FOR THE PRODUCTION OF INSTANT POUNDED YAM States Agency for International Development and the...

//////////////////////////////////////////////////////////////////////////////////////////////////////////////

//////////////////////////////////////////////

June, 2017

USAID-NEXTT PROJECT

FEASIBILITY REPORT

AND

BUSINESS PLAN

FOR THE PRODUCTION OF

INSTANT POUNDED YAM

AND

YAM FLOUR

This publication is prepared by Yinka Ogunseyinde & Co. and produced for review by the

USAID-NEXTT Project. This is an assignment commissioned by Carana Corporation under the

USAID-NEXTT Project.

3

USAID-NEXTT PROJECT

FEASIBILITY REPORT/BUSINESS PLAN

FOR THE PRODUCTION OF

INSTANT POUNDED YAM

AND

YAM FLOUR

4

Disclaimer

The author‟s views expressed in this publication do not necessarily reflect the views of the

United States Agency for International Development and the Nigeria Expanded Trade and

Transport or Carana Corporation.

DATA PAGE

Contract Number: 215006-FPC-YO&Co-01

Contractor Name: Carana Corporation

Name of the Component: Feasibility Report / Business Plan

Date of Report: June, 2017

Document Title: Production of Instant Pounded Yam and Yam Flour

Author‟s Name: Yinka Ogunseyinde & Co.

5

ABSTRACT:

This project aims to promote investments in the production of Instant Pounded Yam and Yam

Flour in Nigeria. In an effort to achieve these, feasibility studies have been carried out and a

Business Plan prepared to highlight the profitability inherent in this investment and market

opportunities available. This project is recommended for both domestic and international

investors.

Information used in the preparation of this report was gathered from various reliable sources

which includes statistics taken from the office of Food and Agriculture Organisation and the

National Bureau of Statistics in Nigeria. Competitors‟ data and industry averages have also been

used as a basis for the preparation of the financial projections included in this report.

This report provides a financial and economic analysis of the opportunities available in the

sector and identifies the potential technical strengths and challenges that may be encountered

by the investor(s) in undertaking the identified project. The report however, helps the reader to

develop an understanding of the operational aspects (equipment, human resource,

infrastructure, etc.) in the sector and its growth potential in the country.

6

ACRONYMS

USAID United States Agency for International Development

NEXTT Nigeria Expanded Trade and Transport

FAO Food and Agriculture Organization

IITA International Institute for Tropical Agriculture

NBS National Bureau of Statistics

IPYF Instant Pounded Yam Flour

BMGF Bill and Melinda Gates Foundation

FMARD Federal Ministry of Agriculture and Rural Development

LCCI Lagos Chamber of Commerce and Industry

7

Table of Contents

ABSTRACT ………………………..………........................................................................................4

ACRONYMS …………..………………………………………………………………………………………. 5

TABLE OF CONTENTS …………………………………………………………………………………………………… 6

EXECUTIVE SUMMARY ……………………………………………………………………………………………………8

1. 0 PROJECT BACKGROUND AND RATIONALE ................................................16 - 38

1.1 INTRODUCTION

1.2 OVERVIEW OF THE YAM TUBER SUB-SECTOR IN NIGERIA

1.2.1 YAM STORAGE

1.2.2 YAM VALUE CHAIN OVERVIEW

1.3 METHODS OF YAM PROCESSING

2. MARKETING FEASIBILITY ………………………………………………………….. 39- 46

2.1 ENVIRONMENT

2.2 RAW MATERIAL

2.3 ACTORS IN THE YAM VALUE CHAIN

2.3.1 FARMERS

2.3.2 MIDDLEMEN

2.3.3 PROCESSOR

2.3.4 CONSUMERS

2.3.5 EXPORTERS

2.4 COMPETITION/COMPETITORS

2.5 MARKETING STRATEGY

2.6 DEMANDS FOR INSTANT POUNDEDYAM AND YAM FLOUR

3. PROPOSED PROJECT LOCATION ……………………………………………………..47-49

3.1 PROPOSED REGION

3.2 SITE LAYOUT PLAN

8

4. YAM PROCESSING DESCRIPTION, MACHINERY AND EQUIPMENT …………..50-59

4.1 YAM FLOUR PROCESSING DESCRIPTION

4.2 INSTANT POUNDED YAM PROCESSING DESCRIPTION

4.3 PROCESSING MACHINES

5. HUMAN RESOURCES ………………………………………………………………..60-68

5.1 MANPOWER

5.2 ORGANOGRAM

5.3 PROFILE, JOB DESCRIPTION AND REMUNERATION OF KEY PERSONNEL

5.4 STAFF TRAINING AND DEVELOPMENT POLICY

6. FINANCIAL …….….......................................................................69-83

6.1 PROJECT DESIGN AND ASSUMPTIONS TO FINANCIAL POJECTIONS

6.1.1 PROJECT SET UP COSTS

6.1.2 MACHINES AND EQUIPMENT CAPACITY

6.1.3 PRODUCTION PROGRAMME

6.1.4 CAPACITY UTILIZATION

6.1.5 MATERIAL AND OPERATING COSTS

6.1.6 OPERATING REVENUE

6.1.7 OTHER ASSUMPTIONS

6.2 LOAN AND REPAYMENT SCHEDULE

6.3 PROJECTED BALANCE SHEET

6.4 PROJECTED REVENUE AND EXPENDITURE ACCOUNTS

6.5 PROJECTED CASHFLOW

6.6 PROJECT RETURNS AND SENSITIVITY ANALYSIS

7. RISKS AND MITIGATIONS .........................................................................84-86

8. BUSINESS IMPLEMENTATION PLAN ………………………………………………………87- 89

9.0 CONCLUSION ……………………………………………………….90

9

EXECUTIVE SUMMARY

This summary should be read in conjunction with the full text of the feasibility report

and business plan from which it was derived.

PROJECT OVERVIEW

Proposed Business Legal Status

The legal status of business tends to play an important role in any setup; the proposed yam

flour production is assumed to operate on as a private limited company.

Project Summary

Processing of yam into instant pounded yam and yam flour

Industry

Food Processing

Proposed Location

The Project is proposed to be sited in the Middle Belt region of Nigeria, due to

abundance of yams in the region.

Product Overview

Product Description Price

Instant Pounded Yam

High quality Instant pounded yam with

natural taste N1,350/1.8kg

Yam Flour More nutritious undiluted yam flour N1,000/2kg

Market Overview: Yam Processing Value Chain

Target market

Upper and Middle class Nigerians who desire high quality and easy to prepare Pounded

yam and quality yam flour.

Demand Function

National demand for pounded yam consumption is 750 tons per day

10

Proposed Company‟s share of market is as follows;

Year 1 Year 2 Year 3 Year 4 Year 5

0.19% 0.21% 0.24% 0.26% 0.26%

Competition: Direct Competitors

Packed Size Brand Price (N) Location

900gm Ayoola 800 Lagos

900gm Ola-Ola 1,500 Lagos

2kg Endy 1,680 Lagos

1kg Niyi 800 Ibadan

1kg Olabisi 820 Lagos

2kg Iyan 1,500 Ibadan

1kg Mc Sure 1,040 Jos

900gm Ayoola 850 Port Harcourt

Human Resources:

Direct Personnel Year 1 Year 2 Year 3 Year 4 Year 5

Number of Production Personnel 69 75 81 87 93

Number of Admin & other Personnel 36 36 36 36 36

Total Personnel 105 111 117 123 129

Management

POSITION/STATUS QUALIFICATION RESPONSIBILITIES

REQUIRED

1 MD/CEO MSC, BSC i. Implementation of Board decisions and policies

Plus minimum of 8 years ii. Provide administrative and direction guidelines

industry experience iii. Ensure achievement of set objectives

iv. Management of resources to ensure achievement

of goals.

v. Liaise with government institutions and other

relevant agencies.

2

PRODUCTION

MANAGER MSC, BSC i. Coordinate the entire production processes

Plus minimum of 5 years ii. Ensure adherence to production standards

industry experience iii. Supervise processing and production staff

iv. Ensure timely and efficient production

11

v. Ensure achievement of production targets

vi. Keep proper records of factory maintenance

vi. Handle stock order and re-order

3

ADMIN.

MANAGER MSC, BSC in Admin. i. Responsible for personnel issues

Plus minimum of 5 years ii. Handle staff recruitment, transfers, disengagement

Administrative experience and other related matters.

iii. Handle staff performance appraisal and promotions

iv. Handle staff welfares and liaise with labour union

4

ACCOUNT

MANAGER

BSC Accounting with

ICAN/ACCA i. Incharge of finance and accounts

Plus minimum of 5 years ii. Prepare weekly, monthly, and yearly accounting

accounting experience reports.

iii. Responsible for general accounting and book keeping.

iv. Handle income and expenditure reconciliation

Production Programme

Production programme based on the capacity of the proposed Machinery & Equipment is

shown below:

At full capacity (100%) Pounded yam Yam Flour

Production line 1 1

Shift per day 2 2

Hours per shift 8 8

Production days per annum 250 250

Raw Yam quantity produced per shift(tons) 4 4

Raw Yam quantity produced per day (tons) 8 8

Conversion rate of raw-yam to finished product 30.00% 28.00%

Finished Product Volume per annum (tons) 600 560

Machine Production Capacity Utilization

Products Year 1 Year 2 Year 3 Year 4 Year 5

% % % % %

Instant pounded Yam 60 65 75 80 80

Yam Flour 70 75 80 85 85

12

Financials

Project Cost N’000

Financed By:

Equity Capital: N60m

Loan or Venture Capital N160m

The loan is projected to be repaid in 5 years with an interest rate of 9% per annum.

Land and Building

99,400

Plant & Equipment

30,000

Generators

15,000

Other Depreciable Assets

30,000

Other Facility

8,000

Pre-operational

4,000

Working Capital

33,600

Total

220,000

13

Projected Operating Activities


N'000 N'000 N'000 N'000 N'000

Turnover

467,040 503,620 562,740 599,320 599,320

Profit before tax

23,640 28,711 47,027 57,222 57,512

Kobo Kobo Kobo Kobo Kobo

Earnings per share

39 48 78 95 96

Return on Capital employed

29 27 32 29 23

Other Projected Returns

Internal Rate of Return (IRR) 16.78%

Returns On Investments (in 5th year) 123.1%

The project discounted payback period is 3 years and 10 months

Sensitivity Analysis

Selling Price > 9.52%

Raw-Material > 13.72%

Unit cost > 11.69%

Sales Volume > 51.33%

It is therefore concluded that the project is most sensitive to sales volume

14

SWOT Analysis

Strengths

Availability and easy accessibility to raw-materials

Access to cheap labour

Thorough knowledge of target market and their peculiar needs

The organization structure shall be function-based and each employee shall have a clearly

defined strategy and goal plan.

Weakness

The business is a startup and the future is always uncertain for most startup companies

The initial stages of the business requires an enormous amount of investment

Opportunities

The yam processing food production industry is still untapped

Fast growing middle class population within Nigeria

Huge population of Nigerians living abroad.

Threats

This being a new entity there is a threat from new business entrants

Cheap imitation instant pounded yam flooding the market

Non-compliance with strict NAFDAC regulations on production

There is a threat of other more established companies starting this line of business thus leading

to stiff competition that the company might not be able to cope with.

15

Business Implementation Plan

The planning, execution and commissioning of the project is estimated to last 12

months from the inauguration of the Board of Directors.

ACTIVITY SCHEDULE

ACTIVITIES MONTHS

1 2 3 4 5 6 7 8 9 10 11 12

1 Organising a formidable Board of Directors

2 Raising of Initial Equity Capital/ Sourcing for Loan

4 Commissioning of Architect and other Engineering Consultants

5 Commencement of Building Construction

6 Deposit for the Purchase of Machinery and Equipment

7 Recruitment of Key Personnel

8 Arrival and installation of Machinery and Equipment

9 Purchase of Initial Raw-materials & Plant Test-Run

10 Plant Commissioning

16

CHAPTER ONE

PROJECT BACKGROUND AND RATIONALE

17

1.1 Introduction

Nigeria occupies 923,768 km2, located on the Gulf of Guinea in West Africa. Only 40% of

Nigeria‟s 84 million hectares of arable land is presently cultivated. The country is endowed with

good natural supply of water with about 263 billion cubic metres from two of the largest rivers

in Africa (FMARD, 2016).

Food quality in yam can be defined as those quality attributes such as physico-chemical

composition (granule morphology, pasting properties, swelling, water binding capacity of yam

starch), nutrient composition (proximate, minerals, vitamins), and anti-nutritional factors

(phytates, tannins, saponins and oxalates) in the yam tuber. These parameters are significant in

determining utilization and acceptability of yam food products by all stakeholders (Farmers,

Processors and Consumers) to ensure sustainable food security. These qualities are directly

proportional to the type of yam varieties being processed and to what products.

Yam Varieties:

1. White Yam {eight-month yam) has white or cream flesh, stores well and produces high

yields. It matures 8 months after planting.

2. Yellow Yam {twelve-month yam) has yellow flesh and matures only 12 months after

planting. It does not store well nor does it produce high yields. If continually tapped it

grows for as long as 3 years.

3. Water yam (ten-month yam) has white, red, or purple flesh which is very soft because of

its high water content. Its storage qualities are poor.

4. Three-Leaved Yam (bitter yam) has yellow, white or pink flesh of poor quality, but it

produces high yields. Its leaves are prickly with three little leaves and the stem climbs

clockwise.

5. Aerial Yam {potato yam or air potato) does not develop tubers but bulbils that grow in

the axils of the leaves or underground. It is of relatively poor quality and is not widely

grown, but it stores well.

6. Chinese Yam (lesser yam) produces very small tubers with pale-yellow smooth skin that

resemble sweet potatoes. It does not store well and matures in 12 months. Its stem is

prickly and climbs clockwise. It grows best in dry, open areas.

18

Nigeria has not been able to exploit its abundant yam tubers population to become a major

player in the international processed yam sub-sector. The major reasons include; non-availability

of appropriate yam storage, lack of low cost processing equipment and absence of modernized

form of yam processing.

1.2 OVERVIEW OF THE YAM TUBER SUB-SECTOR IN NIGERIA

Fig 1.1: White Yam Tubers

Yam, a tropical perennial crop cultivated mainly for its edible tubers is a staple food consumed

majorly in the Tropics and provides much economic benefit to the producers. It is primarily an

agricultural commodity classified as the third most important tropical root crop after cassava

and potatoes. Yam is an important source of carbohydrate for many people of the Sub Saharan

region especially in the yam zones of West Africa. It‟s the second most important tuber crop in

Africa, after cassava root, with production reaching above one third of the level of cassava (FAO,

2002). Yam tuber is essentially a starchy food, its principal nutritional function being the supply

of calories to the body (Onwueme, 2001). This characteristic contributes to the sustaining of

food supply, especially in the scarcity periods at the start of the wet season. Naturally, yam is

rich in starch and produces energy. Yam tubers grow up to 2.5m (8.2ft) in length and weigh up

to 70kg (154lb) it has a tough stem which softens after heating.

19

Yams (Dioscorea spp.) are annual or perennial tuber-bearing and climbing plants with over 600

species out of which six are economically important in terms of food and medicine (IITA, 2009).

Yam belongs to the genus “Dioscorea” and family “Dioscoreaceae”. It is an important tuber crop

of the tropics. Yam is a tropical crop with many species, which originated in South East Asia and

was brought to West Africa in the 16th century. It is one of the principal tuber crops in the

Nigeria economy, in terms of land under cultivation and in the volume and value of production

(Bamire and Amujoyegbe, 2005). Yams are grown on 5 million hectares in about 47 countries of

the world with Nigeria as the leading world producer (FAO 2005 and IITA 2009). Most of the

yam produced comes from Nigeria, which is by far the „highest producer and exporter

worldwide (about 70% of global production) followed by Ghana and then Cote d‟Ivoire,‟

according to the FAO statistics (2010).

Source: FAO, Statistics 2011

These qualities are directly proportional to the type of yam varieties being processed and to

what products. In our survey conducted at Irepodun Local Government and environs in Oyo

North between 6th and 10th of March, 2017 to validate same conducted between years 2003-

20

2006 under the World Bank funded Root and Tuber Crops Expansion Programme where over

123 varieties of yam were collected from farmers‟ field for evaluations and conservation.

Oyo North which is the major and highest yam producing zone of Oyo state, Nigeria as well as

in the whole South West of Nigeria where the common species are Dioscorea rotundata (White

Yam) and Dioscorea alat (water yam). In these areas, the variety of yam cultivated depend on the

yield, commercial value as well as excellent food products. Yam production in this area is on

commercial production that can sustain any yam processing venture resulting in high profits.

However, there are specific varieties of the two yam species (Dioscorea rotundata and Dioscorea

alata) which are best suited for particular yam products as stated on the tables hereunder.

Varieties of Dioscorea rotundata (White Yam)

SN Varieties

(local

language)

Food

products

Ranking Production Other characteristics

1 Lasinrin Instant

Pounded

Yam Flour

Excellent Produced in very high

Commercial quantity

Yellow tubers, one of

the best for processed

products. Forms Stiffer

and heavy dough

2 Agbawobe Instant

Pounded

Yam Flour


Commercial quantity

Excellent food quality

and good and long

storability

3 Amula Instant

Pounded

Yam Flour

and Yam

flour


Commercial quantity

Shining white tubers,

High and long

storability

21

4 Ehuru Instant

Pounded

Yam Flour

Very Good High Commercial Value

and high yielding.

Farmers loved to

produced it in

commercial quantity

White Tubers are very

good for pounded yam

and very popular in all

the South western

States of Nigeria

5 Danacha Instant

Pounded

Yam Flour

Excellent Very big tubers, high

commercial yield and

production are

enormously high..

It is also produced in

commercial quantity in

Niger states, Benue

state as well as FCT

areas. It is common

Abuja Yam

6 Zaria, Gbogi,

Agunmoga

Instant

Pounded

Yam Flour

Very Good The three varieties are

of Good commercial

value and high

storability

Very good for pounded

yam

7 Jibo Instant

Pounded

Yam Flour

Very Good Good and high

commercial production,

but produced slim and

long tubers

White tubers and store

very well.

8 Aro Instant

Pounded

Yam Flour

Very Good High commercial value

and production.

Excellent for Pounded

yam.

Highly reference in Ekiti

and Ondo states. White

tubers.

9 Yangbende Instant

Pounded

Yam Flour

Excellent Early maturing variety.

Excellent Pounded yam

with swell during

Hard tubers with very

low moisture content.

22

preparation

10 Konga,

Monrin,

Korondo and

Gbinra

Yam Flour Excellent

for Yam

Flour

(Elubo)

High commercial value

and production.

Production of multiple

tubers

Small size and very

hard tubers with high

storability.

11 Omi-efun Yam flour Very good Commercial production

and value

Cream coloured tubers

which a good

characteristics of yam

tubers for Yam flour

12 Ajelanwa Frozen Yam

Chips

Good Produced in

commercial quantity

Excellent among the

people as fried yam

13 Kokumo Frozen Yam

Chips

Good High Commercial Value

and quantity

23

Dioscorea alata (water yam))

SN Varieties Food

products

Ranking Production Other

characteristics

1 Ogun awatan Yam flour Good High yielding and high commercial

value. Late maturing but production

in commercial quantity.

Cream coloured

tubers

2 Emi Yam Flour Good Very hard tubers and good

commercial value

Good storability

3 Olesunle Yam flour Good Of good commercial production and

value

Sweet mealy

cream coloured

tubers

24

1.2.1 YAM STORAGE

Roots and tubers such as yams are living organisms. When stored, they continue to respire,

which results in the oxidation of the starch (a polymer of glucose) contained in the cells of the

tuber, which converts it into water, carbon dioxide, and heat energy. During this transformation

of the starch, the dry matter of the tuber is reduced.

The following rules should be applied when storing yams

Do not store directly on the floor. This then allows air to pass freely and prevents

moisture from damaging the tubers.

Tubers should not touch each other so as to reduce the risk of mutual infection.

Do not expose tubers directly to light, or else they might start sprouting too early.

Methods in keeping with these rules are:

• Packing tubers in ashes and covering them with soil,

• covering them with soil and a grass mulch,

• suspending yam tubers from branches which shade them,

• tying them to a framework of poles,

• putting them on rafters in a barn.

Pests and Diseases:

The yam beetle attacks the tubers. No other serious pest is known.

Method of Storage

A number of storage methods are used by farmers in West Africa. A simple method mixes the

tubers with wood ash, heaping them and covering them with soil, possibly topped with dry grass

as a form of mulch. Even more simply they may be stored on the floor or on shelves in shed or

huts sometimes built for the purpose.

25

A Typical Yam Barn

The commonest type of yam store in West Africa is the yam barn (figure above) The barn is built

on open ground but is usually, at least partially, shaded. There are many variations in the type of

structure but basically it consists of walls of vertical timbers, each 5-10 cm in diameter, 2 to 3

metres high and set about one meter apart. The vertical timbers are often made of sawn trees

which, if left unbarked, will take root when set in the ground (Bencini 1991, Ezeike 1995). It is

considered this will reduce the risk of attack by termite or rotting of the timber at ground level.

(The grown timbers will also help to provide shade.) In between the vertical timber are cross

members of lighter section timber, bamboo or similar material. The barns are covered with a

straw roof and enclosed within a fence or a wall for security. Inside the barn the tubers may be

tied individually to the vertical timbers or otherwise arranged to allow maximum air circulation.

26

The maximum storage life of yams in the barn is six months. Losses are reported to be 10% to

15% during the first three months and up to 30% to 50% after six months.

Amongst the major roots and tuber crops, properly stored yam is considered to be the least

perishable. Successful storage of yams requires:

i. Initial selection of sound and healthy yams.

ii. Proper curing, if possible combined with fungicide treatment.

iii. Adequate ventilation to remove the heat generated by respiration of the tubers.

iv. Regular inspection during storage and removal of rotting tubers and sprouts that

develops.

v. Protection from direct sunlight and rain.

Storing yam at low temperature reduces the respiration rates. However, temperatures below

12 °C (54 °F) cause damage through chilling, resulting in a breakdown of internal tissues,

increasing water loss and susceptibility to decay. The symptoms of chilling injury are not always

obvious when the tubers are still in cold storage. The injury becomes noticeable as soon as the

tubers are restored to ambient temperatures. The best temperature to store yams is between 14

and 16 °C (57 and 61 °F), with high-technology-controlled humidity and climatic conditions,

after a process of curing.

1.2.2 YAM VALUE CHAIN OVERVIEW

Farmers in several regions are incorporated into value chains in various ways and for multiple

reasons. A lot of studies have been carried out on value chains and the impact with regards to

small-scale farmers. However, the yam value chain is domesticated, and it is important to note

that, Yams are deeply tied to the lives, livelihoods and cultures in West Africa and among

Africans in Diasporas. (IITA, 2012).

Relative to other crops such as cassava, there is limited yam processing in both the formal and

informal sectors (BMGF, 2014). There are about twenty five yam processing companies operating

in the Nigerian landscape whose products consist of yam flour and instant pounded yam

(otherwise known as Instant Pounded Yam Flour).However, apart from Ola-Ola brand, which is

27

produced by a Company incorporated in the USA and Ayoola brand, others are relatively small

scale producers concentrated in Lagos and part of southwest. Only a few have their presence in

other parts of Nigeria. The number of Companies in this industry is grossly inadequate for the

national demand for processed yam. The yam value chain comprises of the following:

1. Yam Flour (Elubo)

2. Instant Pounded Yam Flour (Instant Pounded Yam Flour)

3. Frozen Yam Chips

1.3 METHODS YAM PROCESSING

There are two methods of yam processing in Nigeria.

1. Informal Method

2. Formal Method

1.3.1 Informal Method of Yam Processing

Although the bulk of yam produced in Nigeria is consumed as fresh yam, informal yam

processing has formed an integral part of culture in Nigeria for decades. Informal processors are

linked to farm families and process yam into yam flour majorly.

28

1.3.1.1 Yam Flakes

Figure 1.2: Yam Flakes Processing

Figure 1.3: Processed Yam Flakes

29

In Southwest Nigeria, informal processing of yam is processed into yam flakes which are

subsequently milled into yam flour. Informal processors produce yam flakes from a particular

variety of yam called “Ikokoro yam”, and the production of yam flakes in this area aligns with the

peak period of yam harvesting during the dry season. Yams are peeled, parboiled and sun-dried.

The dried flakes are then pulverized by pounding in a mortar and then sieved. As a result,

production is limited by the availability of sunlight during rainy season, which makes yam flakes

and flour expensive in that season. The dried flakes can also be run through a motor-driven

milling machine. The resulting product is white, powdery flour. The flour can be stored for

several months, however, the storage environment must be dry to prevent the growth of

moulds, and must be well protected from weevils. Yam flakes are produced in bulk throughout

the dry periods and stored in sacks, to be sold during the rainy season. Buyers from different

parts of the Southwest visit Saki and other yam flakes producing areas in Oyo North to buy yam

chips throughout the year.

1.3.1.2 Pounded Yam

Informally, pounded yam is usually prepared from freshly boiled yam. The yam is boiled to

softness after which it is put in a large wooden mortar and pounded with a pestle until it forms a

thick paste of uniform consistency. The pounding process is however lengthy and noisy. More

recently, various mechanical contraptions have been devised to accomplish the „pounding‟.

Many of these devices operate on the same principles as household blenders and they pound by

maceration.

1.3.1.3 Yam Chips

Yam chips are relatively new form of processed yam. They are produced in the same way as

potato chips by frying the thin slices of tuber in fat, and then packaging them in bags.

Dehydrated yam tubers slices are produced by freeze-drying thick slices of yam tuber. The dried

slices can then be stored conveniently. When needed, they are boiled in water to produce boiled

yam. The quality of the resulting boiled yam depends on the cultivar of yam used, but is

generally poorer than boiled yam produced from the fresh tubers.

30

1.3.2 Formal Method of Yam Processing:

In recent years, yam has begun to be processed formally using modernized methods of

processing along with improved technology. This has made the process more hygienic and of

higher quality. There are a bunch of Companies in Nigeria who are into the formal processing of

yam into various yam products. However, the major yam products being produced are yam flour

(elubo) and instant pounded yam (Instant Pounded Yam Flour) while the processing of yams

into frozen yam chips is relatively new.

Fig 1.4: Formal Processed Yam Products

1.4.2 Yam Flour (Elubo) Processing

Yam flour is brownish in colour, and is made from dried yam. Yam flour is often fortified with

vitamins (e.g. A, B, B2, B3) or minerals (e.g. iron), or occasionally blended with other flours.

With regard to the properties of the end-product, both yam flour and Instant Pounded Yam

Flour are expected to have a moisture content of around 10%, and should be free of moulds

(fungi), etc. It is estimated that dried yam products have a shelf-life of approximately one year.

Yam flour is used to make a very popular Nigerian meal called “Amala”. Yams used in the

production of amala are usually white in color but turn brown when dried and blended into flour

called “Elubo”in Yoruba language. This gives amala its brown colour. Amala is eaten mostly by

the Yorubas in Southwest and Tivs in middle belt of Nigeria.

31

Machinery and Equipment

The major machinery and equipment for production of yam flour are:

a. Yam Slicer

b. Yam Parboiler

c. Cabinet Dryer

d. Hammer Mill with Cyclone

e. Weighing Scale

f. Packaging machine

Processing Technology

The process involved in yam flour production is:

i. Procurement of good quality tubers:

The first step to producing yam flour is getting the white variety of yam tubers (rotundata).

Sometimes, to avoid wastage, yam tubers which are about spoiling are used to make yam flour.

32

ii. Washing yam tubers:

Selected yam tubers are washed thoroughly to remove dirt and sand particles. This also ensures

that the yam flour is hygienically produced.

iii. Peeling of yam tubers:

This is the removal of the outer corky periderm. The method of peeling varies. The general

methods apply include:

a) Steam Peeling: This involves the exposure of the tubers to steam pressure for a

period of time. The process may be in batches or continuous. During this steam

pressure, the steam penetrates the pressure cortex, often the peel results in a

slight expansion of the space between the peel and the cortex. This makes it easy

for the peels to be removed when subject to minor abrasive or mechanical

processing.

b) Chemical Peeling: This involves the immersion of the yam tuber in some non-

toxic chemical such as caustic soda solution of low concentration which helps to

soften the peel. Usually, when this method is used, they are coupled with the use

of heat. The process is controlled by varying the concentration of the dye and its

temperature for effective peeling process. One major setbacks of this method is

the need to use a large volume of water to remove the effect of the chemical

during the post-peeling washing.

c) Mechanical peeling: The basic mechanical method includes the abrasive peelers,

rotary laid mounted rim peelers and use of belt conveyor. In the abrasive peeler,

the peeler consists of a vertical cylinder with a rotating disc in the bottom and a

hinge cover at the top. Abrasive grits may be applied to the inner walls of the

chambers or to rotating disc or both. A measured load of the root or tuber is put

into the cylinder and when the disc is rotated, the tuber spins or thimble so that

the peels are rubbed off when the tubers shall against the abrasive surface.

33

iv. Soaking of yam tubers:

After peeling the yam tubers, they are cut into smaller sizes called flakes after which they are

parboiled at 50 oC in 2 minutes and allowed to cool in the water in which they were parboiled.

v. Drying :

Drying is done to reduce the moisture content in the yam flakes. The yam flakes are dried in the

drying chamber at a particular temperature. This helps reduce the growth of moulds and other

bacterial micro-organisms which may affect the quality of the yam flour. It also ensures

freshness and preservation of the quality of yam flour produced.

vi. Milling:

Dried yam flakes are milled in a miller until a uniform particle size is achieved.

vii. Bagging and packaging:

The yam flour produced are bagged and packaged in an air-tight bag to avoid the growth of

mould and other micro-organisms which may occur as result of moisture and air.

1.4.3 Instant Pounded Yam Flour (IPYF) Processing

In Nigeria, pounded yam is consumed by almost every tribe in the Country. Its consumption cuts

across all regions, age groups, economic and social classes. It is served in parties, ceremonies,

hotels, restaurants, and as a family menu. The traditional method of making pounded yam which

requires physical pounding with pestle and mortar by two or more strong men or women

depending on the quantity, is very laborious and mostly unhygienic.

Federal Institute of Industrial Research Oshodi (FIIRO) has developed and perfected a process

technology for production of Instant Pounded Yam Flour (IPYF), otherwise known as Instant

Pounded Yam Flour, to remove the drudgery associated with the traditional pounding method.

IPYF brings succor to pounded yam lovers as they can now obtain their menu of delight through

a process that is less time consuming and of course a more hygienic product with longer shelf

life.

34


The major machinery and equipment for production of instant pounded yam flour are:

i. Yam Slicer

ii. Yam dryer

iii. Yam Blancher

iv. Hammer mill with cyclone

v. Packaging machine

vi. Weighing Scale

Process Technology

Production of instant pounded yam flour includes the following simple unit operations:

i. Yam Selection:

Fresh harvested yams gotten from the farm are sorted to select whole-some tubers that are

suitable for the production of instant pounded yam flour. Usually the mature white varieties of

yam are most suitable for the production of instant pounded yam flour. During the selection

process, wholesome tubers are sorted out. While sorting, yam tubers that got disfigured during

the harvesting are rejected. It is important to carefully select otherwise internal deterioration

may have started especially if the yam tubers have been stored for a long period of time. This

may have caused the enzymes present in the tubers to bring about deterioration due to the

temperature of the storage area or facility (barn, store house, underground, etc). if the yam

tubers have been exposed to some light, this type of condition can also lead to spoilage which

may not be visible by mere looking at the yam tubers. A simple way of detecting spoilage is by

scalping off the back of the yam tuber and viewing it for some seconds. If there is internal

spoilage, it will show brown to black discoloration in few seconds; depending on the level of

spoilage. After selection and sorting of the yam tubers comes weighing.

35

ii. Weighing:

The second unit operation after the sorting of the yam tubers is weighing and it involves using a

measuring balance to determine the weight of the yam tubers.

iii. Washing :

After weighing the yam tubers, they must be thoroughly washed to remove all dirts and dust

particles. This is to ensure that the end product is hygienically produced without germs.

iv. Peeling :

This is the removal of the outer corky periderm. The method of peeling varies. The general

methods apply include:

a. Steam Peeling: This involves the exposure of the tubers to steam pressure for a

period of time. The process may be in batches or continuous. During this steam

pressure, the steam penetrates the pressure cortex, often the peel results in a slight

expansion of the space between the peel and the cortex. This makes it easy for the

peels to be removed when subject to minor abrasive or mechanical processing.

b. Chemical Peeling: This involves the immersion of the yam tuber in some non-toxic

chemical such as caustic soda solution of low concentration which helps to soften the

peel. Usually, when this method is used, they are coupled with the use of heat. The

process is controlled by varying the concentration of the lye and its temperature for

effective peeling process. One major setbacks of this method is the need to use a

large volume of water to remove the effect of the chemical during the post-peeling

washing.

c. Mechanical peeling: The basic mechanical method includes the abrasive peelers,

rotary laid mounted rim peelers and use of belt conveyor. In the abrasive peeler, the

peeler consists of a vertical cylinder with a rotating disc in the bottom and a hinge

cover at the top. Abrasive grits may be applied to the inner walls of the chambers or

to rotating disc or both. A measured load of the root or tuber is put into the cylinder

and when the disc is rotated, the tuber spins or thimble so that the peels are rubbed

off when the tubers shall against the abrasive surface.

36

v. Sulphiting:

Sulphiting serves a multifunctional role in foods. They possess microbial activity and inhibit both

enzymatic browning reactions. Bisulphate exerts competitive inhibitory effect on

polyhenoloxides by binding a sulphydrl group at the active site of the enzyme. On the other

hand, bisulphate inhibition is due to the reaction of sulphites with intermediate quinines

resulting in the formation of sulphurquinones which irreversibly inhibits polyhenol oxidase

causing complex inactivation.

Although sulphites are very effective in controlling browning, they are subject to regulatory

restrictions owing to their potentially adverse effect on health. Many reports have described

allergic reactions in humans, following the ingestion of sulphite-treated foods by hyper-sensitive

asthmatics. The use of sulphiting agents in food processing is based on sulfur-dioxide

equivalences. The Joint Expert Committee on Food Additives (JECFA) of the World Health

Organization (WHO) and the Food and Agriculture Organization (FAO) recommended an

acceptable sulphite intake of 0.07mg sulphur- dioxide per kg of body weight. Food and Drug

Administration (FDA) has proposed maximum residual sulphur-dioxide levels for certain foods.

vi. Slicing:

After washing and peeling, the yam tubers are sliced into desired thickness before the

blanching. The thicker the width, the longer the period required for blanching.

vii. Steam Blanching:

Blanching is a cooking process wherein the food substance, usually a vegetable or fruit, is

scalded in boiling water, removed after a brief, timed interval, and finally plunged into iced

water or placed under cold running water (shocking or refreshing) to halt the cooking process.

The meaning of blanch is "to whiten", but this is not always the purpose of blanching in cooking.

Food is blanched to soften it, or to partly or fully cook it

When the yam clips turn brown, the color of the yam flour after milling will also be brownish

due to the fact that the color of the dried yam chips must affect the color of the flour after

milling. The purpose of blanching operation is to reduce the browning or discoloration of the

37

yam chips when milled into flour and will have brighter color and a more acceptable look or

appearance to compare with unbalanced yam flour. The blanching temperature is the most

important parameter in the unit operation. This is because, if the temperature is not up to

achieved deactivation, the purpose of blanching is not achieved. Blanching preserves the flavour

of the yam tubers even after milling into flour.

viii. Drying:

Drying is defined as a process of simultaneous heat and moisture transfer in which heat is

required to evaporate the moisture that flows from the product into an external drying medium

usually; air. This prevents the growth of micro- organisms. Drying is important because not only

does it prevent microbial growth, it also preserves the colour, texture, flavour and nutritive value

of the product.

ix. Milling:

Milling is aimed at grinding the dried yam materials to the required particle size for fine flour.

Good milling quality gives good reliable fine flour. There are many types of milling machines

used in the milling of food products. However, the hammer mill machine is good for the instant

Pounded Yam Flour processing operations as it is efficient in obtaining the particle size.

x. Packaging and Storage:

After the production of the instant pounded yam flour, it is important to ensure that it is well

packaged. It is still prone to spoilage if not well packaged. The flour can re-absorb moisture

from the atmosphere and microbial activity can take place from this point. The packaging

material should be as such that there will be no interaction between the packaged product

(flour) and the external environment. For this reason, the product should be packaged in air-

tight and moisture proof polyethylene bags.

Yam, after packaging can be effectively stored for a long period of time of about 12months or

more. It should be stored in environments where rodents and insects are absent because

rodents and insects cause a great deal of damage to stored yam flour.

38

1.4.4 FROZEN YAM CHIPS PROCESSING

This is a product derived from yam tubers that are frozen to preserve them before actual

preparation or use. Frozen yam is a product that takes off the stress as it is easy to prepare.

Frozen yam chips when prepared are mostly called French fries.

French fries are batons of deep-fried yam. French fries are served hot either soft or crispy and

generally eaten as part of lunch or dinner or on their own as a snack and they continuously

appear on the menus of fast-food restaurants.


The basic machine and equipment for yam chips production are:

i. Yam peeling machine

ii. Yam chipping machine

iii. Stem-Blanching (Parboiler)

iv. Stainless Steel Tank (for washing)

v. Freezer

vi. Fryer

vii. Weighing machine and other accessories.

Process Technology:

The peeling, washing, chipping and blanching process technology for the production of frozen

yam chips is similar to that of the production of instant pounded yam flour. However, in the

production of frozen yam chips, the yam chips are frozen in the freezer before frying. This gives

the unique taste of the yam chips after production.

39

CHAPTER TWO

MARKETING FEASIBILITY

40

2.1 Environment of Yam Value Chain

One major achievement of the present civilian administration in Nigeria in the past twelve (12)

years has been the revival of the growth of the middle class which has been witnessed in the

country.

These growths continues to drive the increasing social and health awareness of the need for

hygienically well packaged and prepared foods required for ease of preparation and good

quality living standard of people.

These coupled with the geometrically exploding population and the continued rural-urban drift

continues to fuel the demand for well packaged food stuffs especially instant pounded yam

flour, a staple food in the country.

It is one of the food items that defy socio-economic class, religious and ethnic boundaries, it is

eaten daily in one of every six families in the country (Ref: LCCI).

In recent times due to the numerous products {yam chips, pellets, starch} that can be processed

from yam tubers and the growing need for hygienically well packaged ready to use food

product by the growing middle class in Nigeria, there is a gap in the supply of instant pounded

yam flour in Nigeria thereby prompting a shift in the demand-supply equilibrium in favour of

instant pounded yam flour producers.

The Demand-supply gap has been identified to continue to expand as the population of the

country which is estimated to be 180 Million continues to grow at an average of 3.5% per

annum (Ref. Population Commission)

Also the rural – urban drift in Nigeria would help to deepen the market for instant pounded yam

flour.

2.1 Raw material

The raw material used for making yam flour or instant pounded Yam flour is undoubtedly yam.

However, for production of yam flour, sometimes the fresh yam is not used by some yam flour

41

producers; it is yams which are about spoiling. This will be obtained at cheaper prices and also

prevent complete wastage of the yam tubers. Processors of the instant pounded yam flour use

fresh yam as raw material. These are more expensive than those used for yam flour production.

This fresh yam is abundant in the middle belt of Nigeria particularly in Abuja, Benue and

Nassarawa States. It is estimated that a tuber of yam weighs between 8-10kg per piece. 500 kg

of relatively large tubers (rotundata) when processed is reported to yield 150kg of finished

product (yam flour and instant pounded yam flour).

2.3 Actors in the Yam Value Chain

After looking at the yam chain and the various production processes involved, it is important to

have some insight about the major actors involved in these processes and the reasons behind

the prices and how the yam chain operates as well as the markets. Thus, it is important to note

that every actor in the chain has a specific role in this commercial process.

2.3.2 Farmers

At the production level, we have mostly groups of small-scale farmers either informal

landowners who produce their crops or informal contract workers working for other big farmers

or processing industries. However there are farmers who function individually, or as a group.

Most farmers engage in different levels of reciprocity amongst themselves to boost production.

More also, the poorer farmers who have no yam seedlings become employees for the bigger

farmers.

In addition, some smaller farmers prefer to leave their yams on the farm and wait for someone

to come and buy, due to the cost of transportation as a result of geographical location as well as

poor road networks. However there are also other farmers who take their yam themselves to the

market and sell through the middlemen at the market. The farmers generally, communicate with

the middlemen and have very little relationships with other parties in the chain. Most farmers

sell their yams in wholesale of hundred tubers.

42

2.3.2 Middlemen

The middlemen belong to the wholesale stage, thereby playing a vital role in the markets as an

intermediary between the supplier and the buyer. At the national and local markets respectively,

they serve as intermediaries whereby the farmers are dependent on the middleman to link them

up with various buyers, but in this case, all negotiations are carried out between the buyer and

the middleman. Nevertheless, at peak seasons, the middlemen serve as informants to the

farmers through phone calls so that they can bring their product to the market. There are also

certain instances, where the middlemen go from one farm to the other buying yams from

farmers either on their farms or at the local market although most often on credit. These

middlemen sell to various customers as well as processors.

2.3.3 Processors

Most processors however, buy yam tubers directly from farmers or middlemen so that they can

get it at the cheapest possible rate before transporting it to their industries. Most of the

processors have informal contracts with the various farmers who work on their farms, however,

this is not sufficient enough to produce the required amount needed therefore the need to buy

more from the markets mostly through the middlemen. The processors mostly constitute skilled

workers from a range of machine operators to a group of management and business experts.

2.3.4 Consumers

The consumers are those who drive the various activities in the chain as well as the final

disposal. They are very important based on the prices that will be fixed on either the yam tubers

or the processed yam. In addition, they are relevant in terms of demand and supply, that is, if

the demand for yam is high then there will be an increase at the production and processing

level. In addition, More also, it is important to note that prices are fixed based on the readiness

of the consumer to pay. This is often determined by the location and product specification.

43

2.3.5 Exporters

Most yams exported from Nigeria go to neighboring African countries as well as across the

African borders. However, the major export market for yams from West Africa include Europe

(England in particular) and the United States of America‟ Ayemibo, (2010).

2.4 Competition/Competitors

A survey was carried out between March and April 2017 in Lagos, Ibadan, Port-Harcourt and Jos.

The survey was for yam flour and Instant Pounded Yam Flour to give an insight into the

following:

The available brands in the market.

The market shelf prices of the products per brand.

The demand function of the products

Opportunity for other brands entrance into the market, particularly new brands.

The survey selected organized open markets and major supermarkets randomly. The result of

the survey shows that, there are many brands in the market. Most of the brands are products of

manufacturers within their base region.

There are only two products that have a national spread. These are “Ola-Ola” and Ayoola.

Some other products with local spread are;

Available Brands

Products Brand Name Name and Address of Manufacturer

i. Endy U-Best Industries (Isola Road, Mushin, Lagos)

ii. Goodlife Lagos

iii Delvotic Lagos

iv Ola-Bisi Lagos

v Niyi Foods Km1, Komu Road, Ilero, Oyo State

vi Fresh Serve Yam Ofi Food Industries Ltd (Oluyole Est. Ibadan)

vii

Soldua Pounded Yam

Flour Ogadigbo LGA, Benue State

viii

Mc Sure Foods (Yam

Flour)

5IVE Foods International Venture Ltd, (Km 2, Markurdi-

Aliade Rd, Gwer East, Benue State

44

The shelf market prices per product vary with brand and locations. The average retail prices in

supermarkets are as follows;

Packed Size Brand Price (N) Location

900gm Ayoola 800 Lagos

900gm Ola-Ola 1,500 Lagos

2kg Endy 1,680 Lagos

1kg Niyi 800 Ibadan

1Kg Olabisi 820 Lagos

2kg Iyan 1500 Ibadan

1kg Mc Sure 1,040 Jos

900gm Ayoola 850 Porthacourt

Another striking observation from the result of the survey is that no brand manufactures a

mono product. The manufacturers produce various types of flour. This includes;

a. Instant pounded yam flour

b. Yam flour (Elubo)

c. Plantain Flour

d. Beans Flour

e. Rice Flour

In the course of the survey, we interviewed a chief executive officer of one of the manufacturers

on why they are multi-products and not mono-product manufacturers. He explained that all the

products have flour as their final output.

Secondly, all products are in demand in the market, and their manufacturing processes are same

(Dry the product, Hammer Mill and Package). The only difference is the basic raw-materials.

Thirdly, the gross margin on each product is not too attractive due to the seasonability of the

basic raw-materials. A combination of products gives a better result and ensures an all year

production.

Another observation from our survey is that all manufacturers that are regionally based have a

production capacity of between 1-3 tons per day. This shows that they are all in the group of

Small Scale Enterprises. The Chief executive officer interviewed, explained that most of them in

the industry are using locally fabricated machines. This gives rise to low machine efficiency and

yield.

2.5 Marketing Strategy

We observed that new entrants into the market usually employ one of the following strategies.

45

a. The Product Range Strategy: The product should compete favourably well with the

existing brands that is well patronized by consumers. It should also be able to satisfy

customers‟ demands and also falls within the quality brands in the market. However, it is

important to create a niche for the brand even when the same technology is being used

in the processing.

b. The Pricing Strategy: Good pricing policy enables the product obtain the necessary

market share in terms of volume. The company must be focused in determining whether

the pricing policy be based on costs push, or market pull or combination of the two.

c. Promotional Strategy: Promote sales by various ways including granting of credit

facilities, bulk discount, product launching, and attractive packaging. In relation to sales

promotion, packaging would be designed to create a favourable product image and

establish corporate identity. Packaging also establishes the products‟ differences in case

of narrowly differentiated products. It also offers protection at all stages of distribution.

d. Distribution Strategy: This is a strategy to get the products to customers without much

inconvenience to customers and at a reasonable cost to the company.

The distribution channels could be any of the following:-

a) Directly to the ultimate consumers

b) Directly to the retailer who finally sells to the ultimate consumers.

c) Direct sales through the wholesaler or agent.

d) A combination of any of these alternatives.

2.6 Demand for Instant pounded Yam and Yam flour

There are no reliable statistics to help in determining the national Demand for instant pounded

yam and yam flour (Elubo).

Statistics obtained from Federal Ministry of Agriculture only gave the annual production of yam

in Nigeria. The Minister for State, Federal Ministry of Agriculture, Senator Heineken

Lokpobiri, said that “about 48 million tonnes of yam tubers are produced annually in

West African sub-region on 4 million hectares of land. Nigeria alone produces 36

46

million tonnes on 3 million hectares of land annually accounting for 68% of global

production and being the world‟s largest producer.”(Daily Trust-: Mar 23 2017)

However, the national demand for instant pounded yam can be derived, using some basic

assumptions.

The food processing group of Lagos chamber of Commerce and Industry (LCCI) in a seminar

held in 2015, opined that at least one person in every six families eat pounded yam daily in

Nigeria.

The population of Nigeria is estimated to be 180 million.

Assuming that a family consists of 6 persons (father, mother and four children) then there are

approximately 30million families in Nigeria.

It can be assumed therefore that about 5 million people eat pounded yam daily in Nigeria. An

average daily consumption per person is 150gm (FIIRO), this is why most packaging is 900gm

per pack for a family consumption.

The national demand could be estimated therefore, to be 750 tons per day, excluding

production meant for export.

47

CHAPTER THREE

PROPOSED PROJECT LOCATION

48

3. PROPOSED PROJECT LOCATION FOR PRODUCTION OF IPYF

3.1 The project is best sighted close to its major raw-materials due to perishability of the

material. Our proposed location for the project is Middle-Belt Nigeria (Abuja, Nasarrawa,

Benue or Kogi State).

The benefits of the proposed location are in terms of abundant availability of suitable

varieties of yam for the production of Instant pounded yam flour and relatively low

prices of the raw materials.

50

CHAPTER FOUR

YAM PROCESSING DESCRIPTION, MACHINERY AND

EQUIPMENT

51

4. YAM PROCESS DESCRIPTION

4.1 Yam Flour (Elubo) Processing

Yam flour is brownish in colour, and is made from dried yam. Yam flour is often fortified with

vitamins (e.g. A, B, B2, B3) or minerals (e.g. iron), or occasionally blended with other flours.

With regard to the properties of the end-product, both yam flour and Instant Pounded Yam

Flour are expected to have a moisture content of around 10%, and should be free of moulds

(fungi), etc. It is estimated that dried yam products have a shelf-life of approximately one year.

Yam flour is used to make a very popular Nigerian meal called “Amala”. Yams used in the

production of amala are usually white in color but turn brown when dried and blended into flour

called “Elubo”in Yoruba language. This gives amala its brown colour. Amala is eaten mostly by

the Yorubas in Southwest and Tivs in middle belt of Nigeria.

Processing Technology

The process involved in yam flour production is:

a. Procurement of good quality tubers:

The first step to producing yam flour is getting the white variety of yam tubers (rotundata) .

Sometimes, to avoid wastage, yam tubers which are about spoiling are used to make yam flour.

52

b. Washing yam tubers:

Selected yam tubers are washed thoroughly to remove dirt and sand particles. This also ensures

that the yam flour is hygienically produced.

c. Peeling of yam tubers:

This is the removal of the outer corky periderm. The method of peeling varies. The peeling

would be done manually by women in order to reduce wastages.

d. Soaking of yam tubers:

After peeling the yam tubers, they are cut into smaller sizes called flakes after which they are

parboiled at 50 oC in 2 minutes and allowed to cool in the water in which they were parboiled.

e. Drying :

Drying is done to reduce the moisture content in the yam flakes. The yam flakes are dried in the

drying chamber at a particular temperature. This helps reduce the growth of moulds and other

bacterial micro-organisms which may affect the quality of the yam flour. It also ensures

freshness and preservation of the quality of yam flour produced.

f. Milling:

Dried yam flakes are milled in a miller until a uniform particle size is achieved.

g. Bagging and packaging:

The yam flour produced are bagged and packaged in an air-tight bag to avoid the growth of

mould and other micro-organisms which may occur as result of moisture and air.


The major machinery and equipment for production of yam flour are:

a. Yam Slicer

b. Yam Parboiler

c. Cabinet Dryer

d. Hammer Mill with Cyclone

e. Weighing Scale

53

f. Packaging machine

4.2 Instant Pounded Yam Flour (IPYF) Processing

In Nigeria, pounded yam is consumed by almost every tribe in the Country. Its consumption cuts

across all regions, age groups, economic and social classes. It is served in parties, ceremonies,

hotels, restaurants, and as a family menu. The traditional method of making pounded yam which

requires physical pounding with pestle and mortar by two or more strong men or women

depending on the quantity, is very laborious and mostly unhygienic.

Federal Institute of Industrial Research Oshodi (FIIRO) has developed and perfected a process

technology for production of Instant Pounded Yam Flour (IPYF), otherwise known as Instant

Pounded Yam Flour, to remove the drudgery associated with the traditional pounding method.

IPYF brings succor to pounded yam lovers as they can now obtain their menu of delight through

a process that is less time consuming and of course a more hygienic product with longer shelf

life.

Process Technology

Production of instant pounded yam flour includes the following simple unit operations:

a. Yam Selection:

Fresh harvested yams gotten from the farm are sorted to select whole-some tubers that are

suitable for the production of instant pounded yam flour. Usually the mature white varieties of

yam are most suitable for the production of instant pounded yam flour. During the selection

process, wholesome tubers are sorted out. While sorting, yam tubers that got disfigured during

the harvesting are rejected. It is important to carefully select otherwise internal deterioration

may have started especially if the yam tubers have been stored for a long period of time. This

may have caused the enzymes present in the tubers to bring about deterioration due to the

temperature of the storage area or facility (barn, store house, underground, etc). if the yam

tubers have been exposed to some light, this type of condition can also lead to spoilage which

54

may not be visible by mere looking at the yam tubers. A simple way of detecting spoilage is by

scalping off the back of the yam tuber and viewing it for some seconds. If there is internal

spoilage, it will show brown to black discoloration in few seconds; depending on the level of

spoilage. After selection and sorting of the yam tubers comes weighing.

b. Weighing:

The second unit operation after the sorting of the yam tubers is weighing and it involves using a

measuring balance to determine the weight of the yam tubers.

c. Washing :

After weighing the yam tubers, they must be thoroughly washed to remove all dirts and dust

particles. This is to ensure that the end product is hygienically produced without germs.

d. Peeling :

This is the removal of the outer corky periderm. The peeling would be done mannualy by

women in order to reduce wastages.

e. Slicing:

After washing and peeling, the yam tubers are sliced into desired thickness before the

blanching. The thicker the width, the longer the period required for blanching.

f. Steam Blanching:

Blanching is a cooking process wherein the food substance, usually a vegetable or fruit, is

scalded in boiling water, removed after a brief, timed interval, and finally plunged into iced

water or placed under cold running water (shocking or refreshing) to halt the cooking process.

The meaning of blanch is "to whiten", but this is not always the purpose of blanching in cooking.

Food is blanched to soften it, or to partly or fully cook it

When the yam clips turn brown, the color of the yam flour after milling will also be brownish

due to the fact that the color of the dried yam chips must affect the color of the flour after

milling. The purpose of blanching operation is to reduce the browning or discoloration of the

yam chips when milled into flour and will have brighter color and a more acceptable look or

55

appearance to compare with unbalanced yam flour. The blanching temperature is the most

important parameter in the unit operation. This is because, if the temperature is not up to

achieved deactivation, the purpose of blanching is not achieved. Blanching preserves the flavour

of the yam tubers even after milling into flour.

g. Drying:

Drying is defined as a process of simultaneous heat and moisture transfer in which heat is

required to evaporate the moisture that flows from the product into an external drying medium

usually; air. This prevents the growth of micro- organisms. Drying is important because not only

does it prevent microbial growth, it also preserves the colour, texture, flavour and nutritive value

of the product.

h. Milling:

Milling is aimed at grinding the dried yam materials to the required particle size for fine flour.

Good milling quality gives good reliable fine flour. There are many types of milling machines

used in the milling of food products. However, the hammer mill machine is good for the instant

Pounded Yam Flour processing operations as it is efficient in obtaining the particle size.

i. Packaging and Storage:

After the production of the instant pounded yam flour, it is important to ensure that it is well

packaged. It is still prone to spoilage if not well packaged. The flour can re-absorb moisture

from the atmosphere and microbial activity can take place from this point. The packaging

material should be as such that there will be no interaction between the packaged product

(flour) and the external environment. For this reason, the product should be packaged in air-

tight and moisture proof polyethylene bags.

Yam, after packaging can be effectively stored for a long period of time of about 12months or

more. It should be stored in environments where rodents and insects are absent because

rodents and insects cause a great deal of damage to stored yam flour.

56

The production process of instant pounded yam and yam flour is summarized in the flow

chart below:

Yam Selection

Washing

Peeling

Washing

Slicing

Parboiling (Blanching)

Drying

Milling

Packaging

57

PROCESSING MACHINES

YAM SLICER/ CUTTING MACHINE

US $2,000-3,000 / Set

Dimension:600X500X900mm

weight:70KG

capacity:200-1000KG/HR

Voltage:220V single

Hp:1HP

58

Yam Blanching Machine

59

Air Controlled Milling Machines

US$ 3000 - 4500 / Unit

Product Details

Model Number: Q260-#4107

Brand Name: CMEC

60

CHAPTER FIVE

HUMAN RESOURCES

61

5. HUMAN RESOURCES

5.1. Man Power

The project will require services of both skilled and unskilled personnel. Human

Resource (manpower) required for Production Process is as follows:

Production Manager

Production Supervisor

Quality Control officers

Production Assistant/Operators

Factory Hands

Women for Manual peeling

In order to reduce machine waste, women would be engaged for manual yam peeling process.

Human Resource (manpower) required for administration and marketing purpose are as

follows;

Account/Admin Manager

Marketing Manager

Internal Audit Manager

Accts, Audit and Admin officers

Marketers

Receptionist

Drivers and Security guards

62

5.2 ORGANOGRAM

BOARD OF DIRECTORS

MANAGING DIRECTOR/CEO

INTERNAL PRODUCTION ACCOUNT ADMIN MARKETING

AUDIT MANAGER MANAGER MANAGER MANAGER

AUDIT CLERKS QUALITY CONTROL/ ACCT CLERKS DRIVERS/CLEANERS MARKETERS

SUPERVISORS/PURCHASE RECEPTIONIST/SECURITY

63

5.3 PROFILE, JOB DESCRIPTION AND REMUNERATION OF KEY PERSONNEL

POSITION/STATUS QUALIFICATION RESPONSIBILITIES ANNUAL

REQUIRED

REMUNERATION

N'000

1 MD/CEO MSC, BSC i. Implementation of Board decisions and policies 4,800

Plus minimum of 8 years ii. Provide administrative and direction guidelines

industry experience iii. Ensure achievement of set objectives

iv. Management of resources to ensure achievement

of goals.

v. Liaise with government institutions and other

relevant agencies.

2 PRODUCTION MANAGER MSC, BSC i. Coordinate the entire production processes 1,800

Plus minimum of 5 years ii. Ensure adherence to production standards

industry experience iii. Supervise processing and production staff

iv. Ensure timely and efficient production

v. Ensure achievement of production targets

vi. Keep proper records of factory maintenance

vi. Handle stock order and re-order

3 ADMIN. MANAGER MSC, BSC in Admin. i. Responsible for personnel issues 1,800

Plus minimum of 5 years ii. Handle staff recruitment, transfers, disengagement

Administrative experience and other related matters.

iii. Handle staff performance appraisal and promotions

iv. Handle staff welfares and liaise with labour union

4 ACCOUNT MANAGER

BSC Accounting with ICAN/ACCA i. In-charge of finance and accounts 1,800

Plus minimum of 5 years ii. Prepare weekly, monthly, and yearly accounting

64

accounting experience reports.

iii. Responsible for general accounting and book keeping.

iv. Handle income and expenditure reconciliation

5 AUDIT MANAGER

BSC Accounting with ICAN/ACCA i. Ensure compliance with company's controls and 1,800

Plus minimum of 5 years policies.

internal audit experience

ii. Provide independent assurance that an organisation's risk management, governance

and internal control processes are operating

effectively.

iii. Provide regular evaluation and appraisals of

Internal control.

6 MARKETING MANAGER Msc, Bsc in Marketing i. Develop new business relationship and enrich 1,800

Plus minimum of 5 years existing ones.

marketing experience ii. Drive and promote sales and marketing target.

iii. Supervise the marketing department.

iv. Products and Price survey

v. Monitor Sales

vi. Prepares daily and weekly sales report

vii. Follow up customers and ensure realization of

sales proceeds.

65

5.4 STAFF TRAINING AND DEVELOPMENT POLICY

STAFF PERFORMANCE DEVELOPMENT

1. Purpose

The company‟s Staff Performance Development Process is aimed at

driving the company to become a high performance and commercially focused

organization

aligning individual objectives with company‟s objectives and core values.

encouraging employees to think about and communicate their performance

objectives/targets with their supervisors

focusing on performance improvement

helping staff to continue self value-adding

tracking and rewarding high performers

2. Performance Development Process

Performance Development is a systematic approach to maximizing both individual and

organizational performance.

Performance is defined as a combination of Results (Achievement of Objectives) plus

Behaviours (Competency Development).

66

2.1. Achievement of Objectives

o The company shall adopt a “cascading objectives” system. This system links

individual objectives to department objectives. In turn, department objectives

are linked to company‟s strategic objectives.

o By linking individual performance to company‟s strategic objectives, the

company ensures that:

i) Individuals at all levels of the organization will work towards achieving company‟s

objectives and financial success

ii) Managers effectively communicate division/department objectives to employees

iii) Employees learn how to set their performance objectives in direct support of

division/department objectives

iv) The performance development schedule is aligned with the company‟s strategic

planning and budgeting schedule

2.2. Competency Development

Competencies are observable and applied knowledge, skills and behaviours important

for the success of the organization, personal performance and enhanced contribution.

The company’s Competency Model is directly linked to its core values and vision/mission.

By linking competencies to the company‟s core values, this ensures that employees are

focused on the “right” behaviours.

2.3. Key Phases of the Performance Development Process

The company follows four phases to achieving performance development success:

i) Planning- Setting organization- wide, division/ department-specific and individual

objectives

67

ii) Leading- On-going coaching and feedback to employees about their performance

iii) Reviewing- Determining rewards and incentives

iv) Rewarding. Assessing performance for the year with individual appraisal interviews

between employees and their appraisers

Through these phases, the company follows a systematic, scheduled approach, from setting overall

corporate objectives at the beginning of the year to rewarding employees at the end of the year.

TRAINING & DEVELOPMENT

1. Purpose

The main objective of training and development is to help develop key competencies which

enable individuals to perform current or future jobs successfully.

In this regard, all training and development programs organized by the Human Resources

Department will be geared towards the following objectives:

• strengthening the job skills/knowledge of employees;

• improving operational efficiency and productivity; and or

• developing the potential of employees for maximizing mutual benefit to individuals

and the company

2. Policy

The basic policy in administering and implementing any type of training or development is

in accordance with the strategic business objectives of the company. The Human Resources

Department will work closely with Heads of Division/Department in assessing areas that

need training and development support.

68

3 Types of Training/Development Activities

3.1. Staff training/development activities can be employer- or employee-initiated. In

either case, has to be approved by the manager in charge of the department or

above with additional endorsement from the Human Resources Department or the

Chief Executive.

3.2. Employee-initiated training/development activities may include external programs

that are organized by external training institutes or by the company.

3.3. Employer-initiated programs may take the form of offering sponsorship for

employees to attend external programs or organizing such programs in-house.

3.4. Depending on the nature of needs and operational requirements,

training/development programs may also be implemented as job induction, job

rotation, on-the-job coaching, counseling, individual or group projects, and

secondment.

69

CHAPTER SIX

FINANCIALS

70

6.0 FINANCIALS

6.1 Project Design Assumptions

The project is aims at promoting Yam Value Chain Development in Nigeria.

6.1.1 Project Set Up Costs

The total project outlay is estimated at N220million. Please refer table below for detailed of

project set up costs.

The project will be funded through both equity and debt in the ratio 3 : 8.

The debt will be repaid over a period of 5 years.

Project Set-up Cost

N'000 N'000

Land and Buildings

Land 10,000

Factory and Other Buildings 75,000

Interest during construction 14,400

99,400

Machines and Equipment

30,000

Generators

Generator (100kva) 10,000

Back-up Generator (50kva) 5,000

15,000


Vehicles (4), Delivery Vans (3) and Trucks (2) 25,000

Forklift (1 ton) 3,000

Furniture & Fittings 2,000

30,000

Other Facility

Boreholes and Water tanks 1,500

Effluent Treatment Plant (15,000L) 3,000

Water Treatment Plant 3,500

8,000

Pre-operational Expenses (Registration with

Regulatory Authorities‟ and other expenses)

4,000

Working Capital

33,600

Total Project Cost

220,000

71

6.1.2 Machinery and Equipment Capacity

The machinery and equipment required for production of 4 tons per shift of instant Pounded Yam

flour and Yam flour is as shown below;

Machines and Equipment

Pounded

yam Yam Flour Total

Total

Capacity Number of Number of Number of Cost/unit Cost

Units Units Units N'000 N'000

Yam Slicer 500kg/hr 1 1 2 750 1,500.00

Yam Dryer 5 tons/day 1 1 2 4500 9,000.00

Yam Parboiler 500kg/hr 1 1 2 850 1,700.00

Hammer mill with Cyclone 1 ton/hr 1 1 2 3000 6,000.00

Packaging and Sealing Machine 500kg/hr 1 1 2 4000 8,000.00

Weighing Scale - 1 1 2 250 500.00

26,700.00

Accessories & Installation Cost

3,300.00

30,000.00

The machinery would be a mixed of local and imported

6.1.3 Production Programme

Production programme based on the capacity of the proposed recommended M& E is

shown below:

At full capacity (100%) Pounded yam Yam Flour

Production line 1 1

Shift per day 2 2

Hours per shift 8 8

Production days per annum 250 250

Raw Yam quantity produced per shift (tons) 4 4

Raw Yam quantity produced per day (tons) 8 8

Conversion rate of raw-yam to finished product 30.00% 28.00%

Finished product volume per annum (tons) 600 560

6.1.4 Capacity Utilization

Products Year 1 Year 2 Year 3 Year 4 Year 5

Instant Pounded Yam 60 65 75 80 80

Yam Flour 70 75 80 85 85

Expected Annual Output (tons)

Instant Pounded Yam 360 390 450 480 480

Yam Flour 392 420 448 476 476

72

6.1.5 Material and Operating Costs

1) Raw Material Costs

Yam tubers are the only raw materials for the production of Instant Pounded yam Flour and

Yam flour. The production estimates has been based on the ratio of input to output which is

30% and 28% respectively.

The annual raw-material requirement and raw material cost estimate is as shown;

i Instant pounded Yam Year 1 Year 2 Year 3 Year 4 Year 5

Raw-Yam (tons) 1,200 1,300 1,500 1,600 1,600

Cost per ton (N'000) 140 140 140 140 140

Total Cost of Raw-Yam per annum (N'000) 168,000 182,000 210,000 224,000 224,000

ii Yam Flour Year 1 Year 2 Year 3 Year 4 Year 5

Raw-Yam (tons) 1,400 1,500 1,600 1,700 1,700

Cost per ton (N'000) 100 100 100 100 100

Total Cost of Raw-Yam per annum (N'000) 140,000 150,000 160,000 160,000 160,000

Please note that raw- yam required for instant pounded yam production is of higher grade than

that for yam flour production.

2) Packaging Costs

Polypropylene bags of 1.8kg and 2kg sizes will be used in packaging of the Instant pounded

yam flour and yam flour. The cost including labeling is as shown below;


Instant pounded Yam

Units of 1.8kg polypropylene bags required 200,000 216,667 250,000 266,667 266,667

Cost per labeled polypropylene bags 40 40 40 40 40

Cost of packaging (N’000) 8,000 8,667 10,000 10,667 10,667

Provision for wastages at 5% 400 433 500 533 533

Cost of packaging per annum (N’000) 8,400 9,100 10,500 11,200 11,200

ii Yam Flour (Elubo)

Units of 2kg polypropylene bags required 196,000 210,000 224,000 238,000 238,000

Cost per labeled polypropylene bags 40 40 40 40 40

Cost of packaging (N’000) 7,840 8,400 8,960 8,960 8,960

73

Provision for wastages at 5% 392 420 448 476 476

Cost of packaging per annum (N’000) 8,232 8,820 9,408 9,996 9,996

The cost per packaging bag is not expected to rise as there would be cost advantage of

increase in production.

3. Utilities Costs

The major items of utilities are electricity and diesel. The annual requirement and cost estimates is

shown below;


Electricity in kwh per year (10,000/month) 120,000 120,000 120,000 120,000 120,000

Cost per Kwh (N) 40 40 40 40 40

Cost per annum (N'000) 4,800 4,800 4,800 4,800 4,800

Diesel for generator assuming 100litres/day 17,500 18,750 20,000 20,000 20,000

Cost per litre (N) 220 220 220 220 220

Cost per annum (N'000) 3,850 4,125 4,400 4,400 4,400

Total Costs of Utilities (N'000) 8,650 8,925 9,200 9,200 9,200

4. Manpower Costs

The services of both skilled and unskilled personnel are required. The cost is classified to direct

manpower production costs and other personnel costs. Salary and Wages increase of 2 % annually

is projected for years 2 to 4.


Number of Production Personnel 69 75 81 87 93

Number of Admin & other Personnel 36 36 36 36 36

Total Personnel 105 111 117 123 129

Man power Requirement and Cost Year 1 Year 2 Year 3 Year 4 Year 5

Production Manager 1 1 1 1 1

Salary (N'000) 2,400 2,400 2,400 2,400 2,400

Production Supervisor 2 2 2 2 2

Salary (N'000) 2,400 2,400 2,400 2,400 2,400

Quality Control officers/Lab attendant 3 3 3 3 3

Salary (N'000) 2,700 2,700 2,700 2,700 2,700

74

Production Assistant / Operators 30 30 30 30 30

Salary (N'000) 14,400 14,400 14,400 14,400 14,400

Factory Hands 15 18 21 24 27

Salary (N'000) 4,500 5,400 6,300 7,200 8,100

Women for Manual Yam Peeling 18 21 24 27 30

Salary (N'000) 6,480 7,560 8,640 10,530 11,700

Total Production Manpower Costs 32,880 34,860 36,840 39,630 41,700

Other Personnel Costs

Number

of Annual Total

Personnel Salary Salary

N'000 N'000

Managing Director 1 4,800 4,800

Account Manager 1 1,800 1,800

Internal Audit Manager 1 1,800 1,800

Admin. Manager 1 1,800 1,800

Marketing Manager 1 1,800 1,800

Account and Audit Clerks 5 1,200 6,000

Marketers 4 900 3,600

Drivers 7 480 3,360

Security guards 8 420 3,360

Receptionist 1 960 960

Cleaners/Office assistants 6 250 1,500

Industrial Nurse 1 960 960

26,940

5. ANNUAL DEPRECIATION

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

COST DEPRECIATION N'000 N'000 N'000 N'000 N'000

LAND 10,000 0.00% - - - - -

BUILDING 89,400 2.00% 1,788 1,788 1,788 1,788 1,788

MACHINE AND EQUIPMENT 30,000 12.50% 3,750 3,750 3,750 3,750 3,750

GENERATORS 15,000 20.00% 3,000 3,000 3,000 3,000 3,000

OTHER DEPRECIABLE ASSETS 30,000 20.00% 6,000 6,000 6,000 6,000 6,000

OTHER FACILITY 8,000 10.00% 800 800 800 800 800

182,400

15,338 15,338 15,338 15,338 15,338

75

FIXED ASSET SCHEDULE


LAND

N'000 N'000 N'000 N'000 N'000

Cost

10,000 10,000 10,000 10,000 10,000

Less: Accumulated Depreciation

- - - - -

Net Book value

10,000 10,000 10,000 10,000 10,000

BUILDING

N'000 N'000 N'000 N'000 N'000

Cost

89,400 89,400 89,400 89,400 89,400


1,788 3,576 5,364 7,152 8,940

Net Book value

87,612 85,824 84,036 82,248 80,460

PLANT & MACHINERY

N'000 N'000 N'000 N'000 N'000

Cost

30,000 30,000 30,000 30,000 30,000


3,750 7,500 11,250 15,000 18,750

Net Book value

26,250 22,500 18,750 15,000 11,250

GENERATORS

N'000 N'000 N'000 N'000 N'000

Cost

15,000 15,000 15,000 15,000 15,000


3,000 6,000 9,000 12,000 15,000

Net Book value

12,000 9,000 6,000 3,000 -

OTHER DEPRECIABLE ASSETS

N'000 N'000 N'000 N'000 N'000

Cost

30,000 30,000 30,000 30,000 30,000


6,000 12,000 18,000 24,000 30,000

Net Book value

24,000 18,000 12,000 6,000 -

OTHER FACILITY

N'000 N'000 N'000 N'000 N'000

Cost

8,000 8,000 8,000 8,000 8,000


800 1,600 2,400 3,200 4,000

Net Book value

7,200 6,400 5,600 4,800 4,000

6.1.6 Operating Revenue

The operating revenue will be majorly from the Instant pounded yam flour and Yam flour while the

waste (peel) from the raw-yams would also generate additional revenue as shown below;

Projected Sales Revenue


Instant pounded Yam Yield in tonnes

360 390 450 480 480

Unit package of 1.8kg/bag

200,000 216,667 250,000 266,667 266,667

Price per 1.8kg package (N)

1,350 1,350 1,350 1,350 1,350

Revenue (N'000)

270,000 292,500 337,500 360,000 360,000

76

Revenue from Yam Peels


Percentage in yam tubers 2%

Tons of yam required per annum

1,200 1,300 1,500 1,600 1,600

Yam peels contents at 2%

24 26 30 32 32

Value @ N20,000 per ton (N'000)

480 520 600 640 640

Calculation of Contribution


Instant pounded Yam

N'000 N'000 N'000 N'000 N'000

Revenue from Instant pounded Yam

270,000 292,500 337,500 360,000 360,000


480 520 600 640 640

Total Revenue

270,480 293,020 338,100 360,640 360,640

less: Direct Material Costs

Cost of Raw-materials (Yam)

168,000 182,000 210,000 224,000 224,000

Cost of packaging per annum

8,400 9,100 10,500 11,200 11,200

176,400 191,100 220,500 235,200 235,200

Contribution (Instant Pounded Yam)

94,080 101,920 117,600 125,440 125,440

Projected Sales Revenue (Yam Flour)


Yam Flour (flour) Yield in tonnes

392 420 448 476 476

Unit package of 2kg/bag

196,000 210,000 224,000 238,000 238,000

Price per 2kg package (N)

1,000 1,000 1,000 1,000 1,000

Revenue (N'000)

196,000 210,000 224,000 238,000 238,000



Percentage in yam tubers 2%

Tons of yam required per annum

1,400 1,500 1,600 1,700 1,700

Yam peels contents at 2%

28 30 32 34 34

Value @ N20,000 per ton (N'000)

560 600 640 680 680

Calculation of Contribution


Yam Flour

N'000 N'000 N'000 N'000 N'000

Revenue from Yam Flour (Elubo)

196,000 210,000 224,000 238,000 238,000


560 600 640 680 680

Total Revenue

196,560 210,600 224,640 238,680 238,680

77

less: Direct Material Costs

Cost of Raw-materials (Yam)

140,000 150,000 160,000 170,000 170,000

Cost of packaging per annum

8,232 8,820 9,408 9,996 9,996

148,232 158,820 169,408 179,996 179,996

Contribution (Yam Flour)

48,328 51,780 55,232 58,684 58,684

6.1.7 Other Assumptions

1. Inventory

The annual inventory is based on 1 month of raw-yam required for production and 3 months for

packaging materials.

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

N'000 N'000 N'000 N'000 N'000 N'000

Raw-Yam

12,000 25,667 27,667 30,833 32,833 32,833

Packaging Materials

1,500 4,158 4,480 4,977 5,299 5,299

Total

13,500 29,825 32,147 35,810 38,132 38,132

2. Cost Prices

The average Cost prices of raw yam per ton are stated below:

Cost/ton

Products

N

Instant Pounded Yam

140,000

Yam Flour

100,000

The specie and grade of raw yam for production of instant pounded yam is higher

in cost than that of yam flour.

3. Selling prices are estimated as follows;

Instant Pounded Yam package of 1.8kg is N1,350

Yam flour package of 2kg is N1,000

Sales is assumed to be on cash and carry basis while purchases to be paid for within

a month of purchase.

78

4. Taxation

Taxation is provided at 32% of adjusted profit after consideration of capital

allowances.

6.2 Loan and Repayment Schedule

A loan of N160 million would be sourced for the acquisition of Plant and

Machinery, certain equipment and building construction as stated in the executive

summary.

The loan is assumed for a period of 5 years.

Loan repayment is to commence in the second year of operation with a yearly

repayment of N40, 000 thereafter.

Interest on loan is calculated at 9% per annum

LOAN SCHEDULE

LOAN REPAYMENT BALANCE INTEREST

YEAR

9%

N'000 N'000 N'000 N'000

0

160,000 - 160,000 14,400

1

160,000 - 160,000 14,400

2

160,000 40,000 120,000 14,400

3

120,000 40,000 80,000 10,800

4

80,000 40,000 40,000 7,200

5

40,000 40,000 - 3,600

160,000

64,800

79

6.3 PROJECTED BALANCE SHEET

YEAR 0 Year 1 Year 2 Year 3 Year 4 Year 5

ASSETS

N'000 N'000 N'000 N'000 N'000 N'000

Fixed Assets

Land and Building

99,400 97,612 95,824 94,036 92,248 90,460

Plant & Equipment

30,000 26,250 22,500 18,750 15,000 11,250

Generators

15,000 12,000 9,000 6,000 3,000 -

Other Facility

8,000 7,200 6,400 5,600 4,800 4,000

182,400 167,062 151,724 136,386 121,048 105,710

Pre- Operational Expenses

Registration and other expenses

4,000 - - - - -

4,000 - - - - -

Current Assets

Inventory

13,500 29,825 32,147 35,810 38,132 38,132

Cash and Bank Balances

20,100 46,753 45,644 60,900 85,495 111,479

33,600 76,578 77,791 96,710 123,627 149,611

Total Assets

220,000 243,640 229,515 233,096 244,675 255,321

Financed By:

EQUITY CONTRIBUTION

N'000 N'000 N'000 N'000 N'000 N'000

Share Capital

60,000 60,000 60,000 60,000 60,000 60,000

Accumulated Profit & Loss

- 20,803 46,069 87,453 137,809 188,419

Total Equity Attributable to

Owners

60,000 80,803 106,069 147,453 197,809 248,419

LONG TERM LIABILITY

Term Loan - Project Financiers

160,000 160,000 120,000 80,000 40,000 -

CURRENT LIABILITY

Taxation

2,837 3,445 5,643 6,867 6,901

- 2,837 3,445 5,643 6,867 6,901

TOTAL CAPITAL

220,000 243,640 229,515 233,096 244,675 255,321

80

6.4

FIVE- YEAR FINANCIAL PROJECTION

Projected Revenue and Expenditure

Accounts


N'000 N'000 N'000 N'000 N'000

Contribution from Instant pounded Yam

94,080 101,920 117,600 125,440 125,440

Less : Other Production Overheads

Utilities (Electricity, Diesel and Water)

8,650 8,925 9,200 9,475 9,475

Man power Cost

32,880 35,557 38,273 41,084 43,133

Insurance Cost

912 912 912 912 912

Maintenance

3,648 4,378 5,253 6,304 7,564

Depreciation

12,270 12,270 12,270 12,270 12,270

Cost of Production

58,360 62,042 65,909 70,045 73,355

Gross Profit/(Loss)

84,048 91,658 106,923 114,079 110,769

Less: Other Costs

Pre-operational expenses

4,000

Other Personnel Cost

26,940 27,479 28,028 28,589 28,589

Administrative and General Expenses

12,000 18,000 18,000 18,000 18,000

Other Depreciation

3,068 3,068 3,068 3,068 3,068

Financial Costs

14,400 14,400 10,800 7,200 3,600

Total Expenditure

60,408 62,946 59,896 56,857 53,257

Net Profit for the year before tax

23,640 28,711 47,027 57,222 57,512

Taxation

2,837 3,445 5,643 6,867 6,901

Net Profit for the year after tax

20,803 25,266 41,384 50,355 50,611

Retained Profit B/fwd

- 20,803 46,069 87,453 137,809

Retained Profit C/fwd

20,803 46,069 87,453 137,809 188,419

81

PROJECTED CASHFLOW STATEMENT

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

N'000 N'000 N'000 N'000 N'000 N'000

INFLOWS

Revenue from Instant Pounded Yam Flour

270,480 293,020 338,100 360,640 360,640

Revenue from Yam Flour

196,560 210,600 224,640 238,680 238,680

Equity Capital

60,000 - - - - -

Loan

160,000 - - - - -

TOTAL INFLOWS

220,000 467,040 503,620 562,740 599,320 599,320

OUTFLOWS

Land & Building

99,400 - - - - -

Plant & Machinery

30,000 - - - - -

Generators

15,000 - - - - -


30,000 - - - - -

Other Facility

8,000

Inventory Expenses

13,500 16,325 2,322 3,664 2,322 -

Pre-operational expense

4,000 - - - - -

Cost of Raw Yams

308,000 332,000 370,000 394,000 394,000

Other Production Overheads

- 46,090 49,772 53,638 57,775 61,085

Cost of packaging

16,632 17,920 19,908 21,196 21,196

Administrative Expenses

- 38,940 45,479 46,028 46,589 46,589

Financial Costs

- 14,400 14,400 10,800 7,200 3,600

Loan Repayment

- - 40,000 40,000 40,000 40,000

Taxation

- - 2,837 3,445 5,643 6,867

Total out

199,900 440,387 504,729 547,484 574,725 573,336

Cash Flow Surplus/(Deficit)

20,100 26,653 (1,109) 15,256 24,595 25,984

Opening Cash Balance

- 20,100 46,753 45,644 60,900 85,495

Closing Cash Balance

20,100 46,753 45,644 60,900 85,495 111,479

82

ANNUAL TURNOVER

ANNUAL CONTRIBUTION PER PRODUCT > Series1 : Instant Pounded Yam Series 2: Yam Flour

-

100,000

200,000

300,000

400,000

500,000

600,000

1 2 3 4 5

Series1

-

20,000

40,000

60,000

80,000

100,000

120,000

1 2 3 4 5

Series1

Series2

83

6.6 PROJECT RETURNS AND SENSITITY ANALYSIS

Based on cash flow projections prepared after taking into consideration project set up costs and

operating results;

Other Projected Returns

Internal Rate of Return (IRR) 16.78%

Returns On Investments (in 5th year) 123.1%

The project discounted payback period is 3 years and 10 months

Assumptions

For calculation of IRR and Net Present Value (NPV) of the project cost of equity has been assumed

at 0% whereas, cost of debt is assumed at 9% with a spread of 8%.

Sensitivity Analysis

Selling Price =9.52%

Raw-Material = 13.72%

Unit cost = 11.69%

Sales Volume = 51.33%

It is therefore concluded that the project is most sensitive to sales value.

84

CHAPTER SEVEN

RISKS AND MITIGATIONS

85

7.0 RISKS AND MITIGATIONS

Category Risk Identified Mitigation

A Machine & Equipment Stop functioning due to breakdown The Machines & Equipment are Locally

available and adequate spare parts and

there will be Maintenance agreement for

imported machines and equipment.

Power Failure Having generators as standby power

supply

B Production Stoppage Lack of Raw-material Nigerian produced millions of yam tubers

which are never exhausted yearly. There is

assurance of abundant availability of yam

tubers for production.

C Economic Market Acceptability There is ready market for the products as

people preferred the easy to prepare products

to old method of pounding yam and also

the assurance of undiluted package yam flour

give it edge over those displays in open market.

D Political Negative Government Policy

Not likely envisaged as government is

encouraging SME's growth to boost economy

development and for employment generation

86

E Social Negative Customer attitude

Production Quality would be ensured

throughout the production process in

towards product quality order to create brand name for the

products' quality

F Legal Approval from government regulatory Ensure that all necessary approval is obtained

agencies such as NAFDAC, SON etc. before commencement of operation.

G Others Theft

Adequate checks and balances in the

company‟s internal control and tight security

arrangement.

Fire

Staff will be well trained in the use of

Firefighting equipment and the company

will be licensed by Nigeria fire fighting

Services.

87

CHAPTER EIGHT

BUSINESS IMPLEMENTATION PLAN

88

8.0 BUSINESS IMPLEMENTATION PLAN (BUSINESS PLAN)

Yam Value Chain Development is a project aims to promote investments in the production of

Instant Pounded Yam and Yam Flour in Nigeria. In an effort to achieve these, feasibility studies

have been carried out to highlight the profitability inherent in this investment and market

opportunities available.

This Business Plan is prepared to highlight the activity required for the project implementation and

schedule of the activities to the commissioning of the project.

The implementation of this project can be divided into activities.

Activity I– The Promoters will raise a formidable Board of Directors to formulate policies and

manage the Pre-commencement activities.

Activity II– Raising of initial Equity Capital and sourcing for loan from reputable investors

(banks or Venture Capitalist)

Activity III– Commissioning Architects and other Engineering Consultants to draw the site plans

and prepare the BOQ for Government approvals.

Activity IV– Commencement of Administrative Building and Factory Construction.

Activity V– Deposit for the purchase of Machinery and Equipment.

Activity VI– Employment of key personnel

Activity VII– Arrival and Installation of Machinery and Equipment

Activity VIII– Purchase of initial raw materials and test-run of Equipment

Activity IX– Commissioning of the Plant

The execution of the activities is assumed to take a period of 12 months (One year). The period is

classified as year zero (0) in the financial forecast.

89

ACTIVITY SCHEDULE

ACTIVITIES MONTHS

1 2 3 4 5 6 7 8 9 10 11 12

1 Organising a formidable Board of Directors

2 Raising of Initial Equity Capital/ Sourcing for Loan

4 Commissioning of Architect and other Engineering Consultants

5 Commencement of Building Construction

6 Deposit for the Purchase of Machinery and Equipment

7 Recruitment of Key Personnel

8 Arrival and installation of Machinery and Equipment

9 Purchase of Initial Raw-materials & Plant Test-Run

10 Plant Commissioning

90

9.0. CONCLUSION

Yam Processing and packaging industry in Nigeria is in its infancy stage. Early entrants shall

leverage on the advantage of market shift from traditional method of processing to a more

hygienic and easy to prepare method.

The Business is highly sensitive to price determinants; hence packaging has been limited to

family sizes of 0.9kg, 1kg and 2kg.

With IRR of 16.78% and returns on investment at first five years of 123.1%, the project

compares favourable or better than other agricultural products that are being processed in

Nigeria.

We therefore recommend this project to a progressive investor

Thank you

Yinka Ogunseyinde & Co.

FOR THE PRODUCTION OF INSTANT POUNDED YAM States Agency for International Development and the...

Documents

Transcript of FOR THE PRODUCTION OF INSTANT POUNDED YAM States Agency for International Development and the...