Nigeria plans biofuel production with juicy investment incentives

A draft national policy on biofuel production and distribution likely to be signed into law very soon by Nigeria, has proposed very mouth-watering incentives for investors willing to go into biofuel business in the country, OGN has learnt.

Obtained by OGN in Abuja, the policy document seeks to open up a competitive biofuel business in the country.

It is being fine-tuned by the Nigerian National Petroleum Corporation (NNPC) and Petroleum Products Pricing and Regulatory Agency (PPPRA). Both agencies are driving the document and have held consultations with stakeholders in the sector.

Parts of the incentives proposed in the draft document include the setting up of an appropriate funding arrangement of up to $100 billion for the establishment of a Biofuels Industry Equity Fund by the federal government.

It also proposed that all registered businesses engaged in activities related to biofuels production or the production of agricultural feedstock for the purpose of biofuels production and co-generation within the country shall be accorded pioneer status within the provisions of the Industrial Development (income tax relief) Act.

Apart from the pioneer status leverage, biofuel companies shall be exempted from taxation, withholding tax and capital gains tax imposed under sections 78, 79, 80 and 81 of the Companies Income Tax Act in respect of interest on foreign loans, dividends, and services rendered from outside Nigeria to biofuels companies by foreigners.

Additionally, bio-fuel companies shall be exempted from the payment of customs duties, taxes and all other charges of a similar nature like excise duties on biofuels for an initial 5 year period subject to renewal depending on prevailing circumstances.

There will also be a preferential loan arrangement made available to investors in the biofuels industry to aid the development of large-scale out-grower’s schemes and large scale integrated operation including a feedstock plantation, a plant and within-the-gate co-located power generating plants, cattle feedlots and fruit canning.

According to the document, the domestic financing of industrial production for the biofuels industry shall equally be aided through the provision of special low interest loans to be provided by Bank of Industry (BOI), Nigerian Export Import Bank (NEXIM), commercial banks, agricultural banks, and such other development finance institutions.

A fund of N100 billion shall also be set aside by the government for provision of preferential loans for investment in biofuels refineries similar to other intervention funds for power production and aviation at a single-digit interest rate.

The preferential loan facilities shall be administered by The Central Bank of Nigeria (CBN) through the commercial banks.