Chaperoned by the Petroleum Products Pricing Regulatory Agency (PPPRA), Nigeria is beginning to explore the possibilities of earning foreign exchange from the increasingly competitive biofuel industry, in addition to providing cleaner energy fuel. Besides, the nation also plans to stimulate a domestic biofuel industry with $50 billion seed funding. Chineme Okafor writes
Although hydrocarbon (crude oil and gas) has remained the backbone of Nigeria’s economy, providing up to 90 per cent of foreign exchange (forex), which the country relies on to balance her trade interactions in the global marketplace as well as sustain economic activities within her territories, it has however, contributed just about 30 per cent to the country’s Gross Domestic Product (GDP), thus indicating that its hold on the economy though currently enormous, could be reduced if sustainable alternatives were found.
While the oil sector exerted so much influence on the country’s forex and yet minimal impacts on its GDP figures, agriculture has, on the other hand, contributed between 30 and 40 per cent to Nigeria’s GDP, and has reportedly employed more labour than oil has ever done, so far.
Essentially, Nigeria is an agrarian country, and has an estimated 71 million hectares of her land mass available for agricultural activities. Out of this much, she has also reportedly been able to cultivate about 40.5 million hectares, albeit not really on large scale mechanised level.
Even though she has largely been unable to maximise the values of its cultivated land areas, Nigeria last week initiated some bold steps that could see her leverage on the potentials of her agriculture to grow an alternative means to earning foreign exchange and provide clean energy for her citizens.
Currently driven by the PPPRA, an agency of the government that oversees and regulates pricing and distribution of petroleum products in the country, and the Renewable Energy Department of the Nigerian National Petroleum Corporation (NNPC), the country launched a review and sensitisation of a national policy to develop biofuel production and usage in the country.
The policy as disclosed by the Acting Executive Secretary of the PPPRA, Mr. Victor Shidok, during a workshop in Abuja would set the pace for the development of a vibrant domestic and export-based biofuel industry.
The new industry would provide cheaper and clean energy fuel, reduce the volume of fossil fuel imported into Nigeria with the inclusion of bioethanol and biodiesel in the country’s petroleum products stock, as well as earn foreign exchange for the country.
The Choice and Justification
Because Nigeria had relied heavily on hydrocarbon as her single largest forex earner, she has in this regard, become extremely vulnerable to the fluctuations in the global crude oil market square, which quite frankly occurs on a cyclical basis.
Besides the periodic fluctuations in her crude oil earnings, the country also spends huge forex importing almost all of the petroleum products consumed by her domestic economy. This, on its part, hugely impacts her reserves and products’ supply stability.
She also relies on fossil fuel to provide her electricity. Eighty per cent of her public generated power come from gas plants while 20 per cent are from three functional hydro power plants up north. A vibrant biofuel industry would, in addition to helping Nigeria diversify her energy sources to include clean biofuel as an energy source, cut down her expenditure on petrol importation and reduce shocks from sudden revenue drop from oil price movements.
According to experts, biofuel presents an opportunity for Nigeria to now adjust its energy mix and revenue generation sources. It also provides her a good platform to cut down her unemployment figures as she can gradually drive more of her young people to cultivate, process, and supply biofuel feedstock to operators or refiners.
Shidok said in his assessment of Nigeria’s biofuel potential, that its feedstock could be produced in almost all parts of Nigeria. He said cassava, sweet sorghum, sugarcane, jathropha, and palm fruits which are the major feedstock for biofuel production can be grown in states across the country, while municipal waste are also generated from cities across the country.
He noted that PPPRA took up the government’s renewed interest in commercialising the biofuel industry, to bring stakeholders to review the policy which he said was initially import based, adding that it would now emphasise on domestic market and self-sufficiency in biofuel production for Nigeria.
According to him, the agency would coordinate the policy review and ensure that stakeholders’ inputs are comprehensively taken to achieve acceptability before launching the sector.
“This is to make people understand that there are other alternatives to fossil fuel, and of course potentials that Nigeria can tap into to make sure we diversify our earnings. The area we have been looking at all these while is ethanol which has to do with biofuel,” said Shidok.
“When we are through here, the next level is to get experts to continue to interface until we have an industry that will benefit the country. Basically, we have to plan and we are looking at the next two years to see this industry kick off if the policy is gazetted and passed into law by the government.
“We are looking at the West African region as our potential market to earn forex because we do not just want to achieve self-sufficiency but also export to our neighbouring West African countries,” he added.
Shidok also noted that a vibrant biofuel production could spur commercial industrialised agriculture in Nigeria, as well as a huge opportunity for the country to pivot to the biofuel export market, which experts said was growing on a fast trend.
His sentiments were also shared by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who said at the workshop that, “Time has come for us to explore alternative energy and revenue sources with the abundance of land and great vegetation available at our disposal. I believe biofuels will soon become our foreign exchange earner if we can apply both our mind and might into it.”
$50 Billion Kitty
To support the new drive for a large-scale domestic biofuel production and Nigeria’s energy diversification, the Central Bank of Nigeria (CBN) also disclosed at the workshop that the government would invest about $50 billion to the development of the industry.
The CBN said the $50 billion biofuel fund would be contributed by different government agencies and relevant development banks and institutions including the Bank of Industry (BOI), Bank of Agriculture (BOA) and Development Bank of Nigeria (DBN).
The CBN Governor, Mr. Godwin Emefiele, who was represented by Mr. Lawrence Odeh, noted that the fund would provide credit facilities on favourable terms to the domestic biofuel industry.
According to him, “Fossil fuel have been and will continue to be the dominant source of energy for sometimes, but this category of fuels are non-renewable and raise environmental concerns because they pollute the environment while others are renewable, non-polluting and therefore regarded as clean, thus, they present a viable alternative to fossil fuel and if properly harnessed can be very beneficial.
“Nigeria potentially has global competitive advantage to be a major player in the industry. In the phase of growing global concerns for protecting the environment, funding biofuel development as a commercial venture is becoming a developmental agenda, to that extent, the scope of funding sources have become variable.”
“On the domestic front, it is important to note that the Nigerian biofuel policy and incentives draft document has outlined funding arrangements and incentives arrangements for firms involved in biofuel production.
“Government envisages equity funding arrangements to be known as biofuel industry equity fund of $50 billion and to be jointly funded by parastatals and development banks including the Bank of Industry, Bank of Agriculture, and Development Bank of Nigeria,” Emefiele stated, adding that, “When established, the fund is expected to provide credit on favourable terms to meet the peculiarities of the industry in Nigeria.”