University of Nigeria Research Publications

ONYEMAOBI, Anayo B.

Aut

hor

PG/MBA/98/20967

Title

Rising Cost of Locally Manufactured Goods, Causes and Effects

Facu

lty

Business Administration

Dep

artm

ent

Marketing

Dat

e

May, 2000

Sign

atur

e

rl'I?'I,E

Rising Cost of Locally bIanufacturec1 Goods,

Causes and Effects

A Prqject Report Subnrittcd 'l'o 'I'l~c

Dcpartnicnt Of Markcti~ig,

Facr~lly of Ihsiness Aclministr-alio~l

University Of Nigeria

Ihngu Campus

ii

CERTIFICATION

Onye~iiaobi, Ariayo B. a Postgraduate' student in the Dcpartrncnt of Marketing

PG/MBA/98/20967 has satisfi-tctory conlpleted his project research work fur the

award of a n MBA Degree in Markuting. The work cmhodicd in this pt-cjcct is

original and has not been subnlitted in part or full for any other clcgrcc or any othcr

(Yrqjcct Supe~~visor)

iii

DEDICATION

I dedicate his I-csemh work to all thc

lovers of the Ncccly a ~ i d all Cliaritable

Organisations World-widc

To God be the glory, thanks, honour arld adoration for having seen me

tlirough this research work.

My special thanks goes to my project supervisor Nnoljm, D.A. for her

motherly and scholarIy advice throughout h i s project work.

Special thanks goes to my mothcr Onyemaobi, C.(Mrs.), Mr and Mrs Ifcanyi

Onvemaobi, Mr and Mrs. Chukwudi Onyen~aohi, hifr and Mrs Edwin Onyemaobi

and their families for their prayer, rlioral and financial support. To other members

of the family: Gaberial, Edwin, Elizabeth, Ifeonxi, Obianuju and Ngozi, I say thanks

a lot.

My profound gratitudes also goes to my room-mates Morcli, A.N.

(NDIKAN\hrU); Ofili Tony, Okabr Ernmanucl (NDE); and my friends Chris

Opbozor. Ezeaniasiobi Emeka (Daddy), Eke Vincent, Desmond, Obiaeli Chibuzor.

Ibeawuclii Ijeonia, Okonkwo Nkiru. Ndukwe Maureen, Nwosu Chinyere; and my

cousins Chinedu and Chinonso. I say a miilion thanks for. all you have done.

I also acknowledge the assistance of Aharandu, O.E. (Mr) Senior Works

Accourl~arlt Nigercem Plc. Nkalay wtien 1 callcd his office.

Onyemaobi, h a y o B. Dept. of Marketing ,

University of Nigeria Enugu Campus May, 2000

This project work studied the Rising Cost of Locally hlanufactured Goods,

Causes and Effects.

The objectives of the project include:

To know the nature of cost as regards manufacturing in Nigeria.

Whether cost of manufacturing goods locally fro111 the lasr fivc years to date,

has been on the increase, a a..d 16 W

To find out causes or lktors rcsponsiblc for the rising cost of locally

manufactured goods.

To know the effects of this rising cost on the manufacturing firms, citizenry

and the nation's economy.

Some hypotheses were stated, tested and conclusion dra\f*n.

The primary sources of data included personal iiitcrview with the

m;lnuhcturers and the use of qucstionnairc for the public or consumcrs. The

inter-view was conducted amofis companies located in Anambr;~ and Enugu State

wliilt. one hundred and six (106) questionnaires wcrc also dislribu~etl among the

ge~~era l public within thc two stales. Da~a wkre aIso collected from textbook,

journals, magazines, etc.

rnan~~f~crurccl goods has hccn o n rhc incrctase. Causes were ar~ributcd ro cruric

powcl- supply, high inrerest I X ~ , poor inl'rastructure, etc. while rhc effects includc

irlcrenseti clumping activirics, uncmploymcnt, low industrializ:ttion, etc. Thc study

also made sonw I-ccommencl;\rions as to solving the problems and cushion the e17i'cts

o f h e risinp, cost of locaily nlnnuf;wurd goods.

PACE

r 3 .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I i l k

Certifisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dedication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acl;nowlucl~c~nc~lr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

/\l)sll.;lcl . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

r . I able of Corltents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

List of Tnblcs and List of F ~ ~ I I I * C S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CI-IAPTICR O N E

I .O I~itrocliiclio~~ . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 . 1 State~llent of' 1'1-oblcins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Objectives 01 Study

9 , .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I . . , S i ~ , ~ ~ ~ l ~ c a ~ ~ i c o l ' t l ~ c S t ~ ~ c I y . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I .4 I-lypo~lwsis

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 Liinitutioils

7 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I t l ~ I ~ l ~ l i I C N C . I ~ J S - .

viii

CHAPTER T\VO

2 .1 Nature ol' Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2.2 Need tor Cosr Intix~nation . . . . . . . . . . . . . . . . . . . . . . . . . . 18 >

2.1 Nigerian Manufacturing Environment . . . . . . . . . . . . . . . . . . . . . 19

2.4 Carrses of' Rising Cosr of Loc:\lly Manufactured Goods . . . . . . . . . . 22

2.4.1 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 .2 Foreign Exchang t. 25

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.3 Human Resources 28

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.4 Cost of Tr-ansport~tiion 20

. . . . . . . . . . . . . . . . . . . . . 3.4.5 Depreciation or Dcval i~~ion Kl'li.cr 31

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.6 El'fecr ol' Tax 33

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.7 Eratic Power Supply 34

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.8 Other Infrastr~~cturi: 36

. . . . . . . . . . . . . . . . 2.4.9 Raw M.ltcrials. Spxrc Parts ~ l c l Accessories 37

. 2.5 El'i'ecrs of' Rising C1os[ 01' Loc:~lly Manul-'acrurcd (hods . . . . . . . . . . 39

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.1 Dumping 39

ix

. . . . . . . . . . . . . . . . . . . . . . . 2.5 .2 Unemployment and Retrenchment 41

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.3 Low Indu(;rridizrttion 43

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.4 Large Uncold Swck 44

. . . . . . . . . . . . . . 2.5.5 Low Pa~ronnge of Locally Manufactured Goods 45

2.5.6 Effect on Company's Rcsult . . . . . . . . . . . . . . . . . . . . . . . . . . 46

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References 49

CHAPTER TFIREE

. . . . . . . . . . . . . . . . . . . . . . 3.1 Research Design and Muthoclolo~y 51

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Sourccs o f h t i t 51 . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.1 Primary Sources 01' Data 52

. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 .2 Sccondat-y Sourccs of' Dara 53

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Population 01' Study 54

. . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Dctcrminatio~~ of Silnipl c. S i x 54

. . . . . . . . . . . . . . . . . . . . . . 5 Adrninistr-ation 01' thc Qut.stion~lirc 56

x

CHAPTER 1;OUR

4.0 Prescntarian ;mrl An:ily sis 01' DLIM . . . . . . . . . . . . . . . . . . . . . . . 59

. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Consumer Survey Resulrs 59

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Tcsring 01' Hyporliuscs 71

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Research Findings 79

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Iieconlmuncl;~~io~~s 80

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Conclusion 82

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relbrcncc 83

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R i h l i o ~ l 84

Consunlcr-'s (Suesrionliaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Appendix . . . . . . . . . . . . . . . . . . . . . . . . .) . . . . . . . . . . . . . 95

. . . . . . . . . . . . . . 1 . 0 Nigcrccm Cost of Producin~ One hag of Cement 3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 True Variable C o s ~ 15

2.2 Step V;i~-iablc Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 F i x d Cost 16

. . . . . . . . . . . . . . . . . . . . . . . . 2.4 First B m k Nig . PIC in~cresr raw 33

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Detailcci Rcsponse Kate 59 . >

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Age Distribution 60

4.3 Educational Qunlilication . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

. . . . . . . . . . . . . . . . . . . 3.3 Purchnsin$ Rarc of Locally hlxl c. Goods 63-

. . . . . . . . . . . . . . . . . . . . . . 4.5 Prices of Local LO Intported Coi)ds 63

. . . . . . . . . . . . . . . . . . . 4.0 Effects of M;mulilc~uri~~p COIL OII price 64

. . . . . . . . . . . . . . . . . . . . . . . . 4.7 Effects of Devaluarion of Naira 65

4.8 Eflitccs ol' Dilapidated Infrasrl-uc~ute . . . . . . . . . . . . . . . . . . . . . . 66

. . . . . . . . . . . . . . . . . . . . . . . . . 4 Effttcts of Eratic Power Supply 67

4.10 Eff'ecrs 01' Raw M:lrcrinls a d Spn-e Parts . . . . . . . . . . . . . . . . . . . 68

xii

4.12 Uneniploynicnt and Retr-encl~rnc~~t . . . . . . . . . . . . . . . . . . . . . . . 70

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13 LOW Indus~i-ializa~ion 70

4.14 1" Chi-Scp:~re Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.15 2"d Chi-Square Distribution 76

CHJ'lPTER ONE

1.0 INTRODUCTION

Locally n~anuthcturc~l p o d s arc those produced within the country by those

organisa~ions or n~anufacturing corn pan it.^ locared within the country. The raw

material or 1i1e ecluiprncnt used for the production may bc completely or partly

>

inlporrecl but the n~ost imporrant thing is ~ha t the final processing of the goods inro

final or finished pr-od~~cts mus t be c l o ~ i i . within the premises of a company located

here in Nigeria. 111 the process of scrting these organisariuns or cor~~panies up as

well as tr:rnsforming the raw ~n:ttcri;ils illto finished products, cost will be involved.

Cost can be cictined as the ;t~~-iounr of sacrifice or outlay anributecl to a given

item, process, crc. According to Cashin and Polimeni (1981), cost can be looked

a1 as the hencfits siven up to xcluirc yoocls and services, rllese benef i t s given up are

measured in rnoncrary terns. The cclst mentioned above is the ~ : i l cost which has

three elements or variables namely n1:itcrial cust, labour cost and overhcad cost.

Cost could also bc classifled intc) liscil cost and variable cost.

Rusincss f i l m or an organisation can be dclincd as the coming togethcl of

commonly ; ~ ~ - c c i l pewms r o work jointly in [Ire pursuit oi'ct,mmunly agreed goals,

2

Crif'tkn (1083). This commonly ;~grcc.cl goal is known iis organisatio~lal goal.

0 i a n i s ; w o n s x u cstahlichcd to proviclc ?nods and services ei t lw on profit making

bases or o n ~ron-pl-otir making bases. I f ~ h c company was est:tblished on prolit

ylvc up in rhc process 0 1 ' providi~~g thosc p o d s and scrviccs. The excess usually

profits, :I prot'ii nxtking or-gan~sation c;cnrwt be sus~ained us made to grow. For non-

prolit making organisatmns, i t is ~-cqiiir'ecl that given an initial ;\mount of i n p u ~

(money or capital) the business firm slwuld be arranged and managed in such a way

[hat the valuc 01' its pmclucts or- serviws a t least covers the tu l l or total cost o f their

creation and p rwis ion . including rlic evcn~ual replacement of its plant and

NIGERCERM COST OF PRODUC$ING ONE BAG 3 01: CEMENT BETWEEN 1995 - 1999

Cost of Production

1995

FIG. 1.0

YEAR

4

Ttw issuc 01' cosr 01' producrior~ is a serious matter since i t is rhe major

cluw-rninanl of' dit'l'c~cnt prices liw I L ' I I ~ C I I a COIII~;IIIY can ofkr her goods and

services to the gerwiil public. Hiyli PI-oduccion cost will iinally trwdare into high

.price c, l ' I lni~l iccl produc~ and vice \ . m a . T h a ~ is to say that high cost of

01 ' pcrr-oleum products. erc. A11 rl~cse factors coupled with the decrease in

-6

N2.7 billion 111 thc yuar (1998) under rwicw, a reduction of 12.2 per cent. For the

first time in history, UACN recorded an after tax loss of NS78.3 million in 1998 as

against a proti1 of N487.2 million achiwed in 1997. Benue Cement Company

( K C ) in lL19X rt'cordcd an alter Lax loss o f N373.678 million compared to a protir

before tax ut- X72.425: nlillion in 1097. Some firms like K. Issadas Textile

Illdusrrics Limiicd, Jaybeu Indusrrit..; Nigeria Limited, etc art: already out of

hu \ i rw\ . Bur f ew c o m p a n w wtrc ihlc ro record profit in their triiding result due

lo chclr long term rcs t~uc~ur ing and rcorganisation programmes. Restructuring of

;I company involvcs proccsw ;mcl asqcts whilc reorpanisation involvcs the

>

~a[ionalisarion 01' human resources rlcmenrs.

Thi\ ri\ing cocr o f locally m:~n~itlicrured g o d s is nut a healthy development

conlpnnies lo close down. many pcoplc will lose their job, high cost of production

will rransl;trc: inti) high price and result in low patronage of locally ~nanufaccured

goods, erc.

Therut'ore, government need ro take proactive move to reverse the trend by

prortctin(;? (irrcsptctiw i l l ' her n~ertiher-ship in world Trade 0rganisar.ion (WTO)

7

which ctipulatc free trx!e across nations) and encouraging local investors. This will

reduce unmmhymenr and make lil'c more meaningful lor her ciiizenry.

In line with rhc ;hove points, his research work will identify the causes and

etTecrs of rising cost of locally m;muR~crured goods and suggest possible ways of

1.1 STATEhlENT OF PRORLEnlS

C o s ~ 01' locally m a n ~ ~ u u r e c l y x i s have been on the increase in recent years

and this does no[ mean a good dtx4opment for the economy and the, citizenry.

With the elncrgcncc of World Track Orpnisarion (WTO) which champions the

c~tust: ol' I'reo rrade across nations. a n y country that wants to survive economically

must f-irst ot' all put her producti\*ct sccror in order. This is because her products

have to compare with those n~;trluli~tured abroad under a more conducive

cnvironrncnr. Nigcri;~ bcin? ;I sig~xttory 10 the treaty has n o other time than now lo

iCfcn[ily LIIOSC f'iic~ors L \ ~ ; I L I ~ r i ~ l g ;tboul 1.isin2 COSL 01' locally n~anuliictured goods and

find a lairing st)lution to them.

8

This rising C ~ N 01' production could be attribured to eratic power supply

which has tbrccd Inany companies ro look for alternative sources of generating

power therchy e x p o ~ i n g r h m t o rhc challenges of increased pump price of' fuel or

pctrolcum proctucls. W11i11 about lhc dilapidatccl stale ol' our inl'rastrucrure, where

firms h a w ro spcncl a fo t of money on transportation, relephone, promotions, erc just

to survivi..

A:Icp;~tions alsc) cxisuxl as rcgi~rcls dcvaluatiori of' naira ; ~ n d tho cliflicul~icts in

[he sourcing 01' I'u-ciyl t'xchangc tiw r l w purchase of raw materials and spare parts

from ;rhroad. 0 1 1 ~ ' ~IIsO needs to ~ d k :lbclut hish interest rate charged by banks on

loans y-anted ro manut';icrurers, For insrance, the interest Berger paints PIC paid on

1o:tns and ovcrdraf'r in the fir-st halt ' oi' 1999 which stood at N54.76 million against

N37.85 million paid in rhe corresponding period last year. These represented 66 per

cunt and 35 per ccnt ot' the profi~ bc t im tax respectively of' the company. This

lbrced tht. company's profit before tax ro drop sharply from N50 million to N28 . >

million in 1009. Business Times (Scprcrnber 27, 1999: p. 14). HOW do you expect

I I I ~ C C rn;mul'~t~tu~-t'rs to break even. cup;ind and employ more workers?

9

Onc should nor l i q c t [lie dumping of cheap manufactured goods from abroad

into the counrry, all in rhe name ot' t'rce wade (World Trade Organ~sation).

With the fcw problcms en~~nw:~tct l above, one needs to ask what are [he

factors rcspo~~sible l iw 1111. rising v~)sl ol' locally ~n;~ni~l'acturecl goods'? What are the

as ;t

li-o m

solviny t11cxc problurnc'? Tltcsc nncl 111;111y more arc what this research work is set to

answcr i l ' no1 t'or one reason but ro rccluce cost of production and position these

firm.; well enough ro Sate the challcngcs o f the new millennium.

1.2 OBJECTIVES OF STUDY

This rusearch work wiIl rake a look at:

i ) The n:ltur-e of cost ;IS r e p r d c ni;muFL~cturing in Nigcr-ia.

. . 11) CVhether cost of m;mulacturin~ p o d s locally froni the last Sive years to date,

has been on the increase.

i i i ) The causes or i;.~clors responsible lur rising cost ot' locally rnanuSacturcd

goods

10

iv) Thc cl'f'ecrx ol' [his risiny cost 01' locally manufactured goods on the

ma~iul~~cluring firms, cirixnl-y, nation's cconomy and the intertlntional

mirkct .

1.3 SIGNIFICANCE OF THE Srl'UDY

The rctsult of this reyearch work would be useful to rhc government and its

V ~ I K ~ O L I S ~ ~ C I I C ~ C ~ 10 i ~ n d ~ ' r ~ t ; ~ n ~ I what the local manutiicturing iirms are passing

through, and fashim 01- cotntt out with appropriate tiscol and monetary policies that

will protect and encourage the local ~nanuhctu~-ing Iirms.

The manuf-i~cturers, throupli rhu findings will learn the factors responsible for

the~r rising c o s ~ of prc~duction, how lo tackle the ugly menace whenever they occur

and to know the appropriate autho~ tilts to approach for advicc or solution.

W~rh the prl~bJ01n4 idcntifieci m c l solutions suggested, it will now be easier

tor (he ncw untrttpruncurs to enhx inro tllu manufacturing sector and harness [he

e ~ i s t ~ n g potcnti:ils ~hcrcby establ141in~ more rnanuk~cruring firms, increase

ernploymcnr ,ind sll-cugrllcn rht. economy

1.4 I-IYPOTHESES

111 rllis research work sonlc hypotheses or tentative statements have to bc

> tested LO Ilrid out thcir validity. l r ci\ll only be accepted if foul~d to bc true but

rejecred if otherwise. The hypotheses include:-

i ) Cosr 01' locdly mi~n~~li~crurctl goods has been nn thc iucrcase in the recent

past .

i i j Fiscal md nlonet:cry ~ I I C I L ' ~1 .c ~wponsible for the rising cosl 01' locally

Initnil l';lcturctl y,oods.

1.5 1,IhIlTATIONS

TI I~CC I';ICIOI-S are expecLccl 10 Ilaw adverse effect on this rcsearch work.

They :rru tinw, money a n d ~ - c l u c . ~ \ ~ ~ c c ol' ontcr-priscf in relc;~.;ing inforrni~tion,

especially whcn i r ctmccrns rhe ctmpc.ri[ivu srrategies ot' their orzanisations.

2'1 Griiicn, R. W. (1984): Mi~r~i~zcnlent in Modern Orcanisation Houghton Mit'llin Co. New k'orh.

3 Hccror, R .A . (1989): Cosr / \ccou~l~ing: A Discipline in Transition Peter A Firmin. 1'. 80

3) Agadu, Simeon: Manuli\cturc~-s Remoan S~agnant Economy: Business Times May 17. 1090 P.4

Manul'actu~-in2 is rile process ot' changing inputs into desirccl outputs. It is

this chrtnging or mnslbr-marion, costs are involved. Tt~csc costs car1 bc colleclively

regarded as Total Cosr (TC) which :wccirding to Samuelson (1980) represents the

14

According to Wayne ( 1972 r . ~ l w e arc mainly rhrw cosr hehaviour pattern

usually l im~~cl in niiw i~rs;~nisa~i trn, u m c l y , variable, tixed and mixed or scmi-

variable cosr patterns.

Vm-iable Costs

A variable cost is that par[ of [oral cost which vat-ics in total in direct

pr-oporriorl lo c l u n ~ c s ill tllc activiry Icvcl. 11 is tlw cost ~ h a r rends lo u;~i.y i l l

X C O I ~ : I I I ~ C wilh t11c Iwrl 01' aclivily (wirhin LIK r c l c v a ~ ~ I - ; I I I ~ , C , ~ I K J wi[hill a given

pu-iod ol' timc). Variable cost iricluclcs raw materi;~l c o s ~ , wage, I'ucl, etc. For

c x ~ m p l c . i l ' LIW acrivitp lcvcl cli :mrc~ hy 107, one would expec[ the variable cosr to

~ l s o change by 10%' in symp;~tliy. In o ~ h c r !'or the total variable cost t o change in

clirccl relarionuhip to cIi;inpcs in tllc Ievcl of' activity ~ h c vwiahlc costs nlilsl be

cr,llsl;ml pcr i l l t i l .

Vat-iablc cosr can hc cliviclcd into [wo; namely, true variable cost and step

v;tr-iabk cosr. A t r w v;~ri;tblc cosr such as direct marcrial cost varies clirtfclly with

llle lcvcl ~ ~ l l - p u [ but a step vari:thIc cost such as cost of maintenance is obtainable

in lnl-pc cliunks inct-cases :lnd dccrcascs only in reslkmsc tu fairly wide cllanges

in the level ol' output.

TRUE VARIABLE COST

FIG. 2.1

STEP VARIABLE COST

Lcvcl of Activity FIG. 2.2

16

Fisecl Cost

This ils the amount of' cost rllar sees on independer~tly of output. I t is often

callcd ovcrliead cost or capacity uosr iind usu:llly includes cant rac t~~al commitments

t'or rental, n~aintcnance, cteprcciulion. erc. It is sunk cost that is quite unaffected by

any variarion in quantiry over ;1 pc~.~oci. I t rcn~:lins C O I I S L ~ L in IUL;II but the cost per

unir gurs progressively snialler ;IS rlw nuniher of units proclucud gets b i g ~ e r .

Level of Activity

17

Conlnlittccl Fisccl Cost

Thcst. are part o f l?xcci cost that rclatc to the investment in such itcrns as

plant, ecluipnlcnt cttc.

'The basic cl~~rncrcrisrics 01' comniillccl liwd costs include:

1) r 7 I huy arc lor12 r c m in nature

i i ) 111~'y c;mrlot 11~' i.cduced 10 /.cro wi~llout sefio~~sly ;~l'IL'dng cilhcr the

profitability o r ~ h u lon~-~- i~r i ?o:tls 01' an organisation.

EVCII i l ' o~wr; i( ions ;LIY C L I I . I ; I ~ I L ' C I 01. intcrruplcd, II IC ~o~iini i~Lcd f j x d cost will

still c o n ~ i n ~ ~ c . For ex;mlplc, clurin:? :I rccessionary period a firm will not discharge

its key executives or scll oU' par1 01' tllc plant. F;lcilitit.s ~ 1 d basic orgnisatirmd

S ~ ~ L I C I L I ~ C I I IL~SI hc kept intaci :rl A I I l i ~ w s .

I)iscrctioi~ar~* IGxccl Cost

Discrc~ion;iry iiwtl c o w . ;~llc.rma[ivc.ly refct-rcd lo as nxlnirged fixed costs,

21-isc 1.1-om ; ~ ~ ~ r i u ; r l dccisiotl hy rn:tn;I$clucnr lo spend in ccruin lixcd c o s ~ ar-cas such

:IS xlver~isin::, rcscarch ;tnd C ~ C ' V C ~ ~ ~ I I ~ C ' I U pr~~granl~nes. etc.

determine the selling price for its product. Controlling is another area where cost

information is very vital. Managenwnt through rhe cost information obtained can . >

apply nlanagenmtt b y exception principle to correct those areas thar are not going

according to plans.

According to Anderson and R;-NIII (1978), the need Ibr cost information is to

aid thc management in thc frdlowin~! ways:

1) Evaluation 01' the overall I-csult ul' management decision - the measurement

of' incomc for management evaluation.

i i ) Analpsing alternative decision prublems

i i i ) Planning including long-range plit~lning and preparing plans and buclgcts tbr

iv ) Control and pc r lb rn lmx evaluation of enterprist: activities.

As reputed by Garrison (1985). cost information is the "Motor" that rnakes

managelncnr go. I n thc absence of' a sluacly llow of cost informarson, management

would hc powcrlcss to do anything,.

2.3. NIGERIAN I\.,IANUFACTURING ENVIRONRIIEIV'IL

In ir I'rcc. wciery s u c ! ~ as Nigeria, rhe society gives m m ~ l a c t u r i n g firm !he

riyltt to exist and to function becausc they pracluce g o d s and services for use and

22

and the society arc in1ertlepcnclc1it, thc business organisatioris hwe to reacr ro these

unviro~lrnc~lr;il fiictors or variables ~hcrcby raising rhe issue of effects of rising cost

of locally rnmukicturud gmcls on tlic. society ( i . ~ . rhe economy and the citizenry).

2.4 CtiLJSES 01' RISING COST OF I>OCAI,I>Y h1,WLJFACTURED

GOODS

Many fi~clor-s have been icl~wril'iud to be rcsponsihlc tbl thc rising cost of

locally munu!;icturcd goods. T11usc I';IC'IOI.S incluclc:

3.4.1 Interest Rate

Inrclwt wtc is thc rncmey paid lix borrowing, Lawal (1982:214). I t is a price

by their co~ltrol ot' inlwcs~ S ; W S . FO~CI I I ? interest rate LIP is conrractionary. It shifts

FIRST BANK NIGERIA PLC. INTEREST RATE FROM 1996 - 2000.

Rate (%)

FIG. 2.4

24

High lending rate according to Manufacturers Assodiarion of Nigeria (MAN)

I~ns stiflccl llic rual scctor. This is bcc;~usc the greater part of [he tirst half of last

year (1999) sitw intcrcst r w c f'or p r i m lending? howring between 22 and 26

perccilt, whilc orher categories 01' Icnd~ng artructecl up to 35 - 40 per cenr inrerest,

Business Times (Monday, Scprcnlhrr 27, 1999: p. 14). I'hc high interest rart; on

loanablc I.und\ Ilas limctl mosL hizgcr conipa~~ics to rcsorl to capital nlarkct Sor-

Iunds, whilc the smilll ~nitnu li~cturcrc ~ v l w wcrc not qudil'icd to ;qy-m)xl~ capit;il

markct Iuvc to go to [I12 Shylock ICIICICI -S ~ U I I ~ in the unorganised rn ar k a ct sector

which inclucll: money lenders, Iwsu srxicriecl, family, social cluhs, Age Grades, etc.

'Thc level ol Interest c h a r p ~ l by banks 011 any lourlable funds LO the

manufncturcrc h:rvc. n great i n~p ; l c~ o n the activities of the manufncturing firms.

Higher inrcresr rate scares n ~ a n u t k ~ u r e r s away from approaching money market.

This is becausc higher inturcst I-atc will definitely increase their cost of production

which they wiIl llnaily transfer to tIw tinal consumer through high pricing of their >

prociucts. His11 pricing of goodc will 111 turn scare the consumers away, especially

with 111e decrencc in purchasinr! power 01' the consu~i~ers . Consumers will then go

for cheap imported goods rhcr-chy encouraging dumping.

2 5

This Iligh itwrest raw has iilci~c.,tsetl the manukicturers stock of unsold goods.

narrowed down ~ h c i r I I C ~ prolir nl;~l-gir~ which has resr.~lrcd in the decline in their

tinmcia! pcrli)rilia~~ct.. For instance, Bcrger Paints Pic with operating prolit of about

%I35 million, but high interest c l ~ a r y s (above N54 million) and other expenses

rcducecl i t to ;lbovt 7440 million, T11iscl:iy (Monday, April 26, 1999:p. 19).

Wcsl Al'ricarl Portland C e m m (WAPCOj Plc look n loan of N6 billion early

Iasl year (1999) with NlOO nlillio~l n ~ o ~ ~ t l d y intcrcsls payment, to refurbish its

Ewekoro plant so as to cnhance p r o t l u c m ~ . Cnrnnud Metal Box Niseria PIC during

its trading yc.;~r cnclctl March 3 1, 1909 took bank ovcrdrdli m d comrncrcial papers

01' about 44650.4 million, n devetop~nent which made it to pay about 38 percent of

I [ \ valuc xldcd 01' N348.3 million it5 inkrest charges, while only N25.7 million,

reprtwnti ty scvcn percenf would bc. paid as dividcnd to its sl~areholders. Many

local manu1';~cturing firms have c l ic~A down bccause of high cost of' produclion

brourht ahour by high inrerest raw.

2.4.2. Foreign Eschmgc

Thc I'oreign excllan~ct rate b c ~ w c m countries is the amount oi one currency

thxr musr bc paid in ordcr LC) olmin onc unit of another currency, Lipsey and

26

Manuliic~lirers import onc itcnl or ihe other, ranging from raw materials,

equipment, parrs. etc., from other countries. This they do to maintain successful

oper;ltion ol' heir industries. Sincc thc coun~ries that produce the imporied goods

do no1 use N:iir;t, iherel'ore, manul i~c~i~rers have to convert or change their naira at

a giiCen rate lo ally 01' he in~ernatior~:dlg convertible cun.encies like pounds sterling, .+

US Dollars, Deutsche Mark, erc: clepcntling on the country they are buying the goods

0 v t . r rlic years, governmenr do t ~ l l u c m hupe sums of foreign excllange to the

manufacturing scctors of the economy, but this has not reduced the problems

manufacturers encounrercd whcn sourc.in$ Sor foreign exclian~!cs since Sew people

usually take arlvi~n[apc 01' the opporruniiy. Ttlcsc lkw peoplc instcad of using the

form for wll:it i t is meant for, will IIW i t for personal travelling allowancu, business .

travelling allowance or imporration of finished goods, thereby starving genuine

nl;lr~ufiictur-crs o f tbrex. This is ~1n11c:dtIiy for the economy.

'The C c ~ ~ t r a l Bank ol' Niycri;~ (C'13N) recently amended thc rules governing the

A u m n o ~ n w s Foreign E x c h a n ~ e M ~ k c t (AFEM) to reduce banks' demand for

li)rc.ign cxcl~ange (FOREX). The circular stipulates that any bank bidding Ihr forex

in the AFEM must liavc I'undc equivalent to 200 per cent 'of its forex demand in

treasury hills xi coll:ituritl mil sucli lrlirsr he held for a period not less than one

month. I t also s t m d t h a ~ sucli a hank must provide initial cash (for the I-brex) of

. . 100 per C'UII[ dcpwil wit11 tlle Ccn~ra l J3ank of Nigeria.

Tlic m c n d m c n ~ s were in~cntlcd l o achiwt. chrcc ul?jcctives namely: efficient

Jse 01' hmks I'ilnds, liquidity rllana~clilenl and srablr uxchanye rale have some

I K X ~ I i v ~ impl icnrirjns on rlw econo~ily . rlw i~-tiplic:ttions I I I C I U ~ L ' [ha!, it is citpitble

01 discouraging genuine invesrors {IVlanulaciurers) from ellgaging in Si~rrher

proclucrivc acrivi~ics. This is bcc:rusc Inmy banks, with tinw, .will stitr-1 cli;~rgi.ng

n ~ ; w t ' x r i ~ r e r s o n tl~cir money kcp! wirlr Central Bank 01' Niperiii. Inv;triably, this

would incrcasc cost o f f ~ ~ n d s to nx~nuli~cturers in the short rim. Investigation has

evcn s l ~ r ~ w n h ; t r sonw h;~nks :ire ;~I~-ci~cly cllarging N3 flai o n cvcry dollar bough^ lor

manuliicturers, Business Tin1t.s ( b l o ~ ~ I : ~ y , July 19, 1999: p. 2). 'The long run cflect

01' this developmcnr on the uconomy is rota1 reductiorl in aggregnle supply of goods

10 the market, which may worsen inllationnry rate.

Dit'licultic.~ in obt~~in ing f i m x through banks have rnade some genuine

rnan~1fiicrt11~u1.s t i ) I~L'SOI-I to " Black Mi~rkct " for help. Bur il l black market, foreign

exchange arc sold at an exhorhilnni rate which will tinally increase the cost of

locally manuli~ctured g,oods

2.4.3 Nilman Rcsolirccs

Manul'ac~uring of conlmoditius he i r i~oocfs or services, req~lires a combination

of dii'ferent ti~ctors 01' production. TIIW t'actors include, human resources, land,

capital, etc. R u t out of all the factors of productic )n personnel or human resources

is thc most important L~cwl-, Koonrz a~ld Wcihrich (1994: p. 356; in their book tilled . #

h;IANAGEMENrI': A Global Perspective) quoted managers as saying that "people

are their most important asset and thai is why they could invesl great deal of money

in the recruitment, selection and training ot' people".

Inspile ot' the ;tbove mcrltiuncct qua1i~ic.s as ruyards Iwrnan resources, they are

[he most dil'licult aspect of any manufacturing firm to nunage. They are

unpredict:hle ;lnd can resort to spont:~ncous reactions at any slightest provocation.

Most of' tlw t in iu , employee\ rcsorr r o wike whenever there is a dispute between

rlwm and ihc c.mploycr, This could p;~ralysc the activities ot' the company while the

fixed cost conti~lues 10 run. P o r s o n ~ ~ ~ l o k n times hold the employers to ransom

29

slnce h e y hnow that mnnuhcrurcr> cannot do without them. They will always

roquest fix incrcace In pay (salary), fringe benefirs, advances, etc., which at the end

will increase cost of' production.

Since no nlanirfacrurin_~ lirm will like to go our of business, they have to

yield to the cvcr incic~sing dctm;lnd ol' rlrc employee. The I-c.sulr o f this action will

he an incrc.;~so in rlw total I ~ ~ b o u r COSL which will ~ranslatt. into high cost of

In tht olden days, b u s t s of' Isurrlcn wcrc used li)r transporting goods. B L I ~

today, with rhc i ~ n p ~ - o v c r ~ l c ~ ~ r in tcclu~cllogy itnd ccononlic adv;~nco~nenl ol' Lhc world,

nlorc sophisric;ttccl, chc;~pc.r and I':r.;rcr nlcans ot' rrnncporration have conw to slay.

30

Thew incluctc, tlic ilsc 01' rnil ~ ,o ;ds , [rucks, ships, inland wirer ways, pipelines,

airfreiglir, ctc. So onc h:~u clilli.1-cnt tr:~nsportation modes to cl~oose from, depending

on Ihc n;iturc. of' product, yumtity to bc transported, time limit, distance LO cover, -

cosl irivolvetl, etc.

I t is [rile tli;it C I L I S [ O I I - I ~ dO1ill w;1111 ~ X C U S C S , they wan1 products available

when and wlicre they necd hm. I t is illso true that transpor~ation aids economic

. >

clioosi~ig whicli ~ritnsportarion mode to use. It must he rcmcmbcred that, the value

In clwosing means of rr-allsporrntion one has to consic!cr cost, speed and

cfependability. For ex:tmple, ri~il rir:ds rans sport heavy and bulky gotxls a1 cheaper

rate but thc shipn~unt is slow cornp~ll-ccl to that ot'truck. 'Trucks are more expensive,

but tluxihlc and csscntial. 'fhcy are uscd to [ransport perishable i t e m or those on

urgent dcnlancf or small tiuantitics ol' goods for shorter distmces.

By :\nil l~irgc, transportarion costs contributes greatly to the cosl v f

procluction. I 'ho~~pl i , high cosr 01' r r;~risporrat ion could be atiributed to many 1':tctors

3 1

11ke bad I-oxls, IiigIi pump pricc ol' t'i~cl, high cost of s p , ~ parts, etc, but the fact

still rcmaills thal the cost of locally ma~lufiictured goods is 011 h e increase and one

moved from N1,955,000 to N2,840,000. Since goods produced by the

C I ~ ~ L I I - ~ ~ . This is to rccluco ~ r a n j p o r t i ~ ~ i o n cost as well as rc.ducc cost of' locally

~nanutitcrirrcrl yotrcl~. This will 90 a l(111y way in i~nprovin? tili. economy and the

32

Ccntral i3i1nk 01' Nigeria I I C ~ ~ V C ~ I I 1995 to 1999 tlev;~luecl thc Nigerian

cur-I-cncy f'ru111 N22 to N96 per US tlolli~r. This is to say that N9G will be used to

Tax ;~ccordiny ro 0xfi)rcl Dic[itmary (1974) is money paid by citizens to the

government for public put-posts. 'l'u can bc direct or indiruct. Direct taxes are those

i t has to do will1 thc company's prof'il which is rhr amount obtained after deducting

cost of production I'rcm rhc rcvcnuc.

r - I Iiosca taxcs tliar d(i cl'l'cc~ c o s ~ of' manultcruri~~g goods inclutlc cxcisc- ciury

spare parts and :~cccssc>rics. M:tny manufacturers have been kicking against

2.4.7. Eratic Power Supply

I n Niser-ia, pnwcr- or Elcc~r~ciry i5 gener-aterl and dis~ributed by National

Electric Power- Au~hority (NEPA). Powor supply is very important for el'flcim

running of m y oryniwtion he i t p r o ~ ' i ~ - uricnted or otlwwicc. The power supply

n l w l INN only be :~dequatc bur r e ~ u l a ~ and cheap.

3 5

N o m:inu l'ricturir~g firm car1 opc~-:irc without power bccauke of assorrcd types

? 7

01' machirics t l q usc. I l w c ~lt:~c.liit~cs can only be power-ecl by elccrricity and

inaclqxicy i l l power supply will likely disrupr lhc organisation's operations unless

increase in thc pump pricc 01' pcrrolctim producrs (petrol, Nl I lo H20 and diesel,

N9 to I419 pcr litrcj and inackquaro supply of the costly petroleurn proclucrs due to

breakdown of' ~ h c rcfi~lurics ;md unl-c\l in h c oil producing areas have not helped

thc local manuliicturcrs lo I-uducc uosl.

In s l io r~ , ~ I I C C S S ~ L ~ ~ power inrc~mpriol~ by NEPA has f r c e d rlie manufacturers I

to incure higl~cr cost of production through the buying and maintenance of power

cencrators. For instance, Benue Ccmcnl Company PIC spent hall' of their 1998 L

i'inancial yc:~l- doing nothin? bccausc of' ir.r:~dccluatu supply of power or elecrricity

Frenchies Limited, said rhat, his company spent an average pF~700,000.0(

lair yeas (1998) in powcr generation compared to N35,000.00 budgeted for the same

p l ~ r p \ c !'i\ c year\ ,lgr).

Therelbre, mnna~enient of any orpnisation has to allocare greater part of

thcir finances to power gcncsatiun il ' rlmey desire to remain in business.

2.4.8 Other Inf'rastt-ucturc

Some otlics inl'sastrucrurc likc w:iter supply, telephone, etc., which is

necc.\\,~sy lor- c l ILct~vc upcsalions 0 1 cwg;llusalron arc nor rhcrc. Ix\'en when rhcy arc

37

3.4.9 Raw Rlutcriuls, Spwc P;II-~.; a~l t l ~\ccessorics .

Raw malerials are unprocescod expense items used in rht. production of the

fi~xtl product. Examples of raw m;~rwiitls include logs, iron ore, wheat, cotton, etc. .

A company's f'in:~! product car1 also wrve irs raw marerial tr, some manufacturing

firms. For institncc, wheat Ilour 1.1-o~n 1lou1- mills to bakery industry for bread

product ion.

Sparc parts arc h o s c machines p;ws k c p ~ for use lo replace a broken or worn

out part 01. [ I I C ~mch ine .

Acccsstwics a ~ . c S I I ~ ~ I - I ~ V C C I c;tpi~iil itcnis 01- 1001s il~ld q u i p n x n l used in

production or ol'tice activities. Esanlplcs 01' accessories inclurle copy machine,

t y p c ~ v r i ~ ~ r , fin ~ l l i l ~ l l i ~ l ~ , porkable drills, filling cabinels. e k .

Thi. ;ihovc rncnlioncd h r c c ~ S O L I ~ S 01' IIL'MS ( r ; \ ~ n ~ : ~ t ~ ' r i i \ l ~ , S ~ ; I I Y PilI.lS ; I I I ~

xccssorics) are w r y in~pwrar~r i n [llc conrinucd esislencc 01' n n1anufi1c1uring firm.

'I'hcy are so inlportanr h a t wi1hout I-i~w rnnturiuls, production of the final plwduc~

cennoi go on. That is 10 say. no r:lw n~:itcrial no production. If during produciiiln

lllc 11l;tchin~ Il;~ppc~lccl 10 hsc:~kclow~~, you ncccl slxtre p ~ ~ s Lrr p ~ i ~ rhc l u x l ~ i ~ ~ c in

order othcrwisc production xrivilics will stop. Accussorics tll0ugh riot directly

39

2.5 EFFECT ;ING COST OF LOCALLY MANUFACTURED

GOODS

The ef't2ct of' rising cosr of' locally manufactured goods on the economy, . ..

~nanufacruring indusrries and rhc cirizunry has been harmful. This harmful effect if

no1 chuckcd will make N i ~ e r i n a dumping ground and that could ruin her economy.

WIlen rhi\ Iuppcns, who will su fli.r'! I t is her citizenry. Thew cl'fects include:

2.5.1 Dumping

Dumping 15 [he IInportiltl(jll ( 1 1 ,dl snrts of cheap and sub-srandard goods into

11lc c c o n o ~ ~ i ~ ,I[ ! i ~ r hulow the local ctmpanies' production cosr. It implies the

Inlportation of ti)! eiyn goods in a 1.rlanricr h a t bring% unfair competition in he

marker placc

1 1 1 cvcry [look .mcl cr:lnny 01' rht. ctunlry, you will find all sorts of' imported

poods ranprig Iron1 consumer durahlc 10 consumer non-durable.

For durnp~ng ro occur sonw co~iditrons have ro be met, they include:

I-irs~, tlic p t d s ~ml~ut 'xlurccl i l l a l imign country would have t o be imported

into a ~ t o ~ l ~ c r u u l n l r y :I[ :I price Iouw r h m thc c o s ~ o f production in the goods'

c o u l ~ ~ r y 0 1 ' or19in.

40

Secondly, such goocls arc usually subsidized resulting in the goods being

cllcapcr in tllc country ol' cxpor t rhm 111cir local alternatives

n~mul ' ;~ turcc l goc~ds. You will I ' i ~ ~ c l OLII IIMI price 01' loc;~lly made goods arc: highcr

than thc: imporlcd oncs becacist: of' high cosl of producing [hew goods locally. This

makes the consumer to go for chcilp impor~cd ones hereby inipriwing rhc Ibrtuncs

0 1 ~ i~uporicrs.

This dcveloprncnr is n i ~ t i~ir 10 tlic economy bccausc i~ has a lot of negarive

el'fkots on ~ 1 1 ~ ' Io~a1 i~idustries and tlie c ir i~enry. These ef'f'ecrs include:

1) I t woulc! I-esi111 in [lie hons~in? 01' mpI0y111m i n the exporting country whiIe

~11c C ~ I I I ~ ~ I I L L ' S t h a ~ ni ; i~ iu l i ic~~~re SLICII s u d s in tlie importing one would be

disti-esscd resu l l in~ to retrewlimmr and serious uncmpluymcnt situation.

i i ) 11 has r~csultcd in [he iniporxtrion o f all sorts of low quality products which

h;\s crcarcd unfair cumpetition bctwwn local products and imported ones.

i i i ) l'hc w;whc>itsc ol' alw local nunul'nc~uring conip;~nics anti their distributors

are now 1'illc.d will1 u~lsnld p c ~ ~ t l s , leading ru substantial tie down of funds and

recuivables wliilc capacity urilisarion of factories are declining.

. , Acc.ot.cliug LO 111c N i g c r i ; ~ ~ ~ T~s t i l c M ; I ~ L I ~ ~ I C L L I I . C ~ S Association (NTMA), ~ l l c

42

Two Lagos - bascd textile ~lwnuf'acturing companies' - K. Issadas Textile

Industries Liniitccl and Jaybce Indu.;tru Nigeria Limited rxent ly folded up, leading

to the loss 01' about 1,000 jobs. Thc reasons given for the development include:

1 > High cost of production, acccnt~iated by recent hikes in prices of pctrolcum

producrs.

i i ) Depressed rJeln,\ncl I'or loci~lly rni~n~~f'actiired I'abrics due to dumping of' new

and second-hand materials illto [he country and reduced purchasing power of

tlic people.

i i i ) Mounting liabiliry due to poor cash flow access to funds in the money

niarkct.

iv) Scarciry ot' low pour fuel oil 1'01. powuring [extile boiler engines.

' v) Loss 01' cspol-t m;trkct, cluc to ul~l'avourablt: competition with foreign fabrics

:~ntl l in?,cri~~g c l ' l ~ c ~ s 01' CFA I:r;r~!cc clcv:tluation i l l Wcsl Africa.

Somu ol' rlie cwnpanics tlial 111;1rl;1ged €0 survive, were e~nbarking on

resrructuring and reorganization e.uc:.l-cisus which have led to ~.ctrenr:hn~ent of a lot

43

performance o!' the country, stated chat manufacturing employment dropped by 29

percent in rhc first hall' o f 1998 compared to the cortesponding period in 1997.

. > Soniething should be done to arrest this ugly inciclence of rising cost of

production being cxpericnccd by loc:~l tnmui'acturcrs, at lcasl to improve the

paris of (he country.

2.5.3 Low Industrialisation

Thc r a k at which industries are being estiiblished in the country is

decreasing. This is as a resu l~ of t ' i l i l ~ ~ ~ reconled by the exisring industries. Many

pcople now prclkr going inro retailing ;rnd wholesaling rather tIi;in rnar~uf'acturing

industries. The r-eccn~ actnlission of' Nigeria into World 'I'radc Organisation (WTO)

has also uncnuri~gcd many pcopld to go into irnportatiori as an altcrnativc to

cstablishin~ illclustries. 'Tllusc ~ I I u w n have it in mind to sut up industl-ies are

xx-ccl aw;~y by Ilngc aniount of nroilcy involvcrl and the unccrlainty they will face

alwr c ~ u b l i s h i ~ ~ y llic indc~\ i ry .

Ilow L L I L V O L I l)c c ~ ~ c t ~ i ~ r ~ ~ y c d I(> P O I ~ I O w ~ l i ~ i g u p of a new industry w l w c

and when tllc exist1112 OIICS arc cllocktcl up by high c o s ~ uf prorlucr~on which

44

brings a b o u ~ low capacity urilisntion, 1:11-pe srock of unsold goods, financial losses,

t i c .

2.5.5 Low Patronage of Locally klanufacturcd Goods

Hi$ cost of pr-oclucing y w d s locally has forced the prices of locally made * -

goods LIP, t l~urc .hy plxing [he 2ood\ OLII 01' [tit' reach of poor consumers. As a resulr

of this many people 11ow so fi)r inipomxl second-hand goods, popularly known as

"Tokumbn". 1 1 is nor thar hey prcfcr sccond-hand goods to new ones but because

This shunning 01' locally m:t~wli~crurccl goods bec:rusct of their high prices

c ~ l l sorts ol'che,ip, suh-~~ancl:u~cl and rtjccted goods 1.1-om thc oversea. Virtually every

of c h e ~ p i~nportcd good\ h,ive cs~enclcrl beyond the shores of the country into the

s u b - I - q ~ o n of' Wcst ,411-~ca. E.upt)rr{ hv rhe lucal ~nanut i~c tu l -urs into West Africa

inro West Al'rica by PZ Industries 1'11: i l l 1998 was N47.6 million compared t o

N154.5 nill lion rccordecl in rlw col-r-csponding period of 1997. That of Lever

46

Brotliers Plc clwlinc I'rom N45.9 million in 1097 to W2.4 million in 1998. Exports

of' Carn;iud-Mutal B[}x Nigeria Plc dl-opped from N7.2 n~illion in 1997 to 441.7

million i n lB9X. Wliilc rha1 01' Niitional Oil and Chynical Marketing Plc

(NOLCHEM), dccli~lccl 1'1.0111 N7.4 ~nillicm in 1947 ro N3.1 million in 1998.

Inccniives should be- sivc.11 r o tl~cse local n~anufacturcrs so that their goods

call conlpcrc l'avourably with rhc chcap imporred ones or local indiisrries will go into . *

extinction and that could bc tcrril>lc.

2.5.6 Effects on Company's Profit

At rcduccd cost or production one is bound to make more sales, since

rcvenuc millus cost of' p~oduction cqu;~ls protit or loss as the case may be. But one

has to conlrol ;I large ~n;crkct sl-iwe ro gcner;w enclugh revenue that will bring about

the corresponding p ru l i~ .

If' tho cost of producing soods still remain high then rhe price of the tinal

product will bc I~igll h u ~ i l - lhc c o s ~ conics down tllc prim of tlie Sillill product will

tx low. Fairly priced goods will t>c in a better position to compete with [he cheap

imported goocls thcrel,y creating 111ol-c narke el Sur ~ h t t local producr. Pvlore nlarket

47

means that thc conlpmy will proctucc at I'ull capacity and :it the point where

. , economics ol' sc;~lc c:ui bc nusimizcd. This will improve the profit margin of [he

ctmlixmp.

I-1iy.h procluction cost hy tl-it' local manufacturers coupled with low capacity

u~ilization will clcl'ii~i~cly seduce rhc prot'it margin o f lociil inciustries.

2.5.7 El'L'cct on Balance ol' I ' q r ~ n e n t

A c o u i i ~ ~ ' s hal~rncc of puyn~cnls shows the relationship between ;I country's

reccip~s l'run othcrs ; i ~ d payment 10 otlwrs, as a result ol' international trade between

payments. Whcn p;iyIncnLs arc highcr [Inn receipts, i t is said t l ~ t a country has an

unlilvourable i~iiluncc ol' payments and vice versa.

Local I I X \ I I L I ~ ' ; ~ C [ U ~ ~ S source tlwir raw materials, machines, spare parts, and

accessories I'rrml ourside the country. Durnping and the increasing demand for

foreign mxfc g~)ocls by the public 1i:ivc also increased the counrry's imports. The *

level of Niperian 11on-oil cxporr hm hccn dwindling. All thcst' hitve caiised the

serious. 'I'hil.; issue is vcry serious uspccially w i h h e recell1 clcvelop~nent ol' World

Trade Oqanisittion which stipul:~ies l'rec. trade among member countries. This

mums L Z I ; ~ ~ i l ' your product cmnot find its ground in lie international marker, then

your country will er~cl up being a clunlping grm~~nci for all sorts of inkrior and sub-

st;ind:~rcl goods. This will transli~te inro the coll;ipsc of'ths country's economy.

REFERENCES 1. San~u~.lson, P.A. (1080): Economics. MaGraw Hill Kogakushr-t

Lilniccd 1 1 [h Ed i t io~~ .

Wnld, J. ( 1084): R i ~ c ' s C o ~ t Accounr. Mac Donald and Evans l.imiuxl. London. 1 1111 Edition.

G o r ~ r u r ~ , K.A. (1977): Qhr Accountins, Principle and Manaceria! Appl~ca~ion. Pitnlan Books 1-irnired, London, 4th Eclilion, p. 12.

Andcryon, D. I,. and Raun. D. L. ( 1978): 1nfc)rmarion Analysis in Mana~ernent Accounrinu. Pitmans Books Limited, London. 1 sr --- Edirion.

>

G;irrison, I?. 1-1. ( 1985): M;~naguriid Accounting MacDoland and Evans Limited, 4th Edition, p. 13.

H~cks , H. and Guller, R. (1987): Management McGraw Hill Inc. Sing;~pore, 4th Edition.

La~kaI . O.A. (1982): 'A' Le\,el Economics of West Africa., FIeincmmn Educa~ioual Rooks (Nig.) Limited.

10. Olaloyo, Yawkuhu: High Cosr of Fund Scares Firms from Banks. Thisdig.. April 20, 109'), p. 19. --

1 1 . Lipscg, R.C. ;~rid C l ~ r y s ~ t l , K . A . (1995): An Introduction to Pc)silivc Economics ELRS with 0xti)rd ~ n i v e l ' s i t ~ Press. 6th Edition.

1 McCarthy, l.?.J. :~nd Ptrreault, W.D. Jr. (1990): Basic Marketing. printctl In Ul~irccl States of America. 101h Edition, p. 346.

IS. Gonlcl, M i\ncl l';~et'ti.i, C . (IL)63): Transportation Expansion in Undcrciuveloped C'ottnir-ics. A comparative An:llysis. C e o ~ r ~ ~ p h y Review: Volume 5-3.

16. Hornby, A.S. (1074): O.ul'orcl Advanced Ixarners I k t i o n i ~ r y . 0s l i ) l - c l Univcrsily I'rus. Walton Strcct.

. >

17. AIPI-ccl, L. m c l Oxen, F. (1961): Pricing for Marketing Iixccutives. Wadsworth Publishing Company, Califonia. 2nd Edition.

1 131-;~k, 1:. (lW'3): Accounting i~nd Managcmenr Studies. Orthicl Prcss l3r11i1in. 5th Edition.

3.2 SOUIICI<S OF DATA

'1'11e1.c arc ~ w o n u i n W L L I - C ~ ' \ 01' d m . Tlme iriclucle primary source and

. a

sccond:iry sourct. ' I ' k r~csearchcr ~n ;dc us of both thc prii11al.y source and the

scconclary source 01' data.

advantages ;~nd i1is;dvanrages. nut by combining holh of rhenl, the researcher - 2

Iiopccl ro ilchicvc h e l w I W U I L .

Sonw ol' thc disaclvant:~gcs ;~\;cocii~recl with personal inturviuw includc:

:I) The interviewer can inlluttncc the response of the rcsponrit.rit.

h) The inlet-vicwcr c a n hc hial;.

C ) N o 11i1lc 15 give11 1 0 L I I C rcsponclcril 10 scardl f'or accurate inli)rm:llion.

ci) Dolay t'tlc~or, since the respc-rnclcnt will artend tu yr-ru at histher own

Popul;crion car1 hc t1c.f-inccl :IS ;tny group of objects or people which arc similar

in ow o r 111orc ways wllicll f i ) rn~ tllc subject of study in a particular survey. In

other word\. popul;~rion roprcsentx rhc wholc set of objects about which n statistical

BLIL tbr easy rescx-ch w c ~ h NNI accurate result, sample size has to be

3.4 DETI<RMINArTION OF StWIPLE SIZE

Any sample size is considcrctd to be a true represenr;ltive of the entire 2

population. Arid any in1i)rm:ttior-i \upplied by the sample unit is assumed binding

to [he entire popu1;11ion. The sample unirs in this research work is Anambra and

Enugu Sra~e.;.

To Iind nu[ the samplc s i ~ c . pru-~esting method of the questionnaire was

used. A sample ol' fifteen (133 qucsrionnairt~s were distributed within Enugu

nltrropolis ;~r lc l its environs (E111erlc.1. Thc respondents answcred rwclve (12) out of

tlic !iI'[t'c~i ( I i) cl~~cstion~i;~ircs cot-reedy and this rupresenrs eighty percent (80%) .

I3xsccl on thc i~bovc sesult, [lit s:mple size l o be used was calculated using

56

Therctbrc, the number of quesrionnaires shared .or distributed among the

57

ranging 11-om 11ic highest posilivc resporlse lo the Lowest i~ega~ ive response for

3.7 KICSEARCH KK'S ASSUh'llYI'IONS

'Tl~c researcher - nml: the t'ollocving assurnp!ions co~~cerning the

qwsfionn;~ircs:

i ' l ' l i ; ~ ~ 1 1 1 ~ 5 C I ~ I L * \ I I ~ ) ~ I I I : I ~ I - C wtn~lil lw ( I I S I ~ I ~ L I I C ~ 10 ~ I I C r i ~ ~ . I i ~ pc[)plc ~-;q);iI~lc 0 1 .

providing ~ l i u nccdd cl;~t;~.

i i ) 'l'ha~ ~ l l u rcspo~ldcnr will u~~cllrr-st;~ncl the quescior~s,

i i i ) TII ;~I ~lrc I - C S P O I I C I ~ I I I will hc ; I I I IC ;IIKJ willing to C C ! I I ~ ~ ~ C I C the qu~ci[ ic)~~~li t i l .~ '~.

iv) l'llirr ilie rlucsrionni~ir-c wcr~~ld clicii he needed infurrnr~rion.

I ) OSU;I~~I. E.C. (1981): I n ~ r i x h c t i o n 10 Rese:trch M-ethodoloay Fep. Publishing Co. 1-lc!. Onilsha. 1). 133

4.0 INTRODUCTION

Source: Qucstionnairc . *

FI-on1 LIIC ; I ~ O V O L ; L ~ ~ L ' , O I ~ C 11~111drt'd and six (106) questionnaires were

distributed, eighty-l'ivt: (85) wcrc complcrtely a rd iiccuraklp fillcd and returned

Those from 51 years and above were 12 , representing 14%. Thc highest rcsponse

Q~i~lif ici l t ion

Source: From Qr~estionnaire

FSLC -- WASC/GCE

OND/NCE

I-INDtFirsl Degree

~ h c 85 I-espondcn~s were WASC/GCE holders and represents 24%. Respondents

Number Percentage

13

2 0

1 1 -

5 ~ 1

15

24

13

3 6

62

will1 HND/FIRS'I' DEGREE ulcrc 3 1 and represents 36%. The highcst responsc

canw from hose with HNDIFIRST DECREE and this could be attributed to their

undcrsrancling of the qucsrionnaire hwcr than any other. group of respondents

Tablc 4.1 Put-cllasc Rate of' 1,oCally Made Goods

Source: From Qirwtionnnirc

Table 4.4 ~nrllc;ltes th;~l cvurylx)dy buys locally rn;idt: poods but at different

Response

Very Ofien

Always

Sonlc~inlcs

Not ai All

Total

ratc. From L I I C quesrio~~naiw 10 pcople out o f 85 rcspondcr~ts buy locally made '

eoocls vcry ot'lcti rcpruscntinp 1 Z'L . 30 respondents buy il. always given a 35% V

Respondents

10

3 0

45

--

85 ---

responsc while 45 0111 o f r l x 85 rccpondents represenrlng 53 R buy 1oc:illy made

goods sonwtinws. Those that b u y locally made goods said t t n t they do so because

Percent age

12

35

53

-

100

ol' unl ' ;~vr~~rablc ccrmonlic cimlitiorl~ which illclude dwindling purchasing power,

Table 4.5 Respondents tlssessmcnt of Prices of Locally Manufactured goods

compared to imported 'goods

Frolll ~ t b l c 4.5, rhosc r l u t hcl~cvc.d that prices of' locally made goods were

vtry high conrpxucl ro [heir iniportcd counterparts were I0 out of the 85

respondents. I eprcscnting 12 5T . 55 o u ~ o f 85 respondents represen~ing 65 % agreed

tllar price\ ol locally rnxlt. goods wcrc 111gh cornpared to the pr-lct.., of the imported

Rc*sponw

Vcry I-ligll

High

Moclura~c

Low

Very LAow

L 'I'otal

Rcspo~ldents

10 -

5 5 -

15

5 --

-

8 5 - --

Percentage

12

65

17

6

-

100

64

ones. But 15 of' the 85 respo~ldcnts said that lucally made goods were priced

noder rarely compared t o t l ~ c ~ r inipor-rcd counterparts. This number represents 17%

percent. While, 5 respondents representing 6% were ol' lhe, upiniun that prices of

locally mxic goods were loiv. I t i~il 'mcan lhar prices of locally made goods were

on the high side and this could be nrtributcd to high cost of production imluding the

attitude of y-erdy traders that always like lo make more money by increasing prices.

TabIc 4.6 Ef't'ects of' ILlanufi~cturing Cost on Price

Source: From Qucslionnuirc

Ques~ion nuimber 5 in t l l c qucs~ionnctire was uscrl [o test whethcr cost oi'

ruspondeors ;iprccd [II;II cost ol' I m x l l y 111:muSactured goods dctcrrnines rlic price 01'

Percentage

100

Response

Yes

Respoil tlcnts

8 5

N 0

No1 Sure

'1'0t31

-

85 -

-

100

Table 4.7 GSSccts of Dcwlu:~tion of' Naira and .~i'fficultics in Obtaining .

Source: Fro~n Questionnaire

Response

Y c5

No

Don't Know

'rotill

Responclcnts

6 1

4

20

85 --

Perceutage

72

4

24

loo

Source: From Questionnaire

Resi~Ilq li-om table 4.8 sliows L t x r r 70 at11 of the 85 respondents, rcprescnting

82 2, response, atrributad thc r i s i y cost of ~minufacturing pwds locally to the

dilapidated infi-artruct~irc, while 6 01' llic 85 respondenls representing 7% disqyeed

w ~ t h thc alxwc: claim.

-

Rcsponsc

Yes

N o

No1 Si11.c

Itcspondcnts

70 -

6

Pcrccntagc

82

7 -

? 11 ---+

11

Tablc 4.9 El'f'ects of Erntic I'owcr Supply on the Ma~lufacturing Cost

I,O\il

Very Low

Total

- Kespondcnts I'crcen tage

- 20 24

60 70 1

Soul-cc: From Questionnaire

Tablc 4.10 Effects of Raw hlntcrints and Sparc Parts

Rcsponsc

Source: From Questionrrairc

Y cs

No

l h n ' r Know

The ;~bovc result indicates \hilt 75 of the 85 respondem, represenling 88%

I-cqxmx poinrcd accusins I"lngur 111u I~ish cost of' raw materials and spare parts

ac; 111;ijw- t i ~ t o r s ~ l l i \ t II;IVC broil~I11 ;~houl rise in the cost of m a n ~ ~ f i ~ c t u r i n ~ goods

1oc;tlly. But 3 out of ~ h c S5 rcspondcnrs, I-cpresenting 4% response disagreed.

i I

Rcspondcnts Pcrcentagc

7 5 -

3

7

8 8

4 -

8 -,

Table 4.11 Dumping Activities

Yes

'The quc5tlonnairu t i ~ r t l w I - U V C I ~ I L ' C I [hiit 76 01' the 85 respondenw, that is 89'76

rssponce n3rec.d tlxu dumping activities survive in the uounrry because of ~ h c rising

co\ t 01' I I ~ ~ I I I L I ~ ' ~ ~ C ' L U I ' I I ~ ~ ~~oocl\ locally \tlll~cll ~csultt'cl 10 111~J1 priccs of l ~ c d l y rnadc:

goods. But 6 o u ~ 0 1 ' the 85 wspo~ttlents disagreed with the claim, while 3

I-ecpondcnts said they wtru not sure.

Rcspondcnts Percentage

76

N o

Not SUIT

Total

6

3 -

85 100 --

Yes 8 0

Sourcc: From Questionnaire

From iuhle 4.12, 80 of' the 85 rcspondcnts, representing 94% response

t ~ n m r n c ~ ~ s l y qreccl that rising cou 01' producing goods 'locally contributed to the

increasing rate ol u~~cnlployrncn~ ; L I I C ~ retl-mchnlen[ being expcricnced in the

~i~a~lufrtcruring indi~stries. While 4 ~-t'spo~idents said no to the claim.

Table 3.13 Low Indirstri;~lization I

Source: From Qucstic~nmirc

Don't Know

Totid

Pcrccntage

92

Rcsponse

Yes

5

85

Respondents

7 8

6

100

No 2 I 2

71

Table 4.13 indicares that u u ~ 01' the 85 responcrkr~rs, 78 representing 92%

response attributed 111e country's low industrialization tn the increasing cost of

rn;mut'acturing goods loc;~lly.

Testing of Hypotheses

To rest the hypothtses, X2 (Chi-squal-t.) test was u s d . This is because of its

abilily to supply useful technique for comparing observed and expected frequencies.

The lbrmular (Chi-squaw) s ~ r o s

fij = indicnrcs LIIC D~SOI-ved frequency in the i - jth cell

cij - - incfiu~cs tlw expoctcd frequency i l l [he i - jth cell

N? = I-epr-csunts chi-squarc calculated

2: - - indicates summation sign.

Furthcr, t l ~ c expcctcd ficqucncy in Lhc i - jth cell is calculated as

= (Row ~o la l ) (Column total Overall total

The X2 (chi-sclunre) tabulated will be represented as XZ,. I t can be obtained as

XZ,, = x2a (I' - 1 ) (K - 1)

LY = represents' [IIC level of significance .

The results were rested itt 5% level of signiticance. To test the hypotheses the

square calculated) is g r m e r t1i:m X2!, ( ~ c chi-square tabulated). That is to say if X',

Hypothesis 1

Answers to qucstion numher 0 in the qucsrionnaire was used t o tcst the

validity of ~ h c slatcrncnt madc in hypothesis 1, which status that cosl of'

nianul'acturin~ goods locally has h w n 011 rhe i~icrease in the r e c m past ( 5 years r o

73

Table 4.14 Chi - Square h'latric Showing the Observed and Expected

Frequencies

li Nncwi

Calculations:

Onitsha 0 t h -Total]

I - ' I

e 1.j - - A (Row . total) (Column Total) Overall Toul

Sirlcc ~ l l c C;I~CUI;IL~CI ( c h i - s q u ; ~ ~ - ~ ) X 2 , is greater than the tabulated (chi-square)

X2,, that is X2, (10.21) > X2, (5.991) We now reject the null

hypothesis and accept the alternative hypothesis which states that cost of

rnanul'acturiny soocls locally has brcn on h e increase in the recent past (5 years to

CHI-SQUARE DISTRIBUTION

Fig. 4.8

76

We now reject the null hypothesis and accept [he alturrlative hypothesis which

states rhar cost of' locally n~ani~lhcrtir-cd goods has been o n the increase in thc recent

pas1 ('5 yc;113 1 0 cl;11c).

I-Iypothcsis 11

, . I his Ilypo~llesis srittcs that I'isc;~l a ~ l d mnnetar-y policies were responsible fbr

the rising cosl 01' locally rnani~f;icru~.c.cl guods. To test for lhe validity of the above

statcnlcnl, answers io qucstion numhcr 0 in the yueslionnairc wi15 used. Suc table

4.15 fix details:

Tahlc 4.15 Chi - Square hlatr-ic Showing the Obscrved and Expected

Total

5 4

3 1

Y cs

N o

Enugu ,

(9.53)

10

(5.47)

--

Awlta

(8.89)

4

(5.11)

'Toral

Nncwi

(22.23)

25

(12.76)

5

15

Onitshi1

(1 3 .?4)

15

(7 O O t

--

1 0

? - -3 3

0

2 1

oij

eij = &ow toral) (Column total Overall toral

Thc dcgree of f'rcctlom M = ( r - 1) (I( - 1 . Then a t 5 % lev:! of signil'icance,

CHI-SQUARE DISTRlSUTZON

. . Fig. 4.9

Since !he ca1cul:ired (chi-square) X z , is greater than the r;+bul~ted (chi-square)

X2,,, that IS X', (98,939) > X?,, (7.815). We now rtfjcct the tiull hypothesis and

accept h e iiltcrnnlrvc hyporhesic which \tares lliat tiseal and monetary policies were

ro\ponsibll: i i jr I ~ I C 1-1sin~ cosi of' locally rn i~nut 'x~i~red goods.

79

CI-IAPTER FIVE

RESEARCH FINDINGS, RECOh.1R.IENDATION AND CONCLUSION

5.1 RESEARCH FINDINGS

The 1i)llowing findings were made nficr reseawhiny on rhe topic "Rising Cost I

01 Locally Manufacrured goods, C;\USCS :\nd Effkct~".

I ) That wuly cost of manut'acrurins soods locally has been on the increase with

rtt'cr-tncc to the past five (5) ycars. This, nu doubt, has brought about a lor

ol' socio-economic problems I[} rhc. country.

b) That a 101 of factors arc responsible for this rising cost of locally

manut'actured ~ o o d s but prominent among them include:

i > Erntic po\vctr supply

11) Dilapidated inl'ractruc~i~l-c

i

i I )

i i i )

i v )

V )

v i )

v I i )

5.2 RECOMMENDATIONS

Based o n the I'intli~igs, the rcse;ischer hereby recomn~end that:

I ) Gov~1r111iient s l i o~~ ld provi~lc s~c;tiIy c lcc~r~cl ty ancl water supply, good roads,

rolecornrnunic;~tiol~, cor~ducivc legislations, among orhers Lo reducc

pr-oduct~on cost ancl make locitlly mnnul'tic~ured goods compt.ritive in the

wosld markut.

8 1

Covernmcnr should bring out policy on importation which will increase tariff

on l ' inishd (consurnable) good3 and reducrion of thar on manufacturing

machines, equipment and industrial saw materials, etc.

Government should give the local manufacrurers incentives like soft loans and

a130 conlpcl banks tc) lend industrialists money at reduced interest rate

Iket erence should bc yiven Irr the local manufac tururs whrn sharing foreign

exc11,inyc to enable them obtain Ibreign exchange at reduced cost.

l:,srabli\hment of' a private sector-1d anti-dumping committee to monitor goods

~rnported Into the country.

A rcv1t.w of ~ h r World Trade Organ~sa~ion (WTO) agreement implemenration

since the agrccmenl ;dlows variou5 countries to defer the implementation up till

2005 to grve local rnrinuF~crurer\ r m e to prepare to absorb the challenges of

cor~\p l~ ,~ncc

On rhc other hand, the local ~i~anul'ricturer should rnudernise their production

rechnolugies ro reduce waste and bc more cost-eftective in their operations.

M;tnutltcturers should consider tnerger as an option, whereby, they will come

toge~hcr Iiw I ~ I C purpost' 01 cc~~iibining rheir tinancial, material and human

rcwurcc\ r o ;ic!iiuvc a bettcr I c w l r

Organisatirms should also a w l 1 rhcrnselves of the opporrunirirs provided by the

Nigei- in capital ~ n a r k c [ w i ~ h a I ~ c w ro better their return on investment

M;in:tgcment should re-or&ni/e and rrstructure rheir manufricturing activities

to be IIIOJ,: I'ururc and result or~cntcd

82

5.3 CONCLUSION

~cchnologic:tl dcvcloprncn~s) and onc c r t ~ easily make hisil~er purchases via internet

or web site. With reduced transporiaiicm harriers. goods can tind their way to any

part of' rhc world. All rhc custonicr W;II I IY is 11ic right prr>ducl ;it the cl~ci~pesl price

by. All and sundry, both the govemmcnt, private sector and the individuals should

join1 hands and see wl-~at c m ~ bc donc LO rcduce tho growing wend of rising cost of

locally rnanuiiictured goods. If h i s rend is not changed, Nigeria will remain a

consumer xition ns ivoll it5 A dumping ground for all sorts of goods.

S~a i i s~ ic s have shown that o ~ ~ t ul';~hout 120 million Nigerians, only about 2.6 >

million peoplc are currently ernploycd, (Business Times, Mity 22, 2000). With

reduction in production cost more ~nm~~~li ic tur- in3 companies will spring up and more

people will be employed. This will reduce already heightened socio-economic

problcnls such as restive youths aurivllics, communal clashes, armed robbery, riots,

c.t .c, thescby ~naking Niger-ia :I bclrer place to live.

1 . Momoh, A. : Unionisr Lnmcnrs I-Iigh Level of Unemployment. Business 'Tin~cs. May 22, 2000. p . 10.

Altied, L. and Oxen, F. (1961): P r i c i n ~ for Marketing Executives. Wacfsworth Publishing Conip:~ny, Califonia. 2nd Edirion.

Brack, F. (1074): hccoun~ing and Mai~agun~cnt Studies. Orthid I'ress Brilain. 5111 13 i~ ion .

Garrison, R . H . ( 1985): Managcriit l Accounting MacDolantl and Evans Lin~i~ci l . 4111 Eili~ion.

G o r r n m , K . A , ( 1077): Cost Accounting , Principle and Managerial Appl ica~ion. Pitnlan Books Limited, London, 4th Edi~ion.

Conlcl, M and T;wt'!'ui, C'. (1963): Tr,mymrtation Expansion in Undcrilc.vtlo~ml Counrries. A comparative Analysis. C & ~ r a ~ h v Review: Volunie 53.

Gril'i'cn, R . M . (1084): Ma~~:~gerlrcnr i l r Modern Organisation, Houghton Mil'tlin Co. Nc\v Y o r k .

Hector, R . A . ( 1 989): Cosi A c c u u ~ ~ r i r ~ s : A Discipline in Transi~ion. Peter A. Esimin.

Hornby, A.S. (1974): Oxl'ord Advanced Learners Dictionary. Oxford University Press. Walton Slrcct.

Koon~z, 1-1. and Wcihrich, N. (1994): Management: A Global Perspective. McGraw Hill Inc. Singapore. 10th Edition.

Lawal, O.A. (1982): 'A' Lcvd Jlconon~ics of West Africa. Meinernann Ecluca~ional Rooks (Nig.) 1,11111tcd.

Lipsey, R.G. and Chryural. K.A. (1005): An Introduction to Positive Economics ELRS with Oxt'ortl University Press. 8th Ediliorl.

McCarthy, E.J . and Perreault, W. D. Js. (1990): Basic Marketinr;. Printcci in Unitcd States of Anlcrica. 10th Edilion.

Osuala, E .C. (198 1 ) : Introduction lo Reseal-ch Methodology. Fep Publishing Co. Ltcl. Onitsha.

Samuelson, P.A. (1980): Economics. MaGraw Hi l l Kng;ikusha Limited 1 1 t h Edirion.

WaId, J. (1984): Bigs's Cost Account. Mac Donald and Evaos Limited, London. I It11 Edition.

Wayne, J . M . (1972): Cost Acoout~ri~y; MacDonaltl and Evans Limited, Lolldon. 2nd Ed i~ion.

JOURNALS

Agada, Silncon: Mi~nul l~c~~r-c~-s Rcmo:r~~ Sti~gnant Economy. ~3usi1iess Timcs, Mi~y 17, 1900.

Departnient of Marketing University.,ot' Nigeria Enugu Canlpus

Date.. . . . . . . . . . . .

Dear Friend,

This quus~ioilni~ii-e is only uscd in research work to access your opinion on rhc c;iuseh a ~ d cl ' l 'cc~~ ol rising cost 01' locally mnnufitctured goods.

Yours sincerely,

SECTION A

P15RSONAL DATA

'rick v) on the correct Ros

Sex:

(a) Malc I I

(b) Fen~alc,. I I

M ; I I - ~ I : I ~ S~rtus:

(;I) Singlc [ 1

(h) M:I~I-iccl I I Occupation

(a) C~vi l Surva~lt I I ( b ) Business Man I 1

(c) St i ide~~t I1

d) Unenlployecl 1 1

Educational Attai~lment:

(c) Ni) l'orn~al E:,lluc:uion 1 I (b) First Sc l~wl [-caving Ccs~il'ica~e (FSLC) I I (c) WASC/GEC

(d) Graduates and above

Age:

{a) 17 years and below

(b) 18 - 30 years

( c ) 3 1 - 50 years

(d) 50 years and above

SECTION B

Tick (d) on the correct box or specify as applicable.

1 . Do y o u buy loc;illy ~nmui\ctulwl good'?

[ 1 (a) Yes

(b) N o 1 1

2 . Give reasons for youf answer in question No. 1

3. I!' yuur answer to question N o . I is yes, [hen how often?

(a) Vcry 0th [ 1

(b) Always [ 1

(c) Sometimes 1 1

d) Not nt all 1 1

4 . I-Iow do you consider prices 01' Incally manufactured goods to imporced ones?

d) Low I 1

8 . Can you altributt: the dc~alua t ion of naira and the difficulties in obtaining

foreign exchmge as one of tlw causes of rising cost of locally manufi~ctured

gooclc'?

{a) Ycs f 1

(bj I I (c) Don'[ Know I I

9. Do you agree [ha[ fiscal and monetary policies contribute to the rising cost

of' loc;~lly manufactured goods?

(a) Yes I I

(b) No I 1

(c) Not sure ( 1

10. Can y o ~ i atrributc the 'dilapiclated inl'l-astrucrure like bad roads, water supply,

erc., as one 01' the causes of high cost of production'!

(a) Yes 1 I

(1)) No I I (c) Don't Know 1

1 1. In your opinion, do y o u itgrcc h c eratic power supply also contribute to the

( a ) Ycs I I (b) N o 1 1

(c) Not sure ( 1

(c) very low I I

Do high cost of raw materials and spare parts contribute to the rising cost of

producing goods locally?

(a) Yes [ 1

(b) No [ 1 (c) Don't Know [ ]

Is dumping of cheap imported goods into the country as a result of high cost

of producing goods locally?

(a) Yes [ 1

(b) No [ 1 (c) Not sure [ ]

Do you agree that unemployment and retrenchment by industries is as a

result of rising cost of production?

Low industrialisation beins witnessed in the country could be attributed to

high cost of producing goods locally?

(a) Yes [ I

(b) No [ 1 (c) Don't Know [ ] ..

Rising cost of locally nlanufactured goods if not checked, can it be

detrimental to the economy and the citizenry?

(a) Yes [ I

(W No [ I

STI

1. TI

2. UI

3. 14

da

4. L%

0 f

5 . Is

1 h

6 . D

7. D

at

If

8. M,

94

ZUCTURED INTERVIEW SCHEDULE FOR M W A C T U R E R S

he name and address of the company

'hat type of products do you produce?

ow can you access your cost of production in recent years (from 5 years to

1 te)?

'hat is the unit cost of producing each product 5 years ago and what is the cost

' producing the same unit today'?

your machines or equipments locally made or imported? Where do you buy

e spare parts?

o you source your raw materials locally or abroad?

o you encounter any problem in getting your raw materials or machine from

)roadr?

yes, what are the problems and do they effect your cost of production'?

'hat factors do you think were responsible for the rising cost of locally

anufactured goods?

allowed to continue, can high cost of locally manufactured goods be

:trirnental to the economy or the citizenry'? If yes, how'?

ave this high cost of production been affecting your sales and stocks? If yes, *.

IW?

o you produce at full capacity'? If no what are the reasons?

'hat do you think can bc done in other to reduce the rising cost of

anufacturing goods locally'?

'hat are the gains of reduced cost of locally manufactured goods?

60 Sccc

45 Sccc

30 Secc

15 Sect

GO Secc

45 Sect

30 Secc

15 Sccc

Durati

30 mi:

60 mi3

on:

1s

.IS

97

NiGERIAN TELEVISION AUTHORITY CHANNEL 8 ENUGU

ADVERTISEMENT KATE

ANNOUNCEMENT (PURE PRODUCT COMMERCIAL)

TIME

TIME DURATION 1995

60 Sec. 2,014.00

8an1 - 4p1n 45 Sec. 1,596.00

30 Sec. 1,558.00

15 Sec. 1.178.00

60 Sec. 2,063.00

4pin - 7pm 45 Sec. 2,014.00

30 Sec. 1,406.00

15 Sec. 1,140.00

00 Sec. 3,212.00

7~113 -1 1y i i 45 Sec. 2,185.00

30 Sec. 1,596.00

15 Sec. 1,330.00

60 Sec. 2,014.00

I l p n - 45 Sec. 1,596.00

closc 30 Sec. 1,558.00

down 15 Sec. 1,178.00

2000 SEGEMENT

CODE

2,332.00 A

1,848.00 A

1,804.00 A

A . .