So much attention has been drawn to the development of biofuel in recent
times. Biofuel is seen as a means to alleviate global energy concerns, foster
rural development and mitigate climate change. Since biofuel is changing
the face of the energy sector in the world, Africa is not left out. Africa is on
the verge of stepping into the biofuels industry in a big way, with every
sector being placed in the use of cleaner renewable energy.
Nigeria, as the giant of Africa has mapped out comprehensive plans that
will launch it into becoming one of the major players in the biofuels
industry both at the continent and world levels. Despite strong indications
of biofuels promotion, there are few countries currently participating in the
production. However, production cost of biofuels is still relatively higher
than those of fossil fuels and this poses a problem in the successful
substitution of fossil fuels with biofuels.
This work will focus on Nigeria’s biofuels industry by discussing the
economic justification of promoting biofuels in terms of its costs and will
Electronic copy available at: http://ssrn.com/abstract=1959778
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investigate the challenges and opportunities abounding in the promotion of
biofuels. Based on available data and information, we found that extensive
biofuel usage induces huge financial costs. Presently biofuel production is
not economically viable, and the drive for its production is driven by the
policies of some countries that perceive it as the only possible alternative to
fossil fuels and a way out from the declining world crude reserves.