A number of incentives have been introduced to stimulate Nigeria's biofuel industry.
The objective of Nigeria's Biofuel Production Programme is to firmly establish a thriving fuel ethanol industry by utilising agricultural products as a means of improving the quality of automotive fossil-based fuels in Nigeria. The policy shall link the agricultural and the energy sector, with the underlying aim of stimulating development in the agricultural sector.
All registered businesses engaged in activities related to biofuels production and/or the production of feedstock for the purpose of biofuel production and co-generation within the country shall be accorded Pioneer Status within the provisions of the Industrial Development (Income Tax Relief) Act.
2. Withholding tax on interest, dividends, etc.
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:
3. Waiver on import and customs duties
Biofuel companies shall be exempted from the payment of customs duties, taxes and all other charges of a similar nature, specifically:
3.1 Biofuel companies shall be exempted from the payment of duties and other related taxes on the importation and exportation of biofuels into and out of Nigeria.
Exemption from payment of import duties on biofuels is aimed at ensuring adequate supply of biofuels in line with regulations as it relates to the importation of petroleum products.
Biofuel companies shall be exempted from payment of excise duties on biofuels for an initial 10-year period subject to renewal depending on prevailing circumstances.
3.2 Biofuel companies and their contractors and subcontractors shall be exempted from the payment of import duties, taxes and all other duties, levies and charges of a similar nature, in respect of all necessary imports of plant machinery, goods, chemicals, fertilisers, pesticides and materials for use in the construction of, or incorporation in milling plants, mechanised agricultural production (such as tractors, harvesters, haulers, irrigation equipment, etc.), infrastructure for biofuels transportation, co-generation facilities and ancillary works used in biofuel company business, and in respect of any major spare parts.
4. Waiver on Value Added Tax
Biofuel companies that are involved in the production of biofuels feedstock; or the production of biofuels and/or the generation of electricity from biomass shall be exempted from payment of Value Added Taxes on all products and services consumed by them.
5. Long term preferential loans
Preferential loan arrangements will be made available to investors in the biofuel industry to aid the development of large scale outgrower schemes and large scale integrated operations, including a plantation, a plant, and within the gate co-located power generation plants. The domestic financing of industrial production for the biofuel industry shall be aided through the provision of special low interest loans provided by the Bank of Industry, Nigerian Export Import Bank, commercial banks, agricultural banks, and other development finance agencies.
Preference in loan disbursement will be given to investors/organisations with commercially viable outgrower schemes as a source of significant feedstock supply for biofuel production.
An Environmental Degradation Tax shall be charged on oil and gas upstream operations to provide a source of funding for preferential loans.
A fund of N10-billion have been set aside by the government for provision of preferential loans for investment in biofuel distilleries to complement the N50-billion set aside for the agricultural sector on similar terms of a single-digit interest rate.
Preferential loan facilities shall be administered by the Central Bank of Nigeria through commercial and agricultural banks.
