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Practice of Entrepreneurship EED 216: Topic 1: Know Technique For Generating Business Ideas
Practice of Entrepreneurship EED 216: Topic 1: Know Technique For Generating Business Ideas
EED 216
TABLE OF CONTENTS
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Topic 6: Know the Various Existing Industry Support
Agencies in Nigeria
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TOPIC 1:
INTRODUCTION:
Potential entrepreneurs require guidance on how to generate business
ideas. They are also expected to identify, assess and utilize business
opportunities to their advantage. It is against this background that effort
is made in this section to guide potential entrepreneurs to generate
business ideas and exploit available business opportunities. At the end of
this module students should be able to identify business opportunities
using SWOT Analysis. In addition they should learn how to conduct
market survey and select the most viable business venture and set up a
small business enterprise.
CONTENT:
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Nigeria is a lead of vast and rich human and natural resources with
exceptional opportunities for full development. There are creative,
innovative and profitable possibilities which offer a range of opportunities
for the young people with the zeal to develop their skill and also driven
by achievement motivation.
There are diverse opportunities in the following areas for the imagination,
creative, inventive and innovative minds:
Stone and Mineral based industry
Chemical and Allied industry
Petroleum industry both upstream and down stream
Mechanical and metallurgical industry
Electrical industry
Electronic industry
Forest based industry
Agro-based Allied industries
Rubber based industry
Leather industry
Water Resources based opportunities
Service Industry
Miscellaneous activities such as Pharmaceutical, Paper processing
etc.
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Opportunities are always ever there waiting to be plucked. To take
advantage of them, someone must hunt or prospect for them, perceive,
capture and realize them. In the words of Carlin (1965), “Opportunity
offers itself to men in direct proportion to their ability, will for
action, power of vision, experience and knowledge of business”
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determine the interest or otherwise of the idea/opportunity and
capability and competence or the financial viability of the project;
technical or production pre-feasibility of the project; marketing,
commercial or economic viability of the project as well as social
desirability. Investment appraisal of the project(s) or ideas may be
conducted first, through a pre-feasibility study which highlights the
prospect of the project(s) and second through a comprehensive
feasibility study that provides critical, technical, economic, and
financial and management of the project(s).
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demographic change, political changes such as war, tariff and embargoes
or artificial scarcities. Other conditions that may create opportunities
include shortages, surpluses, price response, and shifts in demand.
Exercises:
i. Group students to scan their environment for possible business
opportunities. Each group to report its findings.
ii.
iii. Guide students on a visit to a close-by trade fair or market.
Students should prepare a summary of the products/services on
display.
iv.
v. Give students assignment to watch television or listen to radio
advertisements at home and compose a newspaper article
assessing; the intended target audience, attention – getting values
that were visible, product information given, etc. Students to
brainstorm and prepare a concept web of opportunities that might
arise from these advertisements. Students to debate whether
ideas create opportunities or vice versa.
vi.
vii. Analyze a case involving identification of opportunities and ideas.
viii. Students to role play a variety of daily life situations that can
provide an introduction to identifying opportunities and ideas.
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4. State the Process of Conducting a Market Survey in Order to
Establish Demand/Supply Gap;
A market for a business is all the people within a specific geographical
area, who need a product or service and are willing and able to buy it.
Exercise:
Guide students to conduct a market survey and prepare a detailed
report. State uses of the survey.
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Finding a good idea is the first step in transforming the entrepreneur’s
desire and creativity into a business opportunity.
Exercises
1. Do the nine dot exercise. Ask students to connect the nine dots with
four straight, continuous lines.
2. Do the creative square exercises as another example of creativity in
action
3. Provide solutions and explanations to the two exercises?
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TOPIC 2:
INTRODUCTION:
In developing a business idea there is a need for potential entrepreneur
to adopt a carefully moderated and intelligent approach. It is against this
background that an attempt is made under this section to guide
potential entrepreneur to be more careful by examining and evaluating
every step in the course of developing and establishing business
enterprise. At the end of this module students should be able to prepare
a preliminary project proposal, explore Internet for company profile,
product catalog, product information, etc; as well as conduct a modest
business plan on a selected venture. Students should present the plan to
a panel of successful entrepreneurs for assessment.
CONTENT:
There are different types of plans that may be part of any business
operation. These include financial plans, marketing plan, human
resource plan, production plans, sales plans etc. Plans may be short
term or long term or may be strategic or operational. Whatever the type
of plan or the function, plans have one important purpose; to provide
guidance and structure to management in a rapidly changing market
environment.
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A business plan on the other hand is a written document prepared by
the entrepreneur that describes all the relevant external and internal
elements involved in starting a new venture. It is often an integration of
functional plans such as marketing, finance, manufacturing and human
resources. It also addresses both short term and long term decision
making for the first three years of operation. Thus, the business plan, or
road map, answers the strategic questions of where am I now? Where am
I going? And how will I get there? Potential investors, suppliers and even
customers will request or require a business plan.
Exercises
i. 1. Students to react to the following situations:
What unpleasant occurrence in your recent past could have been
avoided by Planning?
ii. Do you agree with the statement: ‘failing to plan is planning to fail’?
iii. Students to analyse a case where lack of planning led to failure.
2. Students to pick a personal goal that they would like to achieve in the
next few months, example; to improve on their examination scores in all
subjects next term. Using the planning guides, students should describe
the plan, procedures and standards that can help to accomplish this
goal. Students may also make daily, weekly or monthly plans. Students
should select a proposed venture from the opportunities available in the
local environment and apply the planning process to it.
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3. Proposal: give an overview of the proposed project and the
approach, i.e. the activities which will be undertaken to achieve the
project objectives. Clearly establish the research element or
novelty component in the proposal.
5. Objectives and Deliverables: Identify (1) the objectives and (2) the
deliverables of the proposed project.
a. Markets and Uses: identify possible uses and markets for the
deliverables of the project.
b. Benefits and Beneficiaries: identify the beneficiaries of the
project’s results (e.g. the project participants, the general
public, third parties) and the manner in which they will
benefit.
c. Roadmap: give an indication regarding what further steps,
effort, costs and timeframes are necessary before tangible
benefits can be realised from the deliverables or results of
the project (unless these are realised within the lifetime of
the project).
d. Spillover Benefits: identify any secondary benefits of the
project (e.g. facilitating participation in funding programmes,
improving Malta’s ranking, strengthening Malta’s reputation
in a particular area, etc.)
9. Other Issues
If applicable, briefly identify any gender, ethical or legal issues that
may be connected with the proposed project.
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3. Explain the process of preparing a detailed business plan;
The meaning of a business plan has earlier been discussed. Reasons for
writing a business plan were also highlighted. Stages of writing a
business plan are: After deciding to go into business, before starting the
business and when updating is required.
EXERCISES
I. 1. Distribute sample Venture/Business plan to students; students
to examine the plans and make their notes and observation, with
respect to its function, importance, mission and purpose.
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II.
III. 2. Divide students into groups of five or more. Each group to plan
an event such as wedding, concert, anniversary, athletics, picnic,
school dance, debate, quiz, graduation etc. Let them identify
problem areas. Discuss problem areas with the students; let them
know that an event is somewhat like a venture. If it is not well
planned, it may end up with serious problems that are difficult to
solve when the event is actually taking place. Let them realize at
what point their venture will never work and should be abandoned.
They should also know that they may choose to proceed, abandon
or modify their venture after the planning framework has been
completed. It is better to halt a project before large amounts of
time and resources have been expended on something that cannot
succeed. Students should know that the single most important
factor in beginning a successful venture is careful panning. Many
things can go wrong, but careful planning can prevent many of
them from happening. Students should also know that sometimes
a venture might seem like a good idea before the careful planning
stage. Some problems however, may be imminent which cannot be
solved. The best course of action may be to abandon the venture
and lose just the planning time.
IV.
V. 3. Students to assume that they are investors with a large amount
of money to invest. Many venture plans have been presented for
their consideration. Let them suggest criteria to use to pick the
best plan. They should know if they do not do a good job, they
stand a very good chance of losing a lot of money.
VI.
VII. 4. Prepare a model business plan on a selected venture.
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e) Project description and
f) Loan advancement
g) Promoter
h) Location
Market and marketing plan
Potential customers
Competition
Pricing
Sales Tactics
Advertising and Promotion
Distribution.
Financial Projection/Feasibility:
Overview on capital requirement
Financial plan
Projected cash flow
Projected profit and loss account
Projected balance sheet
Break-even analysis
Source and application of funds
Organization Plan:
Form of ownership
Identification of partners/Principal shareholders
Authority of Principals.
Management team background
Roles and responsibilities of members of organization
Assessment of Risk:
Evaluate weakness of business
New technologies
Contingency plans.
Schedules:
12 months projected sales
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12 months projected purchase
Fixed Assets and depreciation schedule
Profitability index.
Exercises
1. Present a hypothetical business plan to students; Let them analyze
it bringing out clearly:
Strengths and weaknesses in terms of available resources,
expectations of the planners (are they realistic).
Anticipated opportunities and threats that can be seen both
internally and externally.
Develop goals for the venture including timeliness. Both long
term and short term goals may be identified.
In the light of the strengths, weaknesses and environmental
issues identified, develop operating objectives and operating
plans.
2. Present copies of annual reports of several organizations to
students. Let them study them and compare the relationship
between marketing expenditures and sales. This experience may
help students to gain a sense of the costs needed to obtain
revenue.
3. Group students. Each group to prepare a comprehensive business
plan for their selected hypothetical venture. Each group to take
their proposal to a financial institution to determine if their
financial plans are realistic and viable. Upon returning from their
research, the groups may confer with each other about the
implication of the findings for the venture plans. Students should
also share their experiences about their findings.
4. Students should list a set of principles or criteria that financial
Institutions apply to ventures to determine the viability of a
financial plan, and use them as a basis to self-assess their
financial plans
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TOPIC 3:
INTRODUCTION
The need to guide potential entrepreneurs regarding how to go about
selecting the right type of product can not be over-emphasized as it is
quite crucial for their future survival. The point is that choosing the
wrong type of product or service delivery could easily lead to business
failure which would be disastrous to a potential entrepreneur. Hence, an
attempt is made in this section to guide entrepreneurs to go for an
effective way of selecting the right type of product or service. At the end
of the module students should be able to analyze a given case in product
selection; select a product and prepare a feasibility report on a modern
business and evaluate the viability, using CBA (Cost Benefit Analysis)
methodology. They should also be able to generate venture idea on
selected exportable product obtained from the web.
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11. Explain effects of government policy and regulations on the
selected product;
12. Identify legal aspects of business in product selection.
CONTENT
Meaning of product/service
1. A transformed input via a throughput or the resulting output
secured through the conversion of selected inputs in a
transformation process (systems definition).
2. Any producible, manufacturable or serviceable items altered
from the original state to a desired advanced state thereby
creating specific values or objectives for its producers and
users.
3. Anything that can be offered to a market for attention,
acquisition, use or consumption (marketing definition).
4. A bundle o f complex tangible and intangible attributes or
benefits. Such attributes/benefits include durability, finish,
image, colour, packaging, repair service, etc (marketing
definition)
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3. Explain Product Selection Criteria:
Early in the product evaluation and selection process you would identify
products that are expected to meet the market requirements. This is not
as easy as it sounds, since the number of innovative products is
overwhelming. Sometimes, it is difficult to cut through the thicket of
vendor marketing messages and carve out the substance of what a
product really does and when to use it.
I refer here to the bottom-up growth idea, as the top-down ones are
usually rooted in well structured (and expensive, even if done internally)
market researches and validated through formal yearly strategic
planning session.
For the bottom-up ideas, after the ideas have been collected, the
funneling process begins. An "expert" team analyzes the ideas from a
product technology and manufacturability standpoint; and then
check the result against the Voice of Customers tools (i.e. web site,
claims, reports from the sales force and technical assistance staff, etc.).
The ideas that pass through the "expert judgment" in terms of product
technology, manufacturability and compliance to Expressed Customer
Needs will go through a further technical analysis by the product
development department. If the PD Dept. states that yes the idea is really
feasible from a technical standpoint, then they are analyzed in terms of
economics (costs to make the product, investments required, etc.). In
parallel, a market analysis is done: how many sales in how many years
at what price. Finally, the financials are calculated and priority rank is
done based on those parameters. Here it is very important to use
multiple criteria, as otherwise the highest NPVs will overcome the
others...and this is risky as the NPV Volatility is not calculated (in other
words, the bigger developments will throw out the smaller ones, but
because the bigger are also more difficult to sell, hence the calculated
NPV is inherently more volatile than for smaller developments).
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The parameters we consider in the funneling process are:
Once a product has been selected for production, there is need for
further analysis of some key factors to determine how production will
proceed and what legal requirements and licenses must be met. Below
are some of these factors that must be investigated.
Processing Activities:
Description of the process showing simplified flow charts indicating
comprehensive material and energy requirements;
Consideration of alternative processes and justification for the
chosen process;
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Source of supply of machinery and equipment (indicating whether
local or foreign) and including costs and terms.
Comparative analysis of alternative machinery and equipment in
terms of cost, reliability, maintainability and local technical
expertise.
Raw Materials:
Description and specifications relating to physical, mechanical
properties
Current and prospective cost of raw materials, including sources of
materials
Local availability, continuity of supply all year round, and prospect
for importation.
Waste Disposal:
Description and quantity of waste to be disposed of
Description of the chosen waste disposal method and cost
Comparison with other methods to indicate cost benefits
Compliance with legal requirement with regards to environmental
impacts
Manpower Requirements:
Skilled and unskilled labour requirement
Technical and managerial staff requirement
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Training needs assessment and training schedules
Proposal on remuneration including fringe benefits
It is impossible for a project manager to control all the factors which can
affect a project. There are always social, political, technical, economic,
physical, and other factors beyond the project manager's control that are
necessary for successful achievement of project objectives.
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These conditions include hypotheses (predictions), which are internal to
the project, and assumptions (conditions), which are external to the
project. After identifying the assumptions affecting the project, one can
deal with them in a way that increases the probability of success.
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6.Explain the Different Steps in Preparing Pre-feasibility Study;
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Analysis Of Assumptions
- market factors
- cost factors
- financial factors
- political factors
- technical factors
- cultural and social factors
- geological/climatic factors
- managerial factors
To gain a clearer idea of what these factors include, consider how some
of the following questions might come out of an investigation into these
factors.
Cost Factors - What are all the major initial costs involved in
production? What are the important recurring costs? How much is the
labor cost likely to be?
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Political Factors - Does the governor support the general idea? What are
the licenses and inspections needed? Is the activity legal?
Climatic Factors - Does the project hurt the environment? Does it use
already dwindling natural resources?
The type of assumptions chosen for analysis will determine the type of
feasibility study needed to investigate them.
Then, identify the assumptions most appropriate for analysis. Out of the
long list of assumptions, how do you choose the correct ones to study?
We suggest a simple two criteria basis for selection-importance and
uncertainty.
Arrange data collection efforts to provide the information you need. The
data collected on assumptions should reduce the uncertainty of project
designers about the following:
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If assumptions are unimportant (i.e., low impact) or very probable, they
should not affect project design or selection. When assumptions have
high impact and low probability, we have a danger signal. If we can
redesign the project to affect the assumption, we may wish to go ahead.
Otherwise, we would be well advised to suggest that the project be
abandoned in favour of something more promising.
Product:
Description of the product including specifications relating to their
physical, mechanical and chemical properties;
Uses of the products.
Processing Activities:
Description of the process showing simplified flow charts indicating
comprehensive material and energy requirements;
Consideration of alternative processes and justification for the
chosen process;
Project Location:
Map showing project location
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Desirability of location in terms of distance from the source of raw
materials, market and other factors
Desirability of location in terms of infrastructures and utility
supply.
Comparative study of different locations indicating advantages and
disadvantages;
Project Layout:
Description of project layout showing building and facilities.
Types of buildings and estimated cost
Land improvements such as access road, drainages, etc
Type of supplementary utilities and cost.
Raw Materials:
Description and specifications relating to physical, mechanical
properties
Current and prospective cost of raw materials, including sources of
materials
Local availability, continuity of supply all year round, and prospect
for importation.
Evaluate the sources and adequacy of the raw materials needed to
sustain viable production of the selected product(s).
Waste Disposal:
Description and quantity of waste to be disposed of
Description of the chosen waste disposal method and cost
Comparison with other methods to indicate cost benefits
Compliance with legal requirement with regards to environmental
impacts
Manpower Requirements:
Skilled and unskilled labour requirement
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Technical and managerial staff requirement
Training needs assessment and training schedules
Proposal remuneration including fringe benefits
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Land related businesses (Certificate of Occupancy) or if you are planning
on applying for a piece of land for business purposes you will do that at
Abuja Geographic Information Service (AGIS)
Whatever your business is, your Counselor will be able to tell you
whether any special licences are needed. The CAC and NAFDAC promise
short processing time, but you should still allow enough time for them to
process your application. You will not be able to start your business
without NAFDAC licenses, if you are in the food, drug and cosmetics
industry.
Socio-Cultural Factors
• Community Structure
• Traditional Cultural Habits and Customs
• Historic Sites
• Religious and Social Services
• Recreation
• Housing
• Internal and External Relations
• Protection of Vital Natural Resources
Social Infrastructure
• Education
• Sanitation
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• Health
• General Well-Being (Diseases, Physical Safety, Population Density,
Etc)
Emissions
• Liquid Waste
• Solid Waste
• Air Pollutants (Gases, Dust, Fumes, Vapours)
• Noise and Vibrations
• Odours
• Chemical Reactants (Producing Colours, Odours, Poisons)
• Hazardous Substances
The National Agency for Food and Drug Administration and Control
(NAFDAC) is the government of Nigeria regulatory body responsible for
food and pharmaceutical products manufacturing, importation,
advertisement and distribution in Nigeria under the provision of the
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government of Nigeria Decree 19 of 1993 and its accompanying
guidelines. No food item may be imported, advertised, sold or distributed
in Nigeria unless it has been registered by NAFDAC.
General Requirements
NAFDAC regulation requires food labeling to be informative and accurate.
The following are NAFDAC’s minimum labeling requirements;
1. A product brand name or common name must appear in bold
letters.
2. A complete “location” address of the manufacturer showing
country of origin must be provided on the product label.
3. The production ”batch” number, date of manufacture and expiry
date must be indicated.
4. Net content, specifying essential ingredient in metric weight for
solid, semi solid and aerosols and metric volume for liquids.
5. Ingredient must be noted by their common names in order of
their prominence by weight unless the food is standardized, in
which case the label must include only those ingredients which
the standard makes optional.
6. Food additives and colours must be declared on the label.
Spices, flavours and colours may be listed as such, without
naming the specific material; but any artificial colour or flavour
should be identified as such.
7. Labeling should be in English. If it is in another language, an
English translation must be shown on the label r package insert
(where applicable).
8. NAFDAC registration number must be included on the product
label.
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Registration
In January 2003, NAFDAC increased its fees for registration, vetting and
documentation for all imports. The fee for registering each product was
increased to 750, 000 Naira about ($6, 000) up from 10, 000 Naira ($100)
in 2002.
Additionally, NAFDAC Requires that:
1. No applicant will be allowed to register a food product in more than
one name.
2. Where different flavours of the same food are produced, each
flavour will have to be registered separately.
3. Major supermarket operators or importer can import mixed
container loads of high value product (HVP) under NAFDAC global
hooting of supermarkets (GLS) and other specialties required by
hotels, fast food, chain and international organizations, firms
participating in the programme are routinely inspected by the
agency.
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TOPIC 4:
INTRODUCTION:
An attempt is made in this section to guide potential entrepreneurs
regarding the steps to adopt in the course of starting and operating their
proposed business enterprises. At the end of this module, students
should be able to identify the procedure as well as the documentations
required for registering different types of business ventures in Nigeria.
They should also understand the important elements in an Article and
Memorandum of Association.
CONTENT:
Main features of CAMA 1990: - The Company and Allied Matters Act
(CAMA ) is divided into part A, B, C.
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PART A
This part deals with incorporated companies: the procedure of
incorporating companies, the function of corporate affairs commission
(CAC), types of companies, composition of the companies, inflow and
outflow of capitals in a company, types of meetings, merger and
acquisition of companies and the winding up of companies.
PART B
Part B deals with business name: which business name is registerable
and unregisterable?
PART C
Part C defines incorporated trustees. Incorporated trustees are non profit
organization. It deals with the procedure of incorporation, function and
composition of incorporated trustees.
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Business is the totality of the economic and commercial life of a nation. It
is an organization whose purpose lies outside the business itself (to
create customers).
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A private company is composed of a minimum of two and maximum of
fifty members. A public company on the other hand has a minimum of
seven members with no upper limit.
Exercise;
Students should brainstorm to come up with additional factors.
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A business name is the name or style under which any business is
carried on whether in partnership or otherwise. A business name will be
rejected by CAC if;
It is found to be identical with or similar to any registered
trade mark or to a name by which any firm, company or
individual has already been registered as a corporate entity
under part A of the CAMA 1990 or part B as the case may
be.
It is found to be deceptive or objectionable in that it contains
a reference direct or otherwise to any personage, private or
institution, or it is likely to mislead the public as to the
nationality, race or religion of the person(s) by which the
business is wholly owned.
A business name would not be registered if it contains the
word “national, government, municipal, state, federal or any
other word which imports or suggest that the business
enjoys the patronage of the federal, state or local
government.
Contain the word “co-operative” or its equivalent in other
language or any abbreviation thereof or contain the word
“chamber of commerce, building society, guarantee, trustee,
investment, bank, insurance or any other word of similar
connotation”.
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Submission of tax clearance certificates for at least three years.
Exercise:
Students to further brainstorm on the reasons for existence of registered
business names.
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S/N Organization Certificate/Licence/Permit
1. National Agency for Food and Drugs Foods and Drugs
Administration and Control (NAFDAC)
2. Nigerian Police Fire Arms
3. Export Processing Zones (EPZ) Finance
4. Nigerian Investment Promotion Tax Concessions/Pioneer Status
Commission (NIPC)
5. Nigerian Immigration Service Expatriate Quota
6. Nigerian Institute for Standards (NIS)/ Certificate for Standards
Standard Organization of Nigerian (Quality Control)
(SON)
7. Nigerian Export Promotion Council Certification relating to exports
(NEPC)
8. NACCIMA/Ministry of Commerce Certificate of Origin
9. National Office for Technology Intellectual Property
Acquisition and Protection (NOTAP)
10. Ministry of Environment Location Permit
11. Federal Inland Revenue Services Tax /Vat Certificates
(FIRS) and Board of Internal Revenue
(BIR)
12. State/Federal High Court Stamp Duty
13. National Copy Right Commission Patents, Trade Marks, Designs,
(NCRC) Copyright, etc
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TOPIC 5:
INTRODUCTION:
Potential entrepreneurs need to fully understand certain guidelines
regarding the smooth running of business enterprises if they are to
manage them successfully. These operational techniques for managing
an enterprise are treated in this section. Students should be able to draw
an organogram for any SME. They should understand the
communication process in an enterprise as well as the function areas of
business and in particular the importance of good record keeping
practice.
CONTENT:
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collectively to include all the individuals in that group. For
instance, a group of people often referred to as the
“management” of the organization.
3. Management is a process: As a process, management is
viewed as involving some specific activities or function, and
it is the collective performance of the function that is referred
to as management. In other words, carrying out specific
actions is recognized as management.
4. Management is a set of activities undertaken by one or more
persons in order to coordinate the activities of others in the
pursuit of ends which could not be achieved by any one
person. [Donnelly, Gibson and Ivancevich (1975:10)].
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in an organization. A manager is a manager by virtue of the performance
of the functions of management. The key functions of management are
planning, organizing, leading (directing) and controlling.
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The organizational structure can be horizontal or vertical; it can also be
formal or informal.
General Manager/CEO
3) Horizontal structure:
GM
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Marketing Production Finance
GM
GM
GM
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Welding Punch Drilling
Process
e) Departmentalization by Product:
GM
f) Matrix structure
g) Committee Organization
Exercise
Students should practice drawing different organizational charts from
the simple to the most complex. They should decide which is suitable for
small enterprise.
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Planning, organizing, staffing, leading and controlling were identified by
Henri Fayol, as managerial activities. Planning is to foresee and provide
by examining the future and drawing up the plan of action.
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into jobs, authority is delegated, appropriate basis for
departmentalization of jobs is determined and the optimum number of
jobs in each department is decided.
Staffing: Staffing involves finding the right people, with the right skills, abilities, and fit,
who may be hired or already working for the company (organization) or may be working
for competing companies.
In the knowledge economies, where talent becomes the new capital, this
discipline takes on added significance to help organizations achieve a
competitive advantage in each of their market places.
"Staffing" can also refer to the industry and/or type of company that
provides the functions described in the previous definition for a price. A
staffing company may offer a variety of services, including temporary
help, permanent placement, temporary-to-permanent placement, long-
term and contract help, managed services (often called outsourcing),
training, human resources consulting, and PEO arrangements
(Professional Employer Organization), in which a staffing firm assumes
responsibility for payroll, benefits, and other human resource functions.
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Determine whether the performance matched the
standard
Take corrective action.
BASICS OF MARKETING
Whoever engages in business, whoever embarks on entrepreneurial tasks
will - knowingly or unknowingly - engage in marketing. Looking at this
subject historically, we can state that whenever people engaged in
business, they also engaged in marketing. Some aspects of marketing
have over the years changed rather dramatically. The current
understanding of marketing, its philosophy and science, is not very old
and gained momentum only after the end of World-War II, more
particularly, in the fifties and thereafter. But as late as the sixties, many
world-wide important enterprises offering exclusive products or services,
and operating on monopolistic grounds, neither recognized the need nor
really needed to engage in what we today consider marketing activities. It
was enough to have good quality products or services, offer them at
reasonable prices, and go out and sell. Selling alone was considered to be
the actual marketing activity.
In the late sixties, the seventies and the eighties this changed, gradually
at first, but with and ever increasing momentum. Quality products and
services in the historical sense were no longer all that customers were
looking for. Design, innovation and support became more and more
important. More manufacturers, more distributors and increasing buying
power changed the ‘market-place’. Globalization of markets set in, and
new and more sophisticated management instruments were needed to
help manufacturers, distributors and entrepreneurs to stay in business
and grow with growing markets and all of this despite ever-increasing
competition and fighting over market shares. Marketing, therefore,
means much more now than just selling, the latter being just one -
although an important one - of the marketing instruments, which
entrepreneurs have at their disposal.
Market Segmentation
Any market primarily consists of people, and the cassava and cassava
products market is no exception. It consists of buyers who differ in one
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or many characteristics. They differ in their geographic, demographic and
psychological needs, and in their behavioural characteristics. It is a huge
market that one entrepreneur cannot effectively and competitively serve,
given his limited resources. Instead of marketing cassava and cassava
products to everyone in the market, the entrepreneur needs to
concentrate his/her efforts on one of the segments of the market in
which the products have the greatest potential appeal.
Marketing Strategy
The target markets and segments identified and the marketing objectives
established serve as the bases for the development of an appropriate
marketing strategy.
51
seminars, etc.
Publicity: Develop good public relations with the professional buyers
who may exert strong influence on industrial users. Set
aside adequate funds for such activities.
Personal Follow up customer leads with a personal presentation of
Selling: the product, emphasizing again the product positioning.
Encourage professional buyers by, for example, giving
them the incentive of a certain percentage of the selling
price.
Market Research
Conduct a market survey in selected areas among those identified users,
to find out their intentions with regards to volume of purchase monthly.
All of these activities cost money. Prepare everything well and get all the
information you need before you take any decision. Well-targeted and
well-prepared campaigns pay rich dividends, poorly prepared advertising
and promotional activities are like throwing money away.
Marketing control
To ensure that marketing activities are implemented according to the
marketing plan, the entrepreneur has to constantly monitor such
activities. To monitor means to see to it that the company has not
deviated from the plan. In cases where there are deviations, the
entrepreneur decides on corrective measures.
The results of marketing control are then used as inputs for marketing
plan for the next planning period.
52
HOW TO SELL
Marketing and selling involve a two-way flow of information. The market
(customers) needs to know all about cassava and cassava products and
the producers need to know all about the customers. Tile producers
provide information to the customers through promotion, advertising and
direct conversations. Customers express their likes and dislikes and in
this way the producers learn about their customers’ needs. Up to now
the focus has been on the preparation for an actual selling situation. You
have learned about the market (customer needs related to market
segments) and also about some ways of promoting your products before
an actual sale.
Warming Up
A meeting with a customer should begin with a so-called warming up
stage. This stage applies regardless of where the meeting takes place. In
many cultures it is part of being polite. The conversation can be light and
general, or more personal if the customer and producer know each other
or have friends in common or business contacts. An example would be to
ask the customer where he grew up or went to school. In some cultures it
is polite to mention a mutual friend or contact person known to both
parties. The warming up period enables each party to relax and relate to
the other. If a relationship of mutual respect has been established,
communication is easier. The main topic, that is, cassava and cassava
products, will only come into the conversation when both parties are
relaxed and ready. The length of the warming up stage varies from
country to country.
Opening
When both parties feel at ease with each other, the discussion moves on
to business. The customer expresses his interest and needs and the
producer introduces his products. Usually the salesperson is prepared
and knows the information he wants to give to the customer. If the
salesperson is nervous at first, it is a good idea to practice a short
introductory talk before meetings. Below are some tips in opening the
sale conversation:
- Find out what the general needs of the customer are - why has he come
to you?
- Give general information on the products, stressing the advantages.
- Show pictures and start asking questions about the specific needs of
the customer.
- The producer should lead the conversation, but encourage the
customer to express his needs and ask questions.
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- During the conversation take note of any information the customer
provides and adapt your opening to the customer’s needs.
Discussion
The needs of the customer should be the centre of the conversation, with
the customer doing most of the talking and the producer most of the
listening. When appropriate, more information can be given during the
conversation about the products and their advantages. Generally it does
not pay to criticize competitor products. Most successful businesses
focus rather on their own products. Some businesses even instruct their
salespersons never or hardly ever to mention the competitors’ products.
If the customer asks about the competitors’ products, however, it is good
to provide information in a fair and truthful way.
In some cases the customer will ask about prices right at the beginning
of the discussion. If at all possible, politely delay discussing prices until
the advantages of your products have been explained and some pictures
shown. At the beginning of the first meeting the customer probably does
not know any details about your products and still needs to be
persuaded about their advantages.
Summarizing
Summarizing the customer’s own comments and repeating them to the
customer is a technique that clarifies the situation, your understanding
of it and reinforces positive aspects brought up in the discussion.
Trial Close
The producer does a trial close when he feels that the customer has
decided to buy his product. It is an attempt to close the selling
transaction and finalize the sale. A trial close should not be attempted
too early in the selling process as this could cause the sale to be lost. It
tests the customer’s reaction, but if the reaction is not favorable then it
is wise to continue the discussion and perhaps clear any doubts the
customer may have. Often the customer will need time to think about the
54
matter and the discussion may be continued at a later date. A trial close
may be done a few times, but care should be taken not to make the
customer feel that he is being put under too much pressure.
The Close
If the trial close is successful, that is, if the customer agrees to buy a
specific product, the transaction has been made. This usually involves a
brief summary of what is needed and the purchase conditions, ending
with a definite order.
PRODUCTION
55
The production process is a complex, adaptive, on-going social system.
The inter-relationships between labour, capital and the socio-
organisational environment are important in the way they are balanced
and co-ordinated into an integrated whole. Productivity improvement
depends upon how successfully we identify and use the main factors of
the socio-production system. It is important, in connection with this, to
distinguish three main productivity factor groups:
- job-related;
- resource-related;
- environment-related.
The external factors are those which are beyond the control of the
individual enterprise and the internal factors are those within its control.
Thus it can be clearly seen that the first step towards improving
productivity is to identify problem areas within these factor groups. The
next step is to distinguish those factors which are controllable. Factors
which are external and not controllable for one institution are often
internal to another. Factors external (macro-productivity factors) to an
enterprise, for example, could be internal to governments, national or
regional institutions, associations and pressure groups. Governments
can improve tax policy, develop better labour legislation, provide better
56
access to natural resources, improve social infrastructure, price policy,
and so on, but individual organisations cannot.
Since some internal factors are more easily changed than others, it is
useful to classify them into two groups: hard (not easily changed) and
soft (easily changed). The hard factors include products, technology,
equipment and raw materials, while the soft factors include the labour
force, organisational systems and procedures, management styles and
work methods. This classification helps us build priorities - which factors
can easily be dealt with and which factors require stronger financial and
organisational interventions. A brief description of some key aspects of
each internal factor follows.
HARD FACTORS
57
Product
Product factor productivity means the extent to which the product meets
output requirements. “Use value” is the amount that the customer is
prepared to pay for a product of given quality. “Use value” can be
improved by better design and specifications. Many companies around
the world fight a constant battle to incorporate technical excellence into
marketable products. Breaking down the walls between research,
marketing and sales has become a major productivity factor. For
example, leading Japanese companies continually redesign products
which are on the market. Product “place value”, “time value” and “price
value” refer to the availability of the product at the right place, at the
right time and at a reasonable price. The “volume factor” in particular
gives us a better notion of the economies of scale through increased
volume of production. Finally, the cost-benefit factor can be enhanced by
increasing the benefit for the same cost or by reducing the cost for the
same benefit.
Technology
Technological innovation constitutes an important source of higher
productivity. Increased volume of goods and services, quality
improvement, new marketing methods, etc., can be achieved through
increased automation and information technology. Automation can also
improve materials handling, storage, communication systems and quality
control.
58
examples of the application of this technology are the development of
automatic downtime recording systems and automatic lubrication
systems which have reduced the idle time of men and machines, and
reduced overtime expenditure. New technology is normally introduced as
a result of such productivity improvement programmes as fighting
obsolescence, process design, R & D and the training of scientists and
engineers.
SOFT FACTORS
People
As the principal resource and the central factor in productivity
improvement drives, the people in an organization all have a role to play -
as workers, engineers, managers, entrepreneurs and trade union
members. Each role has two aspects: application and effectiveness.
59
In order to stimulate and maintain motivation, the following few factors
should be considered:
60
quality. It is a function of method, technique, personal skill, knowledge,
attitude and aptitude - the “ability to do”. The ability to do a productive
job can be improved through training and development, job rotation and
placements, systematic job progression (promotion), and career planning.
Work methods
Improved work methods, especially in developing economies where
capital is scarce, technology intermediate and labour-intensive methods
dominant, constitute the most promising area for productivity
improvement. Work method techniques aim to make manual work more
61
productive by improving the ways in which the work is done, the human
movements performed, the tools used, the workplace laid out, the
materials handled and the machines employed. Work methods are
improved by systematically analyzing present methods, eliminating
unnecessary work and performing the necessary work more effectively
with less effort, time and cost. Work study, industrial engineering and
training are the main tools of improving work methods.
Management styles
There is a view that in some countries management is responsible for 75
per cent of productivity gains, because management is responsible for
the effective use of all resources under enterprise control. One
productivity expert and consultant to many leading Japanese companies
believes that as much as 85 per cent of the quality and productivity
problems in United States industry are common problems of the system
that lie within the province of management, not the individual worker, to
correct.2 There is no perfect management style. Effectiveness depends
upon when, where, how and to whom a manager applies a style.
Management styles and practices influence organisational design,
personnel policies, job design, operational planning and control,
maintenance and purchasing policies, capital cost (working and fixed
capital), sources of capital, budgeting systems and cost control
techniques.
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Figure 2 Model of internal productivity factors
63
1) Good records provide the financial data that help you
operate more efficiently, thus increasing your profitability.
64
To be competitive, small business owners must prepare for all future
events and market changes. One of the most important aspects of such
preparation is cash flow planning. Failure to properly plan cash flow is
one of the leading causes for small business failures. Knowing some
basics of accounting will help you better manager of your cash flow.
Cash management is controlling in such a way that you have enough for
your immediate needs.
Poor internal control may cause cash losses. Always plan your cash
requirements. Lack of cash planning may find you running short of
money in the course of operations. Watch out against diversion of funds
to unproductive uses. Use the money for the purpose for which it is
intended. To guard against problems in bills collection, always make
inquiries about a person/company you extend credit to. Maintain a
regular follow-up on collection of bills. Specify a time limit in which all
bills must be paid. Keep an expense control. Balance your expenses to
the level of your production. This will be done by preparing an expense
budget.
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C. Cash items in a small industry
To start with, let us identify the items that can be regarded as cash/or
cash equivalents. These are the following:
Cash on hand
Cash in banks, current account
Bank deposits
Postal money orders
Bank draft
Cashier’s checks
Manager’s checks
Traveler’s checks
Short-term liquid investment readily convertible to cash and
not likely to a significant change in value. An equivalent
that matures within 3 months or less from the date of
acquisition is cash equivalents.
D. Safeguarding Cash
Once you have classified all your cash items accordingly, you have to
keep close guard of your cash because it is easy to steal. The following
are some ways by which records may be manipulated to conceal the
theft:
Misrouting books of original entry, documents and schedules
and reconciliation
Recording of duplicates or false purchase of expense
vouchers
Padding of payroll
Forging of documents
Writing off assets to sales discounts
Lapping-concealment of shortage by delaying the recording
of cash receipts
Kiting- e.g. check in one bank (A) is deposited in another
bank (B) and the amount of check is not shown as a
deduction from the balance in Bank (A) at the date of
transfer
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Segregation of business and personal funds
Immediate recording of all cash receipts
Deposit of cash intact
Use of petty cash fund entrusted to a petty cashier for all
payments other than checks
Reconciliation of bank accounts monthly
Use of Daily Cash Report
Approval of disbursements, signing of checks and bad debts
write-off
Annual audit by a chartered accountant on a retainer basis
Careful selection of employees
Deposit of Cash
Deposit your cash collection in the bank intact and monitor the
deposits made.
67
Daily Cash Report
A daily summary of cash will provide information as to your current
cash position. This summary should show balance at the beginning
of the day and deposits, disbursements and balance at the end of
the day.
Figure 7
Sample Form
Name of the Business
Bank Reconciliation Statement
Date
Figure 8
Sample Form
Name of the Business
Daily Cash Report
Date
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Opening cash balance, Date xxx
Add: Receipts
Cash sales xxx
Collection of accounts receivable xxx
Other receipts xxx xxx
Total cash available xxx
Less: Disbursements
Cash purchases xxx
Payments of accounts payable xxx
Payroll xxx
Other payments xxx xxx
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SPECIMEN I
INCOME STATEMENT OF AN ENTERPRISE FOR THE YEAR ENDED
31ST DECEMBER, 201X
N N
Sales (Revenue) xxx
Sales Return
(x)
Less cost of sales xxx
Opening inventory xx
Purchases xx
Carriage inwards (x)
Purchases returns (x)
(xx)
Gross profit xxx
Other income:
Discount received x
Rent income
x
Total income
xxx
Less: Expenses:
Discount allowed x
Salaries x
Electricity x
Telephone & internet x
Insurance x
Rates x
Bad debts x
Advertisements x
Motor vehicle expenses x
Depreciation x (xx)
Net profit xx
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SPECIMEN II
STATEMENT OF FINANCIAL POSITION OF ABC ENTERPRISE AS AT
31ST DECEMBER, 201X
Cost Accumulated Net Book
Depreciationn Value
ASSETS N N N
Non-Current
Assets
Freehold Property xx - xx
Motor Vehicle xxx x xx
Office Equipment xxx x xx
xxx x xx
Current Assets:
Inventory x
Trade receivables xx
Less: Provision for doubtful debt(x) x
Accrued rental income x
Cash at bank x
Prepaid insurance x
Prepaid rates x
xx
Total Assets xxx
Owner’s Equity and Liabilities:
Owner’s equity at 1st January, 201x xx
Net profit for the year xx
Total equity at 31 December, 201x
st xxx
Current Liabilities:
Trade payables x
Accrued salaries x x
Equity and liabilities xxx
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EXAMPLE I – SIMPLE FINAL ACCOUNTS OF A SOLE TRADER
The following statement of financial position was extracted from the
ledgers of Boom Enterprises as at 31st December, 20x6.
DR CR
N N
Purchases/Sales 1,200,000 4,900,000
Returns 20,000 10,000
Discounts 50,000 90,000
Trade Receivables/Payables 1,150,000 1,200,000
Inventory at 1/1/20x6 950,000
Carriage inwards 150,000
Carriage outwards 50,000
Long Term Debt 200,000
Drawings 150,000
Land and Building at Cost 1,500,000
Rents 150,000
Motor Vehicle at Cost 800,000
Advertisement 20,000
Provision for Doubtful Debt
25,000
Salaries & Wages 900,000
Bade Debts 25,000
Cash in Hand 250,000
Cash at Bank 300,000
Equipment MBV 1,000,000
Accumulated Depreciation of Equipment 300,000
Equity as at 1st January, 20x6
2,340,000
8,865,000 8,865,000
Additional Information
1. Inventory at close is N350,000
2. Depreciation for equipment during the period is N100,000
3. Depreciation of 5% is charged for motor vehicle and Land &
Building
4. Provision for Doubtful Debt amounting to 10% of trade receivable
is to be made
Prepare:
i) Statement of income for the year ended 31st December, 20x6
ii) Statement of financial position as at 31st December, 20x6
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Solution
1) INCOME STATEMENT OF BOOM ENTERPRISES FOR THE
YEAR ENDED 31ST DECEMBER, 20X6
N N
Sales/Revenue 4,900,000
Less Sales Return (20,000)
Cost of Sales 4,880,000
Opening inventory 950,000
Add Purchases 1,200,000
2,150,000
Add Carriage Inwards 150,000
Less Purchases Returns (10,000)
Less Closing Stock (350,000) (1,940,000)
Gross Profit 2,940,000
Add Discount Received 90,000
3,030,000
Less Expenses
Discount Allowed 50,000
Carriage outwards 50,000
Rent 150,000
Advertisement 20,000
Salaries & Wages 900,000
Bad Debts 25,000
Depreciation of Equipment 100,000
Depreciation for motor,
Land & Building 115,000
Increase in Provision Doubtful Debt
(10% x 1,150,00 – 25,000) 90,000 (1,500,00)
Net Profit 1,530,000
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2) STATEMENT OF FINANCIAL POSITION OF BOOM ENTERPRISE
AS AT 31ST DECEMBER, 20X6
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G.PRINCIPLES OF AUDITING
Annual Audit
An annual audit helps prevent frauds. The fact that an audit is
conducted may discourage trusted employees, who may otherwise be
tempted to embezzle funds from the business.
Budgeting should be both top down and bottom up; i.e. upper level
management and middle level management will both work to finalize a
budget. We can streamline the budgeting process by developing a
financial model. Financial models can facilitate "what if" analysis so we
can assess decisions before they are made. This can dramatically
improve the budgeting process.
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Nature and Purpose of Auditing
Nature of an Audit
The day-to-day running activities of the company are vested on the
Directors. Their responsibility is to ensure that the possibility of fraud
and error is reduced if not eliminated; they set up a system of internal
control for various checks and procedures in order to control the
recording of the business transactions. Upon engagement of the auditor
for any audit work which is a two-stage operation for each year; in which
case, the first stage is a system audit whereby the audit is conducted to a
particular date within the accounting period. This first stage is also
known as interim audit.
Stage two is that the audit is carried through to completion in one
continuous session, which involves verification of items in the final
accounts i.e. final audit.
Audits are performed by audit team comprising of audit trainees and
qualified accountants. A manager will oversee their work while the actual
audit is signed by one of the partners in the name of the audit firm.
(Mohammed, 2003).
Reasons for an Audit
The reasons for an audit exercise can be:
Statutory: as required in Companies and Allied Matters Act (CAMA)
1990 and some other enabling statutes for certain industries.
In order to enhance the confidence of the owners of the business
enterprises
To enhance the confidence of other interested parties in the
business enterprise
To prevent and detect errors and frauds.
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In applying for loans from banks or overdraft, the negotiations
would be easier to be taken where the company’s accounts have
been audited.
The application of sound auditing techniques would always detect
fraud committed by staff of the client and the fact that an audit
would be undertaken would guide against perpetration of future
fraud while inefficiency and weaknesses of the workers could be
revealed.
Since an auditor is familiar with his clients business and financial
statements, this fact would make any advice readily workable if
required by the client. (Mohammed, 2003).
Disadvantages
Audit fees: the cost of audit work can be high
Audit work allows auditors to interfere in the private affairs of the
company
Management and staff time is taken by the auditor
It brings about inconveniences to the client’s staff
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H.PRINCIPLES OF TAXATION
1. Definition of Taxation
Taxes may be classified into two broad categories: direct and indirect
taxes.
i) Direct tax is where the person assessed is also the person who
bears the burden of the tax. The person who pays the tax is unable
to shift the burden to any other person.
ii) Indirect tax is where the person who pays the tax can shift the
burden to someone else.
3. Essentials of a Good Tax System
Adam Smith outlined the following as being essential for a good and
equitable tax system.
i) Universality: It should be all embracing
ii) Certainty: The amount of the tax liability and time of payment
must be determined with certainty
iii) Convenience: The time and manner of payment must be
convenient to the tax payer
iv) Economy: The system of collection must be economical.
4. Relevant Tax Authority
Tax shall be payable for each year of assessment on the total income of
every individual, corporation – sole or body of individuals deemed to be
resident for that year in the relevant state in Nigeria except
a) Persons employed in the Nigerian Army, Navy, Air Force and the
Nigerian Police.
b) Officers of the Nigerian foreign service
c) Residents of the federal
d) Persons resident outside Nigeria but who derive income or profit
from Nigeria
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5. Incomes Chargeable To Tax
These are:
i) Interest on money borrowed and applied as capital
ii) Interest on loans for developing an owner occupied residential
house
iii) Rent
iv) Any expense incurred for the repair of premises, plant, machinery
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TOPIC 6:
INTRODUCTION:
The role of support agencies and various existing industries is quite
paramount and therefore potential entrepreneurs need to be intimated
about the assistance they render and the functions they discharge. This
section therefore intends to highlight them. On completion of this course
students should be able to identify various industry/support agencies in
Nigeria and their functions. They should also know types and sources of
plants and machinery used in small scale industries, nature and type of
material inputs for each industry type and be able to source information
about market and financial assistance; as well as understand the
environmental factors associated with Industrial and economic
development in Nigeria.
CONTENT:
World wide findings over the years have shown that small firms and
entrepreneurships play very important roles in national economic growth
and development. The Government of Nigeria, like its counterparts, the
world over, has realized the importance of small and medium scale
enterprises and has, over the years formulated various public policies to
encourage, support and fund the establishment and development of
SMEs. Developments in small and medium enterprise are what give a
80
developing nation the base for employment creation, solid base for
creating a middle class and encouragement for the use of local raw
materials and technology.
The NEPC was established through the promulgation of the NEPC Act of
1976 and formally inaugurated in March, 1977. The Council’s
Amendment Decree of 1992 was to minimize the bureaucratic
bottlenecks and increase autonomy in dealing with members of the
Organized Private Sector. Its goal and mission are to make the non-oil
export sector a significant contributor to Nigeria’s GDP, facilitate
opportunities for exporters to promote sustainable economic
development. Their Web sight is www.nepcng.com
81
Nigeria
To collect and disseminate information on products
available for export
Collect and disseminate local manufacturers and exporters
information on foreign markets
Provide technical assistance to local exporters in such areas
as export procedure and documentation, transportation,
financing, marketing techniques, quality control, export
packaging, costing and pricing, publicity and other similar
areas
Provide directly or jointly, with training institutions,
training for its staff and assist with the manpower
development of the export community in Nigeria
Organize and plan the participation of Nigeria in trade fairs
and exhibitions in other countries
Administer grants and other benefits related to export
promotion and development
Undertake studies of the current economic conditions, with
special attention to the export sector with the aim of
advising Government on necessary policies and measures
Co-operate with other institutions on matters relating to
export financing, export incentives specialized services to
exporters
Engage in export promotion publicity
Assist in finding appropriate solutions to practical problems
encountered by exporters in the process of exportation
Plan and organize outward trade missions and provide
support from Nigeria
Services to in-ward missions from other countries
Perform such other functions as may be conducive to the
achievement of the objective of the Export Decree (Act).
82
Nigerian economy. Most of the efforts of the NIPC are, therefore, focused
on attracting foreign investment.
However its total mandate includes domestic investment and its area of
operation even include small and medium scale enterprises. It is
currently managing, on behalf of the Federal Government, a World Bank
Micro, Small and Medium Enterprise (MSME) pilot project aimed at
empowering and increasing capacity in the MSME sectors as well as in
NGOs that specialized in delivering Business Development Services (BDS)
to MSMEs. While the pilot programme only includes Lagos, Abia and
Kaduna States, it is likely that other states and the FCT will come under
this programme within the next five years. The NIPC also has a new very
informative web site at www.nipc-ng.org. It has a very comprehensive
section on tax incentives.
In the early 2000 the NIDB was transformed into the Bank of Industry
(BOI), following the government’s decision to merge it with NBCI and
NERFUND.
In addition to the above the government, since the advent of the new
democracy, initiated more programmes aimed at fighting poverty in the
country. They range from the National Poverty Eradication Programme
(NAPEP) to Small and Medium Enterprises Development Agency of
Nigeria (SMEDAN)
83
The microfinance scheme has just been introduced in 2007, as an
evolution of the community banks to Microfinance Banks (MFBs) that
would primarily focus on small scale lending as a way of empowering low
income earners and small ventures so as to fight poverty and boost
economic activities.
84
critical to economic development. RMRDC is therefore very critical to the
development al of Nigeria’s productive sectors.
The global goal is to pursue this policy which will invariably have
multiplier effects on the nation’s economy in terms of new industries,
more employment and increase gross domestic product (GDP). Their web
site is: www.rmrdc.gov.ng
Justification for the existence of SMEDAN rests on the fact that poverty,
which is due to lack of access to income-earning opportunities and lack
of capacity to take advantage of the opportunities, is a social malaise that
is threatening global prosperity in general and national economic growth
and development in particular.
It is also realized that a well developed MSMEs sector has proven to be
one of the most veritable channels to combat poverty. The establishment
of SMEDAN is therefore justified by the need to trigger the development
of Nigeria’s MSMEs in a structured and efficient manner
85
Its main functions are to provide business information, in partnership
with various state governments. Its efforts with most states, and the FCT
are well placed on the web at www.abujaenterprise.org.
These sites serve as credible suppository of business information for the
locations. They compile, review and update all existing economic policies,
regulations, incentives, and legislation affecting MSME operations within
the country.
Its world market section sources and makes available information on
international markets, products standards/specifications and
regulations, including updates in development databank on MSMEs, raw
materials, available local technologies, machineries and prototypes. Its
proposed services through their sites and offices include:
Proposed Design and Establishment of Comprehensive BSCs and IPs:
To be able to provide Business Support Centers (BSCs) in each State, to
provide business advisory services. i.e Link MSMEs to sources of funds;
provide internet/website facilities; provide market information; provide
business consultancy services; collate and make available business plans
and prototypes; implement capacity building programmes; advise on
regulatory and standardization frameworks and collate all relevant
business information that could be useful to SMEs.
Develop and establish, in collaboration with state governments and
NGOs in the private sector, Industrial Parks (IPs) to facilitate easy access
to land, good infrastructure, security, regulatory bodies such as NAFDAC
and SON; banking services etc.
86
Improve the financial management skills of MSMEs through
training workshops.
Develop and implement effective strategies for opening up
domestic and international markets for MSMEs products.
Over the years, the Federal Government has taken various steps, to
promote the development of Small and Medium Scale Enterprises
(SMEs). These included, among others, funding and setting up of
industrial estates to reduce overhead costs.
87
Trade and Industry, and was taken over in 1970 by the Federal
Government.
Under NEEDs I and II, the institutional and policy framework for this
was being established through Small and Medium Enterprise
Development Agency of Nigeria, (SMEDAN), Technology Business
Incubation Centres, (TBIC’s) and Small and Medium Industries Equity
Investment Scheme, (SMIEIS).
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LOCALLY AVAILABLE RAW MATERIAL AND MINERAL
RESOURCES BY POSSIBLE USES AND PROCESSING EQUIPMENT
REQUIRED, AND POSSIBLE MARKETS
Table 1 shows the uses, processing equipment for major agricultural raw
materials while Table 2 does the same for minerals. It is evident that
many of these raw materials and mineral resources can be put to
multiple uses while the processing equipment in many cases has
multiple applications. Markets often exist locally and internationally for
the products
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4. Soya bean - composite flour - dehuster, - local and foreign
- baby food, cereals, dryer/steamer, baby food and
livestock feeds milling machine, other food
- confectionery packaging manufacturers,
- protein concentrate - crusher/oil animal feed mill
- edible oil extractor and refining - domestic
plant consumers, food
and drug
manufacturers
5. Groundnut - edible oil, margarine - steamer, milling - pharmaceutical
- peanut butter machine, crusher/oil companies,
- cosmetics - soap, extractor, vegetable oil
perfumes and creams mixer/blender manufacturers
- animal feed - washer, driers, - local and foreign
- babay food, cereals. grinders, mixers, baby food and
- dehuster, animal other food
feed mill manufacturers
- pharmaceutical
companies
- farmers
- food processing
plants.
6. Cassava - starch (textile finishing) - cassava mill - agro-allied
- livestock feed (washing, weighing industry
- alcohol scales, drier, - domestic
- adhesives pelleting machine, consumption
- garri peeler, packaging - local garri
- confectionery machine), mixers, manufacturers
packaging machines - chemical
manufacturers.
7. Cocoa - cocoa butter - cocoa mill, grinder, - cosmetics
- wine and beverages steamer, dryer manufacturers
- cocoa powder/ash - distilling units - food and drug
- confectionery (grinder, steamer, manufacturers
- livestock feeds dryer) - bakeries
- suppository - cocoa butter
- detergents manufacturing plant
8. Kolanut - beverages distilling units - export market
- stimulants (grinder, steamer, for products
- wines dryer) - local beverage
- dyes manufacturers
- soft drink concentrates - domestic
consumers
9. Coconut - edible oil - oil extraction units - export market
- cosmetics, soap - crushers, for products
- furniture and fibre - blender, - local
units - furniture making pharmaceutical
- confectionery equipment and confectionery
- animal feeds - charcoal chamber industries
- vinegar - domestic
- decorations consumption
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- charcoal
91
extractor
18. Rubber Tyres and Tubes Oven, extrusion same
machine, roller mill,
conveyor belt
19. Potato Chips peeler, washing same
utensils, boiler,
dryer, frier and
packaging machine
20. Banana food/confectionery peeler, slicer, dryer same
and miller
21. Plantain food/chips peeler, chipping same
machine, fryer and
dryer
22 Pineapple/ fruit juice continuous juice Same
Orange expeller, pasteuriser,
filteration machine,
cooking machine,
packaging machine.
23. Sorghum flour, starch, animal Jaw crusher, same
feed, malt pulverisers, screens,
hammer miles
24. Millet flour, feedmill, same same
confectionery
25. Wheat flour, malt milling machine same
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kiln
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- pipes insulator etc - pumps manufacturers
- floatation machine
- weighing scale
- bagging machine
9. Talc - cosmetics (powders) - jaw crushers, -
- pharmaceutical hammer mill, pebble pharmaceuticals
processes mills - cosmetics
- paper and paint - classifiers - electrical
production - floatation cells products
- ceramic industries - slurry pump manufacturers
- compressor - paper, paint
- hydrocyclone and ceramic
- filter press manufacturers
- flash drier
- weighing scale
- bagging machine
10. Phosphate - fertilizer (NPK) - rotary washers - fertilizer
- phosphoric acid - trommel manufacturers
- jaw crusher - phosphoric acid
- vibrating screen manufacturers
- hydraulic classifier
- rougher bed
- floatation machine
- mixing tank
- silos
- hammer mill
- classifier
- packaging
equipment
11. Gemstone - Jewellery and grinding, polishing, local and
ornament cutting and water international
- electronics pumps markets
12. Laterite Tiles, building & hydroclones, sieves, local and foreign
construction tanks, filter drier, markets
separator
13. Columbite Iron and Steel excavator, separator, Same
pumping
14. Tin Same excavators, Same
separators, air
flooding, pumping
machines
15. Marble Building and cutting, polishing, Same
construction excavators
16. Galina Same excavators and Same
separators
17. Zinc ore iron sheet and steel excavators, Same
separators and air
flooding
18. Gold iron, steel, electronics excavators, Same
and ornaments separators, air
flooding machines
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19. Rock building and excavator, cutting, Same
aggregate construction polishing
20. Whoframite electronics, ornaments, excavator, separator Same
building and
construction
21. Aquamarine food and chemicals distillers and drier Same
22. Silica ornaments, jewellery and excavators and Same
electronics separators, cutting,
polishing,
23. Copper ornaments, jewellery and excavators and Same
electrical, electronics separators, cutting,
polishing,
24. Lead Same excavators and Same
separators
25. Iron ore iron and steel excavators and Same
separators
26. Potash soap production, water hammer mill and domestic and
treatment crushers export
27 Coal cokes, fuel hammer mill and same
crushers
28 Sandstone Building Not indicated Same
29. Lignite paraffin wax crusher, dryer mill, Same
mixer, grater screen
30. Bauxite Refractories and crusher, Same
abrasives beneficiation plant
31 Bronze Fittings clay, bronze, heater, Same
wires, latente
Source: CBN SMINIS Document 2006.
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percentage mark-up and average sales per month.
96
Who Can Provide Information and Assistance?
“FREE”
“FOR A FEE”
97
Try to develop good questioning techniques to get as much advice and
information as possible from these professionals.
NATURAL ENVIRONMENT
A: Natural Resources
• Land
• Atmosphere
• Surface Water
• Groundwater
• Flora
• Fauna
• Ecosystems
• Energy Resources
B: Social Resources
• Cultural Factors
• Economic Factors
• Social Infrastructure
• Social Development
EMISSIONS
• Liquid Waste
• Solid Waste
• Air Pollutants (Gases, Dust, Fumes, Vapours)
• Noise And Vibrations
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• Odours
• Chemical Reactants (Producing Colours, Odours, Poisons)
• Hazardous Substances
99
TOPIC 7:
INTRODUCTION:
There is the doubt that the Commercial and Development Banks are
playing a very significant role for the promotion of small and medium
scale enterprises in Nigeria. It is against this background that, this
section attempts to intimate the potential entrepreneurs to appreciate
the contributions of these financial institutions in the promotion of
SMEs. Students should be able to identify sources of finance to SMEs
and know how to access their funds. They should understand the modus
operandi of government policies as they affect different sectors of the
economy.
CONTENT:
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These institutions, before the Government took the decision to merge
them, were unable to perform their roles effectively due to the following
reasons:
1. Low Capitalization
2. Inefficient Operations
3. Poor loan portfolio
4. Poor Liquidity
5. Inability to access external lines of credit, and
6. Lack of capacity to finance projects
SHAREHOLDING:
NAME: UNITS %
Min. of Finance Incorporated 297,688,401 59.54
Central Bank of Nigeria 201,822,645 40.36
Nigerian citizens and associations 488,954 0.10
FACILITIES
• Initial capital base of N50 billion
• Six zonal offices
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PRODUCTS AND SERVICES DELIVERABLE BY BOI
1. Medium and Long-term loans.
2. Working Capital Finance
3. Equity Financing
4. Management of dedicated funds
5. Loan guarantees
6. Co-financing
7. Investments in Corporate Boards
8. Business Development Services
9. Lease financing
10. Trusteeship
11. Stock Brokerage
12. Foreign Exchange Dealership
13. Insurance Brokerage
PROSPECTS
The BOI is intended to focus on the private sector in both funding and
commercial operations. The Bank has opted to adopt the existing
prudential guidelines for Banks though more stringent when compared
with the CBN proposal to apply some standards used by other finance
companies for BOI.
BOI would focus on SMEs with linkages within the broad economy with a
view to enhancing overall industrial interaction, expanding output and
employment and utilizing local resources to its fullest advantage. The
huge SMIEIS funds currently accumulated by the Banks will help BOI
fulfill its mandate.
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Federal Ministry of Finance 60%
Central Bank of Nigeria 40%
FACILITIES
• Six zonal offices.
• 200 branch offices.
• N50 billion capital base.
TYPES OF BUSINESS
NACRDB provides:
• Finance and credit facilities to agricultural and agro-allied
industries.
• Loans to farmers, agricultural institutions, organizations and
cooperative societies.
• Direct investments by way of equity participation in wholly owned
or joint-venture projects.
• Provision of guarantees to viable agricultural and agro-allied
ventures.
• Rural savings scheme.
LENDING CHANNELS
The NACRDB has five channels of financial support to its clients:
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The special projects are usually undertaken in collaboration with such
international financial institutions and donor agencies as IFAD,
ECOWAS and ILO.
v. Investments in projects
This targets mainly medium and large-scale entrepreneurs who have the
capacity to provide collateral securities.
PROSPECTS
• Sourcing of offshore credit facilities for loan disbursement.
• Participation in Agricultural Exchange Market through its
subsidiary, the Food Development Company.
• Creation of local market for raw material supply to local
industries.
• Diversification of operations to agricultural support services:
desertification control project, tangential agro-allied projects,
equipment leasing, agro-chemicals manufacture and others.
The Scheme requires all banks in Nigeria to set aside ten (10) percent of
their Profit After Tax (PAT) for equity investment and promotion of small
and medium enterprises.
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The funding to be provided under the scheme shall be in the form of
equity investment in eligible enterprises. This will reduce the burden of
interest and other financial charges expected under normal bank
lending, as well as provide financial, advisory, technical and managerial
support from the banking industry.
1. Equity under the scheme may be in the form of fresh cash injection
and/or existing debts owed to participating bank.
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4. Prospective beneficiaries are advised to seek the opinion of third party
consultants such as lawyers, accountants and valuers in determining the
value to be placed on the assets and capital of their businesses in order
to determine a fair price before or during negotiations with the banks.
Requirements by Beneficiaries:
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1. Equity financing
When equity sources are not enough, the entrepreneur has the option of
borrowing from other sources. Lenders will usually lend money for
starting a business to people they know and trust. Lenders are careful
not to lend money if the risk is too great. Lenders do not want to lose
money on businesses that fail. Most lenders will therefore review the
business plan carefully. This plan should describe how the business will
be operated, how much money will be needed and how it will be used,
and at what point the business will be profitable.
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potential borrowers, these institutions have to be assured that
repayment of the loan will take place as agreed by the borrower. It is
necessary to understand the following factors that are taken into
consideration when appraising a loan application.
Type of loan: short-term (up to one year) or long-term (longer than one
year).
Guarantors: some lenders call for security both in the form of immovable
property and tangible assets and guarantees from friends.
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feasibility study to assess and appraise the viability of the proposed
business. A very significant aspect is the cost involved and the cash flow.
Cash flow, as well as financial and statistical projections, indicate
whether the project can generate more money than the cost incurred.
These results will indicate to the lender whether the loan is safe and the
borrower can repay according to the agreed terms.
Which loan source exposes the business to the lowest degree of risk? (risk)
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Could the owner’s control of the business be adversely affected? Could the
loss of control prevent the entrepreneur from making operating decisions
that are in the best interests of the business? (control)
In the equity alternative, the net income would be =N=30,000, since there
would be no interest expenses. However, only =N=22,500 would be
applicable to the present owners since =N=7,500 (=N=30,000 x 25%)
would represent the participation of new shareholders. Therefore, the
income of the business under the equity alternative would be higher, but
the participation of the present owner(s) would be less.
Each capital source has its own cost. Internal sources such as the sale
or liquidation of assets could lead to a loss of revenue following inventory
disposal or added operating costs if machinery was sold to generate cash.
In reaching a decision, it is important to consider all relevant costs for
each source of finance.
Risk. There are several types of risk involved in raising capital. Use of
trade credit could lead to supplier dissatisfaction and possible damage to
your credit standing. Since borrowed money must be repaid with
interest, debt capital imposes obligations upon the cash flow of the
business that must be met to avoid default. A default could cause a
number of actions, such as forfeiture of collateral or forced bankruptcy.
The only money source that involves no risk to the business is equity
capital, since the equity investor, not the business, is the risk-taker.
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owner’s description of his or her business affairs. When an
entrepreneur’s request for a loan is turned down, the loan applicant
should accept the refusal gracefully and eliminate weaknesses before
applying for a loan in the future.
Trade Credit: This type of money is not borrowed. It is money you owe
your suppliers who permit you to carry inventory on open account. A
good past credit experience is evidence of your ability to repay borrowed
funds.
Short-term Credit: Banks and other lenders provide this type of money
to make purchases of inventory for special reasons, such as buying
inventory for the next selling season. Such loans are self liquidating
because they generate money from sales. Short-term credit is repaid in
less than one year.
Long-term Credit: Loans for more than a year are used for the
expansion or modernization of a business. They are repaid out of
accumulated profits. Usually, a loan of this type is a mortgage or a
promissory note.
Equity Funds. This type of money is never repaid. An investor gives cash
to the business in return for a share of ownership in the business.
Many owners fail to recognize the difference between the four types of
money. Keep in mind that money borrowed for a temporary purpose
should be used in the profit producing areas of the business and will be
repaid out of that operation. Equity funds are those which remain in the
business and increase the net worth for the owner.
Are sales adequate? Is a loan being requested to: increase sales volume,
buy additional stocks of high volume merchandise which may have even
greater potential, or create a new image through an overall advertising
campaign?
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What is the receivables position of the business? Receivables are the
accounts receivable that are going uncollected and getting old. In effect,
does the business need money to carry old accounts?
Is the profit margin adequate? Is there a lot of business but results show
a lack of profit? This may indicate that the business expenses are not
controlled. Is the market insufficient? What is the plan for repayment? Is
the forecast for cash income and expenditures realistic?
The lender will carefully review the cash flow of the business to
determine whether or not the owner is providing sufficient cash to meet
the firm’s obligations. The lender also has to make sure that cash needed
for working capital is not being absorbed by the business into other
areas of equity and thereby reducing the available cash.
With the advent of the new democracy and the national quest for free
economy, the government has created and adopted policies promoting
the use of technology in education. The Nigerian Economic Policy 1999-
2003, is a comprehensive compendium of the government’s policies and
guiding principles for the nation. The policy states: "Government will
provide affordable quality education for all Nigerians, the Universal Basic
Education and mass Adult Literacy programmes will be pursued in
earnest" and in particular, "Government will create incentives to expand
access to information and communications technology which will
facilitate leap-froging in order to short-circuit the longer span of
development.” The policy even recommends partnerships with national
and international agencies including the United Nations Transfer of
Knowledge through Expatriate Nationals, (TOKTEN) programme.
112
and policies and decided on rationalizing the DFIs to make them more
functionally effective.
The reduction of all six existing DFIs to two; (BOI and NACRDB) has
narrowed the playing field and streamlined the operations of the DFIs.
The Nigerian Industrial Development Bank (NIDB), the National
Economic Reconstruction Fund (NERFUND) and the Nigerian Bank for
Commerce and Industry (NBIC) have been brought together to form the
Bank of Industry. On the other hand, the Family Economic Advancement
Programmeme (FEAP), Peoples Bank of Nigeria (PBN) and the Nigerian
Agricultural and Cooperative Bank (NACB) have become a single Bank,
the Nigerian Agricultural, Cooperative and Rural Development Bank
(NACRDB).
The following strategies have also been used to address poverty reduction
and SME growth:
1. Support for rapid development of SMEs through increased funding
of development financial institutions to enable provision of long-
term credit to the real sector of the economy;
2. Design and implementation of agricultural subsidy and special
presidential initiatives (on selected products) for direct benefit for
the Nigerian farmers;
3. Elaborate the infrastructure and platform for private sector
exploitation of solid minerals;
4. Utilize the competitive opportunity provided by due process
mechanism for award of contracts to encourage participation of
indigenous enterprises in government procurement
5. Support and encouragement of foreign construction companies
and other multinational corporations to patronize local producers
of inputs as well as sub-contract to small indigenous firms.
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A microfinance institution (MFI) is a semi-formal, non-governmental and
community development organization involved in rural development
(Marx, 2001). In recent decades, microfinance, of which microcredit is a
component, is a sub-set of flexible structures and systems by which a
wide range of financial and enterprise development services are offered to
micro enterprise owners in an affordable and convenient manner. It has
become one of the buzzwords of contemporary development initiatives all
over the world. This is particularly contextual to the developing
countries, where top-down formal financial institutions have failed to
address the credit needs of the real sector of the economy, thereby
constraining the processes of investing for livelihood enhancement
among the poor, the small-scale farmers and micro-level entrepreneurs.
The Nigerian microfinance industry has come a long way and boasts of
all the four well-known models in the industry. A CBN study identified,
as at 2001, 160 registered MFIs in Nigeria with aggregate savings worth
=N=99.4 million and outstanding credit of N=649.6 million, indicating
huge business transactions in the sector (Anyanwu, 2004). Institutional
structures for the provision of microcredit vary and may be government
or public sector-oriented, NGO-supported, traditional or a mixture of two
or more of these.
There are those that exist along the lines of the Informal Model and
involve revolving credit and savings associations, which are based on
traditional experience. These groups provide savings and credit services
to their members. They operate under different names such as ‘esusu’
among the Yorubas, ‘etoto’ for the Igbos and ‘adoshi’ in the North for
Hausas. These associations operate traditional microfinance in various
forms in rural areas/communities and urban centres.
114
banks to village cooperative societies and other groups for financial
support.
115
Institutional evolution is taking place in the Nigerian microfinance
sector; but the pace is slow. Sources of change sweeping the
microfinance sector include the CBN, MFIs themselves, the State
governments and donors who initiated these processes. There is
increasing recognition and prioritization of the needed basic
interventions to foster private sector participation in this vital financial
sector that has the greatest potential to reach and affect the lives of rural
Nigerians. For example, the United Nations Capital Development Fund
UNCDF, through its MICROSTAT project, has made significant efforts to
strengthen the institutional, organizational and technical capacities of
MFIs. Donors are now supporting mostly ‘retailer’ MFIs as opposed to
‘wholesale’ institutions.
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o Corporate Bonds
o Options and Futures
o Preference Shares
o Debentures
o Exchange Traded Funds
Capital
Capital is the money which gives the business the power to buy goods to
be used in the production of other goods or the offering of a service.
Capital market
Long-term funds are bought and sold:
o Shares
o Debentures
o Long-term loans, often with a mortgage bond as security
o Reserve funds
o Government Bonds
Money market
Financial institutions can use short-term savings to lend out in the form
of short-term loans:
o Credit on open account
o Bank overdraft
o Short-term loans
o Bills of exchange
o Factoring of debtors
Borrowed capital
This is capital which the business borrows from institutions or people,
and includes debentures:
Redeemable debentures
Irredeemable debentures
Debentures to bearer
Hardcore debentures
Own capital
This is capital that owners of a business (shareholders and partners, for
example) provide:
Preference shares:
117
o Ordinary preference shares
o Cumulative preference shares
o Participating preference shares
Ordinary shares
Bonus shares
Founders' shares
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TOPIC 8:
INTRODUCTION:
The position of personal savings and portfolio investment in this country
vis-à-vis the nations’ economic development is quite significant and
noteworthy. So, the potential entrepreneurs need to be very conversant
with this development. Therefore this section attempts to expose these
entrepreneurs towards this dimension. Students should understand the
importance of Personal Financial Planning and Management. They
should be able to develop personal budget for a chosen period and create
a spreadsheet for tracking the budget. They should imbibe the savings
culture as well as understand how to invest in stocks and bonds.
CONTENT:
119
Income is increases in economic benefits during the accounting
period in the form of inflows or enhancements of assets or decreases
of liabilities that result in increases in equity, other than those
relating to contributions from equity participants.
For the average citizen in many countries, the term “income” is most
relevant for its role in determining how much income tax a person must
pay.
Saving differs from savings in that the first refers to the act of putting
aside money for future use, whereas the second refers to the money itself
once saved.
For example: you may decide to start saving 10% of your income;
because you aim for your savings to grow into an amount sufficient
to buy a car
120
investment is realized, unlike cash saving(s). Lower levels of risk
normally apply to savings e.g. interest rates may fail to preserve its real
value, or in extreme cases loss can occur due to bank failure.
Have you ever dreamed of starting your own business and being your
own boss with your own hours? It may seem like a dream, but it’s not
impossible to attain—a majority of first-generation millionaires got there
just by starting their own businesses. These aren’t just tech businesses
though—these are electricians, plumbers, and other local small
businesses. These are companies that anyone can start—even you.
To do so, however, you need to have some startup capital. For some
companies, venture funding is the way to go, but for most, self-funding is
essential. This means that you will need to have money saved up to start
your company. If you are serious about wanting to start your own
business, you will need to begin budgeting for it.
If you want to save money to start your own business, you have two
options:
121
#1 - You can try to work on the new venture while you are still at your
current job. Depending on your situation, this might be a better option
than the second one.
#2 - Save enough money so that you can quit your job and focus on your
new company full time.
Both options have their pros and cons, but it might be a good idea to
follow #1. Many companies fail, and the first option is a good way to
hedge your bets in case your company doesn’t do as well as you hope.
If you don’t have a budget, it’s pretty important that you create one,
especially if you are planning to quit your current job. In a previous post,
I provided links to some good resources and articles on such topics as
calculating start-up costs. You should try to do the math to see how
much you need to save. In a future article, I’ll try to explain how to figure
out exactly how much you need to start your business.
Beyond saving for a new business, there are other options, such as
borrowing. A survey of Person to Person (P2P) loans in Lending Club
shows that a growing number of business owners are turning to Lending
Club to raise funds for creating and expanding their businesses.
This lesson assumes that students have worked with percents and
decimal equivalents
122
4. Explain Personal Financial Planning and Management;
Typical goals most adults have are paying off credit card and or student
loan debt, retirement, college costs for children, medical expenses, and
estate planning.
Shopping Habits
123
economy is of primary concern, shoppers exercise more discretion about
where and how they spend their money.
Loyalty can be stolen: Shoppers will deviate from past shopping habits
to achieve additional value. Taking queues from the economy, 61% cited
price/value as the primary reason driving them to a retail destination.
Control your habits, improve your life: We are all the sum of our daily
habits. Small actions repeated over and over make up our day, our week, our year, our life. We all
know there are things we ~should~ (or shouldn't) do. The trick is just getting our conscious brain a
little help to turn "I think I should" into "I knew I could!"
124
money from both parties. In others, the brokerage receives a commission
only from the seller.
Stocks can help your money grow in two ways. If the share price of your
stock goes up, you can draw a profit – also known as a capital gain –
when you sell your shares. Of course, the share price can go down, and
you can loose some of your money. Some stocks pay investors a
dividend, which is a portion of the company’s profits, on a regular basis.
Stocks are bought and sold at the stock market. This is where public
companies seeking capital meet investors who seek profits. The first
stock exchange began in 1602 in Amsterdam, Holland, where shares of
the United East India Company were traded. America’s first stock market
opened in 1792, near an old buttonwood tree where stock traders used to
125
meet. England’s first stock market opened in 1773, in a former London
coffeehouse. The Nigerian stock exchange opened in 1961. At the stock
market, each stock is registered with a particular exchange. If you think
of the stock market as a big shopping mall, then an exchange is a store
that carries only certain brands of products. Today there are stock
markets all over the world. At each, stocks are bought and sold on a
daily auction conducted by stock traders and specialists.
When a stock market does well and prices rise over a period of time, it’s
called a bull market. When prices decline for a period of time, it’s called a
bear market.
126
GENERAL EXERCISES:
and administrative
requirements for a small business.
target.
production process.
n process management,
inventory management and control.
directions.
127
Entrepreneurial Project Topics
innovative business.
-
added” ideas that could be adopted by the owners.
business.
identify
business opportunities to deal with them. Prepare a feasibility report.
128