Importance of Feasibility Study in The Realization of Project Objectives

University of Nigeria
Research Publications
ADEMIJU, Samuel Adebayo
Author
PG/EMBA/98/0001
Importance of Feasibility Study in the Realization of Project

Title
Objectives
Department Faculty
Business Administration
Management
May, 2001
Date
Digitally signed by Omenuko Sunday

Omenuko
Signature
Ogbonna
DN: CN = Omenuko Sunday Ogbonna,
Sunday Ogbonna C = NG, O = University of Nigeria, OU
= Innovation Centre
Reason: I have reviewed this document
Date: 2008.12.01 12:39:02 -12'00'
IMPORTANCE OF FEASIBILITY STUDY IN THE
REALISATION OF PROJECT OBJECTIVES. "AN
EMPIRICAL ANALYSIS OF SOME SELECTED
PROJECTS".
'\
ADEMIJU SAMUEL ADEBAYO

CMD/UNN/PG/EMBA/98/0001
DEPARTMENT OF MANAGEMENT
FACULITY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA, ENUGU CAMPUS,
ENUGU.
MAY 200'1
IMPORTANCE OF FEASIBILITY STUDY IN THE REALISATION
O F PROJECT OBJECTIVES. "AN EMPIRICIAL ANALYSIS O F
SOME SELECTED PROJECTS".
ADEMIJU SAMUEL ADEBAYO

CMD/UNN/PG/EMBA/98/0001
BEING A RESEARCH PROJECT SUBMITTED TO THE

DEPARTMENT OF MANAGEMENT, FACULTY OF BUSINESS
ADMINISTRATION, UNIVERSITY OF NIGERIA, ENUGU
CAMPUS, ENUGU IN PARTIAL FULILAMENT OF THE
REQUIREMENT FOR THE AWARD OF MASTER OF BUSINESS
ADMINISTRATION (MBA) DEGREE IN MANAGEMENT
-
MAY 2001
\
CERTIFICATION
ADEMIJU, Samuel Adebayo, a postgraduate student in the Department of
Management, Faculty of Business Administrated with Registration number
CMDKJNN/PG/EMBA/98/000 1 has satisfactorily completed the
requirements for the award of the degree of Master in Business
Administration (MBA)
The work embodied in this report is original and has not been submitted in
part or in full for any other degree or award of this university or any other
University
............................ .............................
Professor E.U.L. Imaga C.0' ~ ~ ~ u k w u
Supervisor Head of Department
DEDICATION
TO MY WIFE AND CHILDREN
iii
ACKNOWLEDGEMENT
It is a saying that "to give honour to whom it is one is an honour for which
no one can sue". I so give glory to the Almighty God who spiritually
strengthened me to successfully completed the programme.
I am indeed highly indebted to my supervisor, Prof. E.U.L. Imaga for his
assistance, patience understanding, advice, inspiration, encouragement and
support throughout the course of the project may the merciful God continue
to shower His households, Amen.
My appreciation also goes to my wife and children for their understanding
and support throughout the duration of the programme.
Finally, I my appreciation goes to Mr. Mark C. Ukegbu for the for the
excellent promotion of this study. More blessings of the Lord, Amen.
Samuel Ademiju
May 200 1.
ABSTRACT
Business involves risk and as such, it requires systematic planning. The

whole idea of feasibility studies revolve around conscious efforts at business
planning, hence a feasibility study is a comprehensive and rigorous business
planning process
Many investors especially in developing countries embark on industrial

projects without pre-investment studies to across the viability of the venture.
Even where investment decisions were preceded by pre-investment studies,
the standard and depth of such studies are often not adequate
The problem of improper identification of business opportunity resulting in

wrong choice of project implied with wrong timing has led to many project
failures
The objective of the study is to highlight the importance of feasibility studies

in the realisation of project objectives
The survey research method using questionnaires and hypothesis was

adopted in eliciting data from the respondents for this study.
The major findings are:
Financial commitment to a project has something to do with the success or

otherwise of the project.
Feasibility study do assist in determining the viability of a project feasibility

study is an excellent told in achieving project objectives
A project will not achieve optimal financial success unless it is properly,

efficiently and effectively planned and operated with respect to its technical,
social, commercial and financial requirement.
In meeting the above requirement, it is expected of an entrepreneur to
endavour to carryout a feasibility of any project to be embarked upon so as
to determine its viability.
TABLE OF CONTENTS
Title page
Certification
Dedication
Acknowledgement
Abstract
Table of contents
CHAPTER ONE Introduction
1.1 Background to the study
1.2 Statement of problem
1.3 Objectives of the study
1.4 Formulation of Hypothesis
1.5 Significance of the study
1.6 Definition of terms
CHAPTER TWO Review of Related Literature
2.1 introduction and Definition
vii
Typical structure for a Feasibility study 14
Stages leading to the Development of Feasibility study 19
Factors to be considered when conducting a
feasibility study 22
Computer Feasibility Study 25
Feasibility study and prospects 28
The summary of the Review of the Related Literature 28
References
CHAPTER THREE Research Methodology
3.1 Introduction
3.2 Research Design
3.3 SourcesofData
3.4 The Population
3.5 Sample Size
3.6 Sampling plan
3.7 Instrument for Data collection
3.8 Tools for data Analysis

...
Vlll
3.9 Scope of the study 38
CHAPTER FOUR Data presentation and Analysis 39
4.1 Introduction 39
4.2 An Empirical Analysis of four Selected Projects 52
CHAPTER FIVE Discussion of Results 74
CHAPTER SIX Summary of Major Findings, Conclusion &

Recommendation
6.1 Summary of Major Findings 84
6.2 Conclusion 92
6.3 Recommendations 93
6.4 Area for Further Research 94
Bibliography 95
Appendix - Questionnaire 97
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY:
Many investors, especially in developing countries, embark on industrial
projects without necessary pre-investment studies to assess the viability of the
venture. Even where investment decisions were preceded by pre-investment
studles, the standard and depth of such studies are often adequate. As a result
of this deficiency, many industrial ventures had run into critical problems or
even folded up within a short spatx of time after the start - up of operation.
The first positive step in business planning is feasibility study. To minimise the
rate of industrial mortality, it is absolutely important for prospective investors
to seek the services of professionally qualified and experienced consultants to
carry out a feasibility study on the proposed project to determine if it is a

/
worthwhile venture.
i
Feasibility study has been variously defined by authors, analyst and
consultants. In a nutshell, however, a feasibility study is a scientific
investigation and analysis of a proposed project in order to determine its
economic desirability, or value, technical feasibility, organisation and
manpower requirement, financial logistics, commercial viability and
profitability. Thus, a feasibility report is a comprehensive business plan.
Feasibility reports are highly valued world wide. Apart from their common use
as business planning documents, these reports are put into various other related
uses. For instance, owing to a very high poverty level, most prospective
investors reply on feasibility reports as the basic document for finance
sourcing.
Infact, since the advent of the structural Adjustment Programme (SAP), a
number of Loan packages have been available to Nigeria Investors, especially i
in the area of Agriculture, a g o allied, Industrial support services, mining and
manufacturing enterprises. These packages have come under various

programmes such as the small and Museum Enterprises Loan Scheme (SMES),
the National Economic Reconstruction Fund (NERF'UD) the National Risk
Fund (NRF) the National Directorate of Employment W E ) and Family
Economic Advancement Programme (FEAP), for which a total of N7.4 billion
has now been earmarked. All these programmes stimulate the demand for
feasibility studies.
For project execution, monitoring and supervision, feasibility reports constitute
authoritative refiee materials. In fact, a project is 'usually implemented in
accordance with the provisions of its feasibility reports. It therefore serve as a
guide for project monitors and supervisors.
In general terms, a feasibility study consist of research into the possibility of a
solution to a problem.
1.2 STATEMENT OF PROBLEM
Inspite of the unassailable and nature value of feasibility studies is to the

3
realization of project objectives following problem are identified as a set back:
Improper identification of a business opportunity or wrong
choice of project to be executed.
Timing of the proposed project. Some project are conceived at
a wrong time with improper feasibility study carried out based
on the project will not work.
Inflation is another problem of using feasibility study for project
realization.
The use of quack or dubious consultant for the preparation of
feasibility study can erase the importance of its use in the
realization of project objective.
(e) Political Interest supersede feasibility study in public sector.
1.3 THE OBJECTIVE OF THE STUDY
Thls study attempts to show the important of feasibility stuhes in the
realization of project objectives. At the end of thls study it will be established
that feasibility studies are not all plain sailing. The conclusion may be
4
reached that the proposed project would be uneconomic and not in the best
interest of the organisation.
The fact still remain that the amount spent on feasibility study is not wasted
whether the project is camied out or not. It will be established in thls project
that it pays not to carry out a project that will later be abandoned. The amount
to spend on such project will be more the amount paid for feasibility
studies.
1.4 FORMULATION OF HYPOTHESIS:
The following hypothesis can be formulated in relation to the topic under study:
1. Null Hypothesis m) There is no significant relationship between
feasibility study and project failure or success. Alternate Hypothesis
(HI) there is significant relationship between feasibility study and
project failure or success.
2. Null Hypothesis @&,)Financial commitment to a project has nothing
to do with feasibility study.

Alternate Hypothesis (HI) Financial commitment to a project has
something to do with feasibrlity study.
3. Null Hypothesis &) there is no significant relationship between the
steps taken to achieve project objectives and feasibility study.
Alternate Hypothesis (HI) there is significant relationship between the
steps taken to achieve project objective and feasibility study.
1.5 THE SIGNIFICANCE OF THE STUDY:
Tlus study is carried out with the hope that the following parties will benefit
fiom it.
Government agencies will find this study useful as it shows the
extent to which feasibility study is useful before embarking on
any project.
Researcher will find the information in this study useful as
additional data for their research.
Student of management will benefit from this study. Reading it
will enable them to know the practical side of the topic.

6
4. Consultants can use the mformation in this study as additional
input to their consultant jobs.
5. Business men/Entrepreneurwill benefit greatly from this study as it
serves as eye opener to other essential aspect of management tool.
6. Investors can make use of this study as a guide to any investment, to
invest in any venture there is need for further plan. This can best be
found in the feasibility studies.
7. Financial Institutions who lend money for business venture will find the
information in this study useful. It will show the fact that not every
feasibility studies can be relied upon for giving loans
1.6 DEFINITION OF TERMS:
Importance: When we say something is important we mean it is of great
influence, something that need to be treated seriously and having a great effect.
Feasible: When somethmg can be done or can be managed and that is
convenient, is described as feasible. The noun form of this is feasibility.
Studv: This mean devotion of time and thought to getting knowledge of

7
something. It also mean close examination of a subject.
Realization: This is the act of converting (a hope, plan etc.) into a fact.
Project: A project can be defined as a scientifically evolved work plan devised
to achieve a specific objective within a specified period of time.
Obiective: Objective constitute the basic purpose of a firm. The aim, target or
pursuit of an organisation is its objective. Objective are the ENDS toward
which all activity is directed.

CHAPTER TWO
THE REVIEW OF THE RELATED LITERATURE
2.1 INTRODUCTION
There are many definitions of feasibility study from different Authors. The fact
is, the definitions are similar, but having subtle distinctions; John E. Walsn Jr.
gave many defhtions, five of them are that;
A feasibility is an inquiry which result in the determination of that
project which will give the maximum return on invested capital.
It is an inquiry which result in the determination from all available
possibilities of that project which is the most economical producer of
the chosen commodity.
A feasibility study examines the practicability or success of a business or
undertaking.
It is a document which clearly describes with a minimum of bias, the
project being studied in a logical and orderly fashion. 1
It is the projection of a series of balance sheet and income statement of a
tentative project.
9
Mr. Chidi Agubs, a management consultant based in Lagos in one of his
write up defines the term feasibility study as a scientific investigation and
analysis of a proposed project in order to determine its economic desirability or
value, technical feasibility, organisation and man power requirement financial
logistics, commercial viability and profitability.
E.U.L Imaga described feasibility study as the investigation to determine the
viability, desirability or practicability of an undertalung.
Steven Pauley wrote extensively on feasibility reports. Before he gave the
feasibility report structure, he described what it means by the word feasibility.
According to him change in industry is a sign of stability; firms must change in
order to remain competitive. Fierce competition with other h s demand that
companies constantly develop faster, more economical method of producing
their product. Because of the emphasis on innovation, change is not only a sign
of stability, it is the most stable thing in industry; if firms can be certain of

10
nothing else,.they know that tomorrow will bring change.
He want further to say that when one proposal is presented, the company must
decide whether to act upon it; if several are presented, the base one must be
selected. Separating the good ideas &om the bad, and the practical ones from
the spectacular requires extremely thorough investigation. The function of
judging proposed ideas and recommending whether they should be acted upon
belongs to feasibility reports. In industry "feasibility" implies more than
"possibility" a feasible idea must be supported by evidence that it will succeed.
A department which wants to make expensive changes must often demonstrate
the feasibility of its suggestions. For larger matters such as expansion,
development of a new product or purchase of new system, a team investigate
all aspects of the proposed change before making a recommendation.
Andrew Parkin described a feasibility as the activities in the first phase of a 1

i
new project after it has been initiated. The feasibility report is not only for a
yes or no decision. It is also to allow management an opportunity to

11
modifl specific weaknesses or to take advantage of strengths not previously
recognised to check out for side effects which only the management are in a
good position to predict and to weigh up their confidence in the feasibility
reports.
Linus Osuagwu, feasibility study in business management is a part of the
planning process. He defined it as an examination of all factors surrounding the
making, production, marketing, staffing and financial aspect of a business
venture. According to him, feasibility study do not only answer the questions
of whether the ideas for a new or expanded business operations are expedient.
The studies go further to identify those actions that if taken or followed, will
help assure success of new business venture or the continued success of the
existing business ventures.
If the idea for the new business venture is practicable, a good feasibility study
provides a blue print for planning. For non-practicable, business ventures, a
good feasibility study discourages the business venture. Feasibility go

further to indicate those factor that will create unusual high risks and probably
lead to business losses and failure.
Ralph Von Gersdorff in his article "The making of feasibility studies" describe
the need for feasibility study before start of project. According to him
feasibility studies are needed by firms and institution which ant to expand old
lines or start new production lines. Projects or the finding of suitable projects
may be suggested by individual (businessmen, bankers, officials, politicians,
engineers, scientist) or by institutions (firms, private, associations, development
banks, government, development boards, political parties international
institutions). Suggestions may be based on spontaneous discoveries of needs
or demand, or existing studies and development plans or simply on the desire
for economic growth. Proposals for simple projects may already be
accompanied by feasibility studies e.g profitability tests for expansion of an
enterprise, but mostly feasibility studies will be made before a project is /

\
proposed, elaborated, and started. They are examined not only by the firm or
institution concerned but also by engineering and management

13
consultants, banks, and government officials, if financing and licences have to
be applied for.
Gerald A. Silver on his own said "The systems department has developed a
sophisticated means of evaluating the practical aspect and details involved in
implementing a new or modified system. This analysis is called a feasibility
study". According to him it purpose is to gather analyse and document the data
needed to make an mformed, intelligent decision regarding a systems
practicality.
2.2 TYPICAL STRUCTURE FOR A FEASIBILITY STUDY;
According to John E. Walsh Jr., vital judgments are required in structuring a
feasibility study since each study is concerned with adifferent project usually
in a different city or section of a country.
He submitted that in practical terms, feasibility study have been structured to
include four major aspect: Economic, Techcal, Financial and Managerial.

14
Imaga described the structure as include market Technical, Financial, Social
profitability analysis.
Osuagwu on his own part gave eleven features of a business feasibility: They
The product or service
The market size of product or service.
The management team.
The production or operation process and plan
The marketing plant
Manpower requirement
Estimated capital expenditure
Estimated working capital
Cash budget
Projected Balance sheet
Profitability analysis and evaluation of the project.

The last point is described as the point of decision making on whether to
engage in the business or not. Certain guidelines that will help in taking a
decision are given as:
(a) Break-even analysis
(b) Determination of pay back period
(c) Determination of annual rate of return.
Steven Pauley on his own part gave three hypothetical situation to show the
structure of a feasibility study. They are:
A) Problem: a city needs additional airport facilities
Alternatives: (1) expand the present airport
(2) build a new airport at site A.
(3) build a new airport a site B.
Criteria: (1) cost
(2) capability:
a) Land and air space available
b) access to highways and commercial centres

c) ecological effect (air, water, noise pollution)
B) Problem: a firm needs a data-processing system
Alternatives: Various-sizes computer systems.
Criteria (1) cost
(a) Initial (b) Operating (c) Maintenance
(2) Capability
(a) to meet f
hpresent requirement
(b) to meet requirement if firm expand
(C) Problem: The site for a branch plant must be selected.
Alternatives: Proposed sites in various region of the country.
Criteria: (1) Cost
(a) Construction (b) Transportation (c) Labour
(d) Taxes
(2) capability of local utilities.
He concluded by saying that good feasibility reports include all

17
pertinent criteria, but as the example suggest, the criteria can often be grouped
into the major categories of "cost" and capability. These criteria do not apply
to all feasibility problem but an effort should always be made to limit the
number of major criteria; doing so helps organize both the investigative and
writing aspect of a feasibility study.
Ralph Von Gersdorff described the structure of a feasibility study as check list
for the collection of data. He explained that feasibility studies should start with
a check list of data sought. This list can be broken down into six sections: (1)
Materials and supplies (2) Market factors (3) Economic and technical
factors (4) Personnel (5) Financial factors and (6) Social factors.
2.3 STAGES LEADING TO THE DEVELOPMENT OF A

FEASIBILITY STUDY
Walsh Jr. described the stages and activities leading to the development of a
feasibility study as intuitive stage which aptly describes what take place in I/
arriving at an idea for a project.

Pre-feasibility study which is the process of gathering a reasonable percentage
of facts and opinion, weighmg them and taking into account unknown
information for the purpose of determining whether a tentative project is worth
pursuing more deeply:
The pre-feasibility study is likened to a "mini feasibility study" with the basic
purpose of quickly evaluating areas essential to the project decision. The basic
purpose of the preofeasibility study is to eliminate unnecessary time and
expenses.
Gerald A. Silver explained that implementing a new or modified system is done
in three phases. The first, called the Preliminary study in concerned with
determining whether or not the direct or indirect benefit gained fiom the new
system will be greater than the cost involved. If the answer is no, the feasibility
study ends there and the project is temporarily or permanently abandoned.
If the answer is yes, the analysis enter the phase the investigative study. There
the problem is carefully defined and all details in the solution are specified.
The last phase of the feasibility study according to him is the final report. It
fully documents the work done during the first two phase. All expected cost,
benefit and outcomes are shown. It tells how and hen the new system should
be implemented. After the completion of a pre-feasibility study, it is possible
the prospects will appear so outstanding and the risk so small that a feasibility
study is not required while situation like this are extremely rare they do occur
for example, when the invested capital is small and can be paid back in a short
time - say from six months to a year. It is also possible the prospects can be so
utterly dismal that the project is eliminated from further consideration, and this
kind of result is more typical than the first.
Without question, most project will require more detailed information and a
careful, systematic analysis, hence, after the completion of pre-feasibility study
a company would be ready to conduct a feasibility study, provided of course
the results obtained were inconclusive or positive.
Image described the various stages of a feasibility study as:

Identification Staae which involve the establishment of the objective to be
attained.
P P r of In this stage a decision should be made
of whether it is advisable to examine in detail the feasibility of a project.
Where there is a long list of project opportunities, and because a complete
study is time consuming and expensive, it may be desirable to perform a pre-
feasibility analysis in order to narrow down the possibilities.
Analysis Stage: The various alternatives in marketing technology and other
consideration must be studied at this stage. This will include, Market,
Technical, Financial and social feasibility analysis.
Subseauent Stape: Once the decision has been made that the project is
feasible, then the implementation stages are embarked upon.
2.4 FACTORS TO BE CONSIDERED WHEN CONDUCTING A

FEASIBILITY STUDY
Another important area discussed in literature is the factors to be considered
when conducting a feasibility study.

John E. Walsh Jr. list five factors, they are:
(1) All feasibility studies must be based on practical grounds.
(2) They must be presented in a logical order.
(3) They should be written in a conversational manner.
(4) They should show how they are related.tobroader planning.
(5) All feasibility studies should consider all major alternatives.
Agubas in one of his write up put forward important factor. This is the
inclusion of professionals in the team that prepare a feasibility study.
According to him, owing to the inter-disciplinary requirement of feasibility
studies, the team should be made up of professional in relevant fields. As
recommended by the United Nations Industrial Development Organisation
(UNIDO) the team should comprise the following numbers: an Industrial
economist, market analyst, engineer or technologist in the appropriate industry, /
structural or civil engineer (if required) and an industrial

i
management/accounting expert.
Ralph Von Gersdorff listed maintenance, Transportation and distribution
services as factors influencing feasibility. According to him, maintenance cost
are usually high in underdeveloped countries, owing to a lack of maintenance
enterprise, absence of training (and resulting damage of machines through
ignorance and neglect) and shortage of spare parts. Unduly high rates of
depletion and waste of scarce capital assets are the rule rather than the
exception.
Many projects can be carried out only if other facilities are available or are
provided at the same time. For instance, the establishment of an iron are mine
and or a steel industry is practicable only if there are adequate facilities to
transport the raw material and the finished products. Feasibility studies must
take into account not only the usual types of protection in force, such as
imposition of import duties or quotes for infant industries, but also limitation on
Distribution services are often inadequate in underdeveloped countries. Profit
are mostly made on exaggerated mark ups rather than on the expansion of
turnover. There are many monopoly or quasi-monopoly positions which could
be knocked out by efficient competition. Investigators should not only study
the existing services and their costs and prices but also consider the possibility
of establishing alternative services for a manufacturing project.
2.5 COMPUTER FEASIBILITY STUDY
Other area that need to be review in literature is the computer feasibility study.
This is a specific area of feasibility study.
D. Fiehd make a comprehensive survey of all the areas which should be
considered before decision whether an installation is likely to be worthwhile.
He was of the view that before electronic computer can be installed, very
careful and most detailed examination of existing procedures must be
undertaken.
In his opinion computer feasibility study start with prospective and approach.
By this he explained that it is of major important that the mind of the
investigators are in correct perspective for a larger scale examination of this
nature. They will have problem to face during the course of their studies.
Perhaps the most important is how to make the right approach to the
examination.
He broke down that is involve in computer feasibility study into: the
establishment of objectives, selecting the investigating team, deciding where to
start, preparation, the detail, individual functions and charting the details.
Andrew Parkin gave examples of feasibility report content as consist of the
following:
Term of Reference: As modified.
Justifications: Statement of system objectives and scope. (This should specify /
what messages will be supplied by the system, what processes will be
controlled, what decisions are to be supported, operational messages,

monitoring information and decision support infomation listed) Major
alternatives considered and preferred solution (assumptions and unknown
influencing choice should be emphasized).
Fit with long-and medium terms plans. Cost and benefit summary, project
target. Limitations of preferred solution. Other implication or side effects of
interest to management.
Present system: Summary of procedures, skdling, equipment. Outline design
of the imputs, outputs and business procedures. Data dictionary or summary of
the data base content, listing the entities and relationships and their attributes
which are to be recorded by the system. Control, integrity and security and
security features.
Conversion: Conversion requirement and conversion plan.
Future Plan: Overall project plan. Detailed plan for the analysis phase.
Recommendations for participation in the next phase.
26
Avvendices: References to document read or mentioned in report. Supporting
detail of present system, proposed system, conversion plans, volumes,
estimates costs, benefit, hardware, software, data transmission, terminal
network etc. being mainly copies of or extracts from the standard system
documentation files.
2.6 FEASIBILITY STUDY AND PROSPECTUS
John E. Walslh Jn. explained the relationship between feasibility study and
prospectus. He pointed out that unless a company has internal sources of
funds, it must borrow money to build a plant buy land, machine tools,
equipment, material and obtained technical assistance for long term capital
loans. All lending institutions such as the International Finance Corporation
(IFC), The Private Investment Corporation and Development Bank require the
borrower to submit a prospectus. The prospectus according to him is simply
feasibility study except it point of view has a built in biase - a biase favouring
the borrower. The prospects should be a total and comprehensive and give due
recognition to every aspect of the company over the short and long run
27
that is relevant for the lending Institution to determine whether loan should be
granted.
2.7 THE SUMMARY OF THE REVIEW OF THE RELATED

LITERATURE REVIEW
From the review of related literature, it was established that feasibility study is
the first step in business planning. In fact every forward loolung entrepreneurs
appreciate the importance of feasibility study as a guide to achieving project
objectives. So, we can summarise the definition simply as the process
designed to check the validity of the business opportunity decisions. The
literature review have shown that a feasibility report is a comprehensive
business plan. The study may be carried out by potential investor especially if
the business proposal is a simply one.
But the business trend today is rapidly changing. Investment in transportation,
manufacturing, agriculture, food processing, local and international trade,
telecommunications, etc. have witnessed an upsurge in the number of

commercial outfits such as assorted corporations, mergers, acquisitions and
conglomerates. Business is therefore becoming more complex.
The literature review enable us to know that feasibility studies dig into the past,
examine the present and project into the fbture, analjysing the trends including
the strengths, weaknesses, opportunities and threats in a particular industry or
proposal for instance, a feasibility report on newspaper publishmg must
examine the history of the newspaper industry, even if briefly; identifj. both
successed and failures in the business trends, as well as weakness, strength and
prospects.
The topic of this research is the importance of feasibility study to the
realization of project objective. After the feasibility study have been prepared,
it has to be analysed. Most business opportunity decisions do not survive the
feasibility analysis phase without being revised in a major way. Infact, a fairly
\
high percentage of business opportunity conclusion will be proven invalid
during this analysis, and dropped completely. It is a lot cheaper to find

29
out at this stage that a new business is not worth a company's investment than
to discover the bad news after major resources have been committed.
For a feasibility study to be useful for the realization of a project objective it
must pass through various analysis; these are market or Economic, Technical,
Financial, Social profitability feasibility analysis. The analysis should provide
enough information to co&ont the decision; "Is there a valid business
opportunity?"
REFERENCES
1. Batty J., Development in office management page 207 p 219.
2. John E. Walsh Jr. Preparing feasibility studies in Asia. Published by
Asian productivity organisation - Tokyo.
3. Imaga E.U.L, production and operations management with practical
feasibility studies. Pages 147 to 150.
4. Deverall C.S., A GEES study book:
Management Techniques in Administration and Finace, Aids to
Decision making pages 204 - 208.
5. Unamka P.C. and Ewunun U.J.F; Business Administration (page 3)
6. Ralph Von Gersdorff; (1%5) Graw-Hill Mc series in International
Development. International Hand book of Management.
7. Andrew Parkin; systems Management. Published by Edward Arnold
(Publishers) Ltd.
8. Linus Osuagwu - Business Research Method Principles and Practice.

Published by Grey Resources Ltd, Iiorin.
9. Steven Pauley - Techn.mil Report writing today pages 192-224.

10. Horby: Oxford Advanced Learner Dictionary
11. Brockington R.B (1987) Financial Management page 1-3.
12. Gerald A. Silver, Introduction to system analysis pages 160-166.
13. Chen, Kung K. (198 1) Financial mgt vol. 10 No 1 198 1 pp5 1-60.
14. The Guardian, Tuesday 17, 1999, August 3 1 1999 and September 21,
1999 pages 45, 52 and 55 respectively.
15. Management in Nigeria SeptemberIOctober 1991 Edition Vol. 27 No
5, page 23.
16. Management in Nigeria August 1985 Vol. 2 1 No 8 pages 38-43.

CHAPTER THREE
RESEARCH METHODOLOGY
3.1 INTRODUCTION
This type of research make use of both secondary or historical and Primary
data. Secondary data refers to data collected and assembled for some project
other than this one. Examples or such data were extracted from Newspapers,
Libraries, Annual reports, Financial Statements of companies and various
feasibility studies and proposals.
From the secondary data the nature and purpose of feasibility studies was seen.
Those studies that were used to realise the objective of a project and those that
was not used because the project proved not to be viable as a result of the
feasibility study analysis carried out.
The Primary data are those gathered and assembled specifically for this project.
For the purpose of this, a research process was carried out which finally
produced a report.
3.2 RESEARCH DESIGN
For the purpose of carrying out this research, survey research method was
used. This require asking people who are called respondents for information,
using both verbal and written questioning. For this purpose, Questionnaires
and Interviews were utilized to collect the data necessary for this research.
Sample survey which shows the representative sample of the target population
was used in the course of carrying out this project.
3.3 SOURCES OF DATA
(a) Primary Sources: Data were collected fiom consultancy firms, Auditing
firms, manufacturing companies Oil Industries, Insurance Companies,
Financial houses, Private and Public sector in Lagos State. Feasibility
studies of five of these companies were collected for an empirical
analysis.
Many business men, Sole trader,chahan of business organisation,
Directors in both private and public sector were interviewed as to the -
role which feasibility studies played in the execution of projects in

34
their organisation. The result of all these were used as Primary data.
(b) Secondary Sources: My secondary source of data collection include
Newspapers, text books, journals and other publications. In the Agency
for International Development, Government of the USA publication, Q

checklist was presented to be used to appraise a feasibility study prior to the
actual launching of industrial venture (appendix 11). A conceptional
fimework for a feasibility study was also extracted fiom "preparing
feasibility study in Asia" (Appendix 111). From the Guardian Newspaper of
Tuesday August 17, and 3 1, 1999. Agubasi president of the National
Association ofIndustria1 Consultants (NAICON) wrote about the secret of
feasibility studies. This was used as secondary data.
3.4 THE POPULATHINi
The population for this study comprises firms, Executive and Directors in both
public service .and private sector, self employed Tradesmen, self-employed
professional, and Traders. The study make use of Lagos state as base. So,
35
all the above organisations are those based in Lagos state only.
Generally, fifty different organisation were used as the population for the
study.
3.5 SAMPLESIZE DETERMINATION:
For the purpose of this study, five different organisation were studies as
representative of all the Fifty organisation that make use of feasibility studies in
Lagos State. The result obtained showed what is obtained in other companies.
3.6 SAMPLING PLAN:
For this type of research, a systematic sampling method was used. This means
out of fifty different organisation that makes use of feasibility studies only five
different organisations were selected for study. By the systematic
sampling method adopted, our population was fifty organisations fkom
Lagos State. The sample size is five. With this plan, when a list of all the 50
organisation were supplied, we shall pick 10th name fiom the list, that is,
loth, 20th, 30th, 40th and 50th would be selected.

36
3.7 INSTRUMENT FOR DATA COLLECTION:
The instrument used for this research was questionnaire and standardized
interview. In order to make the results obtained valid and reliable, the scoring
were made to be accurate and systematic. The interview carried 60% while
questionnaire carried the rest.
3.8 TOOLS FOR DATA ANALYSIS:
The tool used involve calculation and interpreting descriptive statistics. By this
method, the frequency distribution of scores will be determined by the
presentation of data in percentages.
3.9 THE SCOPE OF THE STUDY:
The study covered the organisations in Lagos State only. Five different
organisation were selected for study.

CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 INTRODUCTION
This chapter deals with presentation, analysis and interpretation of data
collected through the questionnaire. The presentation was based on the
working hypothesis postulated for this survey. Through the questionnaires, the
respondents gave their opinions about the use of feasibility study to achieve
project objectives.
Out of 100 questionnaire distributed in a period of one week only 45 were
completed and returned. The low response can be attributed to the fact that
most of the executives don't count the questionnaire as important thereby
misplaced them. Some of the respondents travelled and many were unable to
get to me in time. Below are the findings fiom the questionnaire.

Table 1 The use of feasibility in carrying our project
0- Frequency % Frequency
a Yes 33 73%
b No 12 27%
From this presentation, it was discovered that many businessmen have used
feasibility study in one way or the other before. The 73% that chose "yes" for
answer were mostly in private sector. The 27% that took 'No' for answer were
mostly public sector and some Enterprenuer.
Table 2 Preparation of Feasibility study.
Options Frequency % Frequency
a Auditor 18 40
b Management Consultant 15 33
c The Promoters 5 11
d Investment department 7 16
Majority of the respondents make use of their Auditors for the preparation of \
the feasibility study. 40% of the respondent confirmed that Auditor prepare
feasibility for them. 35% make use of management consultant, 11% said the
promoters prepared the study for them and 16% said it was their analysis was
that majority of the respondent prepared the study for expansion purposes.
Most Government parastatals like Federal Auport Authority of Nigeria make
use of their investment department to prepare it.
Table 3:The main purpose of preparing feasibility study
Processing application for Loans 15 33
For viability and feasibility of a project 9 20
Execution, monitoring and supervision of 4 9

project
Business expansion 11 24
For prospective Investor 6 14
It was discovered fiom the above table that most people prepared feasibility
study purposely to obtain loan. This account for why 33% of the respondent
picked processing of application for loans. Next to this was the business
40
expansion. Most of the companies that prepared feasibility study for execution,
monitoring and supervision are construction and Engineering companies.
Table 4 Sources of fund used by business organisations.
Options Frequency O h Frequency
Loans fiom financial Institutions 13 29
Fund fiom selling of shares 11 24
Statutory allocation and Taxes 3 07
Subvention fiom Government 4 09
Donation, gift and fund fiom parent 5 11

companies
Profit fiom business transaction 9 20
The above table shows ways of getting funds for business operation. Most
companies depend on loans fiom banks and other financial Institutions to
survive. 29% of the respondents agree that they use loans fiom financial
Institutions. Selling of share came next and carried 24% of the respondents. /
Most small scale business make use of the profit generates fiom business
i
transaction to increase their fund. This account for 20%. Ministries and
41
extra-rninistries establishment depend on statutory allocation and taxes.
Tables 5: Evaluation of the use of feasibility study in achieving
project objective
Excellent 18 40
Good 16 36
Fair 9 20
Poor 2 04
In evaluating the use of feasibility study, most people describe its use in their
business organisation as excellent. This account for 40% of the respondents.
Other people describe its use as good. This group account for 36%.
Table 6: Question as to whether the respondent know other company that
make use of feasibility study;
options Frequency % Frequency
Yes 32 71
No 13 29
From the response received on this question, majority Knew other company
that made use of feasibility study. 71% picked 'yes' for answer while 29%
have not known any other company that use feasibility study.
Respondents provided different answers to the purpose of preparing the
feasibility studies in other companies. Majority gave processing of application
for loans as the main reason. W e r said the purpose was to determine the
possibility of expanding business. Another reason gave by respondents was to
determine the viability and feasibility of a project.

Table 7 Question as to whether feasibility is important in the
achievement of project objectives.
Optiolrs Frequency % Frequency
Yes 31 69
No 14 31
He we saw that majority of people believed that feasibility is important in the
achievement of project objectives. 69% gave 'yes' as answer. Most of the
people that answered 'No' are from public sectors. Some of them don't even
know what feasibility is.
Points given by respondent that are very important in the achievement of
project objectives apart from feasibility study are:
1) Proper supervision of the project
2) Availability of experience and dedicated staff
3) Availability of adequate funds
4) When there is peace in the country

5) Stability of government
6) Acceptance of the project by the community.
Table 8 Question as to whether an organisation have ever embark
on project that was abandoned or rejected.
a Yes 21 47
b No 24 53
It was discovered fiom this analysis that most organisations had in the time past
abandon some projects. 47% of the respondents agreed to the fact that there
had been abandon projects.
Notes on what led to tbe ~roiecta h d o a m e n t
The following are the reasons the respondents gave for the abandonment of
project:
1) Inadequate funds
2) Improper planning
3) Rejection of the feasibility evaluation

4) Lack of peace - communal rivalry and disturbances
5) Instability of government
6) The use of incompetent hands
The above points still explains the importance of feasibility in achieving project
objectives. Before a project is embark upon, there has to be proper planning.
With the preparation of feasibility study, all the points raised by the respondent
would have been addressed.
Table 9: Question as to whether lack of feasibility study can lead
to project failure.

a Yes 27 60%
b No 18 40%
This table shows that most people believe that lack of preparation of feasibility
can lead to project failure 60% of the respondent agreed to thls fact. Most of
the 40% who answered 'No' are executive from public sectors and some non-
profit making organisation.

Table 10 How organisations handle technical aspect of business.
Options Frequency %Frequency
a The use of Technical partners 11 24

b Sub-contract to professionals 14 31
c Our staff are technically capable 10 22
d Employment of contract staff 7 16
e Others 3 7
From the above table, majority of the respondent sub-contract t e c h c a l aspect
of their business to other professionals. This carries 31% of the whole
respondents next to his is the use of Technical partners which 24% chosed.
The three people who picked "others" did not know the meaning of technical
aspects of their business.

Table 11 Areas of feasibility study that is most important to the
achievement of project objectives.
a Techcal Aspect 8 18
b Economic or Market 12 27
c Financial Aspect 14 31
d Managerial Aspect 11 24
It was discovered that 14 out of the 45 respondent which represent 3 1%of the
respondent picked Financial aspect as the most important aspect in the
achievement of project objectives. This account for the reason why most
businessmen prepare feasibility study purposely to get loan fiom financial
institutions.
Table 12: Ranlung of factor h t i n g the use of feasibility study.
Options .
(a) Wrong choice of project to be executed

48
(b) Timing of the proposed project
(c) The use of incompetent and dubious consultant
(d) Political, ethnic and religious factors
(e) The use of outdated feasibility study.
Rank 1 Freauencv %Freauencv
(a) The use of incompetent and dubious consultant)
(b) Political, ethnic and religious factor 1 15 33
(c) Timing of the proposed project 1
Rank 2
(a) Wrong choice of project to be executed
(b) The use of incompetent and dubious consultants 17 38
(c) Political, ethnic and religious factor

Rank 3
(a) The use of outdated feasibility study

(b) Political, ethnic and religious factors
(c) Wrong choice of project to be executed
Rank 4
(a) Timing of the proposed project
(b) Political, ethnic and religious factors
(c) Wrong choice of project to be executed
Respondents ranked these factors based on individuals experience. What
actually limit the use of feasibility study depend on the prevailing situation in
the country or the environment in focus.

Table 13: Reasons why business men in developing countries fail to
make use of feasibility studies.
a Lack of awareness 12 27
b Cost of the study 15 33
c Illiteracy 10 22
d Presence of small scale business 8 18
The main reason why most business man in developing countries fail to use
feasibility study is the cost of preparing the study. This account for 33% of the
respondents. Next to this is the lack of awareness which took 27%. Illiteracy
and presence of small scale business account for 22% and 18% respectively.
4.2 AN EMPIRICAL ANALYSS OF FOUR SELECTED PROJECTS
1) Establishment Of Aero Mcrebat Bank Limited
International Auports Consultants Limited is a subsidiary of the Federal
Purports Authority of Nigeria. It was incorporated in 1986 as w o r t s
Consultant.
In 1991 it conducted a feasibility for the establishment of Aero Merchant
Bank. The company and some other professionals combined to promote
the bank and sell the idea to Federal Auports Authority of Nigeria
(NAA) The major objective of this bank was to address the financial
problem inherent in the investments and financing of transport/ aviation
projects.
In the opinion of the promoter of this bank, the existing commercial and
merchant banks have over the years tried to finance project in aviation
sectors, but .they have not been specilised enough to adequately help the
sector to get off' the ground. They also observed that because
52
most projects in the transport and aviation sectors require huge capital
outlay, individuals and corporate bodies have not been able to source
finance through the existing bank for their investment projects.
The feasibility study was prepared based on the standard required by the
central bank of Nigeria. The study was divided six chapters a and a
conclusion chapter. There were seventy five pages in all.
Chapter two gave the Nigeria Economic profile. This chapter was
divided into seven sub-headings namely, Background, population,
Agriculture, Petroleum, manufacturing, Impact of "SAP" on the
Economy and the assessment of performance under SAP. Each of these
sub-headings were discussed at length.
Chapter three discussed the Nigeria financial system. This chapter
described the nature of the Nigeria financial system under five sub-
headings. The introduction which discussed the peculiar Nigeria

circumstances. The circumstances which characterise the situation of
underdevelopment. Other subheading include Historical background,
Banking Legislations, Development roles of Banks in Nigeria and the
need for Banking services in Nigeria.
The name, Aero Merchant Bank Limited was described in chapter four
under six sub-headings. The Background showed why the bank was
conceived. The promoter explained that the bank will take initiative of
mobilizing resources and d o t the sponsorship of heavy investment in
key sectors of the economy, especially the transport and Aviation
sectors.
Objectives of the bank which were said to be contained in its memorandum and
Articles of Association make the second sub-heading. The third sub- heading
was the organisation structure. The proposed bank was designed to adopt a
corporate structure that was consistent with and necessary to achieve its goals
and objectives. The structure was designed to consist of three main

departments, namely;
(a) Corporate Banking

(b) Corporate Finance and
(c) Corporate services
Under this sub-heading, Board of Directors, Managing Director,
Assistant General Manager, company SecretaryLegal Adviser, other
management staff were discussed and their schedule of works were
analysed. (See next page for proposed organisation structure)
The forth sub-headmg was on departments into which the bank was
expected to be divided. The fifth sub-heading explained in details the
proposed career development and training while the sixth sub-headings
dealt with capital structure and funding. The extract fiom the main study
that shows the funding structure is presented below:
"The fully paid-up share capital of N4O million will be used in
fundmg the project as follows;

TABLE 4 PROPOSED ORGANISATIONAL STRUCTURE
BOARD OF DIRECTORS
0 MANAGING DIRECTOR
COMP, SECRETARYJLEGAL ADVISER
MANAGER - INTERNAL AUDIT & CONTROL
MANAGER - ADMINISTRATION
MANAGER - ACCOUNTSJFINANCE
CORPORATE
CORPORATE CORPORATE
FINANCE
,
PORTFOLIO
MANAGEMENT
LOAN SYNDICTATIONS
PROJECT FINANCE
DISCOUNTABLE
INVESTMENTS
SPECIALISED
LIVERAGED
FUNDING
.
MANAGEMENT
SERVICES MEGER
& ACOS
INVESTMENT
BANKING
F
RADE FINANCE
ORRESPONDENT
BANKING
DOMESTIC &
INTERNATIONAL
REASURY FX
CREDIT POLICY & LOAN

REVIEW
PROCESSING
MARKETING
Capital Expenditure
Pre-operational Expenses
Fund available for working capital
Total
Chapter five narrated the financial estimates. It consist of two sub-headings
only. They are (1) Bases and Assumptions underlying the financial (2)
Accounting policies.
The last chapter of this feasibility study is chapter six which showed the
financial projections of the project and conclusion. The whole chapter was
divided into fourteen sub-headings, namely;
(1) Loans and Advances (2) Loan policy (3) Deposit Generation
(4) Foreign Exchange Transactions (5) Equipment on lease
(6) Letter of credit, International collections and Transfers

(7) Interest Ratepolicy (8) Investments (9) Gross Earnings
(10) Interest Expenses (11) Balance sheet projection
(12) Profit and loss projection (13) Cash flow projection and
(14) Conclusion.
In the concluding part of the study it was clearly emphasized that the main aim
of Aero Merchant Bank was to introduced innovation in Merchant Banlung in
Nigeria by specializing in the provision of banking services to the transport and
aviation industries.
The central Bank of Nigeria accepted this feasibility study. A letter was issued
to the promoter of the bank to subrmt documents for the insurance of licence to
operate (see appendix 11) for the copy of the letter. In the letter, 120 copies of
the feasibility study were required to be submitted. This shows the important
of feasibility to the existence of a bank.
Inspite of the lot of money spent on this study, it was found not to be feasibility
I
at that time. l'he project was confirmed that N80,000.00 was spent on the
preparation of the study.

4.2.2 THE ESTABLISHMENT OF TRANS WEST AFRICAN
AIRLINES (TWAAL)
The establishment of Trans West Afiican Airline was conceptualized by some
professional fi-iends in the viability or otherwise of the object was embark upon
for presentation to interested shareholders.
The feasibility study was divided into five chapters. Executive summary was
placed in the whole of chapter one. The executive summary summarised the
detailed study in few words. It explained the need for an airline that afford
businessmen to have their luggage checked in as baggage rather than cargo.
The promoters decided to use B707 combined and they proposing to make use
of routes mostly patronised by businessmen.
The Executive summary also gave brief explanation of the Technical and
/
Management consideration. A total of 51 qualified staff were proposed for i

employment. The board would be responsible for formulating policy for the
airline, Financial and viability analysis was presented in the executive summary
chapter as well. The total captalisation for the project was estimated at
N122,000,000 The equity contribution would be N30,000,000. While total
loadoverdraft would amount to N92,000,000. A profit before tax figure of
N28,729,760, N42,050, 400, N53,957,070, N67,090,080 and N81,582,230
was expected for the first 5 years of operation.
The viability analysis of the project revealed a pay back period of five(5) years
and an internal rate of return of 26%.
In the concluding part of the Executive summary, it was stated that the study
had given consideration to the market, management, technical and financial
aspects of the proposed airline project.
Chapter 2 discussed the Economic and Historical background. The chapter
was divided into 4 sub-headings, namely, Nigerian's socio economic
background, pioject concept stated that the airline was to provide both
passenger and cargo transportation services w i h n the ECOWAS countries out
the initial stage and will complement the service of existing airlines on the
routine.
Market study was placed in chapter 3. This chapter concerned itself with the
demand, supply and competition in the aviation industry and the implication of
establishing an airline that proposed to operate both cargo and passenger
services using B707 combi aircraft. The promoter made use of the inability of
the Nigeria Airways to embark on cargo operation on the West Coast route.
Statistics on cargo freight and cargo move were presented in the study. Both
revenue fi-om cargo and passenger showed that there was prospect in the
proposed airline. From cargo alone, a conservative estimate of N62,400,000
was expected to be realised every year.
From the configuration of combi B707 aircraft, a total number of 80 passengers
could be airlifted. Using a load factor of 50% and an average tariff of N3,SOO
per sector, and considering 5 flights a week, a revenue estimate of N700,OOO is
expected per week and N36,4000,000 per year respectively (40 x 5 x

61
N3500 x 52).
In chapter 4 we have techcal and management considerations. It was
explained that the airline business usually succeeds, when there is a high
technical competence, back up by good technical and consultancy services with
regards to aircraft brokerage. The need for an overseas technical partner was
taken very seriously in the study.
The management of the airline was discussed and analysed. The Board of
Directors was expected to formulate and evolve policies and guidelines
including stating clearly the objectives of the airline. The General Manager and
his management team would be responsible for the implementation of policies
to achieve the goals and objectives of the organisation. The Board of
Directors was expected to comprise seven (7) members, as outlined below;
Project promoters 3
Technical partners
Major shareholders
The organigram proposed for the airline has three (3) major divisions:
(a) Finance/Administration
(b) SaledMarketing
(c) Operations
The study recommended three(3) Managers for the take off of the venture.
These are operations FinancidAdministration and saleslmarketing. (see next
page for the organigram)
Chapter 5 focused on the financial sb-ucture and project capitalisation for the
proposed airline. The project was proposed to have an initial capital outlay of
N122 million as indicated in the Financial consideration and viability analysis
in the next page. Other financial consideration include capital structure,
Estimate of working capital, office furniture and Equipment, loan and interest
payment schedule, projected capital allowance, projected Income statement,
cash flow statement, profit and viability analysis.

The profit and viability of the project showed that payback period for the
project is less than 5 years. The return of Investment (ROI) was calculated to
be 39.34% Internal Rate of return was 26.8%the Internal rate of return for the
project was 26.8%and this was higher than the expected cost of capital at that
time whch was 21%. In the final analysis the project was considered to be
viable moreso when the discounting factor of 21% (Interest rate) gives a
positive net present value for net cash inflow.

BOA= OF DIRECTORS
GEENUAL MANAGER
OPERATIONS MANAGER FINANCE a ADMIN, 'MARKETINGISALES

MANAGER MANAGER
CHIEF PILOT
PILOTS ACCOUNTANT CONFIDENTIAL SEC
CO-PILOTS ACCOUNTS CLERKS TYPISTS MARKETING/SALES

OFFICER
FLIGHT ENGINEERS MESSENGERS
MAINTENANCE ENGINEERS DRIVER
STATION OFFICER CLEAENRS
FUGHT STEWARDS
LOAD MASTERS
Based on this feasibility study, individual and financial institution provided
funds for the project. Aircraft were leased to the promoter and the flight
operation began in 1992 with operational license obtained in

65
Gambia (see appendix 111) This shows the importance of feasibility study in the
realization of project objectives.
4.2.3 EFUNPO PHARNA S m S LIMITED

Feasibilitv Sfudv For E m Purpose
Kunle Ladejobi and company a firm of Chartered Account had been the
Auditor of this company since incorporation. The company was incorporated
as a Limited Liability Company on 26th January, 1983 vide incorporation
certificate No RclOlO87.
The company since inception had been operating as a pharmaceutical company,
that is, buying and selling of drugs, both on wholesales and retail basis. Before
1989, the company had two main stores within Lagos metropolis and they are
duly registered with the pharmacist Board of Nigeria. The company later
ventured into a small scale production and packaging of proprietary drugs
under the trade name of HALLE - HEALTH, BOL - GENERICS.

Gambia (see appendlx 111) This shows the importance of feasibility study in the
realization of project objectives.
4.2.3 EFUNPO PHARMA STORES LIMITED
Feasibili S
Kunle Ladejobi and company a firm of Chartered Account had been the
Auditor of this company since incorporation. The company was incorporated
as a Limited Liability Company on 26th January, 1983 vide incorporation
certificate No RclOlO87.
The company since inception had been operating as a pharmaceutical company,
that is, buying and selling of drugs, both on wholesales and retail basis. Before
1989, the company had two main stores within Lagos metropolis and they are
duly registered with the pharmacist Board of Nigeria. The company later
ventured into a small scale production and packaging of proprietary drugs
under the trade name of HALLE - HEALTH, BOL - GENERICS.

The company's Directors decided to change the name of the company from
Efunpo Pharma Store Limited to Efunpo PHARMA LIMITED after a board
was passed in 1989. This explained why the company needs additional funds
for the business. Kunle Ladejobi and Co., was mandated to prepare a
feasibility study to get h d s for the expansion.
The feasibility study was prepared with eight (8) chapters, this include, brief on
the company, brief on the directors, brief on the pharmaceutical manufacturing
plant, organisation chart, brief on various drug to be manufactured market
consideration, financial evaluation and man-power requirement. The appences
included at the end of the study include;
- Schedule of Equipment and cost

- schedule of disbursement
- Project balance sheet (5years)
- Projected Profit and Loss account(5years)
- manpower requirement and cost
- schedule of loan repayment and interest
- projected five years annual sales
This study was presented to the United Bank for Afiica to find the project.
Based on this study, UBA gave lcun to the company. The proposed
expansion has now become a reality. The pharmaceutical plant comprise
two basic production lines
(1) Tabulating lines
(2) Liquid lines.
4.2.4 A FEASIBILITY STUDY ON THE MODERNISATION AND

EXPANSION OF B U T DENTAL POWER PROJECT.
Dannac Investment company Nigeria Limited Commissioned Ibegbu Osadebe,
a consultant in 1992 to conduct a feasibility study to determine the desirability
of widering and upgrading its existing productive facilities towards meeting the
demand of its enlarged local market.
The study was divided into seven (7) chapters and the opening page was taken
to be the executive summary of findings. The study covered a lot of topics;

wluch include objectives of the study, Investment environment, market
consideration, Technical consideration, Financial consideration, Profitability
analysis and socio-Economic Analysis. The study also include appendices
wluch shows the profonna Income statement, casMow projections and
profonna balance sheet.
The project was conceived and established in 1989 as a down steam project for
the production of dental powder of high quality with over 60% local content.
Ever since its coming on steam the project has witnessed years of successful
and prosperous operations, establishing a large clienteles all over Lagos State
through its high class quality products and efficient customer service.
The company is now desirous of widening and up-grading its operation through
a planned programme of modemisation and expansion on its existing
productive facilities towards meeting the demands of its enlarge local market.
To enable it achieve this objective, the company is seeking to avail itself of the
opportunity presented through the National Economic Recovery Fund

(NERFUND) to secure funding assistance from institutional investors.
It is pertinent to note that the data used throughout this study comprised actual
operation parameters sieved out &om the company's books and extrapolated,
where need be, as well as data derived from verified information and authentic
publication.
In analysing the investment environment, the consultant wrote extensively on
Nigeria resources, population and labour force, Agricultural resources, mineral
resources, Industrial Wastructure, Transport facilities, communication
facilities, power supply, fuel, water financial Institutions, Technological
factors, political environment and Industrial incentives. Having analysed all
these situations, it was concluded that favourable Investment climate exists in
the country.
The financial consideration covered the project cost financial plan and the
analysis of ope;ating costs. The details of the estimated for the total investment
requirement for the implementation of the project were provided. What
attracted attention was the comparison of the existing assets with the assets to
be required. In summary, the total project cost was presented as follow;
Item Descriphn Existing as To be Total

at 3014192 required
N N N
01-06 Total Fixed Investment cost 60,000 2,873,000 2,933,000
07 preliminarylpre-operative 70,500 8 1,000 151,500

expenses
130,500 2,954,000 3,084,500
08 Working capital Provision 90,000 253,203 343,203
Total 220,500 3,207,203 3,427,703
Chapter 6 of this study dealt with profitability Analysis. Cash flow analysis,
pay back period, projected Debt service, Net present value and profitability
Index were clearly shown.

The payback period of the project was one year six months employing that the
initial investment outlay on this project could be recouped in less than 2 years
of operation, hence ensuring fast rate of capital recovery and enhanced
liquidity. The annual ability to service debt ratio was calculated thus; Year 1
1.58; Year 2 4.81; year 3 7.66; year4 8.79 year 5 10.08. Therefore, debt
service coverage ratio @.S.C.R) average = 6.58. This with an impressive debt
service ratio, rising even from first year, the project was capable of liquidating
the debt obligation far in advance of contractual maturities.
Net present value was calculated to be positive at 21% discount rate. This
indicates that the project had the potential for making positive contribution to
the overall wealth of its . shareholders. By and large, it had been aptly
demonstrated fro the foregoing analysis that the project satis@ all criteria for
technical and economic feasibility as well as commercial viability and
profitability. Based on this study, the company was able to get loan for its
expansion programme.
CHAPTER FIVE
DISCUgSiON OF RESULTS
The topic under discussion is ''the importance of feasibility study in the
realisation of project objectives; an empirical analysis of some selected
projects. In discussing the topic, data were presented and analysed. The result
obtained shows various areas to which feasibility study can be used to achieve
the project objectives.
In chapter one of this paper, a project was defined as a scientifically evolved
work plan devised to achieve a specific objective within a specified period of
time. Most organisations visited for the purpose of this research work believed
that facility study played an important role in the achevement of project
objectives.
The analysis of four selected projects explained in practical terms, the use of
feasibility study. The first one was that of the establishment of Aero Merchant
Bank Ltd., The promoter prepared a good feasibility study which was
presented to and accepted by the Central Bank of Nigeria. When the feasibility
study was analysed by the parent company, it was rejected on the basis that the
project was not viable.
We learn from this analysis that not all feasibility studies can be relied upon for
the execution of a project. It has to be subjected to serious evaluation of a
project. It has to be subjected to serious evaluation. If the bank was
established then, is likely it wouM have been one of the distressed ones by
now. For this reason the cost of the feasibility study for this project was not a
waste if compared to what would have been wasted if the bank was distressed.
In the case of feasibility report on the establishment of Trans West Mean
Airline, the feasibility was used to raise funds. Subsciber found the project to
be viable in all aspects. Aircraft were leased and the flight began. This was a
/
case where feasibility study was used to achieve the project objectives.
Other business organisation selected for analysis was Efmpo Pharma Stores
Ltd. This shows a situation where feasibility study was prepared for business
expansion. The firm of chartered Accountant prepared the study to obtain loan
for the manufacture of pharmaceutical products. This project became a reality
when United Bank of M c a (UBA) accepted the feasibility study and gave
loan for the execution of the project. What made this project possible was the
feasibility study prepared for the loan.
The fourth project analysed was the modernisation and expansion of Best
Dental Powder Project. A consultant was commissioned to conduct a study to
determine the desirability of widening and un-grading its existing productive
facilities towards meeting the demand of it enlarged local market. Based on
the feasibility study, the company was able to obtain loan to enlarge its
productive facilities.
From these four project we can see the role played by feasibility study whether
a new project is being conceived or an existing project want to expand. It

shows the direction to follow, it gives the potential investors the confident to
invest in the project, it is also a planning tool for the executives.
From the questionnaires administered and the Interview conducted, we are able
to bring out more fact about the use of feasibility study. Different question ere
asked and the answers given by respondent enable us to know how important
feasibility study is to the achtevement of project objectives.
73% of the respondent agreed that they have used feasibility study in carrying
out a project before. My research shows that those who had not been using the
study are mostly found in the public sector. In this kind of environment,
political interest takes place of feasibility study. Proper planning is not
necessary before embarking on project in most of the public sector. This
account for why most project were abandon before completion.
It was discovered that the main purpose of preparing feasibility study is for the
processing of application for loans. This account for 33% of the respondents.
Next to this is for expansion purposes which took 24%. Other reasons include
for viability and feasibility of the project for execution, monitoring and
supervision of project and prospective investors.
In practical term we can see that the main reason why business men prepare
feasibility study is to get loans fiom financial Institution or to expand their
business. Thls can be seen in the four project analysed in chapter 4.
The question as to who prepared the feasibility study was answered based on
the options given. In the four o@ons given 40% picked Auditors as the person
who prepared feasibility study while 33% accepted that management consultant
prepared it. This proved a point that it was professionals that can prepare an
acceptable respect to who prepared feasibility study are use of investment
department 16% and the promoters 11%. The summary of this that most
companies prepare feasibility on the advice of their Auditors and consultants.

When asked about the main purpose of preparing feasibility study, five options
were given. 33% of the respondent picking processing application for loans
and next to this was for the business expansion which 24% of the respondent
picked. What I observed f i m all these was that feasibility study can be
prepared before the beginning of a project or when the project was going on.
From the responses received fiom business executives about the source of fund
by business organisations, it was discovered that loans from financial
institutions carried the highest percentage of 29% of the six options given. The
next one was fund from selling of shares which carried 24Y0and profit from
business transaction took 20%. Donation, gift and funds from parent
companies carried 11%; while subvention fiom government took 9% and
statutory allocation and taxes carried the least percentage of 7% of the
respondents. Based on this result, we can see the reason why majority use
feasibility studies only for processing of application for loans.

It was also established in this study that the use feasibility study was an
excellent tool in achieving project objectives. 40% of the respondent ranked it
as excellent while 36% ranked it as been good 20% ranked it as fair and 4%
ranked it poor.
To be sure of how important is the use of feasibility respondents were asked if
they know other company that made use of feasibility study apart from their
own. 71% of the respondents picked "yes" for an answer while the rest 29%
picked "No". This gave us the assurance that many companies made use of
feasibility study. When asked further the purpose preparing the study, the
reason given were the same as was given earlier. That is, to process
application for loan, for expansion of business and to determine the viability
and feasibility of a project.
Respondents gave their support for the use of feasibility in the achevement of
project objectives, a question was asked whether the study is important. 69%
of the respondents choose "Yes" for an answer. The rest 31% disagreed.
They argued that other points like proper supervision of a project, availability
of experience and dedicated staff, availability of adequate funds, peaceful
atmosphere stability of government and the acceptance of the project by the
community concern, are also important in the achievement of project
objectives. It is pertinent to note that that feasibility study still plays an
important role, which others follow. It is the foundation upon which a business
rest.
Questions as to project abandonment were asked. 47% accepted that they had
embarked on project that was abandoned or rejected before. The reasons for
the abandonment as given by the respondent are inadequate funds, Improper
Planning, rejection of the feasibility study evaluation, lack of peace, instability
of government and the use of incompetent hands. The fact still remains. If
proper study was carried out it would have solved most of the problem listed as
reasons for the project abandonment.

Can lack of feasibility lead to a project failure? This was a question which
respondents answered. 60% of the respondents answered "Yes" while the rest
40% said "No" The fact is, business that doesn't prepare feasibility study
before the beginning of the business may not be standing on a solid foundation.
It may need the study as the business proceeds in order raise more funds to
expand the business. As the business proceeds, the need for expansion and
need for more h d s will arise which will call for feasibility study.
Talking about the area of feasibility study that is most important in the
achievement of project objectives, four options were given. 31% of the
respondent picked financial aspect, 27% picked Economic or marketing aspect,
24% picked Managerial aspect and 18% picked Technical aspect. From the
above result, the financial aspect took the highest percentage. This proved the
fact that majority of the business in Nigeria need more fund to survive.
The last aspect of the research question which is relevant to this discussion is a
question why many business men in developing countries failed to make

81
use of feasibility study inspite of the benefit derive from it . Four option were
provided, 33% picked the cost of the study, 27% picked lack of awareness,
22% picked illiteracy and 18% picked presence of small scale business. The
fact here is, those who know the important of feasibility study are running away
from the cost. That was why m y project were not completed or rejected
alone the way.

CHA?TER SIX
SUMMARY OF MA- FIIWINGS CONCLUSION AND

RECOMMENDATIONS
6.1 SUMMARY OF MAJOI FINDINGS
This chapter deals with the summary of all the previous chapters in thls write-
up. Its aim is to give a compacted view of the whole project in its most brief
manner.
It is an evaluative study of the use of feasibility study in achieving project
objectives. In achieving the objective of this project, the writer employed
many methods, Interview were conducted, Questionnaire were administered,
Feasibility studies of four companies were analysed, many related books and
journals were consulted. The summary of findmgs are now presented as follow;
The first chapter introduced the study. This chapter gave the /
background to the study, problem statement objective of the study,

\
formulation of Hypothesis and the significance of the study. The
83
first positive step in business is feasibility study. This was explained in
the background to the study. Nearly all business project decision entail
choosing among alternatives or options; including the decision to do
nothing or maintain the stahquo. The alternative business option chosen
should be a matter of guess work, hunch or intuitor. Feasibility studies
help in taking a decision on whether to accept, modifjr or reject a
business project based on the analysis of the project's merit and demerit.
The problem that can limit the use of the feasibility study were identified as
(i) Improper identification of a business opportunity
(ii) Timing of the proposed project (iii) Inflation and
(iv) The use of quack or dubious consultant for the study was stated as
feasibility study. The main objective of the study was stated as been the
examination of all factors surrounding the making, production, marketing
staffing and financial aspect of a business venture. It was established
that if the idea for the new business venture is practicable, a good
feasibility study provide a blue print for planning. For non-

84
practicable business venture, a good feasibility study discourages the
business venture.
Three hypothesis on which the whole feasibility study was based were stated
as;
There is a significant relationship between feasibility study and
project failure or success.
Financial commitment to a project has something to do with
feasibility study.
There is a significant relationship between the steps taken to
achieve project objectives and feasibility study.
The introduction chapter also shows the partial that will benefit from the
project as government agencies, researchers, student of management,
consultants, Business men~Entrepreneur,Investors and Financial Institutions.
The focus of the introduction chapter is to show the reader what the whole
project is all about.

The second chapter is the review of related literature. Many books, journals
and other research work were contacted for review. The review was conducted
under seven heading. Many definitions of feasibility study were given by
different Authors. What is important to note is that feasibility study is an
inquiry, it is an investigation, it is a projection and it is a document. From all
these phrases, we can see that by definition, feasibility study shows in practical
terms, a guide to investment.
For a feasibility study to achieve its purpose, it has to be structured to include
four major aspects namely; Economic, Technical, Financial and managerial.
Many Authors classified these four into many simplified categories. l b s
aspect is explained in detail in the second heading of the literature review.
The third heading shows the stages leadmg to the development of a feasibility
study. It has to follow some stages in order to be meaningful and to achieve
the purpose for which it is been prepared. it has to pass through some stages or
phases . Authors looked at the stages in different ways but what is common
86
to Authors is that there are some activities to be carried out before the
preparation of the study. This is followed by pre-feasibility study. The pre-
feasibility study will show whether to continue or not. The important of these
stages is to guide against spending money and time on useless things.
In the fourth headmg we have factors to be considered when conducting a
feasibility study. Depending on the way Authors look at it the factors are
differently presented. What it involve is that all feasibility study must be based
on practical grounds and must be presented in logical order.
The fifth heading talked about computer feasibility study. Computer project is
a specialised area which need to be handled by the professional in this area.
Here the feasibility study involve the establishment of objectives, selecting the
investigating team, decision where to start, preparation, the details, individual
functions and charting the detail.

Sixth heading compared feasibility study with prospectus. In actual fact,
prospectus is just like feasibility study except it point of view has a built in
biase - a biase favouring the borrower.
The last heading of the literature review chapter explained who will conduct the
study. Because of the interdisclglinary requirement of feasibility study, the
team that will conduct it should be made up of professional in relevant field.
Some Authors gave four ways in which the study can be handled. They are the
employment of outside consultant and expert, continuing committee, task force
and project duector. the main point here is that feasibility study should be
handled by experts who know what to do in the process of conducting the
study.
Chapter 3 described the methodology used for the project. The introduction
part described the two types of data used. They are secondary and primary
data. For the purpose of thls research work, survey research method was used.
This made use of Questionnaires and interview to collect data. Sources of data
collection were disclosed.

88
The population for the study comprises organisations in Lagos State. Sample
size was taken to be five different organisations in Lagos State. A systematic
sampling method was used. This mean out of fifty different organisations that
made use of feasibility study only five were selected as representation of the
rest. The result obtained fiom the five organisation covers the rest
organisation. Instrument for data collection was questionnaire and
standardized interview. The interview carried 60%. The tools for data analysis
involve calculation and interpreting descriptive statistic. The study covered
organisations in Lagos state only.
In chapter 4, we have data presentation and analysis. Here we saw the

responses of executive and businessmen about the use of feasibility study.
Through the questionnaires administered, respondent gave their opinions about
the use of feasibility study to achieve business objectives. Out of the 100
questionnaires distributed in a period of one week, only 45 were completed and
returned. These 45 questionnaires were analysed. From the analysis, it was ,
established that feasibility study play an important role in the achievement of

project objectives.
An empirical analysis of four selected project was presented. The first one,
Aero Merchant Bank, was considered not to be feasible, so, it can not be
established inspite of the money spent on the preparation of the study for its
establishment. The second one, Trans-West M c a n Airlines was established
based on the study prepared. Funds were sourced for it establishment. The
remaining projects were on-going project prepared for expansion. They were
able to be expanded as a result of the feasibility study prepared for the purpose.
Chapter five discussed the results of the data presented and analysed. From
facts gathered so far, it has been established that feasibility study do not only
answer questions of whether the ideas for a new or expanded business
operations are expedient. The study go fwther to identifj. those actions that if
taken or followed, will help assure success of new business venture or the
continuous success of the existing business venture.
If the idea for the new business venture is practicable, a good feasibility study
provides a blue print for p-l, for non-practicable business ventures, a

90
good study discourages the business venture. Therefore feasibility study is
necessary for firms and institutions which want to expand old lines or start new
production lines.
6.2 CONCLUSION:
In most capitalist economics, the success of business project is more commonly
measured in terms of their financial efficiency than in any other measure, index
or approach. A project will not achieve optimal financial success unless it is
properly, efficiency and effectively planned and operated with respect to its
technical, social, commercial and financial requirement.
It is pertinent to note that feasibility is useful both in private and public sector
of the economy. To the private sector the major objectives of feasibility study
is the determination of the average rate of return on investment (ROI) over the
years. In public sector, because the projects must be acceptable to one or more
government agencies, public sector projects in Nigeria consider many factors
such as savings on foreign exchange, use of local raw material, use of local
91
labour, social benefits and contributions to national defense. One term used for
all these is national economic interest. Therefore the major objective of a
feasibility study for public sector is to maximize national economic benefits or
to select that project which makes the greatest contribution to the economy.
It can be concluded that to put an end to persistent project abandonment in
Nigeria both private and public sector must take feasibility study serious before
embarlung on any project.
6.3 RECOMMENDATIONS
We learnt fiom this study that feasibility is an inquiry, it is documented, it is
comprehensive, it deals with project and their probability of success with a
minimum of bias and it seek to determine profitability and retum on investment.
A feasibility study is the only one method of investigation in the investment
decision process. So, I recommend this method for both private and public
sectors. Resources to execute all project are not always available in large
quantity, therefore there is need to use the little one available judiciously.
92
The best way to identify those projects that add most to the present and future
of a company or the to the economic structure of a country is the preparation of
a feasibility study. There must be a way to determine how to get the greatest
return fi-om limited resources available, and subsequently plan and organise for
growth. The recommendation method is the feasibility study. Feasibility study
is the one effective method of planning a project, whether it be related to
agriculture, industry'or government in such a way that its potential profit and
return on investment can be estimated.
6.4 AREA FOR FURTHER RESEARCH
The relevance of feasibility study in public sector project Empirical study of
some public sector projects.

BIUKDGRAPHY
BOOKS
Batty, J., Develo~mentin Office Management, (New Dehni, M, Graw-Hill
publishing Inc, 1997)
Brockington, R.B., Financial Moaanement (New Dehni, mc Graw Hill
publishing Inc, 1987).
Deverall, C.S, A Gees Study book: Mana~ementTechniaues in Adrmnistration
and Finance, Aids to Decision Makink (London, Harper collins
Publishers, 1995)
Gersdorff, R.V., International Hsdbook of Management, (Newjersery,
Prentice Hall Inc., 1994).
Horby, A.S., Oxford Advaced Learner's Dictionary of Current
Ennlish.(Auckland, Oxford University Press, 1998)
Imaga, E. U.L, Production and ODerations Manamment with Practical
Feasiblitv Studies, (Enugu, Lecture manuscripts, 1999)
Osuagwu, L., Business Research Method Princi~lesand Practice, (Ilo~in,
Grey Resources Ltd, 1996)

94
Parkin, A., Svsterns Management, (London, Edward Arnold(Pub1ishers)
Ltd, 1994)
Silver, G.A., Introduction to System Analysis, (Newyork, Prentice Hall
Inc, 1997)
Unchukwu, C. anf Ewunun, U.J.F., Business Adrmnistration, (Enugu, New
Generation Publishers, 1995)
Walsh, Jr, J.E., Prmaring Feasibility Studies in Asia (Tokyo, McGraw-
Hill, Inc, 1992).
JOURNALS AND PEMDIMCALS
Kung, K.C., Financial resources management, Financia11Management Journal,
Vol 10, No 1,'1981; 51-60
Osuga, D.A, "Role of Feasibility study in Project survival", Guardian Paper,
Tuesday, July 7 1999.
Takurna, P.T., "Feasibility study and project viability", Management in
Nigeria. NIM Journal, SeptemberIOctober 1991, Vol27, No 5: 7-1 1

AWENDIX I
QUESTIONNAIRE
INTRODUCTION:
I am a Postgraduate student of University of Nigeria Nsukka. The
questionnaire below is a research instrument for data collection. I pledge that
the information supplied will be treated with utmost confidentiality and shall be
used strictly for academic purposes.
Samuel Adebayo Ademiju

INSTRUCTION:
Please Mark ( * ) in the answers provided where applicable and lor give
appropriate answerslsuggestion where necessary.
(A) PERSONAL DATA
1. SEX: Male -------- Female -------------

2. AGE: (25-30) (3 1-35) (36-40) (4 1 -46) 46 and above
3. OCCUPATION: Public service---------- Private sector-----------
Self employed Tradesman------------self employed
5. EDUCATIONAL BACKGROUND
6. NATURE OF ORGANISATION BUSINESS: (BANKTNG)
(MANUFACTURING)
(Insurance) (oil producing) (oil Marketing) (Gas)
(Buying and selling) (Consulting) (Accounting
and Auditing)
7. NATIONALITY:
(B) RESEARCH QUESTIONS:
8. Have you ever make use of feasibility study in carrying out any project
before? (yes) (No) l-.l

9. Who prepared feasibility on behalf of your organisation:
(a) Our Auditor
(b) Management Consultant 0

(c) The promoter 0
(a) Our Investment department. 0
iO. What is the main purpose of preparing feasibility study in your
organisation.
(a) Processing application 0

@) To determine the viability and feasibility of a project
(c) For project execution, monitoring and supervision r l

(d) To determine the possibility of expanding our business r l
(e) To be given to p r o p t i v e investors to get involved in a new
project.
11. What are the sources of fund used by your organisation.
(a) Loan from financial Institution
(b) Fund from selling of shares
(c) Statutory allocation and taxes
(d) Subvention fiom government
(e) Donation, gift and fund from parent companies [7

(f) Profit from business transaction.
12. How would you evaluate the use of feasibility study in achieving project
objective in your organisation.
(a) Excellent 1 @) Good 0(c) Fair 0
(d) Poor 0
13. Apart fiom your organisation, do you know any company that made use
of feasibilitystudy.
(a> Yes 0~ o ) NO 0
14. If the answer is yes what is the purpose of preparing the study.
15. Based on the nature of your organisation business, do you believe that
feasibility study is important in the achievement of your project
16. If your answer to (15) is (NO) please give only one point that you think
is very important in the achievement of project objectives.
17. Have your organisation ovex embarks on project that was abandoned or i
rejected
(a) Yes (b) NO 0
18. What do you think led to the project abandonment?
19. Do you believe that lack of feasibility study can lead to project failure
20. How do your organisation handle the technical aspect of your business
(a) The use of Technical partners 0

(b) Sub-contract of professionals 0
(c) Our staff are technically capable 0
(d) Employment of contract staff
0
21. Which area of the feasibility study listed below do you think is most
important to the achievement of project objectives;
(a) Technical aspect 0
(b) Economic of Market Aspect n
(c) Financial Aspect
(d) Managerial Aspect. 0

22. Kindly rank in order of important to you, three factors you consider
101
limiting the use of feasibility study as tool for achieving project
objectives.
(a) Wrong choice of prokct to be executed a
@) Timing of the p r o p o d project 0
(c) The use of incompetent and dubious consultant for the
preparation of feasibility study. 0

(d) Political, ethnic and religious factors u
(e) The use of outdated feasibility study and those prepared for
different location. [7
23. Inspite of the enormous benefit derived from the preparation of
feasibility study, why is it that many business men in developing
countries fail to make use of it.
(a) Lack of awareness u

@) Cost of the study
(c) Illiteracy
(d) Presence of small scale business.

Importance of Feasibility Study in The Realization of Project Objectives

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University of Nigeria

Importance of Feasibility Study in the Realization of Project

Digitally signed by Omenuko Sunday

ADEMIJU SAMUEL ADEBAYO

ADEMIJU SAMUEL ADEBAYO

BEING A RESEARCH PROJECT SUBMITTED TO THE

ADEMIJU, Samuel Adebayo, a postgraduate student in the Department of

Management, Faculty of Business Administrated with Registration number

CMDKJNN/PG/EMBA/98/000 1 has satisfactorily completed the

requirements for the award of the degree of Master in Business

TO MY WIFE AND CHILDREN

strengthened me to successfully completed the programme.

I am indeed highly indebted to my supervisor, Prof. E.U.L. Imaga for his

assistance, patience understanding, advice, inspiration, encouragement and

to shower His households, Amen.

My appreciation also goes to my wife and children for their understanding

and support throughout the duration of the programme.

excellent promotion of this study. More blessings of the Lord, Amen.

Business involves risk and as such, it requires systematic planning. The

Many investors especially in developing countries embark on industrial

The problem of improper identification of business opportunity resulting in

The objective of the study is to highlight the importance of feasibility studies

The survey research method using questionnaires and hypothesis was

The major findings are:

Financial commitment to a project has something to do with the success or

Feasibility study do assist in determining the viability of a project feasibility

A project will not achieve optimal financial success unless it is properly,

CHAPTER ONE Introduction

1.1 Background to the study

1.2 Statement of problem

1.3 Objectives of the study

1.4 Formulation of Hypothesis

1.5 Significance of the study

1.6 Definition of terms

CHAPTER TWO Review of Related Literature

2.1 introduction and Definition

Stages leading to the Development of Feasibility study 19

Factors to be considered when conducting a

Computer Feasibility Study 25

Feasibility study and prospects 28

The summary of the Review of the Related Literature 28

CHAPTER THREE Research Methodology

3.2 Research Design

3.4 The Population

3.5 Sample Size

3.6 Sampling plan

3.7 Instrument for Data collection

3.8 Tools for data Analysis

CHAPTER FOUR Data presentation and Analysis 39

4.2 An Empirical Analysis of four Selected Projects 52

CHAPTER FIVE Discussion of Results 74

CHAPTER SIX Summary of Major Findings, Conclusion &

6.1 Summary of Major Findings 84

6.4 Area for Further Research 94

1.1 BACKGROUND OF THE STUDY:

Many investors, especially in developing countries, embark on industrial

projects without necessary pre-investment studies to assess the viability of the

venture. Even where investment decisions were preceded by pre-investment

rate of industrial mortality, it is absolutely important for prospective investors

to seek the services of professionally qualified and experienced consultants to

carry out a feasibility study on the proposed project to determine if it is a

consultants. In a nutshell, however, a feasibility study is a scientific

investigation and analysis of a proposed project in order to determine its