Policy issues in the promotion of cassava as abio-energy crop, the experience in Nigeria

Boma Simeon Anga, Chairman, NEPAD Pan African Cassava

Initiative

• Urgent need to reduce energy insecurity• Africa has 13% of global population yet uses 3% of

electricity used globally.• Only 1 in 4 people in Africa has access to electricity.• Under exploitation of available resources : 6% of

hydroelectricity and 0.6% of geothermal potential exploited.

• Abundance and decentralized availability of biomass resources especially cassava

• Need to raise GDP growth rate from 3.5% to 8% if Africa is to meet the MDGs & needs to be a corresponding increase in energy demand.

KEY Drivers of Africa’s Bio-fuel initiative

Target Beneficiaries: Net oil-importers in 2009 (39 countries) 25 countries are landlocked;

Note: oil producers are underlined

• Benin, Botswana, Burkina Faso, Burundi, Cape Verde, Central African Republic, Comoros, Djibouti, Eritrea, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritius, Morocco, Mauritania, Mozambique, Namibia, Niger, Rwanda, Sao Tomé and Principe, Senegal, Seychelles, Sierra Leone, South Africa, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe.

In addition the price of crude oil is escalating at incredible rate creating an urgency for development of

alternatives sources of energy:

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Oil

Pri

ce

( U

SD

/bb

l )

Yom Kippur

War

Invasion of Kuwait

Invasion of Iraq

Lebanon War

Iran (Nuclear issue) – USD

100/bbl

Iranian Revolutio

n

Currently there is war in Northern Iraq.

Militancy in Nigerian Niger Delta

4

Figure 1: Remaining years of oil extraction2004 oil extraction rate

0

10

20

30

40

50

60

70

80N

umbe

r of

yea

rs

THE NIGERIAN E10 BIO FUEL PROGRAMME

Creation of The NNPC Renewable Energy Division in 2005

To create a thriving, domestic bio-fuels industry within the next five (5) years

Vision

Mission Statement

Quality Policy

RED (Renewable Energy Division) is established to introduce and sustain the production of fuel ethanol and Bio-diesel from biomass (cassava, sugarcane, soybean oil, palm oil, etc) and thereby integrating the agricultural sector with the downstream petroleum industry

RED shall provide consistent, steady supply of alternative fuel to the utmost satisfaction of customers and continuously seek to improve its quality management system

Maximize Carbon Credit

opportunities

Thriving Homegro

wn Industry

Sustainable

Development

Rural wealth &

Job Creation

Environmentally Friendly

Energy Self-

Sufficiency

Integrate Oil & Gas

with Agricultu

re

•Nigeria’s land is ideally suited for sugarcane & cassava production. Cassava has a net positive energy balance of 8.80-9.15 MJ/Liter.

•Estimated land availability for large scale bio-fuel operations is above 42 million hectares

•Nigeria has the potential to create a sustainable bio-fuel industry capable of generating between 1,000,000 to 1.5 million jobs.

RationaleThis program should lead to:

Nigeria’s Emerging Fuel Ethanol Economy

BIO ETHANOL FUEL POLICY

• Market entry shall be through registration of Bio-fuel plants/projects by the Bio-fuel Energy Commission.

• Creation of mechanisms designed to promote integrated agro-industrial operations, out-grower schemes and research, e.g. through subsidized loans, issuance of licenses, private-public partnership, etc.

• Creation of a Bio-fuels Research Agency to coordinate and promote the long term development of improved varieties, techniques and processes across existing Agencies

• The setting up of a Bio-fuel Pioneer Fund to be managed by an investment bank with upstream Oil & Gas operators as equity owners.

APPROVED POLICY AND INCENTIVES FOR THE NIGERIAN BIO-FUEL INDUSTRY:

1. Approval of blending of PMS with 10% fuel ethanol by composition and diesel with 20% bio-diesel by composition to create demand for bio-fuels in Nigeria.

2. Official designation of Bio-fuels as an agro-allied industry sector.

3. Commercial guarantee by NNPC for off-take of bio-fuels produced within Nigeria.

4. Designation of bio-fuel industry sector as a pioneer sector, which provides the basis for a package of tailored fiscal incentives.

5. Creation of a Bio-fuel Energy Commission to govern the industry and lease with all relevant ministries and agencies.

Investment Incentives

• Guaranteed 10yrs. Off-take Contract from NNPC• 10 years income tax holiday with a possibly for five

years additional extension for all businesses registered for bio-ethanol and its feedstock production

• Exemption from all import & customs Duty in respect to importation of all equipments. inputs, chemicals for use in Bio-ethanol production

• Withholding & capital gains Tax exemption on dividends, foreign loans and for services rendered by foreigners to the Bio fuel company.

Investment Incentives• Waivers for value added tax payment in respect of all

services and products consumed by Bio-fuels producing industry

• Duty free importation of Bio-fuels for ten years• Duty exemption for the importations of farm

machineries, tractors, implements, fertilizers, chemicals and all inputs that will be used in the farm for bio-fuel feedstock production.

• CBN administered Preferential loan arrangement for large scale nucleus farm development and establishment of integrated fuel ethanol factories.

FLOW CHART OF CASSAVA BASED GASOHOL PRODUCTION PROCESS

General Public

Financial, Technical and Managerial

Partners

We are also engaging key stakeholders involved in the formative industry throughout the duration of

the programme.

Research Institutes

Farmers and Farming Communities

• Facilitate policy implementation• Provide fiscal and political support

• Provide cassava and sugar cane input for ethanol production

• Ensure smooth disruption free operations

• Provide information on local agricultural practices, supply and demand data

• Provide technical support

Federal, Local and State Government and

Agencies

• Provide funding and technical/managerial expertise

• Early acceptance of new ethanol/gasoline blend

Key Stakeholders Envisaged Role/Responsibility

ImoAbia

BornoYobe

Bauchi

Kebbi

Kogi

Kaduna

Zamfara

Edo

Kano

Sokoto

Delta

PlateauNasarawa

Ogun Ondo

Gombe

Cross River

Rivers

Osun

Enugu

Ekiti

Balyesa

AnambraEbonyi

Lagos

Akwa Ibom

FCT

Katsina

OyoKwara

Taraba

Adamawa

Benue

Jigawa

Niger

Sugar cane

Cassava

Bio-diesel

Completed feasibility studies:3 sugar cane sites in Benue and Gombe States2 cassava sites in Ondo and Anambra States.

Studies for 3 oil palm for biodiesel sites to commence in 4Q 2007

- Every state has potential for biofuels project using various crops

- Engaging state governments to lead biofuels initiatives in their states

15

Main Processes, Risks and corresponding Insurance covers

Comparison of PMS and E10 shows the many benefits E10 offers with the constraint of tight water contamination prevention.

Elements PMS Ethanol E10

Appearance Clear and free of suspended matter

Clear and free of suspended matter

Clear and free of suspended matter

Water Nil Nil Nil

Octane 90-94 98-100 92

Lower heating value (Btu/lb)

18,000-19,000 11,500 16,500-17,500

Distillation (oC) 5-205 78.3 TBD

Specific Gravity 0.0.75-0.78 0.794 TBD

Vapor Pressure (RVP) in psi

8-15 2.3

Electrical Conductivity (MicroS/m)

Nil 500 500

Vehicle Acceptance All All

Bio-Ethanol market opportunity in Nigeria

S/No.

Ethanol markets in Nigeria Market Demand per Year

1 Gasoline (E10 Blend) 1.30 Billion Liters

2Paraffin (Replacement With Ethanol Based cooking Fuel)

3.75 Billion Litres

3Raw Material for Portable Ethanol(Re-distillation market)

0.12 Billion Litters

Total Market Size 5.22 Billion Liters

Market Value:3.08 Billion dollars Annual Projected growth rate: 5%

Investment opportunities• Daily requirement: 14,794,520 liters/day• Feedstock requirements: 30,258,500tons of fresh cassava

approx.1,512,925 hectares• Recommended minimum Bio-ethanol plant size:

180,000liters/day• No of Bio-ethanol plants required: 82 plants• Total investment outlay/Plant : 1. Without Nucleus Farm:$60-75 Million dollars.2. With Nucleus farm: $90-110 Million dollars3. Invest required for 82 Integrated Bio-ethanol plants:

$7.38 Billion US Dollars

The recommended business model is a large scale integrated operation open to out-growers, but not

dependent on them.• Tight integration between plantation and plants is required to ensure:

Supply reliability through disciplined management of harvest time Raw material quality through controlled farming practices Low raw material cost through high yields and short travel distances

• We studied the Brazilian and Thai industries and concluded that their experience support integrated model as the base case Brazil industry is highly integrated Thailand industry lack of integration and reliance on fragmented farming community make

their ethanol supply chain less reliable

• An operation with adequate plant capacity could be profitable, yet offer the ability for out-growers to supply plant: Large plant is required to accommodate future growth Out-grower scheme is required to ensure out-growers can supply at competitive prices and

facilitate community integration

• Ethanol fuel imported & launched into the Nigerian market

• Bio-fuels policy developed• Feasibility studies

completed for integrated plantation/plant 3 sugarcane 2 cassava

• Significant progress in securing investors for 1st set of projects

2006 Objectives 5-year Goals

2006 objectives are set to lay the foundation for significant benefits to be gained over the next 5 years.

Benefits 2007 2008 2009 2010 2011 2012

No. of Direct Jobs Created* 0 1000 5250 14250 22250 32250

Foreign Direct Investment ($Million) 0 87.5 225 362.5 412.5 412.5

Carbon Emission Reduction (Million Tons CO2) 0 0 0 0.73 1.45 2.17

Volume of Ethanol Produced (Million Liters) 0 0 0 275 475 675

Volume of Bio-diesel Produced (Million Liters) 0 0 0 0 100 200

Power Generated for National Grid (MW) 0 0 0 105 175 245

Note: * Jobs created indirectly should range between 4 to 8 times direct jobs

Identify technical & quality capabilities required / Check

infrastructure

Define policy changes required tosupport E10, Bio-diesel & long term

strategy

Design & build projects

Design Supply, Pricing &

Marketing Strategy

DomesticBio-fuelProgramme

Define growth models

Develop implementation plan

Create venture

Define Operating Strategy

Define strategic partners

Develop implementation plan

Define best crop route / develop economic rationale

Contract Ethanol imports

Run test program

Implement Policy Changes

Ramp-up to rest of network

Monitor customers and quality control effectiveness

Secure land

Operate projects

Expand best practice models

Monitor program effectiveness

Ethanol ImportProgramme

Policy

Detailed feasibility

Secure financing

4 months24-36 months to operating stage Continuous

Today

Planning Building Foundation Growing

August 2005 2009

Third-Party Programme Support

We are implementing three sub-programmes to deliver the vision: Domestic, Import and Policy.

The Layout of the Crownek Green Energy Integrated Ethanol Factory Complex

NIG

ERIA

N NATION AL P ETRO

LEUM

C O R P O R A T I O N

Nigeria has the potential to create a sustainable bio-fuel industry capable of generating between 500,000

and one million jobs.

Bio-Fuel Industry Socio-Economic Impact

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

250,000 500,000 1,000,000

Hectares

Jobs

Direct Indirect Low Indirect High

Comments

• Nigeria’s land is ideally suited for sugarcane, cassava and palm oil production

• Estimated land availability for large scale bio-fuel operations is above 2 million hectares

• Per million hectares of sugarcane, cassava and palm oil:

– Direct Jobs: 100, 000– Indirect Jobs: 400,000 to

900,00– 50 to 80 bio-fuel large scale

operations (10,000 to 20,000 ha)

– 1/3 of current gasoline consumption

Nigerian Scenario Potential for Bioethanol production

- 4.95 billion lit / annum

Sr. No

Feedstock Qty (m MT/annum)

Land ( million Ha)

1 CassavaTubers

35 1.4

The Cassava Crop

Availability of improved cassava planting materials adapted to All Agro ecologies

• Commercial production of cassava planting materials is big business & big money.

The Biofuels industry presents vast social, economic and environmental benefits for Nigeria.

• Good returns on invested capital

• Lower acquisition costs for fuel

• Increased local production of sugar and power complement efforts at filling existing supply gaps in Nigeria (for sugarcane to ethanol)

• Increased ability to hedge supply risk (either domestic or through imports) by offering additional source of fuel

Economic Benefits

• Rural wealth and job creation

• Sustainable developmentSocial Benefits

Environmental Benefits

• Environmentally friendly fuels / less pollution

• CO2 emission reduction

28

Current Policy Review to be completed in November 2010.

• Liberalized the Bio-fuel market NNPC no longer the exclusive off-taker

• Make the incentives more robust and investors friendly

• Lower the entry barriers and reduce to the barest minimum bureaucratic bottlenecks

• Eliminate importation of Bio fuels to seed the market

“Embrace the New Reality Cassava Is Africa’s Food, Energy & Cash

Crop of The 21ST Century.”

There is a Bright Prospect of Cassava Development in Africa, please be part of it.

THANK YOU

For Further Details Contact: THE PROJECT CONSULTANTS:

:Mr. Boma Simeon Anga

Executive ChairmanCassava Agro industries Services

Limited House 32, 351 Road, off 3rd Avenue,

Gwarinpa Estate,Abuja.

Tel: +234-(0)803-303-1097, (9)290-7366

Fax: +234-(9)222-4046WEBSITE:

www.cassavaagroindustries.come-mail: bomaanga@yahoo.com,

boma@cassavaagroindustries.com