THE PROBLEMS OF ACQUISITION AND REPLACEMENT OF PLANT AND EQUIPMENT IN A MANUFACTURING INDUSTRY

 A CASE STUDY OF ANAMBRA MOTOR MANUFACTURING COMPANY LIMITED ENUGU.

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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

CHAPTER ONE

1. O Introduction 1
   • Background of the Study 1
   • Statement of Problem 5
   • Objectives of the Study 6
   • Significance of the Study 8
   • Scope of the Study 9
   • Research Hypothesis 10
   • Definition of Terms 12

CHAPTER TWO

• Review of Related Literature 13

2.1     Evolution of capital Goods                                                12

• Replacement 16
• The Concept of Capital Budgeting 19
• Financing of Capital Assets 24
• Foreign Exchange           27
• Capacity Utilization of Machinery and Equipment 30

CHAPTER THREE      

• Research Design and Methodology 37

3.1     Sources of Data                                                                 37

• Determination of Sample Size 39

CHAPTER FOUR        

• Presentation, Analysis and Interpretation of Data 45

4.1     Presentation and Analysis                                                  45

CHAPTER FIVE

• Summary of Findings Conclusion

and Recommendation                                                        74

5.1     Summary of Findings                                                        74

• Conclusion 74
• Recommendation 75
• 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:

1. Capital goods for producing capital goods
2. Capital goods for producing intermediate goods
3. 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.

 

• 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