BUSINESS PLAN

ON

ESTABLISHMENT OF RICE PROCESSING MILL

FOR

GALGAL ENTERPRISE

Prepared by:
Name: Mr. Ojo, Oluafemi Lucky

Address: 41, Rukuba Road, Behind Murna Hotel, Jos, Plateau State.

Phone number: 09036362958

1
 TABLE OF CONTENTS
Table of Contents Pages

I. Cover Page = = = = = = = = = = = i-ii

II. Business Plan Content = = = = = = = = = iii-iv

CHAPTER ONE

1.0. Executive Summary = = = = = = = = = 1

1.1. Background Information = = = = = = = = = 1

1.2. Vision and Mission Statement = = = = = = = = 2

1.3. Short, Medium and Long-term Objectives = = = = = = 2-3

CHAPTER TWO

2.0. Project and Implementation = = = = = = = = = 4

2.1. Investment Requirement = = = = = = = = = 4

2.2. Project Location = = = = = = = = = = 5

2.3 Employment Opportunity = = = = = = = = = 5

2.4. Project Implementation = = = = = = = = = 5-6

CHAPTER THREE

3.0. Market Review and Prospects = = = = = = = = 7

3.1. Market Prospects = = = = = = = = = = 7

3.2. Competition, Price and Distribution = = = = = = = 7

3.3. Products and Uses = = = = = = = = = = 8

CHAPTER FOUR

4.0. Rice Exportation and Value Chain = = = = = = = = 9

4.1. Introduction = = = = = = = = = = 9

2
4.2. Commodity Farmers = = = = = = = = = 9

4.3. The Local Buying Agents = = = = = = = = 10

4.4. The Commodity Merchants = = = = = = = = 10

4.5. Commodity Sales Agents = = = = = = = 10

4.6. Benefits of Rice Trading = = = = = = = = = 11

Rice processing in Nigeria = = = = = = = = = = 12

CHAPTER FIVE

Financial Projections = = = = = = = = = = 13-19

CHAPTER SIX

6.1. Risks Associated With Castor Production and Mitigating Plan = = = = 20

6.2. Supporting Evidence = = = = = = = = = = 21

Conclusion = = = = = = = = = = = 21

3
 CHAPTER ONE

EXECUTIVE SUMMARY

1.1 DATA COLLECTION

GALGAL ENTERPRISE proposes to acquire a rice milling plant with capacity to produce 8 – 10
tonnes / day and warehouse will be located at Shimankar, Shendam Local Government Area of Plateau of
the northern states of Nigeria, for the purpose of establishing a rice milling, which would specifically
milled rice for commercial purpose to suit for human consumption.

We are not buying or renting a warehouse, we are going to.

The warehouse shall be constructed for the rice mill, which processing activities will commence with
expectation of profitable yield after some years of processing. Milling other farmers products would be
allowed and it is expected that revenue from the rice milled would augment the productions operating
costs during the initial setting period of the rice processing. The proposed project will cost N10m. Wholly
financed by CBN AGSMEIS loan program.

Based on the projected cost/revenue structure of the proposed business project, the financial
projections show a satisfactory level of liquidity and profitability. These level of profits is expected to
be sustained throughout the milling and processing industry lifetime tenor.

Finally, this report contains information regarding the process and guidelines for the
implementation of a rice processing project, its inherent risks and benefits, milled procedure and
flow chart, as well as all the necessary and relevant data required to make an evaluation of the
proposed business venture.

1.2. VISION AND MISSION STATEMENTS

4
Vision – Bringing neatly milled rice of international standard to all households in Nigeria and beyond .

Mission – Partnering with God in business to advance the course of humanity .

1.3. OBJECTIVES:

i. Short term (current year):

 Provide quality services to our customers
ii. Medium term (next 1 – 2 years):
 To achieve financial success
iii. Long term (3 years and beyond):
 To maximize profit through quality product and heavy marketing campaign

CHAPTER TWO

PROJECT AND IMPLEMENTATION DETAILS

5
2.1 INVESTMENT REQUIREMENT
The total investment requirement for the implementation of the project is estimated at Ten million
Naira, distributed as shown the table below.

Project Cost and Funding Source.

Item Amount (N)

Total cost milling machine and shipping cost 3,000,000
Clearing and forwarding to site 1,000,000
Installation and consultancy 500,000
Construction of warehouse 2,000,000
Cost of 2 plots of land 500,000
Generator 1,000,000
Working Capital 2,000,000
Total 10,000,000

2.2 PROJECT LOCATION

The project location is Shimankar in Shendam Local Government Area of Plateau State. It is the largest rice
producing community in Plateau State, hence a suitable location for the rice mill .

2.3 EMPLOYMENT OPPORTUNITY

The implementation of this proposal will provide direct employment opportunities for a minimum of 4
Nigerians at the initial year of operations. The number of direct employees is expected to increase as
the production project enters maturity stage. Indirect employment is also projected for at a minimum
of six casual workers, whose services would be needed at the warehouse for, bagging, loading and the
offloading stages.

2.4 PROJECT IMPLEMENTATION

The implementation and the establishment of the project is expected to be completed within a period
of three months. This includes; provision for the negotiation, purchase of machinery, documentation,
mill settings, and office fixing. For ease of milestone definition, the following implementation
schedule/plans have been drawn up.

S/N Stage Activities Duration

1 Land Acquisition. Negotiation, acquisition and documentation. 1 Week
2 Construction of Operating office (permanent structures) and 1 Month.
warehouse landscaping for beautification
3 Machine acquisition Shipping to Nigeria, clearing and forwarding 1 Month.
4 Machine installation - 2 Weeks

6
5 Commissioning Commissioning 1 Weeks
Total 3 Months

CHAPTER THREE

MARKET REVIEW AND PROSPECTS.

7
3.1 MARKET PROSPECTS.
The products from the industry after the milling period shall be processed grain. The milled rice shall be
bagged in 10, 25, 50 and 100kg . The products shall be sold in tons (i.e. by tonnage) to customers,
processors, Local Buying Agents and at the international market. The factory will also engage in milling
for other farmers and processors. Market investigations reveal that northern is blessed with a crux
populations, which are reputable for the rice milling industry.

3.2 COMPETITION, PRICING & DISTRIBUTION

The Company’s products shall face some competitions with existing processors within the rice
processing sector. However, the industry will process high quality rice at very competitive prices. The
industry will equally apply modern Milling techniques, using quality equipment/machines that would
guarantee good yields and satisfy the confidence of our customers. The Company’s product will be
sold at the open market, national and international markets.

3.3 PRODUCTS OF RICE AND THEIR USES.

The grain (Seed) & Uses

The rice seed is processed for both food and industrial uses. Rice has numerous health benefits; it is
an instant source of energy for the body and is good not only for skin but also in maintaining blood
sugar levels. And by-products of rice are used in feeding of our domestic animal.

Summary of Rice Uses

 The oil is processed from the bran for both food and industrial uses. Broken rice is used in
brewing, distilling, and in the manufacture of starch and rice flour. Hulls are used for fuel,
packing material, industrial grinding, fertilizer manufacture, and in the manufacture of an
industrial chemical called furfural.

CHAPTER FOUR

RICE EXPORT & VALUE CHAINS

8
4.1. INTRODUCTION
The export business of Rice is still at its very primitive stage in Nigeria with a high potential for
growth. The market is thus inexhaustible [especially for agriculture commodities and other
consumables]. Therefore, there is space for our product to sale at international market to earn foreign
exchange via the export business. We will process these product and sold it out to; commodity
farmers, local buying agents, commodity Merchants or Sales Agents. 
There is a huge demand for agricultural commodities especially rice by exporters in Nigeria.

4.2 COMMODITY FARMERS

The farmers cultivate the agricultural commodities and sell them to the local buying agents. These
farmers could be in cooperatives or act as individuals. The farmer’s major need apart from finance for
expansion, is basically, getting buyers for their commodities during the harvest losses which have been
put at 30-50% in Nigeria by the world of food science. Exporters buying directly from farmers are
however, exposed to the risk of procuring unprocessed, ungraded and unsorted commodities. 

4.3. THE LOCAL BUYING AGENTS

Local buying agents go into the interior and villages to buy from different farmers at the farm gate and
commodity markets and sell to the commodity merchants. The local buying agents have small capacity
with monthly total turnover of less than N2.5 million. They usually do not have equipment to check
the quality of the products and rarely have warehouses. Therefore, exporters buying from local buying
agents could get the commodity at a cheaper rate but they are at the same time exposed to a very high
risk of procuring low quality commodities. 

4.4. THE COMMODITY MERCHANTS

The commodity merchants reside in cities and towns. They buy commodities from various local
buying agents. They have large capacity with total monthly turnover of over N20 million. They often
have large warehouses and also have equipment to check the quality of commodities purchased from
local buying agents. They process these commodities and sell them to exporters and local
industries. Exporters buying commodities from merchants can be assured of good quality products.
They often prefer to sell from their own location but if necessary, they can deliver to the exporters’
warehouse. 
4.5. COMMODITY SALES AGENTS
Commodity sales agents are mainly located in places like Lagos, in Nigeria. They sign an agreement
with exporters to deliver exportable commodity to their warehouses in Lagos. They purchase the

9
commodities from the merchants or sometimes the local buying agent and typically depend on the
exporters mobilizing them with an advance payment [all or part of the total cost of delivery to Lagos]
in order to operate successfully.

BENEFITS OF RICE TRADING

 Higher Return on Investment & Zero Taxation. 
 Guaranteed Pre-Determined Profit. 
 Access to Export Grants. 
 Access to Micro Finance Loans.

THOUGH
• Recent Developments in Rice Research in Nigeria Plant: Over the last 2 decades, rice in
Africa in general has changed focus with the objective to stem two major problems that
faced rice mill and processing industry. Climate change and government policy’s in these field.

4.6. RICE PROCESSING SYSTEM IN NIGERIA

THE MILLING SYSTEM

The primary unit of processing of the rice industry is the company where the unprocessed is milled to
producee fine grains.   There are also brawn of rice.   The industry units are of different sizes and may
be classified as small, medium, and large-scale industries.  The processed rice as the name implies,
milled untended in the industry.   

SMALL-SCALE MILL
Rice milling is a new phenomenon to West African culture.   In most parts of Africa the industry
culture is basically subsistence.   The family processed a small quantity of Rice for their food needs.
Industry-holdings are therefore small and scattered. The small people cannot develop large-scale
unless the government steps in to build industry for public use.   Thus it is difficult to think of one
family owning a large contiguous industry suitable for rice milling.  A small-scale rice industry may
milled 5tons/day. The company’s processing of grain may be processed by the farmer, using the
traditional method of threshing, or sold to other processors. During the lean season the farmer sells to
the small-scale processors at prices higher than those offered to the larger mills. The small-scale mill
are normally well maintained even though they may not adopt modern techniques.

10
MEDIUM SCALE MILLS
The medium-scale industry ranges from 10 to 30 tons/day. This type of industry normally uses modern
techniques. Some industry in this category own production facilities and therefore use their own output
as well as buying from neighbours. Those who do not own farms face marketing problems during it
season whenfarmers is having problem. If the farmer's network is failed they may suffer great loss of
processing and income making it difficult for these industry to finance their operations.   As a result a
number of industries in this category are unable to adequately maintain their mill, resulting in
decreased output from year to year. 

LARGE SCALE MILLS

Large-scale industry cover in excess of 40-50 tones and above. These are state owned enterprises
which were established to meet the internal consumption needs of the country and provide a surplus
for export.  The industry are well run and maintained.   They employ the best techniques and employ
highly skilled professionals to work in their operations.   Unfortunately they are always considered
intruders in the communities where they operate, simply because they employ people who are not
natives of the immediate catchment area. 

CHAPTER FIVE
FINANCIAL ANALYSIS

11
 Project Cost and Funding Source.
Item Amount (N)
Total cost milling machine and shipping cost 3,000,000
Clearing and forwarding to site 1,000,000
Installation and consultancy 500,000
Construction of warehouse 2,000,000
Cost of 2 plots of land 500,000
Generator 1,000,000
Working Capital 2,000,000
Total 10,000,000

SALES ANALYSIS

We are focusing on rice milling for clients in this first year, hence the project cost will be targeted at it

We will be milling an average of 8 tonnes per day = 80 bags (100kg) per day.

We will work 6 days a week = 480 bags (100kg) per week = 1,920 bags (100kg) per month.

One bag of 100kg paddy is milled at N900

One month:

1920 bags × N900 = N20,736,000

Period Quantity Price per Ton Average Amount (N)

produce bag/100kg produced ton price

Annual 23040 900 2880 9,000 N20,736,000

Total sales N20,736,000

Total sales minus production cost.

Total profit divided by total sale.

Income / profit N10,736,000

Revenue Ratio 51.77%

4.4. PRELIMINARY AND PRE-OPERATIVE EXPENSES

Preliminary and pre-operative expenses including but not limited to establishment, legal and admin
charges, feasibility fees and travelling expenses form part of expenditure outlay in Year 1. A provision
of N220,000 is considered sufficient to finance these expenses:

12
 s/n Item Description Total

1 Company registration We registered business with CAC and the 50,000

and plan business was prepared with fee

2 Capital expenses Our expenses basically the miscellaneous 100,000

assets other primary fee attached

3 Legal requirement FIRS Free

4 Advertising Online, media and printed 50,000

5 Transportation Transport charges used in creating awareness 20,000

Total: 220,000

OPERATION EXPENSES
i. Manpower Requirements
A minimum of 6 employees would be needed to trigger operational take off in first Production cycle,
whose total annual wage bill is estimated at N2m as shown in the table below. Need for additional may
arise as from the end of year 2 operation.

Particulars Nos. Monthly salary (N) Salary per annum

(N)
Skilled Worker – Manager 1 50,000 600,000
Skilled Worker – Supervisor 1 30,000 360,000
Unskilled workers 2 20,000 each 480,000
Total 4 1,440,000

ii. Sub Working Capital Requirements

Working capital funding need for the 1st years production cycle is as shown in the table below:
Variable Cost
S/ Cost Items Calculation Value
N
1 Direct Labour (securities) N20,000 x 2 480,000
2 Diesel 216 80,000
Total 480,00
The generator will consume 4 litres of diesel per hour. We intend working for 9hrs daily, 6 days a week.

LOAN APPLICATION FOR EXPANSION

13
4.5. LOAN REPAYMENT

Items Amount Comments

Pre-operating expenses 220,000 For existing activities before inject the

fund

Total startup capital estimate 220,000

SOURCES OF FUNDS

CBN loan 10,000,000 5% interest

Personal fund 0

Total funds sourced N10,000,000

LOAN REPAYMENT SCHEDULE

4.5.1. Loan repayment schedule

Month Principal Monthly Monthly Principal + Cumulative

principal interest interest

0 10,000,0000

1 10,000,000 166,666.67 8,333.3 175,000 175,000

2 9,833,333.3 166,666.67 8,333.3 175,000 175,000

3 9,666,666.6 166,666.67 8,333.3 175,000 175,000

4 9,499,999.9 166,666.67 8,333.3 175,000 175,000

5 9,333,333.2 166,666.67 8,333.3 175,000 175,000

6 9,166,666.5 166,666.67 8,333.3 175,000 175,000

7 8,999,999.8 166,666.67 8,333.3 175,000 175,000

8 8,833,333.1 166,666.67 8,333.3 175,000 175,000

9 8,666,666.4 166,666.67 8,333.3 175,000 175,000

10 8,499,999.7 166,666.67 8,333.3 175,000 175,000

11 8,333,333 166,666.67 8,333.3 175,000 175,000

12 8,166,666.3 166,666.67 8,333.3 175,000 175,000

13 7,999,999.6 166,666.67 8,333.3 175,000 175,000

14 7,833,332.9 166,666.67 8,333.3 175,000 175,000

14
 15 7,666,666.2 166,666.67 8,333.3 175,000 175,000

16 7,499,999.5 166,666.67 8,333.3 175,000 175,000

17 7,333,332.8 166,666.67 8,333.3 175,000 175,000

18 7,166,666.1 166,666.67 8,333.3 175,000 175,000

19 6,999,999.4 166,666.67 8,333.3 175,000 175,000

20 6,833,332.7 166,666.67 8,333.3 175,000 175,000

21 6,666,666 166,666.67 8,333.3 175,000 175,000

22 6,499,999.3 166,666.67 8,333.3 175,000 175,000

23 6,333,332.6 166,666.67 8,333.3 175,000 175,000

24 6,166,665.9 166,666.67 8,333.33 175,000 175,000

Total loan repayment N10,500,000

Purpose of Loan

Our firm is seeking the loan facility:

 To establish rice processing and to meet up with market demand.

 Repayment Plan: Loan interest repayment will be commence after 6 months (six months) of
moratorium and the total repayment will be repaid within a 60 months (5 years Tenor).
 18 months of moratorium

We herewith declare the followings:-

1. The information / documents given herewith and to be given in the future are true and
accurate to our best knowledge. Besides, it is also understood that such documents /
materials given by us are non-returnable for reason whatsoever.
2. We are willing to pay whatsoever fee / cost / commission / charges / levy or others that the
intending bank may impose in relation to the loan offered as per the letter of offer of loan if
the terms and conditions of loan deemed acceptable to us.
3. We undertake to reply to or to contact the lending institution without delay so as prompt
repayment of the loan.

15
 PROFIT AND LOSS ACCOUNT

COMPONENTS: Year: 1 Year: 2 Year: 3 Year: 4 Year 5

Sales 20,736,000 22,809,600 25,090,560 27,599,616 30,359,578

Cost of product - - - - -
sold

Gross profit 20,736,000 22,809,600 25,090,560 27,599,616 30,359,578

EXPENSES

Operating expenses 2,000,000 2,100,000 2,200,000 2,300,000 2,400,000

Interest 100,000 100,000 100,000 100,000 100,000

Insurance 0 0 0 0 0

Amortization 0 0 0 0 0

Total expenses 2,100,000 2,200,000 2,300,000 2,400,000 2,500,000

Net before tax 18,636,000 20,609,600 22,790,560 25,199,616 27,859,578

Income tax 931,800 1,030,480 1,139,528 1,259,980.80 1,392,978.89

Net profit after 17,704,200 19,579,120 21,651,032 23,939,635.19 26,466,599.10

tax

Assumptions:

• Net sales - cost of product sold = Gross profit

• 10 % increment on revenue and 5 % on every year operation

• Tax was computed at 5% of net income

CASH FLOW

Period Period 0 Period 1 Period 2 Period 3 Period 4 Period 5

Pre-start Year 1 Year 2 Year 3 Year 4 Year 5

Cash at hand 0 17,704,200 19,579,120 21,651,032 23,939,635.19 26,466,599.10

Cash inflow

Cash sales 0 20,736,000 22,809,600 25,090,560 27,599,616 30,359,578

16
Personal fund 0 - - - - -

Loan proceed 10,000,000 - - - - -

Total inflow 10,000,000 20,736,000 22,809,600 25,090,560 27,599,616 30,359,578

Cash outflow

Pre-operating 220,000 0 0 0 0 0

Open stock 0 0 0 0 0 0

Operating exp. 0 2,000,000 2,100,000 2,200,000 2,300,000 2,400,000

Insurance 0 - - - - -

Asset cost 0 8,000,000 - - - -

Interest 0 100,000 100,000 100,000 100,000 100,000

Repayment 0 2,000,000 2,000,000 2000,000 2000,000 2,000,000

Tax 931,800 1,030,480 1,139,528 1,259,980.80 1,392,978.89

Total outflow 220,000 13,031,800 5,230,480 5,439,528 5,659,980.79 5,892,978.88

17
 CHAPTER SIX

6.1. RISKS ASSOCIATED WITH RICE PROCESSING AND MITIGATING FACTORS.

Rice processing business just like any other agricultural business in a developing country like Nigeria
has its own peculiar challenges and risks, some of which are as listed in the table below. Some of the
factors and actions listed hereunder would however help mitigate these identified risks;

S/N Risk Type/Definition Mitigates

o
1 Reduction in agricultural  Management program and extension services to help
production, due to crop farmers prevent and deal with diseases
diseases  Apply disease and Pest control.

2 Organic certification not Work with reliable farmers and other certifying agencies in
obtainable due to chemical Nigeria on careful selection of initial areas
drift or other factors
3 Low market prices due to Maximize efficiency to keep costs down and explore joint
competition from existing promotion with other countries to increase world demand
producers.
4 Nigerian Government Work through channels to secure high priority for this
unwilling or unable to development plan
perform the functions
required of it
5 Inadequate labour in certain Adopt competitive pricing methods
areas for picking

18
 6 Low yielding varieties of Avoid low yielding varieties. Source for quality
castor in Nigeria. seed/seedling from reliable sources
7 Destruction of plants by Adopt integrated weed management technique which entails
pest attacks and diseases. the application of herbicides along with cultural weed
control.

Conclusion
The cost benefit analysis above has shown the total profit income of the products that are realizable in
one ton of first production cycle with a net profit of about N10,736,000 bearing in mind that total
capital invested have been deducted from the revenue of first production cycle. More profit will be
realizable in subsequent production cycles. The very high (51.77% revenue ratio) return on
investment of this project signifies that the project is very much Feasible, Viable and Profitable.

19