Investigation of the Feasibility of Transforming Sorghum Bagasse into Bioethanol Fuel in Nigeria: A Techno-Economic Analysis

Abstract

The Nigerian government needs to reduce its over-dependence on

the oil and gas economy as the benefit derived from these resources

have gradually begun to suffer from several uncertainties. Nigeria is

blessed with a vast green resource; therefore, there is a need to

create an avenue of establishing a strong link between the

downstream petroleum industry and agricultural activities. The

Nigerian government has indicated a commitment to biofuels

production from local feedstock, emphasising bioethanol and

biodiesel with the projected annual local market possibility of 5.04

billion and 900 million litres, respectively. Therefore, the study is

focused on investigating the economic feasibility of establishing a

bioethanol plant that would process sorghum bagasse into a

bioethanol fuel to complement the use of petrol. The sensitivity of tax

rate (TR), the currency exchange rate (CER), bagasse price (BP)

and government subsidy (GS) were also investigated. Results

obtained for the profitability analysis of the project showcased the

benefit the project tends to offer. The potential sensitive variables

that have a strong potential of influencing the project’s financial

benefit were identified. The best return on investment was found to

be obtainable at 20 % subsidy (minimum), 0% tax rate (waiver), 150

NGN/$ (lowest), and 10 NGN/kg (maximum). The NPW sensitivity to

the parameters indicated currency exchange rate (CER) (with a

maximum variation of 22%) to be the most significant of all ther

parameters. Findings from the study reveal that the currency

exchange rate has a significant impact on the return on the project

investment. Which showcases why the government needed to develop

a positive economic strategy that would appreciate and sustain local

currency’s value to attract investors in Nigeria.