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1. Agricultural Project analysis
Abba Aminu(PhD)
Professor of Agricultural Economics
Department of Agric. Economics and Extension.,
Faculty of Agriculture
Bayero University, Kano, Nigeria
email: abbasron@yahoo.com

2. General overview of Project Analysis
• Project analysis consists of set of techniques in the economics tool-kit
use for guiding decisions in resource allocation and use.
• The area of application of project analysis has to do with investment
decision with long-term life span.
• Project analysis is carried out in the pre-investment stage and project
management is in the implementation stage
• The first point to bear in mind is that resources are limited and they
are alternative uses of resources. So when considering whether or not
to use resources in investment activities the techniques of project
analysis are applicable.

3. Overview contd
• Project analysis is not historical but future in orientation. The
techniques are used when resources are not yet committed.
• The second point to note is that project analysis is a team work which
may involve different specialist depending on the project type.
• Project analysis is micro in approach but not unrelated to macro-
planning( such as dealing with the choice of individual project to be
incorporated in development plan
• A natural place to start is to ask ourselves what is really a project

4. What is a project?
There are two approaches to the working definition of project
The first approach is a broader general working definition which define
project as ; the use of scarce resources during a specified time period
with the hope of some benefit in future. Under this definition all things
may fit in as project.
The second approach which is narrower define project as; an
investment activity involving the use of scarce resources where there is
a clear-cut cost-benefit stream, well defined beneficiaries and area of
coverage. It is a capital investment activity producing goods and
services over a period of time. This second definition is the one
normally applied within the context of project analysis.

5. Classification of project
We can classify project using different basis;
On the basis of ownership;
• we have government/ public owned project
• Individual/private owned project
On the basis of sector;
• Agricultural project
• Industrial project
• Health project
• Infrastructural project etc

6. Classification of project contdt
On the basis of relationship with other projects
• Rehabilitation project
• Modernization project
On the basis of enterprise within agric sector
• Rice project
• Cowpea project
• Poultry project etc

7. Classification contd
Among all these basis the most useful and relevant basis for
classification is ownership. Because ownership is common to all other
types of classification and the analytical approach in project analysis is
guided by ownership.

8. Basic features of a project
• A project has a location.
• It has administrative structure
• It has its beneficiaries
• It most to be capable of being plan separately
• It most have a starting and ending point
• It involves commitment of scarce resources
• It most have a time stream of cost-and benefits
• There most also be the hope of benefit at a later date or time

9. Agricultural project
What is agricultural project?
The first point to note about agricultural project is the unique nature of
agriculture. There are biological, economic and technical features
which makes agriculture unique. Because of these features it very
difficult to plan and prepare agricultural projects. Examples;
• Fishery project
• Tree crop project
• Livestock project etc

10. Project Development cycle
The project cycle constitute the various stages ( set of activities) through
which a project will pass. The cycle can be broadly divided into three phases;
1. Pre- investment phase
2. Investment phase
3. Post- investment phase
It is not every project that goes through all these stages. Such project that
did not go through all these phases are described depending on how far they
have gone in the cycle e.g. Aborted project( which means that a decision is
taken not to pursue the project), abandon project, uncompleted project etc.
It is not easy to differentiate between abandon and aborted project but they
all means that the project has not gone through complete cycle.

11. Pre-investment phase
Activities under this phase include;
• Project idea
• Project identification
• Project preparation
• Project appraisal and financing
This stage is what is refer to as project analysis or evaluation. A project start with project idea. It is
after these ideas that pre-feasibility is carried out, then identification before preparation.
Project idea- constitutes perceive alternative solutions to a problem identified. For each problem
identified a number of possible solution (ideas) should be generated. These ideas should be
subjected to analysis before choice. Ideas generation could be costly because it involves information
gathering.
Project identification - a project is identified when it is finally selected for evaluation/analysis. At
the end of the analysis a decision can be taken about which project to pursue.

12. Investment phase
Activities
• Detail engineering and design works
• Project implementation
This is the stage at which funds are now being committed and this
stage is also call project realization phase.

13. Approaches to Project analysis
They are two broad analytical techniques used in project analysis (i.e. in considering future
investment decisions). They are; economic and financial analysis
Economic analysis
• This approach is applicable for large scale government project.
• Its theoretical background is welfare economics or the theory of the public sector
concern with efficient resources allocation in the public sector. All large scale
government projects are evaluated using the theories of welfare economics
• The pareto-optimality theory (welfare economics) is highly applicable in this regard. It
prescribe the condition for efficient resource use.
Financial analysis
This approach is applicable to non-government but private investment project. Its
theoretical background is the theory of investment. The market is the overriding institution
and profitability is the main concern.

14. History of Project analysis
Financial analysis was the first technique develop for project analysis. Financial analysis is
the investigation into the profitability of private capital investment and it was the first to
develop right from the earlier times and this was due to three reasons;
1. The desire of the earlier capitalist to invest in the most profitable production
2. The fear of risk is the second reason
3. Checking of the viability by banks of proposal for financing project
At that earlier times, the assumption was that this goal of profitability will lead private
investors to select those project that would advance economic development (the Adam
smith invisible hand at play).
Since the second world war a contrary philosophy began to gain ground that Adam Smith
invisible hand cannot do everything
That government most intervene so as to move the economy forward.
The evaluation of project from the social point of view started to gain ground
But there were a lot of difficulties in using economic and social consideration in the choice
of projects.

15. Concept of project analysis
Evaluation, appraisal and analysis are used interchangeably.
Project analysis or evaluation is a systematic set of numerical , other information
and calculations on the basis of which the consequences, costs and earnings of
production of goods and services can be build and appraise.
Project analysis is a decision-making and planning tool for investment decision
In scope project analysis encompasses ;
• Assessmentof contribution of the project to set goals
• Assessmentof the factors or condition required for successfulimplementation
Project Goal; for government owned project the goal may be economic
development of the nation. So project that move the country towards economic
development should be chosen. For privately owned project the goal is
profitability.

16. Concept of project analysis contd
Project analysis/evaluation/appraisalcan be used in different contexts.
When used in ex-ante context evaluation/analysis is simply an assessment of the feasibility and
viability of an investment activity.
But when used in ex-post context, it is an assessment after the operation stage of the project (i.e.
an impact assessment).
There is also ongoing evaluation which is carried out during the execution of the project.
Project appraisal is often used interchangeably with project analysis and evaluation in ex-ante
context. Project appraisal is used to refer to evaluation or assessment of a project document ( this is
the standard world bank use of project appraisal).
It is a prove into the details of the project document with a view to improving it. It is in other words
a critical review of a formulated project.
The rigor of project appraisal depends of a number of factor such as ; the nature of the project (size,
complexity, financing or cost), quality of the project preparation and the time lag between
completion of the project preparation and the appraisal.
In the banks project appraisal is mandatory before it is considered for financing

17. Concept of project analysis contd
Feasibility and viability which simply means to question whether the project
can be done. Is it technically possible ? Is it viable or profitable? etc
Pre-feasibility which is to question the project possibilities before full scale
project evaluation/analysis exercise.
It is at this stage that possible alternatives project are generated and
considered for evaluation.
Pre-feasibility study is used to identified the project(project identification).
This step is not normally carried-out because of the cost but is very
necessary and should be done either formally or informally.

18. Project planning/preparation
Project pla i g a d a alysis is esse tially a pro ess of seeki g
alter ati e hoi es to rea h a agreed upo set of o je ti es i the
most efficient manner.
The reaso for seeki g alter ati e hoi es ei g to a oid pote tial
disaster if a proje t should fail fall do a d all the proje t
parti ipa ts o e tu li g after !

19. Project Planning analysis process( steps)
The project planning analysis process followed by most development
institutions (such as the World Bank), entail the following steps:
• the assessment of the proposed project in view of the agreed upon
project objectives
• the clear specification of project objectives and the relation of such
objectives to a particular national, regional or global strategies/overall
policy
• the description of the project in terms of the relevant economic,
social, institutional, environmental, technical and financial features
and the analysis thereof

20. Steps contd
• the analysis of alternative project proposals;
• the comparison of these various alternatives;
• the selection of the most beneficial project proposal;
• final decision-making by all major parties involved to implement the
project;
• project implementation according to the agreed upon project
objectives/goals as entail in the proposal; and
• monitoring and evaluation (including impact assessment)

21. Concept of Development project
A project is an instrument of change. Change processes have some basic common features.
These include:
• the broader context in which a project is situated;
• a (problem) situation which must be changed;
• objectives, or visions of the improved future situation, that should be achieved; and
• choices about where and how to intervene through time with investments, actions and
activities to achieve the envisaged improved future situation.
Therefore, development project aims to change a present situation to an improved
situation over time.
The concept of development is dynamic and essentially a human phenomenon. Therefore
change, participation and interventions are major component of development
A development project therefore represents a particular set of choices (or interventions)
over time to move from a present situation to an envisaged future situation

22. Concept of Development project contd
• When defining development projects, it is important firstly to distinguish between
privately financed projects and projects that form part of government (public) initiatives.
• In commercial agriculture, project development is largely financed privately (eg. a
private, farming operation).
• In developing areas, project development on private initiative, however, is extremely rare
and such financing is mostly linked to government or public sector funds
• Within the framework of development projects, the focus is thus largely on the flow of
government funds and the possible mobilisation of private funds
• Such flow of funds is therefore often regarded as the central element in many definitions
of projects
• The FAO, for example, refers to a development project as a proposal for investment
where a cost stream results in a certain flow of benefits over a specified period .

23. contd
• World Bank publications expand on this idea and link project development to a
flow of benefits. Ge erally, in agricultural projects we are thinking of an
investment asset from which we can expect to realise benefits over an extended
period of ti e
• In this perpectives, human development, distributional and social impacts were
not emphasise.
• The contemporary view is rather that development projects are in the first place
people-oriented and that provision must be made for the dynamic elements of
change over time.
• Recent convention thus defined a development project as follows: A project is an
instrument of change. It is a co-ordinated series of actions resulting from a
decision to change resource combinations and levels so as to contribute to the
realisation of the cou try’s development objectives . The focus here is mainly on
macro-economic objectives and policy of a country or region neglecting other
aspect e.g human, social aspects etc

24. contd
• The question (still) now is where does the project participants and more
precisely the beneficiaries (farmers, agribusinesses, etc) fit into this
defi itio ?
• The definition of a development project should therefore be expanded
(broader approach) to contain the notions of interventions, participation
and sustainability for all stakeholders and participants (including the
farmers, businesses, financial transactions and also the public and private
sector investors).
• This broader approach to defining a project allows project objectives to
include aspects such as increased farm income, employment creation,
distributional aspects, including gender and youth, environmental aspects
and national income and other economic growth dimensions.

25. Agricultural Development Projects
The main goals of agricultural development include, among other;
• An increase in profitability,
• An increase in productivity
• Creation of productive job opportunities
• Growth in the food and agric-business sector
These goals should be accomplished with least damage, if any, to the
environment.
Therefore, issues related to sustainable natural resource management,
biodiversity, environmental degradation e.t.c should be factored.

26. Classification of agric development project
• Projects aimed at technological innovation .The objectives of this
type of projects relate to the technical transformation of the
agricultural sector. Key issues include; enhancement of technical
effectiveness with the aim of increasing profitability through
improved productivity
• Projects aimed at expanding the natural resource base. This type of
project is aimed at change and development by unlocking natural
resources such as water and land for production purposes. This type
of project can make a tremendous contribution towards production
and agricultural development. This type of project are large scale and
requires a number of complimentary inputs and services to suceeed

27. Classification contd
• Projects aimed at improvement in the living conditions of previously
disadvantaged groups. This type of project aims to improve the
general living conditions of specific groups. The focus is ; conscious
public decision to intervene in the market process and change the
ownership structure of the factors of production and to channel the
projects’ benefits towards designated target groups.
• Projects aimed at Improving market infrastructure. Improvement in
market infrastructure is extremely important in developing
agriculture. Harvesting, grading, storage and transportation may lead
to a considerable increase in surplus of food and fibre. This type of
project usually are focused on commercialization.

28. Classification contd
• Project aimed at institutional capacity development. This type of institutionally orientated
project aims, in particular, to create a human and organizational infrastructure that
strengthens and supports local initiatives so that decision-making, the choice and
implementation of programs and projects, resource allocation and monitoring can take place
on a more de-centralized and informed basis. Within these types of projects, the focus is on
three levels, viz on macro level, local level and on the level of participating groups and
individuals (micro).
• Multifunctional investment projects. where more than one of the abovementioned
functions(package) is undertaken jointly within one project.
Note:
Good projects require good policy frameworks. The investment in policy and institutional
reforms are therefore important to optimize the impacts of development project types .
Institutional and policy reforms may not be a major investment activity per sé. But they are
important to project implementation and successes.