People & Money

NNPC’s Biofuel Ambition Well Behind 2020 Target

Nigeria’s desire to shift from a near total reliance on crude oil for revenue has given rise to a renewed drive to press for the application of the national biofuel policy, the Africa Report said on Tuesday. The blueprint wants to attain complete local production of the biofuels used in the country come 2020.

Even though Africa’s top oil produce is still hundreds of miles away from its target and it is 2020, pundits believe the biofuel push is straining the country’s limited food supply.

“The implementation of biofuel production in Nigeria will largely be dependent on investment of energy crop cultivation such as cassava and palm oil.  Food production in Nigeria has generally not kept pace with the population growth,” Rosemary Enemuo, energy analyst at SBM Intelligence said.

 

What are biofuels?

 

Biofuels are a renewable energy source, made from organic matter or wastes. Examples are ethanol (made from maize in the USA or sugarcane in Brazil), biogas (methane derived from animal manure and other digested organic material) and biodiesel (from vegetable oils and liquid animal fats).

 

They are important sources of renewable energy and are critical in reducing carbon dioxide emissions. They are blended with existing fuels such as gasoline and diesel when used as sources of fuel in the transport sector. In 2016, $136 billion worth  of ethanol and biodiesel was sold (wholesale price).

 

 

Hitches, which include crude irrigation technology, antiquated land laws, poor credit accessibility and ballooning farming inputs costs like fertilisers and seedlings as well dearth of storage infrastructures have impeded Nigeria’s quest for self-sufficiency in food.

Government contrived a biofuel policy 13 years ago to enable the country produce 2 billion litres by 2020. It would support expenditure cut on ethanol imports, which in 2007 was gulping around $250 million annually.

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Ethanol imports for industrial use cost Nigeria over N160 billion a year, Rajavelu Rajasekar, Director of Allied Atlantic Distilleries Limited said. Local production contributes only 3%.

The Nigerian National Petroleum Corporation (NNPC), which has been racking up losses – would anchor the biofuel programme and “engage in the commercial in-country production of biofuels in partnership with core investors,” as well as “secure 10% of NNPC Mega Station Retail Inventory and become a dominant player in Biofuels business in Nigeria,” among others.

However, it began seeking investors for its renewable energy unit nine years after the policy formulation to execute Nigeria’s automotive biofuels industry programme via a series of special purpose vehicles.

NNPC informed investors it would reflect its negotiation shareholding of 20 to 30% in each of the partnerships just as core investors would be expected to undertake 100% funding of the projects under a carry agreement in the first phase.”

In spite of a number of investments in indigenous ethanol production, including 120,000-litre daily capacity of Africa’s largest ethanol plant in Ogun State, Nigeria is far away from its target.

Analysts believe the state-owned oil firm is grossly incompetent to drive the biofuel blueprint.

It is so because they consider the government’s “insufficient capacity to bureaucratic bottlenecks and weak accountability systems as seen with NNPC and crude oil refineries in Nigeria,” says Enemuo.

He went further to say “the government needs to drop its statist tendencies to economic management while making policies that will incentivise the private sector to participate in the biofuel space.”

Olatunde Dodondawa, a Lagos-based independent energy sector analyst, said NNPC had capable employees that could handle the project successfully “but bureaucracy and lack of accountability are issues of concerns.”

Continuity issue is also part of the challenge, Dodondawa said. “For instance, what happens if the present GMD is replaced today? Another GMD may not believe in the agenda and he may come with his agenda too that may negate what has already been started. Until the NNPC Act is amended and allows private investors to handle the project, things may not change.”

 

 

 

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