Cost of starting cassava-based adhesive business

Cost of starting cassava-based adhesive business

Cassava, also called Manihot-esculenta, is a root crop, native to tropical America, which grows in over 17 states of the country. It also grows in other parts of Africa. Cassava now accounts for about 30 percent of the world food production. It is consumed by millions of people throughout the tropics. In its value chain, over 20 products are processed, amongst which is cassava adhesive (glue).

Production of Cassava-based adhesives is a chemical reaction during which appropriate quantities of caustic soda, hydrochloric acid, calcium chloride and organic acid is added to the Cassava starch for proper dissolution and the solution is later cooled. Solution of preservative such as formaldehyde is added to the mixture to obtain homogeneous product.

MARKET INFORMATION

The demand for adhesives in Nigeria for various uses including wood work, paper and packaging is quite enormous. Different types of adhesives can be formulated to meet the requirement of different end users. This makes the business very versatile. It therefore, implies that a producer can decide to specialise in producing a particular type of adhesive or may produce different types based on demand to meet the needs of different end users.

Large percentage of the nation’s adhesive need is met through importation whereas domestic production accounted for only few percentage of the total supply. It is estimated that the nation’s demand for various forms of adhesives is in excess of 350, 000 metric tonnes per annum.

The average retail price of adhesive depends on the type of adhesive and the quality. However, the retail price of 5kg wood veneer ranges between N900 and N1, 200

RAW MATERIALS

The raw materials for production of cassava starch adhesive are: Cassava starch/ Cassava flour, Caustic soda, Formaldehyde, Hydrochloric acid and Sodium silicate. These are readily available in various industrial raw materials markets all over the country.

Also, the nation is currently encouraging industrial utilisation of cassava and cassava products. Nigeria being the largest producer of cassava in the world, sourcing the major raw material i.e. Cassava starch or cassava flour for this project will not be a difficult thing.

MACHINERY AND EQUIPMENT

The major machinery and equipment for production of cassava starch adhesive are the Adhesive Reactor and the Filling Machine.

Federal Institute of Industrial Research, Oshodi (FIIRO) has designed and fabricated Adhesive Reactors suitable for adhesive production at micro, small and medium scales. The Reactor can be fabricated and delivered within four weeks of commissioning by the investor/entrepreneur. The cost however, depends on the capacity which could vary from 100L – 1,000L/Batch.

PRODUCTION PROCESS

Production of adhesive includes the following simple processing steps:

Weighing

The raw materials are weighed accurately according to the formulation.

Gelatinisation

The base material i.e. the starch is gelatinised in the reactor using caustic soda.

Acidification

The       gelatinised   starch is acidified to normalise its PH.

Mixing

Preservatives and extenders are added and the mixture mixed thoroughly to obtain homogeneous product.

Packaging

The product is packaged in plastic containers ready for sale.

PRODUCTION PROGRAMME

The following assumptions are made in arriving at the proposed production programme.

Production                Days/Annum–300

Production                Volume/Batch–500L

No        of                    Batches/Day–2

Production                Volume/day–1,000L

Production Volume/Annum – 300,000L

LABOUR REQUIREMENT

Both skilled and unskilled personnel are required for the successful operation of this venture. These consist of the production, administrative/account and marketing personnel. Staff matters, finance/account, store management, security, purchasing and other administrative functions are handled by the administration/account division, while the production division takes charge of production. Marketing activities are the responsibilities of all the staff especially the marketing division staff. About 20 personnel are required for the project to take off.

TOTAL INITIAL CAPITAL INVESTMENT

Initial Fixed Capital       N8, 302,190.00

Initial Working Capital N4, 455,830.00

Pre-production                  Expenses N801, 560.00

Contingencies                  N677, 979.00

TOTAL                                   N14, 237,559.00

NB: The initial fixed capital includes factory building, machinery and equipment, generator, project vehicle, office furniture, equipment and bore hole.

PROFITABILITY INDICATORS

Return on Investment (Year 1) 51.1%

Return on Equity (Year 1) 127.7%

Net Profit to Sales 16.5%

Gross Profit to Sales 23.6%

Profitability Index 2.1

Breakeven Point (Year 1) 46.4%

Payback Period 1.4Years

Net Present Value @ 25% N5, 130,380.00

Source: FIIRO.