Nigeria Makes First Step Away From Oil

Nigeria’s state oil company is venturing into renewable fuels with a contract that will see a bioethanol plant built in the state of Kebbi, in northeastern Nigeria. The plant will have a capacity to produce 84 million liters of bioethanol derived from cassava and sugarcane.

This is the second such contract that NNPC has signed with state governments this month. Earlier, the state oil company inked a preliminary contract with the government of Ondo state for a 65-million-liter bioethanol plant, to use cassava as feedstock. That project, according to NNPC’s group managing director Maikanti Baru, would also involve foreign investments.

The idea of developing a biofuels industry in Africa’s top crude oil producer was originally announced by the federal government back in February, with a plan to establish a fund of US$50 billion to develop biofuels production. The funds will be provided to a Bieofuels Equity Investment Fund, which is obliged to invest a minimum of 5 percent in biofuel-related projects.

To encourage the industry, the government of Nigeria has put in place tax incentives and grant availability for private companies engaged in crop-growing for biofuels production. Companies active in the biofuels area were also promised an exemption from import duties for the first five years, as well as expenses related to materials, plants, and machinery involved in the production of biofuels.

Nigeria is heavily dependent on oil export revenues, and like other oil producers, it suffered a severe blow from the last oil price crash. The blow, however, was also a wake-up call that spurred economic diversification initiatives. For now, Nigeria is lagging behind other large producers, but the two biofuel deals indicate that it is not giving up despite growing oil production and higher oil prices.

Wind and solar power are also on the table when it comes to energy industry diversification. The Western African country’s electricity grid is weak, and consumers are dependent on diesel imports to power households and businesses. Yet, startups are appearing, offering an alternative to diesel. Foreign companies, such as Finnish Wartsila, are also starting to pay the country more attention. Recently, the Finnish company announced it had sealed a deal for the construction of what will be Nigeria’s largest photovoltaic power generation facility, with a capacity of 75 MW.

By Irina Slav for Oilprice.com