The House of Representatives is expected to commence debate on the general principles of a bill seeking to provide a policy framework for the development of the biofuels energy industry in Nigeria.
The private member bill jointly sponsored by the Deputy Speaker, Hon. Benjamin Kalu and six others, also seeks to establish the Biofuels Regulatory Commission as well as Biofuels Research Agency, respectively.
As contained in Part one of the bill seen by Tribune Online, the primary objective of the proposed Bill is to “firmly establish a thriving fuel ethanol industry utilizing agricultural products as a means of improving the quality of automotive fossil-based fuels in Nigeria and all matters related thereto and without detracting from the generality of the foregoing, specifically to promote job creation, rural and agricultural development and technology acquisition and transfer.
The legislation also seeks to provide a framework which is capable of attracting foreign investment in the biofuels industry; streamline the roles of the various tiers of government in order to ensure an orderly development of the biofuels industry in Nigeria; and involve the oil and gas industry in a more purposeful development of other sectors of the nation’s economy.
As encapsulated in Clause 28(1, 2 & 3) of the bill, “There is hereby established a fund to be known as the Biofuels Industry Equity Fund for the purpose of stimulating investments in the biofuel industry.
“The Federal Government shall provide the sum of the equivalent of US$50 million for the take-off of the Fund.
“The Fund established pursuant to subsection (1) of this section shall be (a) domiciled with the Central Bank of Nigeria; and disbursed by participating banks upon the approval of the Commission.”
Clause 3(1 & 2) of the bill which centered on the Policy Environment, provides that: “The blending of biofuels as a component of fossil-based fuels in the country as required for all automotive use is hereby guaranteed.
“The proportion of bio-fuels in the blend pursuant to subsection (1) of this section shall be determined by the Commission from time to time.
Clause 4(1) further provides that: “As from the commencement of this Bill, no person shall carry on business of biofuel manufacturing fuel and ethanol and/or bio-diesel unless he is duly registered and licenced by the Minister.
“The licence granted by the Minister under subsection (1) of this section shall include the permit for the company to add a capability to co-generate electric power.”
Clause 5 of the proposed bill also provides that: “For the purposes of this Bill, investment in the biofuel industry shall be treated as an agro-allied activity and shall benefit from the incentives put in place to foster the development of the agro-allied industry, in addition to other incentives under this Bill.
On the establishment of the Biofuels Energy Regulatory Commission, saddled with the responsibility of managing the Energy Development Fund.
Clause 10 of the bill which provides for the establishment of the Commission, empowers it to implement the strategies for growth of the biofuels industry in Nigeria, and specifically the Commission shall (a) register all biofuel plants/projects in Nigeria; issue licence to biofuel operators for the production of fuel ethanol and/or biodiesel in Nigeria; formulate and recommend fiscal, financial and other incentive policies for the biofuel industry, as well as protection measures if and when required; periodically, review and assess the economic, technical, environmental and social impact of the use of biofuels, and shall determine changes in policies required when necessary.
It also empowers the Commission to monitor the supply and utilization of bio-fuels and biofuel blends and recommend appropriate measures to the Minister in case of shortage in the supply of bio-fuels or feedstock; review and adjust the minimum mandated biofuel blends as it deems appropriate; determine and put in place industry stabilization mechanisms; designate and oversee the activities of the investment banks appointed to manage the Biofuel Industry Equity Fund; establish and support the Biofuels Research Agency; monitor intra-industry commerce, in particular relationships between out-growers and bio-fuel producers;
present quarterly reports and briefings on the status of the biofuel industry to the National Assembly; and disseminate and share information with investors and other interested members of the public.
Clause 25 also provides that there is hereby established a fund to be known as the Bio-fuels Research and Development Fund into which shall be paid all monies contributed by biofuels companies being 0.25 percent of their revenue; the Federal Government which shall not be less than 50 percent of the total monies contributed by biofuels companies pursuant to paragraph (a) of this section; and the Petroleum Technology Development Fund pursuant to section 26 of this Bill.”
Clause 25(2) also states that: “The fund established pursuant to subsection (1) of this section shall be domiciled with the Central Bank of Nigeria; and disbursed by the Agency upon the approval of the Commission.
Clause 33 of the proposed bill further stated that: “The provisions of the Industrial Development (Income Tax Relief) Act Cap I7 Laws of the Federation of Nigerian, 2004 with respect to pioneer status shall apply to all bio-fuels companies and shall continue to apply for a period of 10 years.”
Clause 34 stipulates that: “Bio-fuels companies shall be exempted from taxation, withholding tax and capital gains tax as imposed under sections 78, 79, 80, and 81 of the Companies Income Tax Act Cap C21 LFN 2004 with respect to: interest on foreign loans; dividends; and services rendered from outside Nigeria to bio-fuel companies by foreigners.”
Clause 35 further provides that: “Bio-fuels companies shall be exempted from the payment of duties on the importation of necessary inputs or machineries or installations used in the ordinary course of the activities. The duty-free exportation and importation of bio-fuels is hereby guaranteed.”
Clause 36 stipulates that: “Bio-fuels companies involved in the production of bio-fuels feedstock or the production of bio-fuels and or the generation of electricity from biomass shall be exempted from the payment of Value Added Tax as prescribed by the Value Added Tax Act Cap V1 Laws of the Federation of Nigeria, 2004 on all products and services they consume.”
On the Bio-fuels Blending and Off-take Guarantees, Clause 37 mandated the Nigeria National Petroleum Corporation to implement the blending requirements for bio-fuel use in the Nigerian in line with the directives of the Commission from time to time; guarantee off-take of the bio-fuels produced within Nigeria as the buyer of last resort; coordinate importation of bio-fuels in periods of shortfalls in domestic production; support the development of bio-fuel downstream sector activities which may include deport modifications, distribution asset, etc.; and invest in bio-fuels joint ventures and import/export facilities for the purpose of seeding the industry.”
Clause 38 further provides that: NNPC “shall guarantee the off-take of bio-fuels produced in Nigeria at negotiated price and contractual terms that prices shall be based on hybrid formula combining market-based and fair return or cash cost pricing; NNPC shall take 100 per cent of volume offered by supplier upon agreed price; off-take period shall be 10 years from project commissioning for new projects; contracts shall include a take-or-pay clause at agreed price conditions; bio-fuel product is to be delivered at certified NNPC depot which has the capacity to receive bio-fuels after proper notification to NNPC; delivered bio-fuel product must meet specification set by Standards Organization of Nigeria; bio-fuel product quality must to be assessed by NNPC before delivery at depot in order to be accepted.
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