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Economic Feasibility Study on Sitting of Soap Plant in the South Eastern

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Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.9, No.7, 2018

Economic Feasibility Study on Sitting of Soap Plant in the South

Eastern Nigeria
Esonye, Ezinne Ugonna1* Esonye, Chizoo2
1.Department of Accounting, Abia State Polytechnic,P.M.B. 7166,Aba, Abia State,Nigeria
2.Department of Chemical and Petroleum Engineering, Federal University Ndufu Alike Ikwo, P.M.B. 1010,
Abakaliki, Ebonyi State, Nigeria

Abstract
The success of the various governmental sustainable development goals (SDGs) are hinged in the level of
development and robustness of the industries in such countries. Currently, scores of industries are winding up
thereby creating unemployment, social insecurity, and poor standard of living. Lack of understanding of the
requirements for running these industries coupled with over reliance on petroleum powered economy have been
identified as the major cause of the above problem. Therefore, this feasibility study was undertaken using market
and financial analysis as indices to determine the viability of soap production enterprise in the south eastern part
of Nigeria. Through the analysis of raw material, competitors, labour cost of infrastructure, overhead, annual
maintenance, depreciation and cost of production, computation of yearly repayment amount, amortization schedule
and profit and loss estimation, an annual gross operating income of N1,427,802,000.00, annual gross operating
expense of N26,158,000.00, annual cost of production of N5,090,052,000.00 were realized with the worth of the
project being N126,651,300.00. The estimated net annual profit of N981,151,030.00 shows that the enterprise
would pay off its cost of project after five years with justification of external funding. The project of establishing
soap industries in the south eastern part of Nigeria is potentially profitable, feasible, viable and projected to have
a healthy cash flow and viable long term.
Keywords: Soap, Feasibility study, South East Nigeria, Profitability, Viability

1. Introduction
It is very imperative that before committing money, time and energy by a highly spirited entrepreneur a quick
feasibility study of the business idea is needed to see its viability and ascertain possible challenges to the success
of such a project. Soap differs from other detergents in that it is made from natural fats and oils, while other
detergents are generally made from mineral oils by a succession of more complex chemical reaction (Austin,
1984).Therefore; soap is seen as being renewable. The information obtainable from these studies needs to focus
on finance, marketing and production in the frame of location, modus operandi, raw material, equipment, space,
labour skills and overheads.An entrepreneur is expected to investigate the suitability of the opportunity offered by
every business investment to its own specific skills and expectations (Okenwa, 1999). Feasibility studyhelps to
identify the long term basis and financial implications of soap enterprise through analysis (Ohimain et al., 2014).
It equally helps to determine whether the business plan has the necessary resources for its practicability
(Marino,2012). This will reduce the incidence of investing more to correct flaws and remove limitations than make
gain (Lohrey, 2014).This must involve technical, economic, commercial, environmental and social assessments.
However, the main challenge to the success of sitting and operating of various soap industries in the south eastern
part of Nigeria is lack of feasibility study in the approach to establishment of such industries. Soap manufacturing
is currently a very broaden area with various methods of production. Soap production is one of the areas that is
lucrative and needs little capital to operate (Warra, 2013).Many are raising soap factories because, it is a product
with high future potentials as the leading fast moving consumer goods, while few are winding up their soap
factories owning to lack of proper consulting standard feasibility study and the use of wrong hands in running the
process and management of such factories. In Nigeria the poor power supply, unsteady prices of raw materials and
its irregular availability, the high interest rate, strict and frustrating conditions from banks and other financial
institutions are heavily challenging in manufacturing outfits which soap industry is not exempted. There are over
one thousand (1000) soap factories in Nigeria concentrating on Lagos and Ogun state from the west, few at Kano
from the North and the rest at Aba and Onitsha in the south-east. Amongst all these areas the south eastern part of
Nigeria has more advantage owing to the availability of palm oil and palm kernel oil which is the major soap raw
material (Ohimain et al., 2014). Also, there are good markets like Ontisha main market, Ogbete main market Enugu,
Ariaria International market Aba from where the products are distributed to all parts of Nigeria and beyond.
Therefore, the purpose of this study is to investigate the viability of soap industry in the south eastern part of
Nigeria. South eastern Nigeria lies between 5°-7° North of Equator and its position in the Nigeria and Africa is
shown in Figure 1.

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Figure1: The location of south eastern Nigeria

2. Materials and methods

2.1 Field survey
The field work and survey was conducted in the five states in the south eastern Nigeria ( Abia, Anambra, Ebonyi,
Imo and Enugu) in May through November 2017.

2.2 Data Analysis

The data analysis follows the profitability determinants as applied by Ohimain et al (2014). It involved the
following:Raw materials analysis , labour analysis, annual maintenance and depreciation schedule, overhead cost
analysis, annual cost of production, yearly repayment amount, amortization schedule, net profit before tax and
gross operating income.

2.3 Assumptions and Basis of Computation of Financial Projections

In arriving at the financial projections, the following assumptions were made based on the information available
to us at the time of this study. For example, national economy is expected to grow at a projected rate of 12% per
annum through 2019, and the rate of inflation is estimated as published by the Central Bank of Nigeria (CBN) and
reported at 7% per annum. Based on these assumptions, It is strongly believed that the projections would hold true
with little or no variation on the operations of the project, while it is assumed that the cost of the various factors
of production would hold from within the foreseeable future.
Basis: 2 tonnes /hr of Laundry and Toilet soap production.
1. Work hour per day 24.0
2. Number of work days per month 26.0
3. Capacity Utilization 80.0 % (or19.2hrs)
4. Inventory of Finished goods Negligible
5. Maintenance & Repairs (Land/Buildings) 2.5% pa on cost (straight line)
6. Maintenance Repairs (Plant & Machinery) 2.50% pa on cost (straight line)
7. Maintenance Repairs (Motor Vehicle) 2.50% pa on cost (straight line)
8. Maintenance Repairs (Office Equipment) 2.50% pa on cost (straight line
9. Depreciation (Plants & Machinery) 10.00% pa on cost (straight line)
10. Depreciation (Land &Buildings) 2.00% pa on cost (straight line)
11. Depreciation (Office Equipment) 20.00% pa on cost (straight line)
12. Depreciation (Motor Vehicles) 20.00% pa on cost (straight line)
13. Business Promoters 1.00% pa on Revenue
14. Pay roll Services 1.00% Pa on payroll
15. Company Income Tax 30.00% Pa
16. National Economic Growth Rate 12.00% Pa
17. Inflation 7.00% pa

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Vol.9, No.7, 2018

3.0: Results and Discussion

3.1 Market analysis
This product is to be sold to virtually all the markets in Nigeria with the key distributors located in Onitsha, Aba,
Kano, Asaba, Portharcourt, Lagos and Kaduna. Key sub-distributors shall be located in some satellite towns found
to be closer to the plant such as Nnewi, Asaba, Umuahia, Enugu, Gboko, Benin, Owerri, Etche etc. Currently, the
Northern part of the country might be seen again as vibrant markets owing to the decreasing in security challenges
ravaging the area though few customers are currently on but their purchase is always larger and they have less
interest in the quality and aesthetic nature of the product but the price would be less. Hence, efforts shall be made
in advertisement and market awareness to saturate the South- South, South-East and South-West regions of the
Country. Because these regions are seen to be more vibrant market targets owing to the following:
 They have more tendency of social and luxury life activities
 They contain largest educated and more enlightened class of the country’s citizen
 More industrially and commercially driven regions.
 Have more hospitality industries in the country.
 The south east and western parts of the country have more commercially inclined individuals.
 Currently, enjoys more security than every other part of the country.

3.2 Raw material supply analysis

Table 1 presents the price list and sources of the key raw materials applied in the production of soap in Nigeria.
Some of them are obtained from foreign markets while majority of them can be easily sourced locally. Fats and
oil has the highest price among the list and the highest consumed. However, all the oil required are locally available
to the advantage of soap enterprise in Nigeria.
Table 1: List of raw materials, sources and prices
S/N Material Price in #/$ Source
1 Palm Oil 42,000.00/drum Local
2 Tallow fat(Top white) 40,000.00/drum Local
3 Animal fat 36,000.00/drum Local
4 Palm Stearin 35,000.00/drum Local
5 PKO 42,000.00/drum Local
6 Palmitic 30,000.00/drum Local
7 DFA 200,000.00/tonne Local
8 Caustic Soda pellets 2,150.00/bag of 25kg Local
9 Caustic Soda Liquid 19,000/drum Local
10 Glycerin 60,000.00/250kg drum Local
11 Calcium Carbonate 560.00/50kg bag Local
12 Hydrogen Peroxide 12,500/65kg Local
13 Sulphuric Acid 3,700/ 35kg Local
14 Fuel Oil (LPFO) 65.00/Liter Local
15 Colour 65.00/kg Local
16 Perfume 1,150.00/kg Local
17 Carton 50.00/carton Local
18 Soap Base $2,281.97/Tn Foreign
19 Soap base ( Laundry) $1,278.69/Tn Foreign
20 Lauric Acid $1.77/kg Foreign
21 Stearic Acid $1.77/kg Foreign
22 Titanium Dioxiode $1.97/kg Foreign
23 Glycerine $1.97/kg Foreign
24 EDTA $5.9/kg Foreign
25 Triclosan $59.0/kg Foreign
Table 2 contains the list of potential suppliers of the raw materials. The addresses of the suppliers are available
in the Table 2.

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Table 2: Raw material supplier forecast:

Raw material Supplier company Address Foreign/L
Name ocal
Palm Oil Obosi Palm Produce center Obosi, Anambra state Local
Jilnas Nig Ltd EziamaOssahUmuahia, Local
Along mission Hill Road,
Nifex Vegetable. Oil 122 St. Micheal’s Road Aba Local
Deionized fatty Km 13 Aba Ikot- Ekpene Road, Aba
Acid S.O. Umeokoro& Sons 6 Archbishop Heeryst Local
1 Mission Road,Obosi
Ishiaku 80 Trans AmadiIndustrial Layout Local
Portharcourt
Ralpmoore 24 MilvertonAveneu,Aba Local
A.U Jonkej Nig. Enterprises 414 Wares point Rd Local
Tallow Fat White Sand Market, lagos
Uche Holdings 8 Oyebolastreet,Lagos Local
Udeagbala vegetable oil 152 Aba Owerri Road Local
Onyx Commodity Ltd, Ph Local
Local Tallow U & I Chemical Nig. 32 Port Harcourt Rd, Aba Local
Des & Des Enterprises Km 4 Aba P.H Express Way Aba Local
Calcium Hugo Solid Mineral Processing Km 21/2 Nkpor Umoji Road Local
Carbonate Ind. Ltd
Mobell Nig. Ent. Km 163 auchi – Okene Rd Local
Hyco Chemicals & Industrial Ltd 4H Line, No 6 Building material Int Market Local
Ogidi Nigeria
MultiChem Ind. Limited Plot D2, Isreal Adebayo Close Local
Off Ladipo O avenue
Ikeja Lagos Nigeria
Glycerine Chellarams PLC 29 Niger street Fegg,onithsa Local
Timber land & products Ltd 65 Limca Road, Local
MultiChem Ind. Limited Plot D2, Isreal Adebayo Close Local
Off Ladipo O avenue
Ikeja Lagos Nigeria
Colour Swiss Specialty Chemical 387 Agege motor Road, Mushin, Lagos Local
Limited,
A.U Jonkej Nig. Enterprises 414 Wares point Rd Local
Caustic White Sand Market, lagos
Uche Holdings 8 Oyebolastreet,Lagos Local
Hainan fu Wang Trading Co. Ltd D1702 international trade Building Foreign
China.
Soap Noodles Pan Centry Edible oils, Jalan Timah, pasirm Foreign
Gudang industrial estate,
Malaysia
Sasvannah Chemicals 30, Babs animashaun street, Lagos Local
Hainan fu Wang Trading Co. Ltd D1702 international trade Building Foreign
China
EDTA Sinochem Jangau Corporation 49 Zhongshan South Rd, nanjing, China
Hainan fu Wang Trading Co. Ltd D1702 international trade Building Foreign
China
TCC Sinochem Jangau Corporation 49 Zhongshan South Rd, nanjing, China
Irgasan Hainan fu Wang Trading Co. Ltd D1702 international trade Building China Foreign
Hainan fu Wang Trading Co. Ltd D1702 international trade Building China Foreign
Tinopal Swiss Specialty Chemical 387 Agege motor Road, Mushin, Lagos Local
Limited,
Zinc Oxide Hainan fu Wang Trading Co. Ltd D1702 international trade Building China Foreign
Vit E Hainan fu Wang Trading Co. Ltd D1702 international trade Building China Foreign
Sinochem Jangau Corporation 49 Zhongshan South Rd, nanjing, China
Pine Oil Hainan fu Wang Trading Co. Ltd D1702 international trade Building Foreign
China
Rose Extracts Hainan fu Wang Trading Co. Ltd D1702 international trade Building Foreign
China
Carton Acme Packaging Limited Umunaje Quarters Ibusa Road, Asaba, Nigeria Local

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3.3 Competitors Analysis

Table 3: List of Competitors
Sn Company Name Address Product Name
1 Markson Chem. (W.A0 Ltd Km 4 Nkpor Umuoj, Nkpor Anamnrat State Top Powerful Germicidal
Soap, Bethel Antiseptic
Med. Soap etc
2 Tura Int’l Ltd Ayaba Umueze Road, Aba Tura Supreme Family Soap,
Arut etc
3 Pacific Interlink Nig. Ltd 15 Commercial Road, Apapa, Lagos Twist family Health soap
4 Nofan Inv. Nig. Ltd 101, Alkoro St. Ebutere, Marina, Lagos Umoli Medicated &
Antiseptic soap
5 Ala-Ateef Nig. Ltd 127 Demurinst, Biola Bus Stop Ketu Lagos. 505 laundry soap
6 Top Tree Oil Mills Nig.Ltd Km 5 Enugu-Portharcourt Express Way Aba 7stars soap
7 W.J Bush &Co. Nig. Ltd 168 Mission Road Bompai. Kano 77 wjb bar soap
8 Ab System Nig. Enterprises 20 Fola Tyre Area Oyo State Ab & Device soap
9 Sieco Ventures Ltd 19 Chukwurah Odu Street, Awada, Onitsha Knife & ABE soap
10 Abik Nig. Ltd 5 New Town Odigbo, Ondo State Abik
11 Zana Cosmetics Ind. Ltd Km5 Enugu Expressway Aba Alfan Medicated soap
12 Resources Improvement& Co Ltd Akwu-Uru Ind. Estate, Rimco Drive Umudim Alpha Laundry soap
(RIMCO) Nnewi
13 Bonachuks Chem. Ind Ltd Fed. Min. Of Sci. & Tech Incubation Centre, Ano Hard & machine Wash
Unit 9 Anambra
14 Bena Cosmetics Ind. Ltd(Cena 16/17 Chief Ogbuyi,Steet, Aba Antigal Medicated soap,
Antiseptic Soap) Benas Beauty Medicated
soap
15 Rivers Veg. Oil Co Ltd 80, Trans Amadi, Pmb 0245, Portharcourt His & hers Toilet soap Aura
Premium, amar skin
lightening etc
16 Beauty Base Ltd Ayaba Umueze Ind. Est. Aba Kitchen Star Multipurpose,
hammer soap, Black pride
17 Gant Ind. Nig. Ltd 190, Orba Road Nsukka Block soap
18 Jeopet Cosmetics Nig Ltd 11-15, Nwosu Street Off Urattha Road Aba Brush Laundry Soap
19 Anyiamco Chemicals 10, Sir Austin Opara Street, Nkpolu B+ 500 liquid detergent
Oroworukwu M3 Portharcourt
20 Intercil Products Ltd Plot 137, Emene Ind. Layout Ext. Abakiliki Bull bar, ASDA
Rd, Enugu
21 Ceeton Ind. Nig Ltd 3-5, Eze Close Near Deeper Life Church Bullet laundry. De-Prince
Flyover Aba
22 Canopy Ind. Ltd Ogwni Ojii Village Anaocha LGA, Anambra Canopy bars Soap
State
23 Quest Laboratories Ltd 4, Crudas Street Off Denis Osadebe Street, Clearzal Herbal Soap
Asaba
24 C.C. Umeji Agro-Alied Co. Ltd Enugu/ Onitsha Expressway, Near Tollgate, Cow laundry soap
Ogbunike
25 V.O. Adigbe Ent. Cowan Estate Ajagba Dudu Delta States Dv favour Toilet Star
Remover
26 Zan Co. Ind Ltd 50 Asa Rd Aba Germdam Medic Soap
27 Emos Best Ind Ltd 1, Agric Road Nkelle Ezunaka Anambra State Lemo fresh Antiseptic
28 Honombizu Ind. Co. Ltd 7 Powerline Opobo Ogborhill Aba Lindal & Juliet Luandry
29 Lubo Costmetics Ltd 287, Nnebisi Rd Asaba Lubo white soap
30 Naffco Ind. Ltd 60 Portharcourt Road Aba Matchet soap
31 Best Soap Ind. Ltd Km 4 Aba-Enugu Expressway Aba Ngo Tablet
32 Phina Ind. Ltd 17Chimezie Street Aba Phina Kettle laundry
33 Rich Fruit Inv. Nig Ltd 27b Ngwa Road Aba Rich Umbrella bar soap,
three Palm soap
34 Hardis Dromedias Ltd Hardis Ind. Estate Airport Road, Emene Royallux Black, Normal
Enugu sensitive
35 Tela Divine Ventures 1, Minister Agubaohia C Hycent Street Tela wonderful Aloe Vera
Amaebu Orsu, Imo State Black
36 Habil Inv. Ltd 174 Ikot Ekpene Road Aba Tower Bar
37 Internatonal Eqitable Ass. Ltd 1 Nicolas Road Aba Trend Toilet
38 Beta Costmetics Man. Co. Ltd Isioolu Odume Ayout Obosi Turkey Bar
39 Zebra Indu. Inv. Ltd 9 Opobo Road Aba.
Table 3 presents the list of potentials competitors in the soap production enterprise in the area under study
together with their brands. Most of the like RIMCO ltd, RIVOC ltd, Beauty Base ltd, PZ Plc, Unilever Plc are
large scale manufacturers. Others are small medium scale enterprises. It is observed none of the industries exists

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in Ebonyi state and Imo state while more concentration of the soap firms are in Aba in Abia state and Onitsha in
Anambra state and few in Enugu State.

3.4: Product distribution analysis

Table 4:Market Survey on Product Distributors
S/N Customer Location Business Address Comments/Remarks

1 Mr. Uche Abakiliki main Pamason Co. Nig Ltd, The chief Distributor of PZ PLC, for
market No 8 New Market Rd. canopy ind. Ltd and aASDA intercil in
Abakaliki
2. Mrs G Edike Same G. A Edike and Sons The prospect has a serious interest in new
Ltd. 2 New market Road products but already distributes for bullet
3 Mrs abosi Same Abosi M.B Trading A big distributor for bullet soap.
Coy,9 New Market road
4. Uncle Paul Same Ebony Line No 10 A whole seller

5 Happiness Same Ebony line no 7 A whole seller

6 Ejike Same Imo line No6 A whole seller
7 Kele chi Same Divine KC 46 cameroon Same as 6
line
Uche Abakiliki AEO & Sons Ltd Same as 6
8 Express line Z 31
9 - Onuewke main Kings Nig Ent. Buys soap from Pamason AI but others
market from Releif Mkt
10 M. O Udeagu Ogbete Main R4 No 19, S4 No3, Q1 Chief Distributor of RIVOC Portharcourt
Market Enugu No 16
11 Ogbete Main S9 No 1 Wholeseller
SamChuks Market Enugu

12 Micheal Ogbete Main E. A Michael &Bro. ent. Suggests that reducing number of
Edeani Market Enugu Q4 no 1 distributors to 3 will favour the products.
13 Mr.Ukason Ogbete Main R6 no 11 Chief Distributor of ASDA produced by
Market Enugu Intercil Nig Ltd, Enugu
14 Robinson Umahia 4 jos lane He appears to be the most vibrant as
Ekwnife others distributors were referring to him
as the biggest merchant
15 Mr. Dele Relief Market
Mrs Amaka Onitsha
E. Distributors
Mrs Chuks
Mrs Angela
Mrs Akanji
16 Danlami Niger State Distributor
17 Doris Chris Owerri Distributor
18 Favour Auchi Distributor
19 George Ihiala Distributor
20 Mojekwu Nnewi Distributor
21 O.K.C Awka Distributor
22 Okodede Owerri Distributor

3.5Man-Power Requirement/ Labour Analysis

The Plant when fully operational is expected to have the complement of the following staff:
Managing Director or General Manager, Factory Manager, Marketing Manager. These are expected to be holders
of First Degree, Higher Diploma or any appropriate professional qualifications except in the case of the technical
supervisors where the relevant experiences may prevail. We estimate that the plant will require a total of 10 staff.
Details of compensation and emoluments are shown in Labour Analysis.This is the analysis of the estimated labour
cost to be engaged in the business. It is estimated that a total number of fifteen (15) staff would be engaged for a
start. However, the promoters might take some of the portfolios or even one staff may take up double portfolios

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given the rate of unemployment pending the expansion stage. In each case we are analyzing the labour which
should be cheaper in and around the south Eastern states given the fact that there are many sub – urban location
and low standard conditions of labour wage application in the area.
Table 5: Summary of Staff Requirement
S/No Position Department Staff Basic Unit Total
Strength Salary
1 Production/Factory Manager Production 1 40,000.00 40,000.00
2 Quality Control manager Quality Control 1 40,000.00 40,000.00
3 Soap Boilers Production 2 20,000.00 40,000.00
3 Shift Leader Production 2 18,000.00 36,000.00
4. Factory Workers Production 8 15,000.00 120,000.00
5. Machine Operators Production 10 18,000.00 180,000.00
7. Quality Control Supervisor Quality Control 2 25,000.00 50,000.00
8. Technicians (Elect. & Mech.) Production 4 20,000.00 80,000.00
9. Admin / General Manager Administration 1 50,000.00 50,000.00
10 Account officer Administration 1 20,000.00 20,000.00
11 Sales/ Marketing Administration 3 20,000.00 60,000.00
12 Security officers Administration 2 18,000.00 36,000.00
13 Drivers Administration 2 20,000.00 40,000.00
Total 33 268,000.00 736,000.00

Table 6:Labour Analysis

Labour Analysis Rate/24 hrs. Rate/Month Rate/Annum
N’000 N’ 000 N’ 000
Direct manufacturing wages:
Production Supervisors/shift (x2) 1.15 30.00 360
Technical staff (x4) 3.07 80.00 960
Soap Boilers (2) 1.38 36.00 432
Operators (10) 6.92 180.00 2,160
Factory workers (x8) 3.08 80.00 960
Sub Total 15.60 406.00 4, 872
Production Overhead:
Factory Manager/Prod. Manager 1.54 40.00 480
Quality Control manager 1.54 40.00 480
Quality Control supervisor (2) 1.92 50.00 600
Sub total 5.76 150.00 1,800
Admin & Sales Depts.:
General Manager 1.92 50.00 600
Accountant/cashier 0.76 20.00 240
Sales (3) 2.31 60.00 720
Security Officer (2) 1.15 30.00 360
Drivers (x2) 1.54 40.00 480
Sub Total 7.68 200.00 2,400
Grand Total 29.07 756.00 9,072

3.6 Market /Marketing Arrangement

It is obvious why inventory of finished goods was estimated to be negligible in the earlier assumption. This is
because what the marketing department would need to do is to sensitize the consumers of the availability of our
products and their prices and almost instantly, the sales are made. There is the confidence that if competition moves
up the ladder, the company would device an appropriate marketing strategy to meet the challenge. This is the
analysis of the estimated business transaction in respect of the investment. It is strongly believed that this estimate
would hold within the foreseeable future as far as the production capacity of the soap industry is concerned.

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3.7 The Cost of Infrastructure

Table 7: Cost of Infrastructure
S/n Description Measure Quantity Rate(#) Amount(#)
1. Warehouse Size factory 100x120ft 2 3,000,000 6,000,000
2. Gen-set House 12x 10ft 1 350,000 350,000
3. Admin Building 25x50ft 1 2,000,000 2,000,000
4. Bore-Hole & O/head tank NA 1 700, 000 700,000
5 Land 15,000,000
Land & Building(L/B) 24,050,000
6. Marketing Vehicles NA 1 1,200,000 1,200,000
7. Trucks 1 2,000,000 2,000,000
Motor Vehicles(MV) 3,200,000
7.Office Tables/ Chairs NA 10 15,000 150,000
8.Computer/ office machines NA sum 450,000 450,000
9.Office Accessories NA sum 150,000 150,000
Office Equipment(OE) 650,000
Grand Total 27,900,000

3.8 The Cost of Project:

The estimated cost of the project is subdivided into two parts: the machinery and infrastructure. The machinery
cost is estimated based on the price of continuous laundry drying plant from China. The locally fabricated machines
are available in Nigeria and have lower prices and ruggedness but less robustness. The data is contained in Table
8.
Table 8:Feasible estimate of the cost of the project

D e s c r i p t i o n A mo u n t ( Na i ra )
Machinery 98,751,300.00
Key Infrastructure 27,900,000.00

Total Project cost 126,651,300.00

Table 9: Schedule of Annual maintenance and Depreciation

S/N Description Maint. Charge Dep. Charge
1 Land & Building 24,050,000 601,250.00 1,202,500
2 Plants/Machinery 98,751,300 2,468,782.50 9,875,130
3 Motor Vehicles 3,200,000 64,000.00 640,000
4 Office Equipment 650,000 13, 000.00 130,000
Total 3,147032.50 11,847,630

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3.9 Overhead Cost Analysis

Table 10: Summary of Analysis of Overhead Cost
Overhead Cost Analysis Basis Rate/24hrs Rate/Month Rate/Anum
Category N’ 000 N’ 000 N’ 000
Production O/H 29.91
Power & Lighting(diesel) 200 liters @ 150/L 1.15 234.00 359.00
Power & Lighting (PHCN) 9.00 406.00 2,812.00
Salaries/Wages See Labour analysis 15.60 205.73 4, 872.00
Maintenance & Repairs (P/M) 2.5 % on cost S/L 7.91 50.10 2,468.75
Maintenance & Repairs (L/B) 2.5 % on cost S/L 1.92 4.00 601.25
Laboratory Materials 0.15 4.00 48.00
Other Consumables 0.15 822.92 48.00
Depreciation (P/M) 10 % on cost S/L 31.65 100.20 9,875.13
Depreciation (L/B) 5 % on cost S/L 3.85 0.04 1,202.50
Payroll Services 1 % on Payroll 0.02 1,857.24 0.48
Sub Total 71.43 22,287.11

Admin & Selling O/H -

Bank Charges : other N 5/m - 200.00 -
Salaries See Labour Analysis 7.69 5.33 2,400.00
Maintenance & Repairs(M/V) 2.5% on cost S/L 0.20 1.08 64.00
Maintenance & Repairs(O/E) 2.5 % on cost S/L 0.04 53.33 13.00
Depreciation (M/V) 20% on cost S/L 2.05 10.75 640.00
Depreciation (O/E) 20 % on cost S/L 0.41 20.00 130.00
Business Promotions 1 % of Sal 0.76 4.00 240.20
Local Transport 0.15 4.00 48.00
Stationery 0.15 4.00 48.00
Telephones/Postages 0.15 20.00 48.00
Payroll Services 1 % on Payroll 0.76 322.58 240.00
Sub Total 12.40 3,871.00
Grand Total 83.84 2,179.84 26,158.11

3.10 Projected Annual cost of Production

Table 11: Projected Annual cost of Production:

Cost Centre Per annum ( N 000)

Raw materials 5,054,822.20
Labour 9,072.00
Production Overhead 22,287.11
Admin/selling O/H 3,871.00
Total 5,090,052.33
Table 11 contains the annual projected cost of project which includes the costs of raw material, labour and
overheads (Table 10).

3.11 Justification for external Funding

In event that part of the required capital is obtained from bank e.g. Bank of Industry (BOI) in the amount of One
hundred million (100m) naira, we are optimistic that at an annual interest rate of 10% compounded, the loan would
be totally liquidated in five year time at equal yearly repayment. The computation of the repayment amount as
well as the amortization schedule is presented in the Table12.
Yearly Repayment Parameters
Loan amount (Naira) 100,000,000.00
Tenure (Years) 5
Interest Rate 10 %
Discount Factor 3.7908
COY Rate -
Management -
Annual Instalment = Loan Amount/Discount Factor
= 100,000,000/3.7908
=N26, 379,656.00

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ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.9, No.7, 2018

The yearly repayment schedule is presented in the amortization analysis as contained in Table 12while the
profit estimation result is contained in Table 13.

3.13 Amortization Schedule

I n s t a l m e n t Principal amount A n n u a l P r i n c i p a l
Year P a y m e n t I n t e r e s t P a y m e n t
0 - 100,000,000.00 - -
1 2 6 , 3 7 9 , 6 5 6 . 0 0 83,620,344.00 10,000,000.00 16,379,656.00
2 2 6 , 3 7 9 , 6 5 6 . 0 0 65,602,722.40 8,362,034.40 18,017,621.60
3 2 6 , 3 7 9 , 6 5 6 . 0 0 45,783,338,60 6,560,272.20 19,819,383,80
4 2 6 , 3 7 9 , 6 5 6 . 0 0 23,982,016,40 4,578,333.80 21,801,322,20
5 2 6 , 3 7 9 , 6 5 6 . 0 0 - 2,398.201.60 23,981,454.40
.
3.14 Profit and loss Estimation
Table 13: Summary of projected profit and loss for the year 2017

Gross sales 6,491,696.64

Other Incomes ---------
Cost of Raw Materials 5,054,822.20
Salaries and Wages 9,072.00
Gross Operating income 1,427,802.44
Operating Expense
Total Production O/Head 22,287.11
Total Admin &Selling O/Head (including bank charges) 3,871.00
Total operating Expenses 26,158.11
Net Profit before Tax 1,401,644.33
Taxation (30%) 420,493.30
Profit after Tax 981,151.03
Appropriation
Statutory Reserve 490,575.51
Transfer to general reserve 490,575.51

Conclusion
 The Soap production requires an average working capital and energy requirement as cost of raw materials
and overhead is not heavy.
 Soap is among Fast Moving Consumer Goods (FMCGs) and this would make the business to experience
a very high turnover in sales.
 The price of the product is affordable.
 The raw materials could be obtained locally with ease.
 It could be ascertained that from the net annual profit of N981, 151,030.00 realized that the project is
feasible, viable and profitable. Also, the project will be able to pay off its cost of investment.
 The business is more viable than most government financial bonds.
 Also, financial institutions would be interested in funding such an investment while money invested
would be recouped at the end of five financial years with all the loan terms and interest paid up.
 The introduction of other brands and specifications would equally boost the sales and turnover.

Acknowledgement
The authors are grateful to the corporate industries, suppliers and individuals who made the information we
presented in this article available during the survey work. We are appreciative of the contributions of the reviewers
and the editors who saw to the refined version of this article.

References
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http;//www.smallbusiness.chron.com/importance-of-feasibility-study-69080.html. assessed April 20,2017.
Marino, J. A (2012) Why a feasibility study is important for any business. Trumanmox.

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Vol.9, No.7, 2018

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