BUSINESS PLAN ON RICE PROCESSING ENTERPRISE IN KOGI STATE

PREPARED FOR:
LOKOJA AGRO-PROCESSING NIGERIA LIMITED

JANUARY, 2019

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Contents
1.0 Summary of Feasibility Study Report ..................................................................................................... 6
1.1 Executive Summary ............................................................................................................................ 6
1.2 The Promoter ...................................................................................................................................... 6
1.3 The Project .......................................................................................................................................... 7
2.0 Organizational Plan ................................................................................................................................. 8
2.1 Brief Description of the Business ....................................................................................................... 8
2.2 The Business Promoter ....................................................................................................................... 8
2.3 The Location of the Business .............................................................................................................. 9
2.4 Company Summary (Legal Structure/Ownership).............................................................................. 9
2.5 Overall objective ............................................................................................................................... 10
2.6 Keys to Success ................................................................................................................................. 10
2.7 Business Milestone ........................................................................................................................... 11
2.8 Purpose of the Business Plan ............................................................................................................ 11
2.9 The Project Benefits .......................................................................................................................... 12
3.0 Production Plan ..................................................................................................................................... 13
3.1 Service Description and Products ..................................................................................................... 13
3.2 The Production Process ..................................................................................................................... 14
4.0 Marketing Plan ...................................................................................................................................... 16
4.1 Market Analysis ................................................................................................................................ 16
4.2 Market Segmentation ........................................................................................................................ 16
4.3 Main Competitors ............................................................................................................................. 17
4.4 Strategy and Implementation ............................................................................................................ 17
4.5 SWOT Analysis ................................................................................................................................ 18
4.5.1 Weaknesses ................................................................................................................................ 18
4.5.2 Opportunities .............................................................................................................................. 18
4.5.3 Threats ........................................................................................................................................ 19
4.5.4 Strengths .................................................................................................................................... 19
4.6 Advertisement and Public Relations ................................................................................................. 19
4.6.1 Sales Channels ........................................................................................................................... 20
4.6.2 Marketing Strategies .................................................................................................................. 20
5.0 Management Aspect .............................................................................................................................. 20
5.1 Managerial Strategy .......................................................................................................................... 20
5.2 Organizational Structure ................................................................................................................... 21
5.3 Management Team ............................................................................................................................ 21

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 5.4 Personnel Plan ................................................................................................................................... 21
6.0 Financial Plan........................................................................................................................................ 22
6.1 Key Financial Indicators ................................................................................................................... 22
6.2 Expense Forecast .............................................................................................................................. 22
6.3 Projected Profit and Loss .................................................................................................................. 23
6.4 Management Expenses ...................................................................................................................... 24
7.0 Project Economics ................................................................................................................................ 25
7.1 Cost Projections ................................................................................................................................ 25
7.2 Project Revenue ................................................................................................................................ 27
7.3 Economic Analysis ........................................................................................................................... 27
7.4 Loan Repayment ............................................................................................................................... 28

3
List of Tables
Table 1: Milestone ...................................................................................................................................... 11
Table 2: Competitive Landscape................................................................................................................. 17
Table 3: Human and Material Resources .................................................................................................... 25
Table 4: Cost Projections – Year I .............................................................................................................. 25
Table 5: Cost Projections – Year II ............................................................................................................. 26
Table 6: Cost Projections – Year III ........................................................................................................... 26
Table 7: Cost Projections – Year IV ........................................................................................................... 26
Table 8: Cost Projections – Year V ............................................................................................................ 26
Table 9: Revenue Projections ..................................................................................................................... 27
Table 10: Economic Analysis ..................................................................................................................... 27
Table 11: Reinvestment and Repayment Schedule ..................................................................................... 28
List of Figures
Figure 1: Rice processing stages ................................................................................................................. 14
Figure 2: Cost Projections ........................................................................................................................... 23
Figure 3: Sales Projections .......................................................................................................................... 23
Figure 4: Revenue Projections .................................................................................................................... 24
Figure 5: Profit Projections ......................................................................................................................... 24

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1.0 Summary of Feasibility Study Report
1.1 Executive Summary

We are currently in a highly lucrative market in a rapidly growing economy both in terms of its

demography, income and consumption preferences. These may not be unrelated to the current

government policies which favors growth and diversification in all aspect of key agricultural

value chains particularly the rice value chain. This presents an opportunity for an increased

demand for agricultural value added services. The current trend towards an increase in the

number of entrepreneurs and competition amongst existing companies presents an opportunity

for an increased demand for value added services that will enable businesses to prosper in the

market place.

Our services will be positioned very carefully: they will be of extremely high quality and tailored

to the consumer needs. We intend to implement a market penetration strategy that will ensure

that we are well known and respected in our respective industry. We will ensure that our product

prices and packaging take into consideration people's budgets, and that the people appreciate the

services, know that it exists, and where to find it. The marketing will convey the sense of quality

in every picture, every promotion, and every publication. Our promotional strategy will involve

integrating advertising, personal selling and direct marketing. Our target markets will range from

individual consumers and households, supermarkets, retail shops and open market.

1.2 The Promoter

Name of Client: LOKOJA Agro-Processing Nigeria Limited

Name of Chairman:

Address & Business location : Kogi - Nigeria

Contract Phone No: 00000000000, 00000000000

5
Email address:

Legal Form: LTD (Partnership)

000 years
Experience:

1.3 The Project

Project Type: Rice production and Processing

Project Title: Modern Rice Processing Enterprise

Project Location: Kogi, Kogi State

Funding Requirement: NGN 5,000,000 of which NGN3,000,000.00 as loan NGN2,000,000.00
as owners’ equity.
Number of Years: Five (5)

Moratorium: 6-12 months

Discounted Cost: NGN 21,811,414

Discounted Benefit: NGN 27,545,355.0

NPV: Positive (NGN 5,733,942 )
IRR: Positive (>20%)

BCR: 1.26

2.0 Organizational Plan

2.1 Brief Description of the Business

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Rice is presently one of the most important staple food crops in Nigeria and is grown by large

number of farmers across the country and specifically in Kogi State. It has become an important

staple food for majority of the Nigerians. In the past, the production of rice was mostly at the

subsistence level with limited and inefficient processing technologies. The inefficiency in rice

processing enterprise across the country contribute negatively to the demand and consumption of

locally processed rice. However, the demand and preferences for locally produced and processed

rice is increasing among the teeming urban consumers in Kogi. Households and local food

processing outfits are looking for well milled, clean and stone free rice for consumption.

LOKOJA Agro-processing limited intends to venture into rice processing enterprise with a view

to contribute for the development rice value chain especially quality rice processing. LOKOJA

will quality paddy in farms located in Kogi rural production clusters to source for quality paddy

during the harvest seasons and use modern processing technologies to produce high quality

milled rice, package and distribute at affordable prices.

2.2 The Business Promoter

The business is purely commercial rice production and processing activities in Kogi State,

Nigeria. LOKOJA is business organization that has a long experience business and other

economic activities. The organization has a broad spectrum of contacts to partners, experts and

other institutions at various location in Kogi State. The organization has identified a business

potential (modern rice processing) to be promoted in the State, but financial deficiency

constrained the investment. It is this situation that calls for the initiative to venture into loan

acquisition purposely to finance rice processing. The promoter will strictly focus on acquiring

paddy from its production plots within Kogi State and other neighboring for the supply of quality

paddy.

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2.3 The Location of the Business

The project is to be located in Kogi State. Kogi State has been proved as a very good location for

rice processing business with an increasing expertise and demand of the products. The area is

highly strategic for modern rice processing enterprise due to population, type of people in the

area, arrival of guest from different part of the country on subsequent basis and availability of

raw materials among others.

2.4 Company Summary (Legal Structure/Ownership)

The legal structure of the business is partnership with number of staff employed to carry out

various responsibilities for the accomplishment of enterprise objective. The Director in person of

Professor Bala Sidi is in charge with responsibility of business management and other financial

expenditure for the smooth conduct of the business. The enterprise if fully registered with the

State Government and other relevant agencies with capability of paying taxes at all levels. The

enterprise targets processing and distribution of quality rice to meet to local consumers demand in

partnership with

SAMAHA Cooperatives Bayero University Kogi.

Company Summary

LOKOJAS Ltd is a relatively new company that will provide high quality rice to local consumers

in and around Kogi metropolitan areas. It will focus initially on providing and satisfying two

kinds of markets:

1. Local niche market around the BUK using the SAMAHA Cooperative.

2. Wider range of customers in the metropolitan areas (supermarkets, retail shops and open

markets)

As it grows it will take on people and consulting work in related markets. It will also look for

additional leverage by establishing relationships and representations in the broader domestic

8
markets through integrating its investment domain to include large scale primary production,

commercial mills and distribution.

2.5 Overall objective

Our business strategy will revolve around the need to provide quality milled rice to our various

target customers, in the process fully satisfying their needs. We shall position ourselves as a

quality service provider that strives to provide quality products. We will establish good rapport

with our suppliers (local farmers) and service providers (potboilers and millers) and our

distributors.

2.6 Keys to Success

The keys to LOKOJAS success will undoubtedly be effective market segmentation through

identification of several niche markets and implementation strategies. Along these lines the

company intends to implement personal selling and direct marketing strategies to the target

markets. Our key success factors will include the following:

1. Production and Processing of quality and standard rice in appropriate packages and this

dictates that we have the latest processing technologies and processes.

2. Developing visibility to generate new business leads and ensure growing market share.

3. We intend to find and target the quality-conscious customer in the right channels, making

sure that the customer will find us through aggressive marketing.

2.7 Business Milestone

Identification of business milestone is an important component of business development plan.

This provides information on specific activities with details of timelines as depicted in table 1

below:

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Table 1: Milestone
Due Date Milestone

March 30, 2019 Identification of production clusters and farmers

May 30, 2019 Reaching agreement with suppliers of Paddy(Farmers)

May 31, 2019 Identification and agreement with parboilers and millers

June 30, 2019 Purchase and aggregation of paddy (dry Season harvest)

July 31, 2019 Parboiling and drying of Paddy

July 31, 2019 Milling, de-stoning and packaging

July 31, 2019 Marketing and distribution

October 31,2019 Purchase and aggregation of paddy (Wet Season harvest)

October 15, 2019 Parboiling and drying of Paddy

November 15,2019 Milling, de-stoning and packaging

December 30,2019 Marketing and distribution

2.8 Purpose of the Business Plan

The purpose of the business plan includes the following:

1. Identify key requirements for the successful commercial rice processing and distribution

2. Identify the technical and financial viability of modern rice processing through desk and

field appraisals.

3. Determine funding requirement for the business in terms of Capital and Operational

Expenses

4. Highlight some management strategies for cost effectiveness of commercial rice

processing enterprise.

2.9 The Project Benefits

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SMEs are designed to provide certain benefits to various stakeholders within and outside the

business location. The business (modern rice processing) has the potentials of providing the

following benefits:

✓ LOKOJA Agro-processing limited will provide gainful employment for youth as

pernonnel for implementing the business

✓ Additional indirect employment will also be provided to different categories of people

marketers and casual labourers during production among others

✓ Improving the standard of living of the promoter of LOKOJA Agro-processing limited

and partners

✓ Provision of quality processed rice to fill the demand gap for quality domestic rice

3.0 Production Plan

3.1 Service Description and Products

Our business services include: Short-run and Long run:

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Short-run: Production and Processing of paddy rice and selling it in the niche markets within the

Kogi metropolitan areas including the university community.

Long run: Large scale paddy production and processing through establishing commercial mills

and supply the wider domestic market with quality milled rice and other agricultural

commodities. The products of the enterprise comprise milled rice through processing of paddy

using modern technologies. The products are to be distributed in niche markets within and

outside Kogi metropolitan areas. The target market include households, local retail shops,

supermarkets and open market. The revenue stream involves selling our products directly to

potential buyers and also selling through the SAMAHA Cooperatives. The major cost for the

investment are summarized below:

1. Cost of paddy purchase and aggregation

2. Cost of parboiling

3. Cost of milling

4. Cost of packaging

5. Cost of distribution

6. Personnel cost

7. Other costs

3.2 The Production Process

Figure 1: Rice processing stages

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The steps involved in rice processing are summarized as follows:

Cleaning: After harvesting rice, it is transferred to the processing plant where foreign objects and

like stones and tree stumps are removed using De-stoner.

Hulling: Next husk is separated from clean paddy. After the husk is removed, the product is

called brown rice and is ready for the milling process. Paddy graders and paddy cleaners are used

to separate brown rice

Parboiling and Milling: this stage removes the bran layer of rice turning brown rice into white

rice. In the first five years women parboilers and toll millers will be used as service providers.

Polishing: the surface of rice is smoothened and it is given a shine by passing it through a series

of rollers

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Grading: It is a process in which broken rice is separated out and separating head rice into

different lengths.

Sorting: Discolored, yellow and immature rice is removed in this stage adding value to rice

Packing: The finished product is then packed and is stored to be delivered to valued customers.

4.0 Marketing Plan

4.1 Market Analysis

We are today experiencing a rapid growth in the economy of unsurpassed nature. This has been

brought about by amongst other things, the relaxation of foreign exchange policies and

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macroeconomic policies geared towards attracting foreign investors into the country. The current

drive and emphasis by the government on diversification of the economy base away from the

petroleum sector presents an opportunity for LOKOJAS Ltd to make a valuable contribution

towards achieving this goal. This will result in implementation of modern agro processing

services. Having undertaken a thorough and comprehensive research of the market we realized

that there was a need for a specialized agro-processing services focusing in the first instance on

rice processing and distribution. Though there are many similar business firms currently on the

market, some of whom have been in existence for a relatively long period of time, we believe

that there is a market need for one that particularly focuses on providing quality and consumer

centered agroprocessing services and products. We intend to provide quality milled rice and

related services -- something that compete with international standard in terms of packaging,

cleanliness and palatability. We appreciate that entering such a market is not a bed of roses and

intend to implement an aggressive marketing strategy, well supported by the other business

functions. The above prognosis influenced our decision to enter the agro-processing business

industry.

4.2 Market Segmentation

LOKOJAS will be focusing on the first instance on local consumers in and around the Kogi

metropolitan area. In future, the business will expand to target the broader domestic market in the

country through investing in large scale primary production, commercial mills and distribution.

Our most important group of potential customers are the local households within and around the

university community. These are potential consumers who want to have access to safe and

qualitative rice for consumption.

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4.3 Main Competitors

There are numerous companies operating in Kogi who are into agro-processing particularly rice
milling and distribution and thus providing services similar to the one we intend to offer. But,
upon analsying these, it appears that the vast majority of these companies are not providing the
desired quality and form of packaging our target consumers are looking for and upon the prices
at which they sell is not different from what consumers paid for imported rice. Our business
intends to maintain relatively lower overhead costs through efficient utilization of labour and use
of locally sourced resources this will enable us sell our products at a competitive price. Table 2:
Competitive Landscape
Competitors How our solution is better
Wholesalers of import Our packaging is consumer friendly

Commercial rice mill Our prices will be lower

4.4 Strategy and Implementation

Our marketing strategy emphasizes focus. This will be the key. We are a relatively small

company and hence must focus on certain kinds of services with certain kinds of consumers.

Initially LOKOJAS will focus on processing paddy using the services of local parboilers and

millers. We are currently building relationship with potential suppliers of paddy rice, local

parboilers whom mostly women trained by the Sasakawa project and modern commercial mills

are providing hired milling services. We intend to focus on delivering quality service and end

product that in turn produces good referrals, which can then generate revenue.

4.5 SWOT Analysis

We are presently in a highly lucrative market in a rapidly growing economy. We foresee our

strengths as the ability to respond timeously to the market dictates and to provide custom

designed product. In addition through aggressive marketing and quality management we intend

to become a well-respected leader in our respective industry. Our key personnel have a wide and

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thorough knowledge of the local and international markets and expertise, which will go a long

towards penetrating the market. Below are the summarized strengths, weaknesses, opportunities,

and

threats.

4.5.1 Weaknesses

• Production and sourcing of uniform and standard paddy is always an issue.

• Lack of a solid and well-established network in the market place.

• Relying of commercial service providers for parboiling and milling services.

• Limited access to capital for investment.

4.5.2 Opportunities

• Specific niche. Appreciation for high quality products by consumers in the identified

niche markets

• The collaboration with SAMAHA Cooperative presents a vast opportunity for sourcing

funds and also in marketing the finished products.

• Current growth of the sub-sector in comparison to other sectors of the economy presents

an opportunity for an increased access to investment funds from lenders

• Existence of well-established government organs and programs that deal directly with

aspiring entrepreneurs -- local and foreign, presents us with a networking opportunity.

4.5.3 Threats

• The present growth in the economy may result in increased numbers of similar

businesses, leading to increased competition.

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 • Policy inconsistencies at macroeconomic and sectoral levels.

4.5.4 Strengths

• Strategic market segmentation and implementation strategies.

• Diversified market segments. Ensures the lack of dependency on one particular market or

customers.

• Combination of skills in directorship of the company.

• Establishment and maintenance of a well-known business name.

• An aggressive and focused marketing campaign and marketing plan with clear goals and

strategies.

4.6 Advertisement and Public Relations

The business intends to employ qualified production managers and assistance who have the skills

and expertise to communicate effectively for the smooth running of the business. Input

procurement specialist of the business should also strategize and focus on qualitative inputs

especially at the level of paddy production from credible source. For the output market, the

strategy involves gathering adequate market information and identification of potential markets

and consumers with demand for quality rice within the targeted areas.

4.6.1 Sales Channels

▪ Households within the BUK community

▪ Retail shops in the metropolitan areas

▪ Supermarkets

▪ Open market

4.6.2 Marketing Strategies

1. Advertisement in local newsletters such as the university bulletin

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 2. Through the SAMAHA Cooperative

3. Door to door delivery

The annual sales projections for three years are included. It should be noted that as we become

established and known on the market we project sales to increase at a faster rate than the initial

year.

5.0 Management Aspect

5.1 Managerial Strategy

The management team mainly comprising the shareholders who has wide expertise and broad

knowledge of the services and markets, which if well planned for, will enable the business to

realize its goals and objectives. As we grow, we will take on additional consulting help and

personnel. Management style will reflect the participation of the shareholders. The company

intends to respect its community and treat all employees well. We will develop and nurture the

company as community. We do not intend to be very hierarchical.

5.2 Organizational Structure

The business shall be managed by working partners. The company, simply because of its size,

will function more as a partnership than a corporate organization, in the early stages. With such a

group, it will be simple to communicate with and support one another. As the company grows

there will be more structure to the organization, with new employees being assigned a supervisor

or subordinate. When the company is at its full staff potential, it will operate as any closely held

organization, but maintain the personal interest in each employee's personal and family welfare

and their contributions to the business. In the beginning we assume four partners.

5.3 Management Team

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This type of business requires a very high level of knowledge, analytical ability and expertise.

Partners will necessarily be involved in the fulfillment of the core business proposition,

providing their expertise. The initial personnel plan is still tentative. It should involve four

partners, with good staff support. Later, we intend to add more partners, consultants, and sales

staff.

Partners' resumes were included as an attachment to this plan.

5.4 Personnel Plan

The detailed monthly personnel plan and costs is included. We believe this plan is an acceptable

compromise between fairness and expedience, and meets the commitments of our mission

statement. We do not intend to be a large organization or "top heavy" as our industry does not

require doing so. We want the company to stay lean and flexible so that we can respond to

market needs quickly at a lesser cost. We intend to compensate our personnel well, so as to

retain their invaluable expertise and to ensure job satisfaction and enrichment through delegation

of authority.

6.0 Financial Plan

6.1 Key Financial Indicators

We foresee major growth in sales and operating expenses, and a bump in our collection days as

we spread the business during expansion. The cost of paddy and processing services will also

decrease slightly as we established business relations with our suppliers of inputs and service

providers. In the long run, the company will invest in large scale primary production of paddy

and also in acquiring processing facilities and these are expected to reduce our operating costs to

enable us compete more effectively in the market place.

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Collection days are very important. We do not want to let our average collection days get above

30 under any circumstances. This could cause a serious problem with cash flow, because our

working capital situation is chronically tight. However, we recognize that we cannot control this

factor easily, because of the relationship with our clients.

6.2 Expense Forecast

Initial marketing expenses will be relatively high as we sought to become known on the market.

As our market share increases and capital is generated, further marketing programs and the

expansion of those in existence at the time will be undertaken, to ensure market development but

subsequently the marketing expenses will go down. The expenses generated by our marketing

strategies will be high in the initial stages of design and implementation. However with time

these programs will start generating revenue for the business, which we shall in turn reinvest.

The fruits of the above are soon to be gained.

Figure 2: Cost Projections

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 Cost Projections
4,800,000
4,700,000
4,600,000
4,500,000
4,400,000
4,300,000
4,200,000
4,100,000
4,000,000
3,900,000
3,800,000
3,700,000
Year I Year II Year III Year IV Year V
Total 4,091,700 4,556,910 4,650,170 4,676,590 4,331,340

6.3 Projected Sales, Revenue and Profit

Our projected sales, revenue and profit are shown in the figures below. Profits seem to be
impressive even in the first year, and such profit are relatively good for a start-up firm in our
business. We are projecting very conservatively regarding costs and gross margin but the actual
costs, and gross margin may be slightly higher, than in this projection. Figure 3: Sales
Projections
SALES PROJECTIONS
BAGS(30KG

692

697
683
0

661
582

YEAR I YEAR II YEAR III YEAR IV YEAR V

Figure 4: Revenue Projections

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 Reveue Projections
6,000,000
5,800,000
5,600,000
Profit(NGN)

5,400,000
5,200,000
5,000,000
4,800,000
4,600,000
4,400,000
Year I Year II Year III Year IV Year V
Series1 4,947,000 5,618,500 5,805,500 5,882,000 5,924,500

Figure 5: Profit Projections

Profit Projections
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Year I Year II Year III Year IV Year V
Total 855,300 1,061,590 1,155,330 1,205,410 1,593,160

6.4 Management Expenses

The activities of the enterprise will be managed by the business Manager who acquired vast

experience in Agricultural and other related business management skills. The business Manager

will oversee the operations with assistant of supervisors and other supporting staff serving

different capacity of operational activities in the enterprise. The procurement/market specialist

will be responsible for inputs and output marketing. The structure of management staff/casual

labour and their allowances are summarized below:

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Table 3: Personnel and Investment Costs
Unit Cost (N) per Total (N) per
Personnel No. month month
Business Manager 1 20,000 20,000

Procurement/Market Specialist 1 15,000 15,000

Transport Officer and store keeping 1 15,000 15,000

Security Guards 1 10,000 10,000

Sub-Total 60,000

Total (*5 Months of operation per

annum) 300,000
Investment

Facilities/Equipment

Office/Store 1 70,000 70,000

Chairs 3 4,000 12,000

Desk 1 5,000 5,000

Sub-Total (Investment) 87,000

Depreciation @10% pa 8700

Grand total (Personnel +Depreciation) 308,700

7.0 Project Economics

7.1 Cost Projections
Table 4: Cost Projections – Year I
Cost Component No. Unit Cost Total Cost

Paddy 485 6,000 2,910,000

Parboiling 485 450 218,250

Transport 485 150 72,750

Milling & De-stoning 485 900 436,500

Packaging/Empty Bags(25kg) 485 150 72,750

Marketing services(Advertisement and

Promotion) 485 150 72,750
Personnel +Depreciation Costs 308,700

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 Total 4,091,700

Table 5: Cost Projections – Year II

Cost Component No. Unit Cost Total Cost

Paddy 551 6,000 3,306,000

Parboiling 551 450 247,950

Transport 551 70 38,570

Milling & Destoning 551 900 495,900

Packaging/Empty Bags(25kg) 551 140 77,140

Marketing services(Advertisement and

Promotion) 551 150 82650
Personnel +Depreciation Costs 308,700

Total 4,556,910

Table 6: Cost Projections – Year III

Cost Component No. Unit Cost Total Cost

Paddy 569 6,000 3,414,000

Parboiling 569 440 250,360

Transport 569 70 39,830

Milling & Destoning 569 880 500,720

Packaging/Empty Bags(25kg) 569 140 79,660

Marketing services(Advertisement and

Promotion) 569 100 56900
Personnel +Depreciation Costs 308,700

Total 4,650,170

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Table 7: Cost Projections – Year IV
Cost Component No. Unit Cost Total Cost

Paddy 577 6,000 3,462,000

Parboiling 577 420 242,340

Transport 577 70 40,390

Milling & Destoning 577 850 490,450

Packaging/Empty Bags(25kg) 577 130 75,010

Marketing services(Advertisement and

Promotion) 577 100 57,700
Personnel +Depreciation Costs 308,700

Total 4,676,590

Table 8: Cost Projections – Year V

Cost Component No. Unit Cost Total Cost

Paddy 581 6,000 3,486,000

Parboiling 581 400 232,400

Transport 581 70 40,670

Milling & Destoning 581 800 464,800

Packaging/Empty Bags(25kg) 581 120 69,720

Marketing services(Advertisement and Promotion)

581 50 29,050
Personnel +Depreciation Costs 8,700
Total 4,331,340

7.2 Project Revenue

Table 9: Revenue Projections
Year No. of Bags
Revenue Unit Cost Total
1
Milled rice (25kg bag)* 582 8,500 4,947,000
2
Milled rice (25kg bag)* 661 8,500 5,618,500
3
Milled rice (25kg bag)* 683 8,500 5,805,500
4
Milled rice (25kg bag)* 692 8,500 5,882,000

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 5
Milled rice (25kg bag)* 697 8,500 5,924,500

7.3 Economic Analysis

Table 10: Economic Analysis
Discounted Discounted
Cycle Benefit Cost DF Benefit (N) Cost (N)

1 4,947,000 4,091,700 0.99 4,897,530 4,050,783

2 5,618,500 4,556,910 0.98 5,506,130 4,465,772

3 5,805,500 4,650,170 0.98 5,689,390 4,557,167

4 5,882,000 4,676,590 0.97 5,705,540 4,536,292

5 5,924,500 4,331,340 0.97 5,746,765 4,201,400

27,545,355.0 21,811,414
NPV 5,733,942

BCR 1.26

IRR >10%

7.4 Loan Repayment

The total amount of the funds for the investment and operation is estimated at around NGN5,

000,000 per annum. This funds should come in the form of loan (60%) and owner equity (40%).

As such the loan amount will be NGN3,000,000.00 and owner equity will be NGN2,

000,000.00 plus initial investment in office/store and related facilities. The repayment of loan

will commence immediately after the moratorium/grace period, which is assumed to be 6 months

from the date of start of operation. It is proposed that 50% of the annual profit will be used for

business expansion each year while the remaining 50% will be used for loan repayment in the

first five years and subsequently shared as dividends among partners.

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Table 11: Reinvestment and Repayment Schedule
Repayment/Partners
Year Gross Profit Re-investment Repayment Partners share
1 855,300 427,650 427,650 0
2 1,061,590 530,795 530,795 0
3 1,155,330 577,665 577,665 0
4 1,205,410 602,705 602,705 0
5 1,593,160 796,580 796,580 0
Total 5,870,790 2,935,395 2,935,395 0

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