ABSTRACT
This
research is a study of the problems of acquisition and replacement of plant and
equipment in a manufacturing industry.
It is aimed at examining the activities involved in the production
process with a view to using it in determining whether or not resources were
fully utilized. It is also aimed at
discovering the bottlenecks and weakness in the operations of manufacturing
firms using Anambra motor manufacturing company limited as a case study.
This
study has five chapters, which were combined to bring out all the ideals for a
comprehensive work.
Chapters
one contains general ideas of the study.
It introduced the study and laid the foundation for the other chapters
that appear in the other parts of the study.
It contains three hypothesis which were tested in chapter four for
statistical significance.
Chapter
two reviewed related literature on the evolution of capital goods and
investment appraisal techniques to be used in capital budgeting.
However,
chapter three is on the research methodology, population size, sample size and
measuring instrument used in the study.
To make the study possible, survey research method was used based on the
sample size of fifty two respondents.
Questionnaires
were used as the research instruments administered, data collected, analyzed
and interpreted in chapter four.
Chapter
five deals specifically with summary, conclusion and recommendation
TABLE OF CONTENT
Title Page i
Approval Page ii
Dedication iii
Acknowledgement iv
Abstract vi
Table of Content viii
CHAPTER ONE
1. O Introduction 1
1.1
Background of the
Study 1
1.2
Statement of Problem 5
1.3
Objectives of the
Study 6
1.4
Significance of the
Study 8
1.5
Scope of the Study 9
1.6
Research Hypothesis 10
1.7
Definition of Terms 12
CHAPTER TWO
2.0
Review of Related
Literature 13
2.1 Evolution of capital Goods 12
2.2
Replacement 16
2.3
The Concept of Capital
Budgeting 19
2.4
Financing of Capital
Assets 24
2.5
Foreign Exchange 27
2.6
Capacity Utilization
of Machinery and Equipment 30
CHAPTER THREE
3.0
Research Design and Methodology 37
3.1 Sources of Data 37
3.2
Determination of
Sample Size 39
CHAPTER FOUR
4.0
Presentation, Analysis
and Interpretation of Data 45
4.1 Presentation and Analysis 45
CHAPTER FIVE
5.0
Summary of Findings
Conclusion
and
Recommendation 74
5.1 Summary of Findings 74
5.2
Conclusion 74
5.3
Recommendation 75
5.4
Limitation of the
Study. 78
References 79
Appendix 81
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
The
establishment of a consistent industrial system in which technology is fully
understood is the primary objective of many developing countries. According to Omorodion (1986) an industrial
system is a body of capital goods industries (Metallurgy, engineering, building
and public works) of intermediate goods and consumer goods which are linked
together by buying and selling relationship.
There are many obstacles to the
emergence of an industrial system. In
this study, they will be grouped into two, namely external and internal
obstacles. External obstacles are
likened to the world economic crisis.
The fragile nature of the economy has resulted in industrialized countries
altering their production system, thus, modifying the production system or
methods and the distribution of industrial products. These are noticed in monetary imbalance, the
drop in exports of manufactured products and the reduction of outlets. The bad economic situations experienced by
the industrialized countries bounce back to the developing countries.
The situation is worsened by the
continuous deterioration in he terms of trade, increasing indebtedness and the
difficulties in the payment of debts. It
is clear that inordinate increases in
interest rtes are causing considerable problem in the debt management. Some of them have instituted austerity
measures in order to avoid bankruptcy.
In Nigeria,
the structural Adjustment progrmme measure was introduced by the Babangida
administration.
The internal obstacles are linked with
the production system in any developing economy. It could be as a result of the scarce
agricultural goods and services to satisfy the needs of the ever growing
population of a country like Nigeria. The difficulties of achieving mastery of technology
in relation to capital goods are undoubtedly one of the most serious hindrances
to the birth of an industrial system in Nigeria. For the past three and a half decades, Nigeria has
invested heartily though unequally in the acquisition of capital goods.
Omorodion (1988) defined capital gods,
as those manufactured goods use in the production of all sorts of consumer
goods capital goods can be used to produce some other capital goods like plant
and equipment. He further classified
capital goods by their uses such as:
a.
Capital goods for producing capital goods
b.
Capital goods for producing intermediate goods
c.
Capital goods for producing consumer goods
These
capital goods constitute the base for the industrialization process because
each category of the capital goods can help in the development of another.
A
close analysis of works on the problems of industrialization in Nigeria has
shown that planned objectives do not always achieve the desired results, but
they rather result in opposite results due to lack of relationship between industries, lack of technological expertise
to handle the imported capital or inadequate personnel etc.
These difficulties resulted in the Nigerian Government modifying her
trade relationship with the industrialized countries.
The
federal government had the vision to more Nigeria forward and this lead to
the establishment of six progressive automotive manufacturing plants in the
mind seventies and eighties. These
plants include Peugeot Antomobile of Nigeria located in Kaduna, Volkswagen of Nigeria Limited located
in Lagos, Leyland motors company located in Bauchi. There are other private assembling lines like
the federated motors which assembles Bedford
buses amongst others. These plants have
a total fixed capital investment of about four hundred million American dollars
and can provide employment for not less than one million persons. The combined installed capacity of these
commercial and private industries is over one hundred and twenty units
annually.
However,
the advent of structural Adjustment programme in 1986 initiated the
actualization of the vision of the founding fathers of these entities. This programme helped the industries up to
the early nineties. However, since the
middle nineties, these industries have been plundering and oscillating between
life and death. Some have already caved
in while the few surviving ones scrap on marginally. With the exceptions of Anambra Motor
manufacturing company, Peugeot Assembly of Nigeria and some other private
assembling lines, the other manufacturers have stopped production entirely or
are producing far below installed capacities.
1.2
STATEMENT OF THE
PROBLEM
Plant and equipment items form the
largest group of total fixed assets employed in an industrial enterprise. Its percentage to total fixed assets varies
from industry depending upon the degree of mechanization, manufacturing
processes and technology adopted.
It has a higher
percentage of the total fixed assets employed by a production oriented
enterprise.
The acquisition and replacement of
plants and equipment have always been a major problem with indigenous
industries especially those enterprises that are not multinationals. On account of the above This study addresses
itself to the following problems.
a.
To find out f Anambra motor manufacturing company limited
is under capacity utilization is due to the problem of acquisition and
replacement of plant and equipment.
b.
To identify what plant and equipment problems it is
experiencing.
c.
To find out the extent to which scarce financial resources
in the economy affect the acquisition and replacement of plant and equipment.
d.
To find out if there are external barriers militating
against acquisition and replacement of plants and equipment.
e.
To identify the internal barriers (if any) militating
against the acquisition and replacement of plants and equipment.
1.3
OBJECTIVE OF THE STUDY
The shortage of products, the high
prices of available products and the production of different types of products
to satisfy consumers in Nigeria
have been of growing concern among
manufacturing firms. Manufacturing
industries have not been able to meet their primary objectives because of the factors affecting their production systems.
The
major factors affecting manufacturing firms in this country today is the
problem associated with their productive system. These problems could be divided into internal
and external.
The internal problems that a firm
faces in its environment could be the lack of financial resources for the
acquisition of plants and equipment, the maintenance of these plants and
equipment, the replacement of plant and equipment to the capacity required to
meet customers demand ad how to generate the funds.
The external problems are not normally
under the control of the firm, these problems include low infrastructures,
government policies and the technology of industrialized countries.
Therefore, the
purpose of this study are as follows:-
1.
To find out if there is under utilization of resources.
2.
To find out the bottlenecks and weaknesses in the
operation of Anambra motor manufacturing company as re-paid plants and
equipment acquisition and replacement.
3.
To make recommendations on the best method to improve in
the resources utilization.
4.
To determine the rate of acquisition and replacement of
equipment.
5.
To identify the factors influencing the rapidity of
replacement.
6.
To examine the contribution of acquisition and replacement
of replace to organizational performance.
1.4
SIGNIFICANCE OF THE STUDY
This research work would be of immense
relevance to a lot of people in different ways, it will be very helpful to the
economy at large because plant and equipment have the highest percentage of the
total fixed assets employment by any production oriented enterprise and it is therefore
expected to yield maximum production to satisfy the economic needs of the
people.
This study will also be of
significance help to investors since they will like to know how fund are being
utilized in the acquisition and replacement of plants and equipment as this
takes the largest portion of funds invested by the investors.
Also, this study will be of help to
different financial institutions like insurance companies, banks, financial
houses etc. In order to avail
themselves of the opportunity of knowing the plants and equipment needed by
manufacturing firms and the way such plants and equipment will be acquired and
replaced (ie the funding and the sources of fund).
Other researchers
on any similar topic will find this research work helpful as it will form a
base for the review of related
literature and also will be a stepping-stone for future researchers.
1.5
SCOPE OF THE
STUDY
This research will
find out the problems of acquisition of plant and equipment in Nigeria
industries (A case study of Anambra Motor Manufacturing Company Limited). Therefore, other materials places, items
activities or periods are just for the purpose of clarity and vivid
understanding of the subject matter and not within the scope.
A
research of this nature cannot be carried out without difficulties in the
process. There is no doubt that it was
an up hill task for me to carry out this research work.
1.6
RESEARCH
HYPOTHESIS
According to Oyi, hypothesis is a “proposition put forward
as a basis for reasoning on a supposition formulated from provided date and
presented as a temporary explanation of occurrence as a science in order to
establish a basis for future research”.
Also, Chinelo G.O Nzelibe and Guy C. Ilofu defined hypothesis as a guess
on a statement of conjunctive showing the relationship between two or more
variable in the population under certain condition. The relationship can be general on specific
the impact of one or the other i.e cause-effect”. In other to analyse the problems o
acquisition and replacement of plant and equipment in a manufacturing industry,
the following hypothesis will be made.
Ho: There is no direct
relationship between the rate of acquisition and replacement of plant and
equipment and organizational performance.
Hi: There is a direct relationship
between the rate of acquisition and replacement of plant and equipment and
organizational performance.
Ho: Under utilization of capacity
in manufacturing industry does not hinder the acquisition and replacement of
plant and equipment.
Ho: Under utilization of capacity
in manufacturing industry hinders the acquisition and replacement of plant and
equipment.
Ho: Availability of financial
resources does not greatly influence the acquisition and replacement of plant
and equipment.
Ho: Availability of financial
resources greatly influences the acquisition and replacement of plant and
equipment.
1.7 DEFINITION OF
TERMS
ACQUISITION: This is the act of possessing property. However, properties that has never belonged
to anyone or that has been abandoned may
be acquired.
PLANT AND EQUIPMENT:
These are those tangible
properties of a relatively character that are used in the normal conduction of
business.
MANUFACTURE: To make or produce something especially by machinery or
other industrial processes and usually in large quantities.
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