basis. These records will form the basis of your financial statements.
Complete and accurate financial record keeping is crucial to your business success for a
number of reasons:
1)
2)
3)
4)
5)
Good records provide the financial data that help you operate more efficiently, thus increasing
your profitability.
Accurate and complete records enable you to identify all your business assets, liabilities,
income and expenses. That information helps you pinpoint both the strong and weak phases
of your business operations.
Good records are essentials for the preparation of current financial statements such as income
statement (profit and loss) and cash flow projection. These statements, in turn, are critical for
maintaining good relations with your banker. They also present a complete picture of your
total business operation, which will benefit you as well.
Good records are critical at tax time. Poor records could cause you to underpay or overpay
your taxes. Good records are essential during an audit, if you hope to answer questions
accurately and to the satisfaction of the revenue people.
In managing the finances of your business, you need reliable records to make sound and timely
decisions especially on the funds allocation.
It is essential that you try to determine the precise financial condition of your business. It is as critical
as maintaining good customer relations. Good records keeping is time-consuming and can take away
from the time you need to run your business. It is time well spent; and you must keep regular faith
with it!
HOW TO MANAGE YOUR CASH
Money plays a major role in an enterprise. At the end of the business, money is needed to purchase
the necessary tools/equipment, materials/supplies and other needs. In operating the business,
money is needed to pay for salaries/wages, utilities and other expenses. When a sale is made, the
business receives money in payment for the goods/products/services rendered. Money received will
then be used to pay for materials, salaries, etc. This cycle continues as long as the business carries
on with its activities and transactions. The role of money in a business enterprise, therefore, can be
compared to the function of blood circulating in the human body.
To be competitive, small business owners must prepare for all future events and market
changes. One of the most important aspects of such preparation is cash flow planning.
Failure to properly plan cash flow is one of the leading causes for small business failures.
Knowing some basics of accounting will help you become better manager of your cash flow.
Cash management is controlling cash in such a way that you have enough for your immediate
needs.
A.
Pitfalls in Cash Management
The pitfalls in cash management common to small businesses include:




Poor internal control
Lack of cash planning
Diversion of funds to unproductive uses
Poor management of cash e.g. carrying excess cash, late collection of bills, lack of expense
control, etc.
Poor internal control may cause cash losses. Always plan your cash requirements. Lack of
cash planning may find you running short of money in the course of operations. Watch out
against diversion of funds to unproductive uses. Use the money for the purpose for which it
is intended. To guard against problems in bills collection, always make inquiries about a
person/company you extend credit to. Maintain a regular follow-up on collection of bills.
Specify a time limit in which all bills must be paid. Keep an expense control. Balance your
expenses to the level of your production. This will be done by preparing an expense budget.
B.
Scope and Importance of Cash Management
Cash management is important to the business because management needs cash to carry
out its plans and policies. There are two important aspects of cash management. The first is
called Safeguarding. This action protects cash from loss due to theft, fraud and other criminal
manipulation and oftentimes, carelessness. The second aspect of cash management is
maintaining adequate funds to meet the needs of the business. This can be done by planning
or budgeting the cash projections and disbursement of business operations.
C. Cash items in a small industry
To start with, let us identify the items that can be regarded as cash/or cash equivalents. These are
the following:






Cash on hand
Cash in banks, current account
Bank deposits
Postal money orders
Bank draft
Cashier’s checks
 Manager’s checks
 Traveler’s checks
 Short-term liquid investment readily convertible to cash and not likely to a significant
change in value. An equivalent that matures within 3 months or less from the date of
acquisition is cash equivalents.
D.
Safeguarding Cash
Once you have classified all your cash items accordingly, you have to keep close guard of
your cash because it is easy to steal. The following are some ways by which records may be
manipulated to conceal the theft:







Misrouting books of original entry, documents and schedules and reconciliation
Recording of duplicates or false purchase of expense vouchers
Padding of payroll
Forging of documents
Writing off assets to sales discounts
Lapping-concealment of shortage by delaying the recording of cash receipts
Kiting- e.g. check in one bank (A) is deposited in another bank (B) and the amount of check is
not shown as a deduction from the balance in Bank (A) at the date of transfer
E. Internal Control in Small Business
Internal control is a system of checks within a business to safeguard its assets, especially cash. This
control usually provides that the work of one person will be reviewed and examined by another. The
following are internal control applications commonly used in small firms:









Segregation of business and personal funds
Immediate recording of all cash receipts
Deposit of cash intact
Use of petty cash fund entrusted to a petty cashier for all payments other than checks
Reconciliation of bank accounts monthly
Use of Daily Cash Report
Approval of disbursements, signing of checks and bad debts write-off
Annual audit by a chartered accountant on a retainer basis
Careful selection of employees
Business and Personal Funds
Business activities should be separated from personal activities of the owners.
Deposit of Cash
Deposit your cash collection in the bank intact and monitor the deposits made.
Impress/Petty Cash Fund
Establish a separate petty cash fund sufficient to cover small expenses to pay for postage,
transportation, and purchases of small supplies without writing cheques for every small
purchases. When the fund balance reaches a low level, list the expenditures in detail and draw
a cheque payable to the custodian of the fund for reimbursements. The cheque should be
charged to the appropriate expense accounts. All supporting documents should be marked
“Paid”. This will prevent subsequent re-use to obtain funds by deceit and misrepresentation.
Reconciliation of Bank Account
A very simple but effective protection of cash is done through the reconciling of bank accounts
by a qualified person other than the cashier. You, as the owner, should regularly review bank
reconciliation along with the bank statement. By so doing, you will become familiar with the
status of your funds. (see figure 7 below)
Daily Cash Report
A daily summary of cash will provide information as to your current cash position. This
summary should show balance at the beginning of the day and deposits, disbursements and
balance at the end of the day. (see figure 8 below)
Figure 7
Sample Form
Name of the Business
Bank Reconciliation Statement
Date
Balance shown per bank statement, Date
Add: deposits in transit
(adjustments)
xxx
xxx
xxx
reconciling
xxx
Sub-total
xxx
Deduct: outstanding cheques
Cheque no.
xxx
Reconciling items (adjustments)
xxx
xxx
Adjusted balance per bank statement
xxx
===
Balance shown per cheque book, Date
Add: Interest income
xxx
xxx
Reconciling items (adjustments)
xxx
Sub-total
xxx
xxx
Deduct:
Bank service charges
Reconciling items (adjustments)
Adjusted cheque book balance, Date
xxx
xxx
xxx
xxx
===
items
Figure 8
Sample Form
Name of the Business
Daily Cash Report
Date
Opening cash balance, Date
xxx
Add: Receipts
Cash sales
xxx
Collection of accounts receivable
Other receipts
xxx
xxx
Total cash available
xxx
xxx
Less: Disbursements
Cash purchases
xxx
Payments of accounts payable
xxx
Payroll
xxx
Other payments
xxx
Closing cash balance, Date
xxx
xxx
===
Vouchers should be pre-numbered and a record of cheques issued maintained for reference and
control purposes. Review and approve bad debt write-offs. This will keep you informed of accounts
charged off. This will also prevent an employee from pocketing customer’s payments and writing that
account off as bad debt.
Annual Audit
An annual audit helps prevent frauds. The fact that an audit is conducted may discourage trusted
employees, who may otherwise be tempted to embezzle funds from the business.
Financial Planning is a continuous process that flows with strategic decision making. The Operating
Plan and the Financial Plan will both support the Strategic Plan. The best place to start in preparing
a budget is with sales since this is a driving force behind much of our financial activity. However, we
have to take into account numerous factors before we can finalize our budgets.
Budgeting should be flexible, allowing modification when something changes. For example, the
following will impact budgeting:
*
Life cycle of the business
*
Financial conditions of the business
*
General economic conditions
*
Competitive situation
*
Technology trends
*
Availability of resources
Budgeting should be both top down and bottom up; i.e. upper level management and middle level
management will both work to finalize a budget. We can streamline the budgeting process by
developing a financial model. Financial models can facilitate "what if" analysis so we can assess
decisions before they are made. This can dramatically improve the budgeting process.
One of the biggest challenges within financial planning and budgeting is how do we make it valueadded. Budgeting requires clear channels of communication, support from upper-level management,
participation from various personnel, and predictive characteristics. Budgeting should not strive for
accuracy, but should strive to support the decision making process. If we focus too much on accuracy,
we will end-up with a budgeting process that incurs time and costs in excess of the benefits derived.
The challenge is to make financial planning a value-added activity that helps the organization achieve
its strategic goals and objectives.
TOPIC 8:
INDUSTRIES AND SUPPORT AGENCIES IN NIGERIA
Introduction:
The role of support agencies and various existing industries is quite paramount and therefore
potential entrepreneurs need to be intimated about the assistance they render and the functions they
discharge. This section therefore intends to highlight them. On completion of this course students
should be able to identify various industry/support agencies in Nigeria and their functions. They
should also know types and sources of plants and machinery used in small scale industries, nature
and type of material inputs for each industry type and be able to source information about market
and financial assistance; as well as understand the environmental factors associated with Industrial
and economic development in Nigeria.
Various Industry/Support Agencies;
World wide findings over the years have shown that small firms and entrepreneurships play very
important roles in national economic growth and development. The Government of Nigeria, like its
counterparts, the world over, has realized the importance of small and medium scale enterprises and
has, over the years formulated various public policies to encourage, support and fund the
establishment and development of SMEs. Developments in small and medium enterprise are what
give a developing nation the base for employment creation, solid base for creating a middle class and
encouragement for the use of local raw materials and technology.
In Nigeria, the main types of industry include:
 Extractive/Primary Industry: This encompasses stone quarrying, extraction of mineral raw
materials, etc.
 Manufacturing/Secondary Industry: This involves changing the form of raw materials to
useable or semi-useable products e.g. maize to flour, etc.
 Service/Tertiary Industry such as banks and professional service providers;
 Construction Industry such as roads, bridges, etc.
There are several support agencies established by government to assist the various industries in
different dimensions. Among the support agencies are:
THE NIGERIAN EXPORT PROMOTION COUNCIL (NEPC)
The NEPC was established through the promulgation of the NEPC Act of 1976 and formally
inaugurated in March, 1977. The Council’s Amendment Decree of 1992 was to minimize the
bureaucratic bottlenecks and increase autonomy in dealing with members of the Organized
Private Sector. Its goal and mission are to make the non-oil export sector a significant
contributor to Nigeria’s GDP, facilitate opportunities for exporters to promote sustainable
economic development. Their Web sight is www.nepcng.com
Activities of the Council
 To promote the development and diversification of Nigeria's export trade
 To assist in promoting the development of export-related industries in
Nigeria
 To spearhead the creation of appropriate export incentives
 To actively articulate and promote the implementation of export policies and
programmemes of the Nigerian Government
 To co-ordinate and monitor export promotion activities in Nigeria
 To collect and disseminate information on products available for export
 Collect and disseminate local manufacturers and exporters information on
foreign markets











Provide technical assistance to local exporters in such areas as export
procedure and documentation, transportation, financing, marketing
techniques, quality control, export packaging, costing and pricing, publicity
and other similar areas
Provide directly or jointly, with training institutions, training for its staff and
assist with the manpower development of the export community in Nigeria
Organize and plan the participation of Nigeria in trade fairs and exhibitions
in other countries
Administer grants and other benefits related to export promotion and
development
Undertake studies of the current economic conditions, with special attention
to the export sector with the aim of advising Government on necessary
policies and measures
Co-operate with other institutions on matters relating to export financing,
export incentives specialized services to exporters
Engage in export promotion publicity
Assist in finding appropriate solutions to practical problems encountered by
exporters in the process of exportation
Plan and organize outward trade missions and provide support from Nigeria
Provide services to in-ward missions from other countries
Perform such other functions as may be conducive to the achievement of the
objective of the Export Decree (Act).
THE NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC)
The Nigerian Investment Promotion Commission (NIPC) is an Agency of the Federal
Government which was established in 1995 to, among other things, “Co-ordinate, monitor,
encourage and provide necessary assistance and guidance for the establishment and
operation of enterprises in Nigeria.”
By this decree the government abolished almost all restrictions on investment, especially restrictions
on foreign investment into the Nigerian economy. Most of the efforts of the NIPC are, therefore,
focused on attracting foreign investment.
However its total mandate includes domestic investment and its area of operation even include small
and medium scale enterprises. It is currently managing, on behalf of the Federal Government, a World
Bank Micro, Small and Medium Enterprise (MSME) pilot project aimed at empowering and increasing
capacity in the MSME sectors as well as in NGOs that specialized in delivering Business Development
Services (BDS) to MSMEs. While the pilot programme only includes Lagos, Abia and Kaduna States,
it is likely that other states and the FCT will come under this programme within the next five years.
The NIPC also has a new very informative web site at www.nipc-ng.org. It has a very comprehensive
section on tax incentives.
NIGERIAN INDUSTRIAL DEVELOPMENT BANK (NIDB)
NIGERIAN BANK FOR COMMERCE AND INDUSTRIES, (NBCI);
THE NATIONAL ECONOMIC RECONSTRUCTION FUND (NERFUND);
THE BANK OF INDUSTRY (BOI).
Over the years, a number of Development Finance Institutions (DFIs) were established by
various governments to provide funds that would boost economic activities in the country
and in the process, reduce the rate of poverty. Sadly, however, 47 years after independence,
the rate of poverty has continued to grow. Some of the Development Finance Institutions that
were introduced over the years to help fight poverty are: The Nigerian Bank for Commerce
and Industry (NBCI), Nigerian Industrial Development Bank (NIDB), and the National
Economic Reconstruction Fund (NERFUND).
In the early 2000 the NIDB was transformed into the Bank of Industry (BOI), following the
government’s
decision
to
merge
it
with
NBCI
and
NERFUND.
In addition to the above the government, since the advent of the new democracy, initiated
more programmes aimed at fighting poverty in the country. They range from the National
Poverty Eradication Programme (NAPEP) to Small and Medium Enterprises Development
Agency of Nigeria (SMEDAN)
The microfinance scheme has just been introduced in 2007, as an evolution of the
community banks to Microfinance Banks (MFBs) that would primarily focus on small scale
lending as a way of empowering low income earners and small ventures so as to fight poverty
and boost economic activities.
THE RAW MATERIALS RESEARCH AND DEVELOPMENT COUNCIL (RMRDC).
The Raw Materials Research and Development Council (RMRDC) is an agency of the Federal
Government of Nigeria vested with the mandate to promote the development and utilization of
Nigeria’s industrial raw materials.
It originated from the recommendations of a Workshop on Industrial Matters which was
organized by the manufacturers Association of Nigeria (MAN) and the Nigerian Institute of
Social and Economic Research (NISER) in July 1983. It was established by Decree No.39 of
1987, but commenced operation on February 10, 1988. It is today, Nigeria’s focal point for
the development and utilization of the nation’s vast industrial raw materials.
The primary mandates of the Council are:
a.
To draw up policy guidelines and action programmes on raw materials acquisition, exploitation
and development;
b. To review from time to time, raw material resources availability and utilization, with a view to
advising the Federal Government on the strategic implication of depletion, conservation or
stock-piling of such resources;
c. To advise on adaptation of machinery and process for raw materials utilization;
d. To provide special research grants for specific objectives and device awards or systems for
industries that achieve breakthrough or make innovations and inventions; and
e. To encourage the publicity of research findings and other information relevant to local sourcing
of raw materials.
Industrial development is one of the indices for measuring the development of nations. The
development and survival of a manufacturing sector in an economy is predicted largely on availability
of raw materials. The exploitation and utilization of such raw material is critical to economic
development. RMRDC is therefore very critical to the development of Nigeria’s productive sectors.
Currently, the capacity utilization of many industries in Nigeria is low due to lack of raw material
utilization and the singular focus of the economy on one product. It is hoped that RMRDC through
its numerous programmes, will promote new investments in the other local resources and encourage
industries to substitute local raw materials for currently imported ones.
The global goal is to pursue this policy which will invariably have multiplier effects on the nation’s
economy in terms of new industries, more employment and increase gross domestic product (GDP).
Their web site is: www.rmrdc.gov.ng
THE SMALL AND MEDIUM ENTERPRISES DEVELOPMENT AGENCY OF NIGERIA (SMEDAN):
SMEDAN was established by the SMEDAN Act of 2003 to promote the development of the MSME
sector of the Nigerian Economy.
The Agency positions itself as a “One Stop Shop” for Micro, Small and Medium Enterprises
Development. Micro Enterprises are included in the clientele of the Agency since they form the
bedrock for SME’s.
Its vision is to establish a structured and efficient micro, small and medium enterprises sector that
will enhance sustainable development of Nigeria. The mission is to facilitate the access of micro, small
and medium entrepreneurs/investors to all resources required for their development.
Justification for the existence of SMEDAN rests on the fact that poverty, which is due to lack of access
to income-earning opportunities and lack of capacity to take advantage of the opportunities, is a
social malaise that is threatening global prosperity in general and national economic growth and
development in particular.
It is also realized that a well developed MSMEs sector has proven to be one of the most veritable
channels to combat poverty. The establishment of SMEDAN is therefore justified by the need to trigger
the development of Nigeria’s MSMEs in a structured and efficient manner
Its main functions are to provide business information, in partnership with various state
governments. Its efforts with most states, and the FCT are well placed on the web at
www.abujaenterprise.org, www.smedan.gov.ng.
These sites serve as credible suppository of business information for the locations. They compile,
review and update all existing economic policies, regulations, incentives, and legislation affecting
MSME operations within the country.
Its world market section sources and makes available information on international markets, products
standards/specifications and regulations, including updates in development databank on MSMEs,
raw materials, available local technologies, machineries and prototypes. Its proposed services through
their sites and offices include:
Proposed
Design
and
Establishment
of
Comprehensive
BSCs
and
IPs:
To be able to provide Business Support Centers (BSCs) in each State, to provide business advisory
services. i.e Link MSMEs to sources of funds; provide internet/website facilities; provide market
information; provide business consultancy services; collate and make available business plans and
prototypes; implement capacity building programmes; advise on regulatory and standardization
frameworks and collate all relevant business information that could be useful to SMEs.
Develop and establish, in collaboration with state governments and NGOs in the private sector,
Industrial Parks (IPs) to facilitate easy access to land, good infrastructure, security, regulatory bodies
such as NAFDAC and SON; banking services etc.
Capacity Building and Proposed Promotional Services:

Develop, test and disseminate new business models illustrating best business practices to
upgrade SMEs operations.







Conduct seminars, conferences, workshops, and interactive sessions for promotional and
capacity building purposes.
Encourage and facilitate business clusters, networks and cooperatives for enhanced
productivity and easier access to factors of production including finance.
Encourage and facilitate new investments in designated priority areas in each State.
Organize trade and investment exhibitions and interactive fora.
Develop and apply standards and quality control measures for technologies and products
of SMEs.
Improve the financial management skills of MSMEs through training workshops.
Develop and implement effective strategies for opening up domestic and international
markets for MSMEs products.
SMEDAN: A Main Financial Intermediary between MSMEs and Sources of Finance:




Liaise with financial institutions to harness and pool resources for utilization by MSMEs.
Develop and implement a strategy for the effective and timely disbursement of SMIEIS
funds.
Hold regular consultations with international donor agencies, trade groups, relevant
ministries, research institutes, states and local governments with the view to share ideas
and partner in implementing programmes for the development of MSMEs.
Attract foreign investments and funds for the development of the MSMEs sub-sector.
Proposed Policy Development:
Develop and seek statutory approval for a national policy on MSMEs. Conduct impact
assessment studies and use same to recommend improvements in policy intervention.
THE INDUSTRIAL DEVELOPMENT CENTERS (IDCs)

Over the years, the Federal Government has taken various steps, to promote the development of Small
and Medium Scale Industries (SMIs). These included, among others, funding and setting up of
industrial estates to reduce overhead costs.
One of the many institutions established was the Industrial Development Centers (IDCs), to provide
extension services to SMIs in such areas as project appraisal for loan application, training of
entrepreneurs, managerial assistance, product development, production planning and control, as well
as other extension services. The first IDC was established in Owerri in 1962 by the former Eastern
Nigeria Government, Ministry of Trade and Industry, and was taken over in 1970 by the Federal
Government.
Subsequently, more IDCs were established at Zaria, Oshogbo, Maiduguri, Abeokuta, Sokoto, Benin
City, Uyo, Bauchi, Akure, Ilorin, Port Harcourt, Kano and Ikorodu. Over the years the achievements
of the IDC’s have not been commendable and in most instances they have been overtaken by other
government agencies doing the same programmes.
TECHNOLOGY BUSINESS INCUBATION CENTERS, (TBIC’s)
Part of the NEEDS programme of the Obasanjo administration included the creation of jobs, education
facilities with special emphasis on Technology business Incubation Centers, (TBIC’s). The goal is to
promote and engage the semi-formal productive sectors of the economy:
According to information at the beginning of 2000 about 70% of the population of Nigeria is engaged
either in the informal sector, the Agricultural sector, or small and medium enterprises (SME’s). Such
an important sector of the economy has access only to the most rudimentary technology, information
and processes. As part of the transformation agenda, the government wanted to diversify the economic
base and mainstream the informal sector while strengthening its linkages to the rest of the real sector
by increasing the local value addition and share of manufactured goods in total exports.
Under NEEDs I and II, the institutional and policy framework for this was being established through
Small and Medium Enterprise Development Agency of Nigeria, (SMEDAN), Technology Business
Incubation Centres, (TBIC’s) and Small and Medium Industries Equity Investment Scheme, (SMIEIS).
In summary the TBICs aim to provide conducive environments for nurturing start –ups and survival
of value added and technology – related manufacturing.
LOCALLY AVAILABLE RAW MATERIAL AND MINERAL RESOURCES BY POSSIBLE USES AND
PROCESSING EQUIPMENT REQUIRED, AND POSSIBLE MARKETS
Table 1 shows the uses, processing equipment for major agricultural raw materials while Table 2 does
the same for minerals. It is evident that many of these raw materials and mineral resources can be
put to multiple uses while the processing equipment in many cases has multiple applications.
Markets often exist locally and internationally for the products
Raw
Materials
S/No.
Table 1: Uses, Processing Equipment and Markets for Raw Materials
1.
Product/
Processing
Equipment Required
Possible Markets for
Products
- Milling plant with
dehuster, grinder,
sifter
- local and foreign
food and drug
manufacturers
- distilling equipment,
fermentation tanks
- local and foreign
distillers
- Alcohol
- chemical extractors,
concentrators
- adhesives,
industrial chemicals
oil extraction plant
- paper and allied
products
manufacturers
- corn oil
chaff compressor and
compactor
Possible uses
Maize
- corn flour, corn
flakes, animal feed,
baby food, starch
and derivatives,
pharmaceuticals,
confectionery
- particle board
manufacturing
- furniture makers
2.
Rice
- Breakfast cereals,
animal feeds, baby
foods, confectionery,
flour mills
- malting and
brewing
- parboiled rice
-particle board
manufacturing
- livestock feeds
Cow pea
3.
- Thickener in baby
foods
- Milling plant with
dehuster, grinder,
sifter
- Malt production
plant, fermentation
tanks
- Boilers , washers,
driers
- food and drug
manufacturers
- local and foreign
distillers
- food packaging and
retailing companies
- furniture makers
- Chaff compressor
and compactor
- bean flour mills,
dehusters, sifters,etc
- livestock farmers,
private individuals
- local and foreign
baby food and other
manufacturers
- domestic
consumption as food
- individual and
households
- composite flour
Soya bean
4.
- baby food, cereals,
livestock feeds
- confectionery
- dehuster,
dryer/steamer, milling
machine, packaging
- local and foreign
baby food and other
food manufacturers,
- crusher/oil extractor
and refining plant
- animal feed mill
- steamer, milling
machine, crusher/oil
extractor,
mixer/blender
- pharmaceutical
companies, vegetable
oil manufacturers
- protein concentrate
- edible oil
5.
- edible oil,
margarine
Groundnut
- peanut butter
- cosmetics - soap,
perfumes and creams
- animal feed
- baby food, cereals.
- domestic
consumers, food and
drug manufacturers
- washer, driers,
grinders, mixers,
- local and foreign
baby food and other
food manufacturers
- dehuster, animal
feed mill
- pharmaceutical
companies
- farmers
- food processing
plants.
6.
- starch (textile
finishing)
Cassava
- livestock feed
- alcohol
- adhesives
- cassava mill
(washing, weighing
scales, drier, pelleting
machine, peeler,
packaging machine),
mixers, packaging
machines
- agro-allied industry
- cocoa mill, grinder,
steamer, dryer
- cosmetics
manufacturers
- distilling units
(grinder, steamer,
dryer)
- food and drug
manufacturers
- garri
- domestic
consumption
- local garri
manufacturers
- chemical
manufacturers.
- confectionery
7.
- cocoa butter
- wine and beverages
Cocoa
- cocoa powder/ash
- confectionery
- livestock feeds
- suppository
- bakeries
- cocoa butter
manufacturing plant
- detergents
8.
- beverages
Kolanut
- stimulants
distilling units
(grinder, steamer,
dryer)
- wines
- dyes
- export market for
products
- local beverage
manufacturers
- domestic consumers
- soft drink
concentrates
Coconut
9.
- edible oil
- oil extraction units
- cosmetics, soap
- crushers,
- furniture and fibre
units
- blender,
- confectionery
- furniture making
equipment
- animal feeds
- charcoal chamber
- vinegar
- decorations
- charcoal
- export market for
products
- local
pharmaceutical and
confectionery
industries
- domestic
consumption
(Fruit and Nut)
Oil Palm
10
.
- edible oil
- oil mill
- margarine
- hammer mill
- substitutes for
cocoa butter
- crushers
- confectionery
- coffee whitener
- palm wine
- fertilisers
- oil extractors,
- boilers
- pulp compactors
local and
international
pharmaceutical,
cosmetics and
confectionery
manufacturing
industries, furniture
makers, distillers,
domestic consumers
- drums, moulds,
- mixer
- soap/detergent
- cosmetics
- yeast
cocoyam
- starch and its
derivatives
Yam/
11
.
- baby foods
- boiler
- grinder
- dryer
domestic
consumption, flour
millers, food and drug
manufacturers.
- composite flour
- chips
12
.
- orange juice
- juice/oil extractors
- wine
- distilling units
Citrus
- essential oils
- aromatic
- jellies
- marmalade
- flouring
- syrups
local and
international
beverage
manufacturers,
pharmaceutical
companies, domestic
consumers,
confectioners.
Mango, Pineapple, Pawpaw, Guava
13
.
- medicinal extracts
- grinder/extractor
-pharmaceuticals
- edible fresh
- crusher, mixer,
packaging
- export markets
- concentrates
- jellies
- juice
- flavouring
- nectar
- distilling units,
packaging
- jam
- wine
- confectionery
Sugar cane
- crusher, mixer
- syrup
- sweetener
14
.
- grinder, juice/pulp,
extractor
- local and
international
confectioners,
beverage
manufacturers,
domestic consumers.
- beverages
- mixer, extractor,
crushers
- local and
international market
- boiler, distilling
units, packaging
- paper
- leather tanning
18
.
19
.
20
.
Bamboo
Cashew
Rubber
17
.
clipboard and
furniture
sawmilling and
furniture equipment
same
pulp and paper
dryer, paper mill
same
roaster nuts
roaster, cracker
extractor
same
Tyres and Tubes
Oven, extrusion
machine, roller mill,
conveyor belt
same
Chips
peeler, washing
utensils, boiler, dryer,
frier and packaging
machine
same
food/confectionery
peeler, slicer, dryer
and miller
same
medicinal extracts
Potato
16
.
Banana
15
.
Timber
- pharmaceuticals
24
.
25
.
food/chips
peeler, chipping
machine, fryer and
dryer
same
fruit juice
Continuous juice
expeller, pasteurizer,
filtration machine,
cooking machine,
packaging machine.
Same
flour, starch, animal
feed, malt
Jaw crusher,
pulverizes, screens,
hammer miles
same
flour, feedmill,
confectionery
same
same
flour, malt
milling machine
same
Orange
Plantain
Pineapple/
Sorghum
23
.
Millet
22
Wheat
21
.
Minerals
S/No.
Table 2: Uses, Processing Equipment and Markets for Mineral Resources
1.
Product/
Possible uses
- bricks, pottery,
sanitary ware
- ceramic insulator
- refractory and
insulating bricks
Processing Equipment
Required
- ceramics processing
equipment- crushers,
moulds, vibrator, kiln
- jaw crusher
- impact grinders
Clay
- pan mills
-vibrating screen
magnetic separators
Possible Markets for
Products
- domestic demand for
crockery
- local intermediate
industrial users
- international demand for
finished/intermediate
products
- foundries, iron and steel
plants
- cement, fertilizer
- petrochemicals
ceramics processing
equipment - crushers,
mixers, moulds,
vibrators, kiln
- ceramics manufacturers
Feldspar
- ceramic and glass
wares, enamel,
polished stone and
slabs, tiles and
refractories
- chalk, cement,
pharmaceuticals,
plaster of paris
(POP), ceiling
boards, decorative
plaster, moulds,
paint, paper
mixer, moulds, dryer
Gypsum
- ceramic manufacturers
2.
- chalk making industry,
pharmaceutical
industries- local and
foreign.
3.
- dealers in stone ware
4.
- construction
Limestone
- cement
manufacture
- vertical shaft/rotary
kiln
- jaw crusher
- ceramics
- conveyers
- water treatment
- impact hammer
crusher
- As filter in
plastics, fluxes in
iron and steel
smelting
- As source of
industrial salt
- As decorative
ornaments
- As monumental
slabs
- cement manufacturers
- construction contractors
- stone masons
- precipitated calcium
carbonate production
- ball mills
- electrostatic
precipitator
- conditioning tower
- precalcinic system
- cutting/shaping tools
- hydrator
- rotary kiln
- packaging
Bitumen and
Heavy oil
5.
6.
Road construction,
coal tar.
Bitumen processing
plant
construction and
pharmaceutical companies
- local and foreign
floor tiles, wall
decorative finishing,
monumental slabs
- diamond multiple
blade frame saw
local and foreign
construction investors and
service providers
- jaw crusher
- rotary screen
Granite
- hammer mill
- compressor conveyor
- grinding and
polishing line
- circular saw
7.
Tantalite
- trimming machine
- Alloy, electronic
and computer
manufacturing
- computer and
electronic
manufacturing
equipment
local and foreign
construction investors.
8.
- fertilizer
- chalk
Kaolin
- chemicals and
pharmaceuticals
- paint and paper
products
- ceramic tiles and
porcelain wares
- pipes insulator etc
- Sieves, Plungers,
Tanks and Filter Press
- Hydrocyclones
- dryers
- vibrating screen
- separators
- pharmaceuticals
- cosmetics
- electrical products
manufacturers
- paper, paint and ceramic
manufacturers
- calciners
- pumps
- floatation machine
- weighing scale
- bagging machine
9.
- cosmetics
(powders)
- pharmaceutical
processes
Talc
- paper and paint
production
- ceramic industries
- jaw crushers,
hammer mill, pebble
mills
- classifiers
- floatation cells
- slurry pump
- compressor
- hydrocyclone
- filter press
- flash drier
- weighing scale
- bagging machine
- pharmaceuticals
- cosmetics
- electrical products
manufacturers
- paper, paint and ceramic
manufacturers
10
.
- fertilizer (NPK)
- rotary washers
- fertilizer manufacturers
- phosphoric acid
- trommel
- phosphoric acid
manufacturers
- jaw crusher
- vibrating screen
Phosphate
- hydraulic classifier
- rougher bed
- floatation machine
- mixing tank
- silos
- hammer mill
- classifier
15
.
16
.
17
.
Laterite
Columb
ite
- Jewellery and
ornament
grinding, polishing,
cutting and water
pumps
local and international
markets
Tiles, building &
construction
hydroclones, sieves,
tanks, filter drier,
separator
local and foreign markets
Iron and Steel
excavator, separator,
pumping
Same
Same
excavators, separators,
air flooding, pumping
machines
Same
Building and
construction
cutting, polishing,
excavators
Same
Same
excavators and
separators
Same
iron sheet and steel
excavators, separators
and air flooding
Same
- electronics
Tin
14
.
Marble
13
.
Galina
12
.
Zinc ore
11
.
Gemsto
ne
- packaging equipment
23
.
24
.
25
.
26
.
Same
electronics,
ornaments, building
and construction
excavator, separator
Same
food and chemicals
distillers and drier
Same
ornaments,
jewellery and
electronics
excavators and
separators, cutting,
polishing,
Same
ornaments,
jewellery and
electrical,
electronics
excavators and
separators, cutting,
polishing,
Same
Same
excavators and
separators
Same
iron and steel
excavators and
separators
Same
soap production,
water treatment
hammer mill and
crushers
domestic and export
cokes, fuel
hammer mill and
crushers
same
Building
Not indicated
Same
Paraffin wax
crusher, dryer mill,
mixer, grater screen
Same
aggregat
e
Aquama
rine
Whofra
mite
Rock
Gold
excavator, cutting,
polishing
Silica
22
.
building and
construction
Copper
21
.
Same
Lead
20
.
excavators, separators,
air flooding machines
Iron ore
19
.
iron, steel,
electronics and
ornaments
Potash
18
.
29
.
Lignite
28
Sandsto
ne
Coal
27
31
Bauxite
Bronze
30
.
Refractories and
abrasives
crusher, beneficiation
plant
Same
Fittings
clay, bronze, heater,
wires, latente
Same
Source: CBN SMINIS Document 2006.
NATURAL ENVIRONMENT
A: Natural Resources
• Land
• Atmosphere
• Surface Water
• Groundwater
• Flora
• Fauna
• Ecosystems
• Energy Resources
B: Social Resources
•
•
•
•
Cultural Factors
Economic Factors
Social Infrastructure
Social Development
ENVIRONMENTAL IMPACTS OF ECONOMIC ACTIVITIES ON VARIOUS RESOURCES AND
FACTORS
• Emissions
• Health Hazards
• Degradation –Natural Resources and Ecosystems
• Degradation – Social Structures
EMISSIONS
• Liquid Waste
• Solid Waste
• Air Pollutants (Gases, Dust, Fumes, Vapours)
• Noise And Vibrations
• Odours
• Chemical Reactants (Producing Colours, Odours, Poisons)
• Hazardous Substances
HEALTH RISKS & HAZARDS
Health Risk to Workers And Staff
Increase of Already Existing Risks
Risk of Accidents Affecting Social and Natural Environment (During Construction & Operation,
After Closing Down Operations, During Transport of Hazardous Substances)
DEGRADATION OF NATURAL RESOURCES
•
•
•
•
•
•
Direct and Indirect Damage to Natural Water Resources
Damage to Land Resources
Uneconomic Use of Nonrenewable Natural Resources
• Damage to Plant Populations
• Disruption of Interlinked (Balanced) Ecosystems
• Displacement, Extinction of Species
DEGRADATION OF SOCIAL STRUCTURES
•
•
•
•
•
Migration
Displacement of Human Habitation
Displacement of Economic Activities
Disruption of Culture-Specific Social Relationships and Infrastructures
Deterioration of General Living Conditions
TOPIC 9:
ROLE OF COMMERCIAL AND DEVELOPMENT BANKS IN SMALL AND MEDIUM SCALE
INDUSTRIES DEVELOPMENT.
Introduction:
There is no doubt that the Commercial and Development Banks are playing a very significant role for
the promotion of small and medium scale enterprises in Nigeria. It is against this background that,
this section attempts to intimate the potential entrepreneurs to appreciate the contributions of these
financial institutions in the promotion of SMEs. Students should be able to identify sources of finance
to SMEs and know how to access these funds. They should understand the modus operandi of
government policies as they affect different sectors of the economy.
Financial Institutions Involved in Entrepreneurial Development;
The reduction of all six existing Development Finance Institutions (DFIs) to two; (BOI and NACRDB)
has narrowed the playing field and streamlined the operations of the DFIs. The Nigerian Industrial
Development Bank (NIDB), the National Economic Reconstruction Fund (NERFUND) and the Nigerian
Bank for Commerce and Industry (NBCI) have been brought together to form the Bank of Industry
(BOI). On the other hand, the Family Economic Advancement Programme (FEAP), Peoples Bank of
Nigeria (PBN) and the Nigerian Agricultural and Cooperative Bank (NACB) have become a single Bank,
the Nigerian Agricultural, Cooperative and Rural Development Bank (NACRDB).
These institutions, before the Government took the decision to merge them, were unable to perform
their roles effectively due to the following reasons:
1. Low Capitalization
2. Inefficient Operations
3. Poor loan portfolio
4. Poor Liquidity
5. Inability to access external lines of credit, and
6. Lack of capacity to finance projects
BANK OF INDUSTRY (BOI)
The Bank of Industry (BOI) is owned by the Federal Government of Nigeria. This bank emerged from
the government’s rationalization of some DFIs namely the Nigerian Bank for Commerce and Industry
(NBCI), Nigerian Industrial Development Bank (NIDB) and the Nigerian Economic Reconstruction
Fund (NERFUND).
SHAREHOLDING:
NAME:
UNITS
Min. of Finance Incorporated
297,688,401
Central Bank of Nigeria
201,822,645
Nigerian citizens and associations
488,954
The Bank of Industry has four subsidiaries from its merger:
• Leasing Company of Nigeria (LECON)
• NIDB Trustees Limited (NTL)
• NIDB Consultancy and Finance Limited (NIDB Consult)
• Industrial and Development Insurance Brokers (IDIB)
%
59.54
40.36
0.10
FACILITIES
• Initial capital base of N50 billion
• Six zonal offices
TYPES OF PROJECTS FINANCED BY BOI
• Projects in the areas where Nigeria has comparative advantage
• Projects that engage in the efficient conversion of local raw materials into finished products
• Ventures that produce good quality products at a least cost and that could be successfully
marketed locally and/or internationally.
PRODUCTS AND SERVICES DELIVERABLE BY BOI
1. Medium and Long-term loans.
2. Working Capital Finance
3. Equity Financing
4. Management of dedicated funds
5. Loan guarantees
6. Co-financing
7. Investments in Corporate Boards
8. Business Development Services
9. Lease financing
10. Trusteeship
11. Stock Brokerage
12. Foreign Exchange Dealership
13. Insurance Brokerage
PROSPECTS
The BOI is intended to focus on the private sector in both funding and commercial operations. The
Bank has opted to adopt the existing prudential guidelines for Banks though more stringent when
compared with the CBN proposal to apply some standards used by other finance companies for BOI.
BOI would focus on SMEs with linkages within the broad economy with a view to enhancing overall
industrial interaction, expanding output and employment and utilizing local resources to its fullest
advantage. The huge SMIEIS funds currently accumulated by the Banks will help BOI fulfill its
mandate.
It is expected that the bank’s contribution to the economy will grow stronger as the implementation
of the economic reforms progresses to widen the scope of needs for economic/business development
financing.
NIGERIAN AGRICULTURAL COOPERATIVE AND RURAL DEVELOPMENT BANK (NACRDB)
The Bank is a development Finance Institution wholly owned by the Federal Government of Nigeria.
NACRDB was incorporated in 2000 following the merger of the defunct Nigeria Agricultural and
Cooperative Bank, People’s Bank of Nigeria and risk assets of the Family Economic Advancement
th
Programme (FEAP). The Nigerian Agricultural and Cooperative Bank began operation on 6 March
1973 as Nigerian Agricultural Bank Limited. The two government institutions own the Bank in the
following ratio:
Federal Ministry of Finance
60%
Central Bank of Nigeria
40%
FACILITIES
• Six zonal offices.
• 200 branch offices.
• N50 billion capital base.
TYPES OF BUSINESS
NACRDB provides:
• Finance and credit facilities to agricultural and agro-allied industries.
• Loans to farmers, agricultural institutions, organizations and cooperative societies.
• Direct investments by way of equity participation in wholly owned or joint-venture projects.
• Provision of guarantees to viable agricultural and agro-allied ventures.
• Rural savings scheme.
LENDING CHANNELS
The NACRDB has five channels of financial support to its clients:
i. On- lending Scheme:
This is lending through Cooperative Financing Agency (CFAs), Non-Government Organisations
(NGOs), Self Help Groups (SHGs) and some Private Sector micro-credit institutions
ii. Small Holder Scheme (SHS)
The Small Holder Scheme is designed for small and medium scale individual and group farming
organizations and funds are provided as loans on very favourable terms and conditions. Interest
charges are usually below the market rate.
iii. First/Second Livestock Development Programme (SLDP)
These programmes/projects are designed for small and medium scale individual and group farming
organizations and funds are provided as loans on very favourable terms and conditions. Interest
charges are usually below the market rate.
iv. Special Projects
The special projects are usually undertaken in collaboration with such international financial
institutions and donor agencies as IFAD, ECOWAS and ILO.
v. Investments in projects
This targets mainly medium and large-scale entrepreneurs who have the capacity to provide collateral
securities.
PROSPECTS
• Sourcing of offshore credit facilities for loan disbursement.
• Participation in Agricultural Exchange Market through its subsidiary, the Food Development
Company.
• Creation of local market for raw material supply to local industries.
• Diversification of operations to agricultural support services: desertification control project,
tangential agro-allied projects, equipment leasing, agro-chemicals manufacture and others.
SMALL AND MEDIUM INDUSTRIES EQUITY INVESTMENT SCHEME (SMIEIS)
Establishment of the Scheme:
The Small and Medium Industries Equity Investment Scheme (SMIEIS) is a voluntary initiative of the
Bankers’ Committee approved at its 246th Meeting held on 21st December, 1999. The initiative was
in response to the Federal Government’s concerns and policy measures for the promotion of Small
and Medium Enterprises (SMEs) as vehicles for rapid industrialization, sustainable economic
development, poverty alleviation and employment generation.
The Scheme requires all banks in Nigeria to set aside ten (10) percent of their Profit After Tax (PAT)
for equity investment and promotion of small and medium enterprises.
Purpose of the Scheme:
The 10% of the Profit After Tax (PAT) to be set aside annually shall be invested in small and medium
enterprises as the banking industry’s contribution to the Federal Government’s efforts towards
stimulating economic growth, developing local technology and generating employment.
The funding to be provided under the scheme shall be in the form of equity investment in eligible
enterprises. This will reduce the burden of interest and other financial charges expected under normal
bank lending, as well as provide financial, advisory, technical and managerial support from the
banking industry.
For the purpose of this scheme, a small and medium enterprise is defined as any enterprise with a
maximum asset base of N500 million (excluding land and working capital), and with no lower or upper
limit of staff.
Activities Covered By the Scheme:
Every legal business activity is covered with the exception of
(i) Trading/merchandising
(ii) Financial Services
Eligibility for Funding:
To be eligible for equity funding under the Scheme, a prospective beneficiary shall:
(i) Register as a limited liability company with the Corporate Affairs Commission and comply with all
relevant regulations of the Companies and Allied Matters A ct (1990) such as filing of annual returns,
including audited financial statements;
(ii) Comply with all applicable tax laws and regulations and render regular returns to the appropriate
authorities; and
(iii) Engage or propose to engage in any of the businesses covered by the scheme
Mode of Investments and Other Related Issues:
1. Equity under the scheme may be in the form of fresh cash injection and/or existing debts owed to
participating bank.
2. A participating enterprise may obtain more funds by way of loans from banks in addition to equity
investment under the scheme.
3. Eligible enterprises are free to approach any bank, including those they presently have relationship
with, to seek funding under the scheme. Prospective beneficiaries should note that the banks may
operate the scheme directly, through their wholly owned subsidiary venture capital companies or
through venture capital companies floated by consortia of banks or through independent venture
capital companies.
4. Prospective beneficiaries are advised to seek the opinion of third party consultants such as lawyers,
accountants and valuers in determining the value to be placed on the assets and capital of their
businesses in order to determine a fair price before or during negotiations with the banks.
Requirements by Beneficiaries:
1. Beneficiaries will be expected to:
(a) Ensure prudent utilisation of funds;
(b) Keep up-to-date records on the companies’ activities under the Scheme;
(c) Make the company’s books, records and structures available for inspection by the appropriate
authorities (including banks and the CBN) when required;
(d) Comply with guidelines of the Scheme; and
(e) Provide monthly financial and operational reports to the investing banks before the 15th of the
next succeeding month.
2. The recommendations of industrial associations, particularly Manufacturers Association of Nigeria
(MAN); National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA);
National Association of Small and Medium Scale Enterprises (NASME); and National Association of
Small Scale Industries (NASSI) will be mandatory for members of these associations.
3. Membership of recognized NGOs engaged in entrepreneurial development and promotion of small
and medium scale enterprises will also be an advantage.
The Role Of Banks And Financial Institutions In The Creation And Development Of Enterprises;
SOURCES OF BUSINESS FINANCING
Many prospective entrepreneurs have promising business ideas and plans. However, the
capital necessary to initiate their plans may not be readily available. As a result, many
prospective small enterprises never become operational. The small business owner will have
to invest a certain amount of personal money to start a business. However, with sound
preparation and planning, financing can be obtained from other sources. The two primary
sources of financing to establish a business may be the owner’s equity or borrowing from
lending institutions.
1. Equity financing
The main source of equity financing for most entrepreneurs is their personal savings.
Financial experts say that one-half of the money needed to start a small business should
come from the owner. This means future owners must work and save before having enough
money to start a business.
Another popular source of equity financing is money from other sources such as family,
friends, venture capitalists, an existing business. However, there are a few points to consider.
For example, will they want to get involved with operating the business? What will happens
if the business doesn’t succeed? Will it ruin your relationship?
Equity financing can also be obtained by selling part of the business to one or more partners.
With partners putting in money, it is usually easier to raise the total amount needed.
However, partners must be able to get along and sometimes this is not easy. Since many
people starting their own business want to make their own decisions, the partnership
alternative may not be attractive. However, people of like minds are encouraged to form
partnerships where duties and rewards are clearly stated.
2. Borrow from lending institutions
When equity sources are not enough, the entrepreneur has the option of borrowing from
other sources. Lenders will usually lend money for starting a business to people they know
and trust. Lenders are careful not to lend money if the risk is too great. Lenders do not want
to lose money on businesses that fail. Most lenders will therefore review the business plan
carefully. This plan should describe how the business will be operated, how much money will
be needed and how it will be used, and at what point the business will be profitable.
Most people think of banks when borrowing money. However, it is not always easy for small
enterprises to borrow from them. Banks only lend money when the risk of losing it is very
low. Frequently, they will only lend to customers whom they have known for a long time. If
someone is thinking of borrowing money at some time in the future, it would be a good idea
for that person to develop a personal relationship with a local banker as soon as possible.
3. Considerations in applying for a business loan
Different lending institutions have different procedures which have to be followed by the loan
applicant. While lending institutions want to help potential borrowers, these institutions have
to be assured that repayment of the loan will take place as agreed by the borrower. It is
necessary to understand the following factors that are taken into consideration when
appraising a loan application.
Type of loan: short-term (up to one year) or long-term (longer than one year).
Purpose of the loan: it is essential to determine that the applicant will not invest the money in a
business venture which is illegal, not favoured by government policy or is unfavourable to the
community concerned.
Credit worthiness and integrity of the borrower: Can the borrower be trusted?
Capability: the business profile of the applicant becomes an indicator of the entrepreneur’s capability
to operate the project with professional expertise and effectiveness. Capability characteristics help
the lender to understand whether the borrower will be able to utilize the loan for the intended purpose.
Repayment period: this is a very important requirement both from the borrower’s and the lender’s
standpoint. The lender needs to know whether the offer of the borrower to repay is realistic. The
lender can ascertain this through statistical and financial projections and advise the applicant
regarding a realistic repayment period, and other details such as the amount of monthly instalments.
Security: security or collateral for the loan must be acceptable to the lender. Even if all other
conditions are fulfilled, the lender may not grant the loan if security conditions and terms required
by the bank are not adequate. This is especially true when applying for a business loan for the first
time.
Guarantors: some lenders call for security both in the form of immovable property and tangible assets
and guarantees from friends.
Business plan: this is the major instrument used by any lending institution to decide whether a loan
applicant deserves a loan. A business plan discloses whether the intended business is viable or not.
A loan applicant may have his own expert prepare a business plan to prove that the loan he is applying
for deserves due consideration by the lending organization. The lender always appraises the business
plan presented by the applicant and comes to his own conclusions or prepares his own feasibility
study to assess and appraise the viability of the proposed business. A very significant aspect is the
cost involved and the cash flow. Cash flow, as well as financial and statistical projections, indicate
whether the project can generate more money than the cost incurred. These results will indicate to
the lender whether the loan is safe and the borrower can repay according to the agreed terms.
Current customers of a lending institution have an easier position when applying for a business loan
if the loan is to be used as working capital. The bank will study the customer’s past financial records
and these financial records will help the banker to decide what action to take. If the customer intends
to start a new business, then the procedures will almost be similar to that of a new applicant. By
keeping written financial records, the entrepreneurs will have written proof of the past history of the
business.
There are several sources of money available to entrepreneurs. Frequently, the key decision
is to determine which source of money is most appropriate for their current needs. Selection
of the right source of financing for their needs can often have a pronounced effect on the
future of their business.
Receiving a short-term bank loan when a longer-term loan is required can soon create a
crisis. Selling a part of the business to raise capital that could have been borrowed may be
extremely costly. Over-extended credit can be costly and restrict operations.
There are many opportunities for mistakes in the choice of capital source. However, the right
choice can provide the capital needed while freeing entrepreneurs from unnecessary costs,
risks, or the possibility of losing control of their own business.
Criteria for evaluating loan sources
To determine the best source for raising capital needed in a particular situation, the following
five questions should be considered.
What are the benefits of a loan in relation to its costs? (cost)
Which loan source exposes the business to the lowest degree of risk? (risk)
Will conditions imposed by a loan source reduce flexibility in seeking additional capital or in using
capital generated through operations according to the owner’s best judgement? (flexibility)
Could the owner’s control of the business be adversely affected? Could the loss of control prevent the
entrepreneur from making operating decisions that are in the best interests of the business? (control)
Which financial sources are available to the business? (availability)
Cost. The cost of a loan is usually measured by its impact on the earnings of the present
owners, not simply the increased expenses incurred by that business. Consider a company
that is deciding between a =N=20,000 loan at 10% interest or selling 25% of the shares in
the business to raise =N=20,000. The business expects to pay interest of =N=2,000 on the
loan per year, which would reduce its net income by =N=2,000 before taxes. If the business
expects to earn =N=30,000, interest expenses would reduce earnings to =N=28,000.
In the equity alternative, the net income would be =N=30,000, since there would be no
interest expenses. However, only =N=22,500 would be applicable to the present owners since
=N=7,500 (=N=30,000 x 25%) would represent the participation of new shareholders.
Therefore, the income of the business under the equity alternative would be higher, but the
participation of the present owner(s) would be less.
Each capital source has its own cost. Internal sources such as the sale or liquidation of assets
could lead to a loss of revenue following inventory disposal or added operating costs if
machinery was sold to generate cash. In reaching a decision, it is important to consider all
relevant costs for each source of finance.
Risk. There are several types of risk involved in raising capital. Use of trade credit could lead
to supplier dissatisfaction and possible damage to your credit standing. Since borrowed
money must be repaid with interest, debt capital imposes obligations upon the cash flow of
the business that must be met to avoid default. A default could cause a number of actions,
such as forfeiture of collateral or forced bankruptcy. The only money source that involves no
risk to the business is equity capital, since the equity investor, not the business, is the risktaker.
Lending officer’s concerns
Often a bank lending officer refuses or “declines” a loan request. Foremost in the lender’s
mind is the question: “Can the firm pay back this loan?” The lender may refuse the loan
because the owner hastily and haphazardly prepared the loan application under pressure.
As a result, the lending officer detects an air of instability and lack of planning in the owner’s
description of his or her business affairs. When an entrepreneur’s request for a loan is turned
down, the loan applicant should accept the refusal gracefully, hold frank talks with the
declining Bank/Venture Capital and eliminate weaknesses before applying for a loan in the
future.
Questions Concerning Borrowing
The lender needs answers to several pertinent questions to determine whether or not the
borrower can repay the loan. One of these questions is: “How does the borrower intend to
use the money?”
What kind of loan? When appraising loan proposal, determine what kind of loan is needed.
A business uses four basic types of money in its operations. The purpose for borrowing will
determine the type.
Trade Credit: This type of money is not borrowed. It is money you owe your suppliers who permit
you to carry inventory on open account. A good past credit experience is evidence of your ability to
repay borrowed funds.
Short-term Credit: Banks and other lenders provide this type of money to make purchases of
inventory for special reasons, such as buying inventory for the next selling season. Such loans are
self liquidating because they generate money from sales. Short-term credit is repaid in less than one
year.
Long-term Credit: Loans for more than a year are used for the expansion or modernization of a
business. They are repaid out of accumulated profits. Usually, a loan of this type is a mortgage or a
promissory note.
Equity Funds. This type of money is never repaid. An investor gives cash to the business in return
for a share of ownership in the business.
Many owners fail to recognize the difference between the four types of money. Keep in mind
that money borrowed for a temporary purpose should be used in the profit producing areas
of the business and will be repaid out of that operation. Equity funds are those which remain
in the business and increase the net worth for the owners.
Are sales adequate? Is a loan being requested to: increase sales volume, buy additional stocks
of high volume merchandise which may have even greater potential, or create a new image
through an overall advertising campaign?
What is the receivables position of the business? Receivables are the accounts receivable that
are uncollected and getting old. In effect, does the business need money to carry old
accounts?
Is the profit margin adequate? Is there a lot of business but results show a lack of profit?
This may indicate that the business expenses are not controlled. Is the market insufficient?
What is the plan for repayment? Is the forecast for cash income and expenditures realistic?
The lender will carefully review the cash flow of the business to determine whether or not the
owner is generating sufficient cash to meet the firm’s obligations. The lender also has to make
sure that cash needed for working capital is not being absorbed by the business into other
areas of equity and thereby reducing the available cash.
However entrepreneurial forces in Nigeria are traditional and strong. In recent times an increased
unemployment and a corresponding rise in poverty has left few other options for the enterprising
Nigerian.
With the advent of the new democracy and the national quest for free economy, the government has
created and adopted policies promoting the use of technology in education. The Nigerian Economic
Policy 1999-2003, is a comprehensive compendium of the government’s policies and guiding
principles for the nation. The policy states: "Government will provide affordable quality education for
all Nigerians, the Universal Basic Education and mass Adult Literacy programmes will be pursued in
earnest" and in particular, "Government will create incentives to expand access to information and
communications technology which will facilitate leap-froging in order to short-circuit the longer span
of development.” The policy even recommends partnerships with national and international agencies
including the United Nations Transfer of Knowledge through Expatriate Nationals, (TOKTEN)
programme.
Government Policy on Financing Small and Medium Enterprises;
The Federal government has always been concerned on accelerating the growth of SMEs
considering the important role of this sector in the socio-economic development of the nation.
This has informed the setting up of various agencies and Development Financial Institutions
aimed at addressing the peculiar problems of the SMEs. On the inception of democratic rule
in 1999, the government reviewed existing structures and policies and decided on
rationalizing the DFIs to make them more functionally effective.
The reduction of all six existing DFIs to two; (BOI and NACRDB) has narrowed the playing
field and streamlined the operations of the DFIs. The Nigerian Industrial Development Bank
(NIDB), the National Economic Reconstruction Fund (NERFUND) and the Nigerian Bank for
Commerce and Industry (NBIC) have been brought together to form the Bank of Industry
(BOI). On the other hand, the Family Economic Advancement Programme (FEAP), Peoples
Bank of Nigeria (PBN) and the Nigerian Agricultural and Cooperative Bank (NACB) have
become a single Bank, the Nigerian Agricultural, Cooperative and Rural Development Bank
(NACRDB).
These institutions, before the Government took the decision to merge them, were unable to perform
their roles effectively due to the following reasons:
1. Low Capitalization
2. Inefficient Operations
3. Poor loan portfolio
4. Poor Liquidity
5. Inability to access external lines of credit, and
6. Lack of capacity to finance projects
The following strategies have also been used to address poverty reduction and SME growth:
1. Support for rapid development of SMEs through increased funding of development financial
institutions to enable provision of long-term credit to the real sector of the economy;
2. Design and implementation of agricultural subsidy and special presidential initiatives (on
selected products) for direct benefit for the Nigerian farmers;
3. Elaborate the infrastructure and platform for private sector exploitation of solid minerals;
4. Utilize the competitive opportunity provided by due process mechanism for award of contracts
to encourage participation of indigenous enterprises in government procurement
5. Support and encouragement of foreign construction companies and other multinational
corporations to patronize local producers of inputs as well as sub-contract to small indigenous
firms.
The Role of Microfinance (Formal and Informal) in Financing Enterprise;
A microfinance institution (MFI) is a semi-formal, non-governmental and community development
organization involved in rural development (Marx, 2001). In recent decades, microfinance, of which
microcredit is a component, is a sub-set of flexible structures and systems by which a wide range of
financial and enterprise development services are offered to micro enterprise owners in an affordable
and convenient manner. It has become one of the buzzwords of contemporary development initiatives
all over the world. This is particularly contextual to the developing countries, where top-down formal
financial institutions have failed to address the credit needs of the real sector of the economy, thereby
constraining the processes of investing for livelihood enhancement among the poor, the small-scale
farmers and micro-level entrepreneurs.
The Nigerian microfinance industry has come a long way and boasts of all the four well-known models
in the industry. A CBN study identified, as at 2001, 160 registered MFIs in Nigeria with aggregate
savings worth =N=99.4 million and outstanding credit of N=649.6 million, indicating huge business
transactions in the sector (Anyanwu, 2004). Institutional structures for the provision of microcredit
vary and may be government or public sector-oriented, NGO-supported, traditional or a mixture of
two or more of these.
There are those that exist along the lines of the Informal Model and involve revolving credit and
savings associations, which are based on traditional experience. These groups provide savings and
credit services to their members. They operate under different names such as ‘esusu’ among the
Yorubas, ‘etoto’ for the Igbos and ‘adoshi’ in the North for Hausas. These associations operate
traditional microfinance in various forms in rural areas/communities and urban centres.
Microfinance is also extended to clients through formal financial institutions in what is called the
Formal Model. Examples include the Nigerian Agricultural Cooperative and Rural Development Bank
(NACRDB) and the Bank of Industry (BOI). Such institutions usually know very little about the poor
who need microcredit but have to maintain such a unit in order to fulfill statutory requirements by
the political and financial authorities.
There is the Linkage Model in which informal savings collectors are linked to the formal financial
institutions. A good example is the defunct Village Adoption Scheme of the Centre for Rural
Development and Cooperatives, University of Nigeria, Nsukka, which linked commercial banks to
village cooperative societies and other groups for financial support.
Finally, there is the Donor Model in which mainly international donors—such as UNDP—provide
funds to MFIs for on-lending to their members and clients who enjoyed microfinance services.
The MFIs in Nigeria, most of which are non-regulated, include NGOs. More prominent among which
are Nalt-United Self-Help Organisation (NUSHO) in Nsukka; OUTREACH Foundation (OF) situated in
Lagos; the Country Women Association of Nigeria (COWAN) in Ondo State; the Farmers Development
Union (FADU), which can be found in Oyo State; the Development Education Centre (DEC) in Enugu,
the Lift Above Poverty Organisation (LAPO) in Benin and the Save and Produce (SAP), Jos. Regulated
sources of microcredit include the 282 community banks that were licensed by 2003, credit unions
and cooperative societies.
Micro financing is still perceived as public sector-led activity in Nigeria. For example government
initiates and implements activities of these MFIs. The National Poverty Eradication Programme
(NAPEP), whose funds go to alleviate poverty levels by providing equipment (e.g. Keke-NAPEP); and
the National Directorate of Employment (NDE) that equips people with skills thereby encouraging
entrepreneurship; and various State government loan schemes are examples of government
domination of microfinance. The role of government should gradually shift towards creating an
enabling environment for private sector active participation.
Enterprise Development Agencies (EDAs) - e.g. Abuja Enterprise Agency (AEA) should be established
by each State. These EDAs should be responsible for guiding and advising prospective entrepreneurs
to develop and grow their enterprises. They should also monitor and evaluate the functions of MFIs
in their domain as well as provide guarantee trusts for funds granted SMEs that comply with laiddown parameters for funds provided MFIs for on-ward lending. Private Business Development
Services (BDS) providers should be registered with the Enterprise Agencies. These BDS providers
should serve as consultants to potential beneficiaries of various microfinance schemes. The BDS
providers should teach the beneficiaries how to organize their business, basic accounting and record
keeping, budgeting and financial planning, computer applications, among others. They should also
assist the EDAs in monitoring and evaluating the activities of loan beneficiaries at the local levels.
The EDAs should be responsible for remunerating the BDS providers.
Institutional evolution is taking place in the Nigerian microfinance sector; but the pace is slow.
Sources of change sweeping the microfinance sector include the CBN, MFIs themselves, the State
governments and donors who initiated these processes. There is increasing recognition and
prioritization of the needed basic interventions to foster private sector participation in this vital
financial sector that has the greatest potential to reach and affect the lives of rural Nigerians. For
example, the United Nations Capital Development Fund UNCDF, through its MICROSTAT project,
has made significant efforts to strengthen the institutional, organizational and technical capacities of
MFIs. Donors are now supporting mostly ‘retailer’ MFIs as opposed to ‘wholesale’ institutions.
The National strategic development plans - NEEDS and SEEDS, by recognizing the place of
microfinance in poverty reduction, linking with MDGs and now catalyzing current initiatives at the
CBN, assures us that the future of Microfinancing in Nigeria is bright. The ongoing processes are
changing the motives, roles and capabilities of the ‘active’ and ‘passive’ stakeholders in the sector.
Government is beginning to see MFIs less as mere self-help organizations, and more as serious formal
institutions whose activities would affect the nation’s financial aggregates.
WHAT DOES THE CAPITAL MARKET OFFER ENTERPRISES
o Public and Private Sector Equities
o Public and Private Sector Debts Financing
o Infrastructure Finance
o Non-Refundable Capital
o Convertible Long Term Capital
o Derivatives
o Deficit Financing
o Non Convertible Long Term Capital
Capital Market Instruments
o
o
o
o
o
o
o
o
o
o
Equities
Debts
Derivatives
Government Bonds
Rights
Corporate Bonds
Options and Futures
Preference Shares
Debentures
Exchange Traded Funds
Capital
Capital is the money which gives the business the power to buy goods to be used in the
production of other goods or the offering of a service.
Capital market
Long-term funds are bought and sold:
o
o
o
o
o
Shares
Debentures
Long-term loans, often with a mortgage bond as security
Reserve funds
Government Bonds
Money market
Financial institutions can use short-term savings to lend out in the form of short-term loans:
o
o
o
o
o
Credit on open account
Bank overdraft
Short-term loans
Bills of exchange
Factoring of debtors
Borrowed capital
This is capital which the business borrows from institutions or people, and includes
debentures:


Redeemable debentures
Irredeemable debentures


Debentures to bearer
Hardcore debentures
Own capital
This is capital that owners of a business (shareholders and partners, for example) provide:




Preference shares:
o Ordinary preference shares
o Cumulative preference shares
o Participating preference shares
Ordinary shares
Bonus shares
Founders' shares
Differences between shares and debentures




Shareholders are effectively owners; debenture-holders are creditors.
Shareholders may vote at Annual General Meetings (AGMs) and be elected as directors;
debenture-holders may not vote at AGMs or be elected as directors.
Shareholders receive profit in the form of dividends; debenture-holders receive a fixed rate of
interest.
If there is no profit, the shareholder does not receive a dividend; interest is paid to debentureholders regardless of whether or not a profit has been made.
TOPIC 10:
ROLE OF PERSONAL SAVINGS AND PORTFOLIO INVESTMENT IN NATIONAL ECONOMIC
DEVELOPMENT
Introduction:
The position of personal savings and portfolio investment in this country vis-à-vis the nations’
economic development is quite significant and noteworthy. So, the potential entrepreneurs need to
be very conversant with this development. Therefore this section attempts to expose these
entrepreneurs towards this dimension. Students should understand the importance of Personal
Financial Planning and Management. They should be able to develop personal budget for a chosen
period and create a spreadsheet for tracking the budget. They should imbibe the savings culture as
well as understand how to invest in stocks and bonds.
Income, generally defined, is the money that is received as a result of the normal business
activities of an individual or a business.
Internationally, the accounting term income is synonymous to term revenue. The
International Accounting Standards Board uses this definition:
Income is increases in economic benefits during the accounting period in the form of inflows or
enhancements of assets or decreases of liabilities that result in increases in equity, other than those
relating to contributions from equity participants.
For the average citizen in many countries, the term “income” is most relevant for its role in
determining how much income tax a person must pay.
In common usage, saving generally means putting money aside, for example, by putting
money in the bank or investing in a pension plan.
In a broader sense, saving is typically used to refer to economizing, cutting costs, or to
rescuing someone or something.
In terms of personal finance, saving refers to preserving money for future use - typically by
putting it on deposit - this is distinct from investment where there is an element of risk.
Saving differs from savings in that the first refers to the act of putting aside money for future
use, whereas the second refers to the money itself once saved.

For example: you may decide to start saving 10% of your income; because you aim for your
savings to grow into an amount sufficient to buy a car
Saving in Personal Finance
Within personal finance the act of saving corresponds to nominal preservation of money for
future use, although inflation can still erode its real value. A deposit account paying interest
is typically used to hold money for future needs, i.e. an emergency fund, to make a capital
purchase (car, house, vacation, etc.) or to give to someone else (children, tax bill etc.).
Savings within personal finance refers to the accumulated money put aside by saving.
Within personal finance, money used to purchase shares, put in a collective investment
scheme or used to buy any asset where there is an element of capital risk is deemed an
investment. This distinction is important as the investment risk can cause a capital loss
when an investment is realized, unlike cash saving(s). Lower levels of risk normally apply to
savings e.g. interest rates may fail to preserve its real value, or in extreme cases loss can
occur due to bank failure.
In many instances the term saving and investment are used interchangeably which confuses
this distinction. For example many deposit accounts are labeled as investment accounts by
banks for marketing purposes. To help establish whether an asset is saving(s) or an
investment you should ask yourself, "where is my money invested?" If the answer is cash
then it is savings, if it is a type of asset which can fluctuate in nominal value then it is
investment.
Personal finance is the application of the principles of finance to the monetary decisions of
an individual or family unit. It addresses the ways in which individuals or families obtain,
budget, save and spend monetary resources over time, taking into account various financial
risks and future life events. Components of personal finance might include checking and
savings accounts, credit cards and consumer loans, investments in the stock market,
retirement plans, social security benefits, insurance policies, and income tax management.
The Role of Savings in Starting and Sustaining Businesses;
Want to start a business? Start saving your money.
Have you ever dreamed of starting your own business and being your own boss with your
own hours? It may seem like a dream, but it’s not impossible to attain—a majority of firstgeneration millionaires got there just by starting their own businesses. These aren’t just tech
businesses though—these are electricians, plumbers, and other local small businesses.
These are companies that anyone can start—even you.
To do so, however, you need to have some startup capital. For some companies, venture
funding is the way to go, but for most, self-funding is essential. This means that you will
need to have money saved up to start your company. If you are serious about wanting to
start your own business, you will need to begin budgeting for it.
If you want to save money to start your own business, you have two options:
#1 - You can try to work on the new venture while you are still at your current job. Depending
on your situation, this might be a better option than the second one.
#2 - Save enough money so that you can quit your job and focus on your new company full
time.
Both options have their pros and cons, but it might be a good idea to follow #1. Many
companies fail, and the first option is a good way to hedge your bets in case your company
doesn’t do as well as you hope.
If you don’t have a budget, it’s pretty important that you create one, especially if you are
planning to quit your current job. You should check for good resources and articles on such
topics as calculating start-up costs. You should try to do the mathematics to see how much
you need to save. You can then figure out exactly how much time you need to save to start
your business.
Beyond saving for a new business, there are other options, such as borrowing. A survey of
Person to Person (P2P) loans in Lending Club shows that a growing number of business
owners are turning to Lending Club to raise funds for creating and expanding their
businesses.
Regardless of how you raise your funds, budgeting is still important. By budgeting and
planning for your business, no matter what it is, you will improve your chances of it being a
success. If it does well, you will be comfortably rich.
The Benefits of Interest;
It is an important lesson to understand the following rules for personal financial fitness:
(1) Save early and often,
(2) Save as much as possible - at least 15% of your earnings
(3) Earn compound interest,
(4) Try to earn a high interest rate,
(5) Save in Unit Trust Funds to earn high interest;
(6) Leave deposits and interest earned in the account as long as possible, and
(7) Choose accounts for which interest is compounded often.
Compound interest is a powerful financial instrument that must be harnessed to work in your favour.
Most of us, however, allow this to work against us for lack of financial literacy.
Personal Financial Planning and Management;
A key component of personal finance is financial planning, a dynamic process that requires
regular monitoring and reevaluation. In general, it has five steps:
1. Assessment: One's personal financial situation can be assessed by compiling simplified
versions of financial balance sheets and income statements. A personal balance sheet lists the
values of personal assets (e.g., car, house, clothes, stocks, bank account), along with personal
liabilities (e.g., credit card debt, bank loan, mortgage). A personal income statement lists
personal income and expenses.
2. Setting goals: Two examples are "retire at age 65 with a personal net worth of N10,000,000
(ten million naira only)" and "buy a house in 3 years paying a monthly mortgage servicing cost
that is no more than 25% of my gross income". It is not uncommon to have several goals, some
short term and some long term. Setting financial goals helps direct financial planning.
3. Creating a plan: The financial plan details how to accomplish your goals. It could include, for
example, reducing unnecessary expenses, increasing one's employment income, or investing
in the stock market.
4. Execution: Execution of one's personal financial plan often requires discipline and
perseverance. Many people obtain assistance from professionals such as accountants,
financial planners, investment advisers, and lawyers.
5. Monitoring and reassessment: As time passes, one's personal financial plan must be
monitored for possible adjustments or reassessments.
It is important to create a personal spreadsheet that shows details of our spending habits.
This document (see example below) can assist the individual regulate his spending.
Date
Items
Home
Mentainance
Food
Office
Expenses
Car
Mentainance
Petrol
Communication
Entrtain
Charity &
Tithes/Zakat
Dependants
Others
Total
Self
October
3-Oct
Food
9,400
Light bulbs
600
Hoe
150
Electric Cord
1,800
Petrol Benz
10-Oct
3,000
Photo Frame
1,600
MTN Card
1,500
Postages
Forever Lite
600
4,600
Eye Glasses
500
Medicament
17-Oct
120
Car Battery
1,000
Light Meter
18-Oct
4,000
Petrol Benz
2,000
Medicament
Fura
520
100
niece 1
21-Oct
2,000
Dinner with friend
2,600
Aso Ebi for marriage ceremony
4,500
MTN Card
23-Oct
1,500
nephew 2
1,000
Toiletries
25-Oct
Meat
3,150
1,100
Petrol Benz
28-Oct
2,000
Fruits
100
Spieces
300
Petrol friend's car
Sugar & Milk
29-Oct
1,000
1,900
Petrol Benz
4,200
Printing
160
Car Repair for Kd Trip
3,600
Medicament
Suya
31-Oct
350
500
Tithes
9,000
Parents' allowance
October: Monthly
Total
6,000
18,000
23.54
11,300
14.78
760
0.99
4,600
6.02
11,200
14.65
3,000
3.92
2,600
3.40
9,000
9,120
11.77
11.93
1,000
1.31
5,870
7.68
9,400
600
150
1,800
3,000
1,600
1,500
600
4,600
500
120
1,000
4,000
2,000
520
100
2,000
2,600
4,500
1,500
1,000
3,150
1,100
2,000
100
300
1,000
1,900
4,200
160
3,600
350
500
9,000
6,000
76,450
100.00
Shopping Habits
The economy is a core influence. When it is positive, shoppers feel more freedom to be
selective about where and how they shop. When the economy is of primary concern, shoppers
exercise more discretion about where and how they spend their money.
Loyalty can be stolen: Shoppers will deviate from past shopping habits to achieve additional
value. Taking queues from the economy, 61% cited price/value as the primary reason driving
them
to
a
retail
destination.
Control your habits, improve your life: We are all the sum of our daily habits. Small actions
repeated over and over make up our day, our week, our year, our life. We all know there
are things we ~should~ (or shouldn't) do. The trick is just getting our conscious brain
a little help to turn "I think I should" into "I knew I could!". Control can become more
effective when we get into the habit of writing down our shopping list before leaving
home for the market.
Portfolio Investment: Shares, Bonds & Debentures
In economics and finance, Portfolio investment represents passive holdings of securities such
as foreign stocks, bonds, or other financial assets, none of which entails active management
or control of the securities' issued by the investor; where such control exists, it is known as
foreign direct investment. Portfolio investment is strictly connected with a portfolio
diversification process.
Some examples of Portfolio investment are:



Purchase of shares in a company.
Purchase of bonds issued by government.
Acquisition of assets.
Portfolio investment is part of the capital account on the balance of payments statistics.
A brokerage is a firm that acts as an intermediary between a purchaser and a seller. More
commonly, a brokerage is referred to as a brokerage firm. To broker a deal is to communicate
with both the buyer and seller as to acceptable price on anything sold or purchased.
A broker, a single person, or the brokerage firm completes any necessary legal paperwork,
obtains the appropriate signatures, and collects money from the purchaser to give to the
seller. Since the buyer and seller are employing the brokerage to complete the deal, the
brokerage may collect a portion of the money obtained. In some cases, a brokerage receives
money from both parties. In others, the brokerage receives a commission only from the seller.
Brokerage firms are most commonly thought of in relationship to the sale and purchase of
stocks and shares. Fees are variable, depending on the degree to which the brokerage is
involved in decisions about purchase. Some stock owners give their brokers power of attorney
to make decisions about when to buy or sell stock and depend upon their brokers for
researching new stock for purchase. This type of brokerage firm usually assesses a fairly
large fee, and regardless of whether the owner loses or earns money, the firm is paid.
How the Stock Market Works
A share of stock is a small ownership stake in a company. When you buy stock, you become a
shareholder or stockholder. Companies sell stock in order to raise the money needed to expand or
improve their businesses. Businesses that raise capital in this way are called public companies.
Investors buy stock to obtain returns on their investment, just as you may deposit money in a savings
account to earn interest. If you purchase the stock of a company that does well, you may earn a
higher return than what you could earn from a savings account – and your money may actually grow
faster.
Stocks can help your money grow in two ways. If the share price of your stock goes up, you can draw
a profit – also known as a capital gain – when you sell your shares. Of course, the share price can go
down, and you can loose some of your money. Some stocks pay investors a dividend, which is a
portion of the company’s profits, on a regular basis.
Stock prices are driven by supply and demand. If a company is doing well or its shares are selling at
a fair price, many investors may buy its stock, creating demand. Demand drives up the price. If the
company is not doing well – or the share price has been driven too high – investors may stop buying
or begin selling. As demand drops, so does the price.
Stocks are bought and sold at the stock market. This is where public companies seeking capital meet
investors who seek profits. The first stock exchange began in 1602 in Amsterdam, Holland, where
shares of the United East India Company were traded. America’s first stock market opened in 1792,
near an old buttonwood tree where stock traders used to meet. England’s first stock market opened
in 1773, in a former London coffeehouse. The Nigerian stock exchange opened in 1961. At the stock
market, each stock is registered with a particular exchange. If you think of the stock market as a big
shopping mall, then an exchange is a store that carries only certain brands of products. Today there
are stock markets all over the world. At each, stocks are bought and sold on a daily auction conducted
by stock traders and specialists.
When someone wants to buy or sell stock, they usually go to a brokerage firm and talk to a licensed
stockbroker. The stockbroker will execute your trade – that is, help you buy or sell stock – and charge
you a small transaction fee. Stockbrokers who are financial consultants may also offer investment
guidance.
When a stock market does well and prices rise over a period of time, it’s called a bull market. When
prices decline for a period of time, it’s called a bear market.
Let’s say you purchased 10 shares of XYZ stock at =N=52.00 a share. Over time, the share price rises
to =N=78.50 an increase of =N=26.50 a share. If you sell at that point, you will make a profit of
=N=265.00. If the stock pays a dividend, that amount will be added to your total return. A small
transaction fee will be deducted from the proceeds by the firm that executes the transaction. You will
also be responsible for taxes on the profit.
The companies may also give bonus shares to existing shareholders in addition to paying dividends.
This issuing of bonus shares increases the units held by shareholders and serve as a source of capital
gains.
Nature and Types of Information Required by Entrepreneurs
A. Marketing information
B. Technical information
C. Information and communication technology (ICT)
D. Financial Information
Where to Obtain Information and Assistance
1. Industry data is helpful in comparing a business to other similar businesses. This data
is available from trade associations or government agencies and includes ratios such as:
stock turnover, cash discounts, percentage mark-up and average sales per month.
2. Membership-based organizations can provide services such as political lobbying,
conducting research, organizing education and training programmes, implementing new
technology, responding to members’ questions and concerns and disseminating information
through newsletters, magazines and special reports.
3. Subscribing to trade papers and magazines is also desirable. Entrepreneurs should set
aside time to read articles especially those important in understanding new trends and
developments relating to the business. Keep a file of pertinent articles for future reference.
4. Training programmes help entrepreneurs to develop formal plans for improving their
management skills and ability. Training courses and adult education programmes are
designed by many institutions, agencies and associations. Entrepreneurs should be aware of
these personal development possibilities and take full advantage of them.
5. Consultants can be of assistance both directly and indirectly. Pay special attention to the
approach and techniques used by a consultant to solve business problems. When working
on solutions to future problems, you may have to act as your own consultant and may want
to use these same techniques.
6. The library is a primary resource for information. Government agencies have a variety of
publications which may be helpful. Some colleges and universities have reference libraries
which may have a circulation section available to the public. Research institutes and some
large corporations have libraries with sections on specific topics. Trade associations and
labour organizations may also have libraries containing materials related to specific needs.
Libraries are a storehouse of information which may be useful in operating a small business.
Books, periodicals, reports and newspapers may contain information which can be of help in
solving some of the problems in operating a business.
7. Internet can be used to carry out research and to find useful information and data. Email can be used to communicate with providers of information who have web sites on the
internet.
8. Business Development Services providers. There are many Business Development
Services providers who will offer guidance in various aspects of business operations.
Who Can Provide Information and Assistance?
“FREE”
1. Employees. Few entrepreneurs can do everything themselves, and they need qualified
employees to relieve them of most of the day-to-day operational problems. This allows them
to dedicate their time to working on the longer range problems. The people who work for a
business can provide answers to specific problems in a business. For example, entrepreneurs
might ask employees for their advice and assistance about stock display or customer
attitudes. Employees are in a good position to give valuable advice provided they know that
their opinions and suggestions are valued.
2. Customers. These people can supply very special information about the products and
services they buy. Customers should be asked their opinions because they are an excellent
source of information about the relative strengths and weaknesses of a business product or
service.
3. Suppliers. Because the success of most suppliers depends on the businesses they serve,
it stands to reason that they should be interested in an entrepreneur’s success. Many
suppliers are able to give sound management advice because they are able to explain how
other successful businesses operate and provide suggestions about how businesses can
improve.
4. Other Business Owners. Most businesses have common problems and owners are
generally willing to discuss their problems with one another. Occasionally, the competitive
nature of business may discourage this frank exchange. If the businesses are unrelated and
do not compete for the same customers, entrepreneurs may be willing to share ideas
concerning solutions to common problems. In this way, all business owners can benefit from
this interaction and improve their business operations. Belonging to a membership business
association provides useful networking with other business owners.
5. Free Web Sites. Information and communication technology specialists will direct you to
free web sites. Consult them.
“FOR A FEE”
1. Professionals. Use the talents of professionals, such as web designers, IT specialists,
financial advisors, bankers, management consultants, insurance agents, accountants and
bookkeepers, estate agents, surveyors and lawyers, to assist in solving business problems.
Try to develop good questioning techniques to get as much advice and information as possible
from these professionals.
Each professional person is a potential resource, but entrepreneurs must be able to explain
their needs clearly and ask relevant questions concerning their needs so that professionals
can provide valuable advice.
2. BDS Providers. Use the Directory of BDS Providers to contact them.
GENERAL EXERCISES:
 Prepare a list of appropriate business opportunities, select one and identify reasons for the
selection.
 Produce a business plan for a small business.
 Evaluate the plan for feasibility of the business.
 Organize and complete the papers, documents and administrative requirements for a small
business.
 Prepare a plan of the physical layout of the business showing positioning of all major business
components.
 Calculate sale price for the product/service.
 Draw up a sales plan to achieve a given target.
 Design control mechanisms for maintenance of a given market share and suggest strategies
to achieve expansion.
 Prepare an input/output chart to demonstrate the service or product production process.
 Analyze the service or product production process management, inventory management and
control.
 Analyze the business plan for a small business and suggest future directions.
Entrepreneurial Project Topics







Select a business opportunity and prepare a business plan.
Prepare a set of documents necessary for establishing and starting an innovative business.
Evaluate an existing business and make recommendations to the owner for improving the
business.
Survey the range of businesses in the community and propose “Value-added” ideas that could
be adopted by the owners.
Conduct a market analysis and prepare a marketing plan for a small business.
Investigate environmental issues in the community and identify business opportunities to deal
with them. Prepare a feasibility report.
Investigation technological options and prepare a feasibility report for the use of technology as
a business opportunity.
TOPIC 11:
PRACTICAL MANAGEMENT FOR SMALL BUSINESS IMPROVE YOUR BUSINESS: RECORD
KEEPING BASICS
WHAT IS RECORD-KEEPING?
Record-keeping is a way of writing down all transactions involving



Money coming in to your business
Money going out of your business
Money owed to your business by customers
A Transaction is any exchange of money for something, for example goods. Money comes in and goes
out of the business through transactions.
Importance of Record-keeping
Record-keeping also helps you calculate your business profits and losses. You need a written
document, for example a receipt, to prove that you have received money or paid out money. If there
is no document, you must write down the information yourself.
For record-keeping receipts and other documents are called vouchers. The vouchers are the proof of
all transactions.
How can record improve your business?
Record-keeping is necessary for every business. Neat, accurate record will help you find and solve
business problems. Use records to:





Control your cash
Show you how your business is performing
Show others, such as the bank, how your business is performing
Plan for the future
Calculate your business profit and loss.
A SIMPLE SYSTEM FOR KEEPING RECORDS
 The Record Book
The Record Book is where you write down all the transactions in your business, it is the Heart of your
record-keeping.
During the day, when your business is open, write down each cash transaction. For cash coming in
to your business:


Use a Daily Sales Record if your business sells many, less expensive products or
services
Use a Receipt Book if your business sells few, expensive products or services.
Keep the receipts and other vouchers for all cash going out of your business for costs. You can keep
the vouchers in the cash box or until you close the business each day.
If you sell on credit, write down all credit transactions in the Daily Sales Record.
You can also use a Customer’s Accounts Record. Credit sales and payments are also
recorded in the Record Book in the credit provided and credit paid columns.
 Steps of Filling a record book
Step 1:
Get Vouchers for all transaction
Step 2:
Record daily cash transaction
Step 3:
Record Bank transaction
Step 4:
Record Credit Sales
Step 5:
Record Sales and Costs
Step 6:
Record VAT returns and payment
If you buy on credit, keep all the invoices and delivery note in a file called Unpaid Suppliers.
You will write out cheques to pay these and fill in the amount in the Bank column.
At the end of the day when the business is closed, fill in your Record Book as follows:


Write down all the money that came in to your business and where it came from (mostly
from sales)
Write down all the money that went out of your business and what it was used for.
Record Books the same way. But to fill in the Record Book for any business.
1. Fill in the date, details and voucher number
2. Write the voucher number on the voucher and file it
3. Record each amount in two different columns. Enter the amount in the cash, bank or
credit column first. Then enter the amount in the second column to which it belongs
If a page is full before the end of the month, add up all the columns and carry the total and
balances to the next page.
The difference between Value-Added Tax (VAT) paid by you on goods that comes into the
business and VAT paid by your customers on goods that go out of your business will have to
be paid or could be claimed from the local Receiver of Revenue.
For loans, grants, donations, tax, buying equipment and depreciation, write down the
amount in only one column.
USE RECORDS TO IMPROVE YOUR BUSINESS
Use your records to:
 Analyse your sales
 Analyse your costs
 Calculate your profit
 Analyse your profit
When you analyse sales, costs, profit or any other figure in your business, you can use these
steps:
1. Compare your records
2. Find reasons
3. Plan improvement
Study your Record Book to:
 Compare and analyse your sales, Find out
if sales are rising or falling and why
what you can do to increase your sales
 Compare and analyse your costs, Find out:
which costs were higher, and why
which costs were lower, and why
Use your Record Book to do a Profit and Loss Statement and Calculate you Profit.
Sale – Direct material costs – Direct Labour Costs = Gross profit – Indirect Costs = Net Profit.
The Gross Profit is the amount of money left after you have subtract your direct material
and direct labour costs from the money earned from sales. The gross profit must be high
enough to pay for indirect costs in your business.
The Net Profit shows the amount of money left after you have subtracted indirect costs from
the gross profit. The net profit shows the total for your business.
Study your profit and loss statement to
 Compare and analyze your gross profit. Find out:
- If your gross profit is higher or lower than before, and why
- How you can improve your gross profit by increasing your sales or lowering your
direct material and direct labour costs.
 Compare and analyze your net profit. Find out:
- If your net profit is higher or lower than before, and why
- How you can improve your net profit by lowering indirect costs.
TOPIC 12
IMPROVE YOUR BUSINESS BUYING BASICS
WHAT IS BUYING?
Every business will at some point need to buy raw materials, goods and equipment to enable it do the
following:
Manufacture products to sell
Render or provide services or
Re-sell



These procured items can either be consumables or non-consumable depending on its area of need
for the business. Example is a Hair dressing salon that buys shampoo, conditioners, scissors and
combs. The materials are used to treat and make client’s hair. These items constitute consumables
and non-consumables.
In other words, to enable you produce, sell goods and services, there is need to buy. How well you
sell depends on how well you buy. In other to buy well, consider the following:
Quality
Quantity
Price
Place
Time





It is necessary to note that you buy what your market wants and that which will give you the best
profit.
Buying Equipment
Equipment constitutes all the machinery, tools, workshop fittings, office furniture, etc., that a
business needs. Care has to be taken buying them as you may also need them in future. It is best
practice to seek advice from suppliers, your employees, business friends and people who use the
same or similar equipment. Make enquiries about cost and availability of repairs and spares parts
before you buy. In addition, consider not buying the cheapest as they may not be the right quality.
Put the following into consideration when planning to buy. Should your business:
-
Buy new equipment?
Buy second-hand equipment?
Keep using the equipment you already have and barrow or rent extra equipment only
when you need it?
Pay another business that has the equipment to do the work for you?
Raw materials
These are all the materials and parts that go into the products you make. Make sure the raw
materials you need for your business are always available when you need them. Make these
findings before buying your raw materials:
-
What different materials you need
What quality your customers want
How much you need
How often you need the materials.
Always make sure you buy what your customers need and can afford. Be sure to consider if your
customers can accept any increase in price if need be. Always buy your materials from reliable
suppliers and make quality your watch word.
Wholesalers and retailers buy and sell finished goods made by manufacturers. Do a market
research and think carefully before you buy finished goods. Find answers to questions like these:
- Which types of goods do my customers want?
- What quality and size do my customers want?
- What prices are my customers prepared to pay?
- How many of each type of goods can I expect to sell per week or month?
- What guarantees and services will my customers need?
You must negotiate with your suppliers well inn advance when you want to buy. To be able
to negotiate well, you should have a well thought out plan before you go to the suppliers.
This plan is called strategy.
Your
-
negotiate strategy will show:
The quality of materials that you want.
The quality of materials that you are willing to buy.
The delivery time that you require for those materials.
The price that you are willing to pay.
The terms of payment you require, e.g. cash payment, credits, how much credit etc.
The following are steps to follow when you buy goods, raw materials, equipment or other things your
business needs.
1.
Find out what your business needs
2.
Get information about different suppliers
3.
Contact the suppliers
4.
Compare the suppliers and their quotations
5.
Negotiate with the suppliers
6.
Place the order
7.
Check the goods immediately
8.
Check the invoice
9.
Pay for the stock
EXERCISE 1
Fill in the gaps with the correct or best word/words from the list below
(i) Finished goods (ii) Receipt (iii) Order (iv) Delivery note (v) Raw material (vi)
quotations (viii) equipment (ix) spare parts (x) written enquiry
(1) A ____ is a document to prove that you have paid.
(2) Wholesaler and retailer mostly sell ____ made by manufacturers or others.
invoice (vii)
(3)
Before you choose a supplier, you first need to know what each supplier can offer so, it is a
good idea to ask several supplier for ____
(4)
Before a business buys ____, it should find out if service and spare parts are available locally.
(5)
An ____ tells you to pay. Always compare it with your delivery note, to make sure you received
everything you are paying for.
(6) Follow up your ____ to make sure that the goods are delivered on time.
(7)
The quality of the ____ which go into your products is important. They must be good enough.
But if they are too expensive, your prices will be too high. Then, your customers may not be
able to afford your products.
(8)
To find out what supplier can offer you, you can visit the suppliers, or phone them, or send
them a________
(9)
When you need to repair something’s spend your money wisely make sure buy the right ____
remember, the cheapest are not always good enough.
(10)
When a supplier delivers what you have ordered on credit, he or she gives you a ____ which
lists the quantity and type of goods. You get this document before you get the invoice.
Balogun Farm Enterprise Supplies
24 Omisanjana Road Ilawe
QUOTATION
Number 95
18th April, 2015
Fabspring Farm.
Box 65.
Fabulous Business Centre.
Dear Mrs Sam Helen,
Referring to enquiry, we are happy to offer you the following goods and conditions
Quantities
Description
Unit price
Total price
10
Herbicides
17:00
170:00
5
Cutlasses
9:00
45:00
1 roll
Chicken wire 50m
770:00
770:00
2 roll
Barbed wire
225:00
450:00
1
Sprayer
350:00
350:00
Delivery: Within three weeks after order: free deliveries on orders more than R5.000.00 payment cash.
Credit: 15 days, to approved customer’s only.
Thank you for your enquiry. We look forward to hearing from you. Please note that this quotation is
valid for 30 days from the date above.
Yours faithfully,
Nike Helen
Sales Manager
QUOTATION
General Wholesales
11 Fabunmi Street
P. Box 77
Omisanjana Lane
14 April 2015
Fabspring Farm
Box 65.
Fabulous Business Centre
Ado-Ekiti
Dear Mrs Samhelen
Thank you very much for your enquiry dated 6th April 2015. It is our pleasure to offer the following
goods.
Description
Unit price
Total price
10
Herbicides
18.00
180.00
5
cutlasses
9.00
45.00
1 Roll
chicken wire 50m
815.00
815.00
2 rolls
Barbed wire
225.00
450.00
1 drum
paraffin zoolite
350.00
350.00
Quantity
Delivery: Within 2 weeks after order. Free deliveries
On orders more than R2 000.00
Payment: Net 30days
We regret that we do not offer cash discounts, but please contact us for details of discounts on bulk
orders. This quotation is valid for 30 days only. We hope to receive your order.
Yours faithfully,
Nike Helen.
Sales manager
EXERCISE II
1
Which supplier has the lowest price?
2
Which supplier offers the best credit terms?
3
Which supplier has the best terms of delivery?
4
Which supplier do you think Fabspring farm bought from? Why?
5
Which supplier insists on cash terms?
NOTE
Balogun Farm Enterprise
- Free delivery for orders more than R5000
- Delivery within 3 weeks from order
- 15 days credit
- Even lower prices
- It took a longer time to reply, 14 days
General wholesales
- Free delivery for orders more than R2 000
- Delivery within 2 Weeks from order
- 30 days’ credit
- Low prices
-It took a shorter time to reply only 6 days
REFERENCES:
1.
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11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
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