Economics of Biofuels: Assessment of The Fiscal Incentives In Nigeria’s Biofuel Policy

Abstract :

The paper provides an assessment and economic analysis of Nigeria’s biofuels policy by considering the fiscal incentives therein and its effectiveness. It starts with an overview of biofuel industry in Nigeria, highlighting its growth and then describes the biofuels policy with a focus on its fiscal elements. Using available data in a two-scenario model, biofuels investment is appraised to capture basic financial and economic analytics. The study finds that biofuels investment with respect to the sole production of only ethanol is not efficient economically, given the available fiscal incentives. The outcome, however, changes when the number of products increases to include animal forage, processed sugar, and power generation for sale; with inherent risks. Furthermore, it reveals the potential implications of biofuels on government from a fiscal perspective. Following the several open issues for consumers and the environmental effects of petroleum combustion, this paper recommends their consideration to enhance the prospects of biodiesel, biorefinery and bioeconomy in Nigeria.