Michael Ayodele Husu Adaptation of Marketing Mix of Finnish Biomass Power

Michael Ayodele Husu  Adaptation of Marketing Mix of Finnish Biomass Power
Michael Ayodele Husu
Adaptation of Marketing Mix of Finnish Biomass Power
Suppliers for Nigerian Market
Thesis
Spring 2012
Business School
Degree Programme in International Business
International Business
1
SEINÄJOKI UNIVERSITY OF APPLIED SCIENCES
Thesis Abstract
Faculty: Business School
Degree programme: Degree Programme in Business Administration
Specialisation: International Business
Author: Michael Ayodele Husu
Title of thesis: Adaptation of Marketing Mix of Finnish Biomass Power Suppliers for
Nigerian Market
Supervisor: Ville-Pekka Mäkeläinen
Year: 2012
Pages: 74
Number of appendices: Nil
_________________________________________________________________
Availability and reliability of power supplies have always been concerned issues in
Nigeria. With estimated population of 150 million people 2010, Nigeria is the most
populous nation in Africa and belongs to the group of countries with the lowest
energy consumption per capita in the continent. The loss of profit that is forced
upon the industry due to power cuts and frequent interruptions of power supply is
enormous. Alternative sources of energy have an significant role to play in
providing much needed power in the context of growing global concern about
sustainable energy supplies and protecting the atmosphere from the adverse
effects of fossil fuel utilization.
The goal of the thesis is finding out the adapting means of competition of Finnish
Biomass product manufacturers entering Nigerian markets.
The study was conducted as a quantitative desk research. The information is
gathered from secondary data, which are mainly science and technology journal.
In course of my review, Biomass has great potential in Nigeria and the Finnish
Biomass manufacturers can come by considering improving on the low supply of
power sector in the nation, they could take advantage of the villages, through
adoption and the use of these alternative power resources for growth in the
country. The Finnish have the ability and the technical know-how to turn around
the situation.
Keywords: Sustainable energy, biomass potential, power supply, technical knowhow
2
TABLE OF CONTENTS
Thesis Abstract.................................................................................... 1
Tables and Figures.............................................................................. 4
Abbreviations ...................................................................................... 5
1 INTRODUCTION ............................................................................ 7
1.1 Purpose of the thesis .................................................................................. 8
1.2 Solar power ................................................................................................. 9
1.3 Wind power ............................................................................................... 10
1.4 Biomass Power ......................................................................................... 12
1.5 About Nigeria ............................................................................................ 13
2 MAIN ISSUES OF NIGERIAN ENERGY SECTOR ....................... 15
2.1 Energy Consumption Patterns .................................................................. 15
2.2 Energy Issues in Agricultural Sector ......................................................... 19
2.3 Energy Issues in Household Sector .......................................................... 20
2.4 Energy Issues in Industrial Sector ............................................................. 20
2.5 Energy Issues in Transport Sector ............................................................ 21
2.6 Energy Issues in Service Sector ............................................................... 22
2.7 Inefficient Energy Utilization ...................................................................... 23
2.8 Inefficient and Unreliable Energy Supply System...................................... 23
3 RENEWABLE ENERGY IN NIGERIA ........................................... 25
3.1 Renewable Energy in Nigeria Current and Future..................................... 26
3.1.1 Market Obstacles to enter Nigerian renewable energy markets ...... 27
3.1.2 Government and Public Policies to Promote Utilization of Renewable
Energy............................................................................................. 28
3.1.3 Policy measures.............................................................................. 33
3.1.4 Creating Environment to Attract Investment.................................... 34
3.1.5 Renewable Energy Technologies Ready for Local Adoption .......... 34
3.1.6 Technology Development ............................................................... 36
3
4 ADAPTATION OF 4P‟S OF FINNISH BIOMASS POWER
SUPPLIERS TO NIGERIAN MARKETS ........................................ 38
4.1 Adaptation of 4P‟S Of
Finnish Biomass Power Suppliers To Nigerian
Markets ..................................................................................................... 38
4.1.1 Biomass energy case in Nigeria: Agricultural Residues to Energy .. 42
4.2 International Marketing- Adaptation to International Markets .................... 46
4.2.1 Uncontrollable Element in Foreign Environment (Nigeria) .............. 46
4.2.2 Economic Forces ............................................................................ 47
4.2.3 Competitive Factors ........................................................................ 48
4.2.4 Level of Technology ........................................................................ 49
4.2.5 Structure of Distribution................................................................... 50
4.2.6 Geography and Infrastructure ......................................................... 51
4.2.7 Political/Legal Factor ....................................................................... 51
4.2.8 Cultural Adaptation ......................................................................... 52
4.3 Uncontrollable Forces in Domestic Environment (Finland) ....................... 55
4.3.1 Competitive Factor .......................................................................... 59
4.3.2 Economic Factors ........................................................................... 60
4.3.3 Political/Legal Factor ....................................................................... 60
4.4 4Ps and Service (controllable elements) ................................................... 61
5 CONCLUSIONS ............................................................................ 68
BIBLIOGRAPHY................................................................................ 70
4
Tables and Figures
Figure 1. Nigeria is located in West Africa region……………………………………14
Table 1. Nigeria's Energy Reserves/Potential (2005)/ECN 2009)…………………15
Table 2. Final Energy Demand in Economic Sectors in Nigeria (F. B. Dayo 2004
and 2007)………………………………………………………………………………...17
Table 3. Useful Energy Demand of Economic Sectors in Nigeria (F. B. Dayo 2004
and 2007………………………………………………………………………………….18
Table 4. Electricity tariffs in Nigeria (PHCN 2009)…………………………………..19
Table 5. Final Energy and fossil fuel consumption in the transport sector (F
.B.Dayo 2004 and 2007………………………………………………………………...22
Table 6. Short Term Planned Activities and Milestones for Biomass Resources
(2005-2007)………………………………………………………………………………30
Table 7. Medium Term Planned Activities and Milestones for Biomass (20082015)……………………………………………………………………………………...31
Table 8. Long Term Planned Activities and Biomass (2016-2025)………………..32
Table
9.
Energy
Generation
Potentials
of
Biomass
in
Nigeria
(World
2007)………………………………………………………………...……………………40
Table 10. Projected Marketed Possibility (Azih 2007)………………………………41
5
Abbreviations
CDM
Clean Development Mechanism
EFCC
Economic and Financial Crimes Commission
ECN
Energy Commission of Nigeria
FAOSTAT
Food and Agricultural Organization Statistics
FDI
Foreign Direct Investment
FID
Firm Investment Decisions
GDP
Gross Domestic Product
GHG
Greenhouse Gas
IPPA
Investment Promotion and Protection Agreements
MAN
Manufacturers Association of Nigerian
MDG
Millennium Development Goals
MNC
Multi National Cooperation
NASSI
Nigerian Association of Small Scale Industries
NEEDS
National Economic Empowerment and development
Strategy
NCERD
National Centre for Energy Research and Development
NNPC
Nigerian National Petroleum Commission
PHCN
Power Holding Company of Nigeria
6
PJ
Petajoule
PV
Photovoltaic
SERC
Sokoto Energy Research Centre
SSA
Sub-Sahara Africa
TEKES
The Finnish Funding Agency for Technology and
Innovation
UNDP
United Nations Development company
USTDA
US Trade and Development Agency
7
1 INTRODUCTION
According to Abubakar S. Sambo (2005) Energy is the stronghold of Nigeria‟s
economic growth and development. It shows a significant role in the nation‟s
global diplomacy and it serves as a tradable product for earning the national
income, which is used to sustain government expansion programmes. It as well
serves as an input into the manufacture of goods and services in the nation‟s
industry, transport, agriculture, health and education sectors, as well as a tool for
politics, security and international relations.
According E.N.C.Okafor and C.K.A. Joe-Uzuegbu (2010), The result of ozone
layer reduction and its consequences on the lives of people and atmosphere today
are generating a great worry to all the world leaders, scientists, engineers,
environmentalists, industrialists, development specialists, academics, and those
whom, in one way or another are paying attention in power and environment
issues which have impact on global warming arising from green-house result.
Industrial growth and poverty improvement which is a worldwide worry have
prompted the United Nations to put Millennium Development Goals (MDG), which
will be fostered in part by ensuring that electric power accessibility is considerably
increased.
However, several energy resources are obtainable in Nigeria in abundant sizes.
The non-renewable resources include petroleum, natural gas, coal, tar sands and
uranium; while Renewable are solar radiation, biomass, hydropower and wind.
There has been a supply-demand gap, as a result of the inadequate development
and incompetent management of the power sector. The provider of electricity, the
most utilized power resource in the nation has been unpredictable. While the
installation of the first thermal power station in 1920, the development in electricity
generation has not been sufficient to contain the increasing demand. Less than
40% of the 150 million Nigerians are supplied electricity from the national grid, with
numerous
private
companies,
multi-national
companies,
households
and
8
institutions have to make their own arrangements for electricity supply, mainly
through diesel and gasoline-powered electric generators.
The insufficient supply of electricity has constantly led to load shedding, with
unfavorable effects on household, commercial and industrial activities. The Electric
Power Reform Act, signed into law in March 2005, forms the basis for the
hopefulness that continuing private investment and management strategies would
give the momentum to turn around the electricity sector, with better generation and
stable energy supply delivery, with renewable energy-based electricity generation
technologies playing a major function. Get hint from other developing nations like
India, China, Indonesia, Thailand, and Kenya indicate that there are group of
potential in the acceptance of these technologies. These potentials have been
inspired by purposeful government policies to give confidence to the private
sector, the second and third tiers of government, local communities and to install
and manage biomass-energy-based electricity generation plants. To impact the
imminent danger on our environment, there has been series of investment and
research in the area of Alternative energy products and systems. This involves
research in renewable electric power generation, water heating, food cultivation,
processing and preservation, irrigation, access to clean water, water desalination
and pumping, chicken brooding, etc.
1.1 Purpose of the thesis
The goal of the thesis is finding out the adapting means of competition of Finnish
Biomass product manufacturers entering Nigerian markets.
First, renewable energy sources (solar, wind and biomass) are briefly discussed.
Second, the main issues in Nigerian energy sector are dealt with. After that, the
renewable energy in Nigeria is discussed in more detail. In chapter four, the
adaptation of 4P‟s of Finnish biomass power suppliers to Nigerian markets is
analyzed.
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1.2 Solar power
According to Sambo, Doyle and Folayan (1988) solar energy is one of the most
promising of the renewable sources of energy in view of its apparent limitless
potential. The Sun radiates its energy at the rate of about 3.8 x 1023 kW per
second. Most of this power is transmitted radially as electromagnetic radiation
which comes to about 1.5Kw/m2 at the boundary of the earth‟s surface can
receive as much as 1Kw of solar energy, averaging to about 0.5 over all hours of
sunshine. Research relevant to the ease of use of the solar energy supply in the
country has fully indicated its feasibility for practical use. Various applications of
solar Photovoltaic in the country include Solar Photovoltaic electrification
particularly in rural areas.
These applications have a nationwide distribution. Solar Thermal system
applications in Nigeria are Solar Dryers, Solar Chick Brooders, and Solar Water
Heaters. There are quite a good number of solar thermal energy projects in
Nigeria. The solar systems were financed by various bodies including the Energy
Commission of Nigeria, Sokoto Energy Research Centre, and The National Centre
for Energy Research and Development, Nsukka, some state governments such as
Sokoto State Government, Jigawa State Government, Ondo State Government,
international organizations such as United Nations Development Programme,
Japan International Cooperation Agency, United States Agency for International
Development and the United States Department of Energy.
Power Holding Company of Nigeria through the World Bank-assisted National
Energy Development Project is also investing part of the proceeds of this credit to
establish a solar Photovoltaic in a rural community in Cross River State which is
very far from the national grid to address virtually all of the things a community
needs energy for. Under the same project, Power Holding Company of Nigeria in
collaboration with Energy Commission of Nigeria and Fadama II Project (a World
Bank assisted project in Agriculture Sector) .This is with the aim of using solar
Photovoltaic technologies to solve the energy problems of these agricultural and
10
rural
communities
and
thereby
enhance
their
productivity,
economic
empowerment, and consequently standard of living. (F. B.Dayo. 2008).
According to naijatechguide solar panels consists of an array of solar cells, usually
covered in glass. Solar panels provide power for charging your batteries and
powering your appliances.
Solar panels are expensive per watt when compared to a petrol generator, but
uses free energy from the sun. For example, an 80 watt solar panel costs about
N38, 500 in Nigeria. Solar panels may also come in different power capacities.
Solar panels can last for up to 30 years.
One or more solar panels will be required in a solar power system. A two bedroom
flat, for example will require to 10 solar panels.
Prices of some solar products in Nigeria:
-80W solar panels: N38, 500 converted €186, 29
-62W solar panels: N62, 200 converted €300, 00
-140W solar panels: N67, 000 converted €324, 19
-160W solar panels: N76, 000 converted €367, 74
-Grundfos Sqflex solar pumps: N230, 000 converted €1,112.90 (Nigeria
Technology Guide. [Ref. 20 December 2011].)
1.3
Wind power
Wind is a normal occurrence related to the movement of air masses caused
mainly by the differential solar heating of the earth‟s surface. Regular variations in
the energy received from the sun affect the strong point and direction of the wind.
Utilization of wind energy is presently very minimal in the country. The only known
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and still functional wind pump in the country is the Sayya Gidan Gada wind
electricity project in Sokoto State. It has a capacity of 5.0 kWp and was built at a
cost of about #5 million (US$40,000) by the Energy Commission of Nigeria, (ECN),
the Government Agency responsible for the development and implementation of
energy policy issues in the country.
A recent Study Report, Energy Commission of Nigeria (2007) indicated that
Sokoto and Jigawa States are currently making efforts to install wind pumps for
small scale irrigation and electricity generation. The Renewable Energy Master
Plan (REMP) projection for wind power in the country is 1 MW in short term, 20
and 40 MW in medium and long term respectively. The wind energy mapping of
the country has been done and Government has mandated that 10 MW of wind
power farm be built in each of the six geopolitical regions in the country medium
term.
Where Nigeria Can Install Wind Plants
According to Nuhu Wya, Nigeria‟s Minister of State, Power, Nigeria‟s wind
resources are huge no doubt. With a coast line of 853Km and desert areas prone
to wind running into thousands of kilometer, the extreme North and South stand
good chances. Lagos with its Atlantic City being constructed on the shoreline will
tremendously make the New City an eco friendly city by utilizing wind power. A
couple of humongous states in the North West such as Katsina, Kebbi, Sokoto and
Zamfara can invest in wind and harvest the year round rich wind resource of their
area so can Bornu, Yobe, Bauchi and possibly Taraba/Adamawa benefit from a
common plant if well planned.
Examples of wind Farms located in deserts
According to Nuhu Wya, experience shows that wind power can be generated
from deserts and from the sea environments. That makes the two extremes of
Nigeria good conditions for Windfarms that can provide not only alternative
energies but safer and more manageable power plants without minimal damage to
the ecosystem. (Nigerian Infrastructure News. [Ref. 10 January 2012].)
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1.4 Biomass Power
Biomass energy refers to the energy of biological system such as wood and
waste. Biomass energy is an indirect form of solar energy because it arises due to
photosynthesis. The biomass resources of the nation can be identified as wood
biomass, forage grasses and shrubs, residues and wastes (forestry, agricultural
Municipal and industrial) as well as aquatic biomass.
Wood, apart from being a main source of power in the form of fuelwood is also
used for business purposes in different forms as plywood, sawnwood, paper
products and electric poles. For power purposes, the country is using 80 million
cubic meters (43.4 x109 kg) of fuelwood annually for cooking and other household
uses. For crop residues and wastes, estimates of 61 million tonnes of dry biomass
that are produced yearly leave residues whose power content approximate to 5.3 x
1011 MJ. (A S. Sambo. 1991).
The National Centre for Energy Research and Development, and Nsukka under
the supervision of the Energy Commission of Nigeria. As part of the biomass
energy program of SERC, 200 Units of improved woodstove were disseminated in
Danjawa, Sokoto State while 8 units were disseminated in kuje Prison, Abuja.
(Energy Commission of Nigeria. 2007).
Use of Biofuels in efficient Stoves and Lamps
According to Clean Investment in Nigeria, good potentials also exist in the
introduction of pure plant oil (PPO) from Jatropha as a residential sector fuel in
Nigeria. Recent interest in Jatropha as an energy crop in Africa is focused on the
extraction of pure plant oil from the plant and transesterification of the oil to
produce bio-diesel for use in the transport sector. Part of the pure plant oil can be
utilized in special stove designs as cooking fuels in the residential sector. Jatropha
which grows very well in Nigeria is not a food crop as neither its seeds nor it fruit is
edible. The plant is commonly used as a fence around homesteads, gardens and
fields because it is not browsed by animal. Jatropha can be grown in almost all
13
locations in Nigeria, all year round in even arid soil; it will not take up valuable
cropland for it to be in abundant supplies. Example of a technique introduced plant
pure oil from Jatropha as a fuel in residential end-use energy application in
Nigeria, especially in rural and peril-urban households. (Nigerian Infrastructure
News. [Ref. 10 January 2012].)
1.5 About Nigeria
Nigeria is Africa‟s foremost business destination. Its currency is the Naira. N is
approximately N150USD.The country operates a market economy dominated by
crude oil exports with the revenue earnings from the sector accounting for 90% of
FOREX earnings and 65% of budgetary revenues. Other exports are cocoa, palm
oil, groundnuts, cotton, timber and rubber.
Nigeria‟s imports are in the region of $45.5 billion USD (2008).Import commodities
include machinery, chemicals, transport, and equipment, manufactured goods and
live animals. While exports account for $76.8 billion (2008).
In recent times, focus is being directed at non oil exports and agriculture, which
presently accounts for 41% of GDP, to diversify the economic base. Opportunities
exist for the exploitation and export of natural gas, bitumen, limestone, coal, tin,
sands, clays, asbestos, graphite, and iron ore.
The Government has been pursuing economic reforms marked by the privatization
and deregulation which seek to transfer state ownership of institutions to the
private sector and so engender efficiency and the productive sectors of the
economy. These are well articulated in the NEEDS programme. The reforms have
led to an explosive growth in the telecoms sector after years of stagnation. The
Global System for Mobile communication has transformed the economic terrain
creating employment and oiling the operations of businesses in Nigeria. The
country is traversed by a network of primary and secondary roads, and has 4
international airports and 6 seaports (Lagos, Calabar, Onne, Port Harcourt,
14
Sapele, and Warri). It also boasts 147 Television, 100 radios, 35 cable, 5 direct to
home, 4 direct broadcast satellite stations on air and 25 National newspapers. The
internet code of Nigeria is .ng.
Nigeria, officially the Federal Republic of Nigeria, is a country in West Africa and
the most populous country on the African Continent with population estimation of
150 million inhabitants. Nigeria shares land borders with the Republic of Benin in
the West, Chad and Cameroon in the east, Niger in the north, and borders the Gulf
of Guinea in the South. Since 1991, its capital has been centrally located in the
city of Abuja; previously, the Nigerian government was headquartered in Lagos
more than 16 million inhabitants lived in the city. (Why Invest in Nigeria. [Ref. 10
October 2011].)
Figure 1. Nigeria is located in West Africa region
15
2 MAIN ISSUES OF NIGERIAN ENERGY SECTOR
The nation major energy issues can be conveniently categorized as inefficiency
and untrustworthy energy supply system, environmental concerns, energy
financing, inadequate technological capabilities in the energy sector and weak
institutional framework (World Council, 1993).
2.1 Energy Consumption Patterns
Table 1 below give a brief summary of Nigeria‟s energy resource endowments. It
contains recent estimates of other alternative potentials apart from hydropower.
Table 1. Nigeria‟s Energy Reserves/Potentials (2005)/ECN 2009).
Resource Type
Reserves
Reserves
(Billion Tonnes
Equivalent)
Crude Oil
36.0 billion barrels
4.896
Natural Gas
166 Trillion
cubic feet
Coal & Lignite
2.7 billion tonnes
Tar Sands
31 billion barrel of oil 4.216
equivalent
Standard 4.465
Sub-Total Fossil
1.882
15.459
Hydropower, Large Scale
11,250 MW
Hydropower, Small Scale
3,500 MW
Fuelwood
13,071,464 Hectares (3)
Animal Waste
61 million tonnes/year
Crop Residue
8.3 million tonnes/year
Solar Radiation
3.5-7.0 kWh/m2-day
Wind
2-4m/s (annual average)
ECN: Energy Commission of Nigeria
of
Oil
16
Nigeria is richly blessed with primary energy resources. The nation is endowed
with the world‟s tenth largest reserves of crude oil currently estimated to be about
36 billion barrels (about 4.896 billion tonne of oil equivalent (toe)) in 2006). The
country has also been described as more of a natural gas island than oil with an
estimated endowment in 2006 put at about 166 trillion standard cubic feet (5,210
billion cubic meters). This includes associated and non-associated reserves,
placing Nigeria among the top ten countries with the largest gas reserves in the
world. Other important primary energy resource endowment in Nigeria include: Tar
sands- 31 billion barrels oil equivalent (4.216 billion toe); Coal and Ligniteestimated to be 2.7 billion tonnes (1.882 billion toe); Large scale Hydropower
Potentials- 11,250 MW; Small scale Hydropower Potentials, provisionally
estimated to be – 3500 MW. Table 1 above provides a brief summary of these
endowments in Nigeria.
17
Table 2. Final Energy Demand in Economic Sectors in Nigeria.
Sector Energy Consumption (PJ)
Years
Agric.
Industry
Transpo
rt
Comme Residentia
rcial
l
(Househol
d)
Total
%
Annual
Growth
%
Rene
wable
1990
7.13
240.48
287.34
6.99
735.70
1991
7.18
248.67
260.07
6.48
717.30
1,239.70 -3.0
68.23
1992
7.56
247.30
354.41
6.40
770.19
1,385.86 11.8
62.96
1993
7.60
258.96
342.35
6.96
790.92
1,406.79 1.5
63.99
1994
5.54
259.98
246.32
4.63
817.55
1,334,02 -5.2
69.60
1995
5.38
261.75
278.76
7.00
810.18
1,363.07 2.2
70.24
1996
5.71
277.79
241.36
8.01
849.98
1,382.85 1.5
71.42
1997
7.17
311.97
272.58
7.74
918.19
1,517.65 9.7
70.69
1998
6.09
355.75
272.34
8.16
1,002.01
1,644.35 8.3
70.87
1999
6.57
494.64
260.98
7.97
1,074.93
1,845.09 12.2
68.61
2000
8.65
466.94
357.21
7.19
1,163,10
2,003.18 8.6
68.64
2001
7.58
609.64
404.55
8.91
1,274.81
2,305.49 15.1
64.78
2002
8.04
683.79
414.95
8.54
1,373.13
2,488.44 7.9
65.20
2003
6.34
702.88
402.67
9.87
1,462.67
2,584.43 3.9
68.19
2004
3.28
771.88
350.39
9.70
1,571.23
2,706.49 4.7
70.73
2005
5.05
868.16
486.34
10.35
1,758.40
3,128.30 15.1
66.47
64.19
Data on consumption of alternative energy from FAOSTAT). The alternative
portion is mostly biomass (over 90 %) especially fuelwood and charcoal. Source
F.B. Dayo et al. 2004 and 2007
18
Table 3. Useful Energy Demand of Economic Sectors in Nigeria.
Sector Energy Consumption (PJ)
Years
Agric.
Industry
Transport Commercial
Residential Total
(Household)
1990
5.70
122.86
258.39
6.29
234..70
627.95
1991
5.74
127.33
233.85
5.76
210.92
583.60
-7.1
1992
6.05
124.14
318.80
5.76
240.62
695.37
19.2
1993
6.08
131.37
307.91
6.26
245.85
697.47
0.3
1994
4.43
129.81
221.51
4.17
254.68
614.60
-11.9
1995
4.30
127.98
250.72
6.30
237.83
627.13
2.0
1996
4.57
139.42
217.10
7.21
256.30
624.63
-0.4
1997
5.74
160.98
245.25
6.97
274.58
693.52
11.0
1998
4.87
188.42
244.97
7.34
301.52
747.13
7.7
1999
5.26
297.29
234.79
7.17
317.47
861.97
15.4
2000
6.92
264.49
321.49
6.47
340.08
939.45
9.0
2001
6.06
361.83
367.08
8.02
378.29
1,118.28 19.0
2002
6.43
424.62
373.44
7.69
402.06
1,214.24 8.6
2003
5.07
424.64
362.09
8.88
414.92
1,215,61 0.1
2004
2.62
470.07
315.20
8.73
437.34
1,233,96 1.5
2005
4.04
533.09
437.24
9.32
513.76
1,497.46 21.4
Source: F.B Dayo et al. 2004 and 2007
%
Annual
Growth
19
A sector approach is used here in the discussion of the trend in energy demand in
Nigeria during the period 1990 – 2005. The sectors of the Nigerian economy
considered in this report include: agriculture; industry; transport; commercial; and
residential. The useful energy was derived from the final energy in a recent energy
demand and supply optimization study, after making assumptions on end use
energy efficiencies in these sectors (Felix B. Dayo et al. 2004). Both the final and
useful energy demand database utilized in the earlier study was extended to the
year 2005 for the purpose of the present study. Felix have used available data
from Food and Agricultural Organisation (FAOSTAT, 2005) on fuelwood utilization
in the residential and industrial sector as well charcoal utilization in the household
sector to update energy balances during the period 1990-2005.
Table 4. Electricity tariffs in Nigeria (PHCN, 2009).
Category
Amount ($/kwh)
Residential with single phase meter
0.026
Residential with three phase meter
0.042
Commercial houses with single phase 0.052
meter
Commercial with three phase meter
0.055
Average
0.044
2.2 Energy Issues in Agricultural Sector
According to F.B. Dayo (2007), energy use in agricultural production in Nigeria as
shown in Table two is relatively low in spite of the fact that about 70% of Nigerian
workforce is employed in this sector. In 2008, a little improvement compared to
20
17.3% in 2002, the agricultural sector contributed about 41% to the nation‟s GDP
compared to 53% by Industry. Energy use in the agricultural sector has being low
because the production system in the sector is based on subsistence agriculture
characterized by high labor intensity, little or no irrigation and near zero
mechanization. The trend of useful energy consumption in the Agricultural sector
is estimated in recent study has been presented in Table 3.Potential opportunities
for renewable energy investment focused at the agricultural sector will include: use
of solar energy for irrigation water pumping, utilization of agricultural residues for
electricity generation; and generation of biogas from wastes generated from
livestock and animal husbandry sub-sector.
2.3 Energy Issues in Household Sector
During the period 1990-2005, residential energy demand maintained a major
share of total energy demand when fuelwood and other biomass fuels are included
in the energy consumption statistics. The sector accounted for more than half of
the total final energy consumed in the country during the period 1990-2005.The
fact that technologies to utilize biomass and other renewable energy sources more
efficiently are now available in the global market is an indication that the historical
energy supply and consumption patterns in Nigeria can be shifted towards a
cleaner path.
2.4 Energy Issues in Industrial Sector
Demand for final energy consumption in the industrial sector maintained a level
close to that of the transport sector during the period 1990-2005. Final energy
consumption in the industrial sector of the Nigerian economy during the year 1990
amounted to about 240.48 PJ. This figure of sector energy consumption included
fuelwood utilization in cottage industries, examples are, bakeries, block making
etc. The final energy demand in the sector grew at an average annual rate of
21
about 1.7% during the period 1990-1995. While F.B.Dayo (2007) said the annual
growth rate of energy demand in the sector during the period 2000-2005 averaged
over 13%.In all most all manufacturing industrial enterprises in Nigeria where
power and thermal energy (steam) is required, the common supply mode usually
involve standalone onsite thermal and power generating facilities and connection
to the grid for power supplies whenever the grid is up and running.
2.5 Energy Issues in Transport Sector
The transport sector accounted for about one third of the country‟s energy demand
in almost all the years in focus. Petroleum products, petroleum motor spirit, diesel,
fuel oil and dual purpose kerosene are the main fuels consumed in the sector. The
sector is responsible for the highest portion of petroleum fuels consumed in the
country in all the years of focus. It is also the sector responsible for the highest
consumption of fossil fuel in the country in all the historical years. Example about
67% of all the fossil fuels was consumed in the country (excluding those
consumed for electricity generation) in that year. The Table 5 below shows the
corresponding figures for the sector during the years 2000 and 2005 on a final
energy and fossil fuel basis. (F.B. Dayo. 2007)
22
Table 5. Final Energy and Fossil Fuel Consumption in the Transport Sector.
Years
Final
in
Energy % of Total
% of Fossil
%
Transport
Sector (PJ)
Petroleum
Products
Final Energy
Fuel
(Excluding
Fossil
fuel
consumed for
power
generation)
1990
287.34
35.03
66.96
100
1995
278.76
20.45
75.63
100
2000
357.21
17.18
59.84
100
2005
486.34
15.55
48.18
100
Source F.B. Dayo 2004, 2007
2.6 Energy Issues in Service Sector
In rural area, human energy is used for water lifting from wells while in the large
villages and many towns, diesel powered pumping systems are relied upon to
raise water from boreholes. Hospitals and health centers in rural area rely on
together Renewable Energy-generated electricity and diesel generator for lighting,
sterilizing of appliances as well as for storage of drugs and vaccines. The state of
affairs in the health centers is vastly the same in boarding schools, barracks and
prison house.
23
2.7 Inefficient Energy Utilization
The Power utilization in the country is far from being well-organized. Apart from
the straight loss due to power wasted, using energy incompetently has three main
implications in Nigeria. These are:
The investment in some energy supply infrastructure is far in excess of what the
energy demand is.
The environmental problems associated with energy utilization are more
aggravated due to large energy consumption.
Excessive energy consumption adds to costs of goods produced especially in
energy intensive industries like cement, steel works and refineries.
2.8 Inefficient and Unreliable Energy Supply System
In electric power supply efficiencies of existing thermal plants are low. They are as
low as 12 per cent whereas efficiencies of up to 40 per cent are possible with
current technologies. In addition considerable electricity is lost during transmission
and distribution. These losses are sometimes more than 30 per cent of the total
electricity generated. Separately from these inefficiencies the reliability and
availability of existing installed electric generation system is low. There is the
severe difficulty of power unreliability over the years such that most industrial
establishments and upper income households install very costly generating sets
amounting to over half of the total installed grid capacity. This constitutes huge
economic losses to the nation economy. (A.S.Sambo/ISESCO. 2005).
24
The major factors contributing to the above unreliability and inefficiency in the
power sector are:
There are frequent breakdown of generating plants and equipment due to
inadequate repairs and maintenance; lack of skilled manpower and inadequacy of
basic industries to service the power sector.
In the petroleum sector, production, marketing and distribution system are often
inadequate, inefficient and expensive. On the manufacture side, refinery capacity
use is generally low mainly due to operation and repairs problems.
25
3 RENEWABLE ENERGY IN NIGERIA
Etiosa Uyigue (2007) Renewable energies include wind, ocean wave, and tides,
solar, biomass, rivers, geothermal (heat of the earth).However, the spotlight is
based on solar, wind and biomass. He also gave the explanation why they are
called „‟Renewable‟‟ since they are often replenished by natural processes and are
therefore in continual supply. They also can operate without polluting the
atmosphere. Technologies have been developed to harness these energies. This
alternative source of energy are constantly being replenished from natural
sources, they have good security of supply unlike fossil fuels, which are negotiated
on
the
international
market
and
subject
to
international
competition
sometimes may even resulting in wars and shortages. They have significant merits
which could be stated below:
The rate of use does not influence the availability of renewable energy in the
future, thus they are infinite. The resources are normally well distributed all over
the world, although wide spatial and temporal variations occur. Thus all regions of
the world have reasonable access to one or more forms of renewable energy
supply. They can be cheaply and continuously harvested and therefore
sustainable source of energy
According to Etiosa Uyigue (2007) The nuclear and fossil fuels plants which
belong to big companies, governments, or state owned enterprises, alternative
source of energy can be set up in small units and therefore suitable for community
management and ownership. Hence, value from renewable energy projects can be
kept in the community. In Nigeria, this has particular relevance since the electricity
grid does not extend to too many rural areas and it is prohibitively costly to extend
to countryside. This gives exceptional prospect to construct power plants closer to
where they are really needed. Consequently much needed income, expertise
transfer and manufacturing opportunities for little businesses would be injected
into rural communities. Promoting alternative source of Energy will give Nigeria
less greenhouse gas emission and also prevent global warming, increase market
26
opportunities in Nigeria, employment opportunities and also closing the wide
energy supply and demand gap.
According to A. S. Sambo (2005) the country Energy Policy on Renewable Energy
provides for the development and harnessing of the Renewable resources of the
nation and the use of same to support decentralized energy supply. The
development and support of Renewable technologies in the country today is the
responsibility of the Energy Commission of Nigeria. He went further that it
expected that
the Commission will use Renewable Energy to pursue
environmental sustainability agenda. Although the constraints have being
insufficient financial support has affected the few planned projects such as
Renewable trainings, information dissemination, pilot and demonstration projects
that the Energy Commission of Nigeria embarked upon in the past few years.
In terms of its potentials, capacity and development reveals an large quantity of
resources that can be harnessed to make the nation one of the most industrialized
countries in the continent, the Finnish companies can take this advantage to invest
or do joint project with companies or government. The future is bright for investors
why, the political climate in Nigeria is growing very fast and government are
bringing
different
policies
to
encourage
foreign
investment.
(A.S.Sambo/ISESCO.2005).
3.1 Renewable Energy in Nigeria Current and Future
Renewable Energy Potential in Nigeria has high potential to harness power from
renewable sources. The nation falls within the tropics of Cancer and Capricorn
where the abundance of sunlight is inevitable. This energy whose reservoir is the
sun is one of the energy resources whose availability is infinite if it is developed.
Furthermore, unlike the conventional energy resources, solar energy development
is not as capital intensive. Thus, it is fundamental to offer the strategy of
diversifying power resource development outside the usual energy resources
which are in high demand should directly be channeled towards the development
27
of other non-conventional, less capital intensive and non-hazardous power
resources in the country. Efforts need to be geared towards research and
development of solar electricity conversion by both direct and indirect methods.
Wind power is secondary form of solar energy. Experts reported that about 2.5
percent of solar energy captured by the atmosphere is being transformed into
wind. With wind energy available at an annual average speed of 2.0 m/s near the
coast to 4.0 m/s at the northern borders, country possess huge potential to expand
and utilize energy from the wind for electricity generation. Suitable regions for this
technology exploitation are the southern and northern part of Nigeria.
The potential for biomass development is high. Nigeria has all the vegetation
regions of West Africa except that of the desert. Agriculture is the leading
economic activity, which contributes 41percent of Nigeria GDP and employs the
highest labor in Nigeria. Roughly 75 percent (74 million hectares) of Nigeria‟s total
land (98 million hectares) is arable and about 40 percent of this is cultivated,
leaving the remaining 60% of arable land idle. If the country farmland is cultivable,
it would have medium for good productivity if correctly managed. Policy,
institutional and technological approach is predictable to harness biomass
potential in the country.
3.1.1
Market Obstacles to enter Nigerian renewable energy markets
Lack of awareness of the potential and Importance of energy efficiency, lack of
skilled manpower to carry out energy audit studies, lack of awareness of potential
alternatives such as renewable energy technologies, There are limited policy
frameworks on development of renewable energy resources, Attitudinal change of
policy makers and end users of energy, lack of energy efficiency agency and low
government financial support and not availability of fiscal incentives.
28
3.1.2
Government and Public Policies to Promote Utilization of Renewable
Energy
There is need for the nation to explore alternative source of energy particularly to
reach out to the populace that do not have right of entry to electricity and other
current power services. The need to preserve the current energy generated in
Nigeria using energy efficiency products and practices is necessary for sustainable
development. (Etiosa Uyigue. 2007).
Create awareness on renewable energy and energy efficiency, promote energy
efficiency products and practices at the side of end users and energy generation,
and develop appropriate drivers for the implementation of energy efficiency policy.
There is no accredited academic program in any Nigerian University and
Polytechnics that can provide training and produce experts in the field of Solar,
Wind and Biomass energy technology. Hence government wants specific policy
that relate to development of skilled knowledge in this power resource. This can be
achieved by establishing training and research centers in selected Universities and
polytechnics across the country. Serious attention has to be given to construction
of roads for convenience to the rural villages and cities. (M.S.Adaramolaa and
O.M.Oyewolab. 2011).
According to Ibitoye and Adenikinju (2007) and Gbadebo and Okonkwo (2009),
There is a need for policy on repairs of electricity infrastructures that would make it
mandatory for government agencies that are involve in electricity generation and
distribution to carry out regular maintenance on these infrastructures. This can be
done by establishing an electricity infrastructure commission with authority to
frequently inspect electricity facilities (including solar, wind and biomass energy
infrastructures) across the country to make sure that maintenance procedures are
followed strictly.
29
There is different ways government tried to attract investors both local and
international companies to come to the country, the following investment
incentives under section 6.0 of the policy (NNPC. 2007).
-
Funding of research and establishment of biofuels agency to limit
investment costs and access to any government subsidy by the companies.
-
Tax Holiday (Pioneer Status): All registered businesses engaged in
activities related to biofuels production and/ or the production of Agricultural
feedstock for the purpose of biofuels production and co-generation within
the country shall be accorded pioneer status within the provisions of the
Individual Development (Income Tax Relief) Act.
-
Withholding tax on interest, dividends e.t.c.: Biofuels companies shall be
exempted from taxation, withholding tax and capital gains tax imposed
under Sections 78, 79, and 81 of the companies Income Tax Act in respect
of the interest on foreign loans, dividends and services rendered from
outside Nigeria to biofuels companies by foreigners.
-
Waiver on Customs and Import Duties: Biofuels companies shall be
exempted from the payment of custom duties, taxes and all other charges
of similar nature.
-
Waiver on Value-added Tax: Companies that are involved in the production
of biofuels or feedstock and/ or the generation of electricity from biomass
shall be exempted from payment of value-added taxes on all products and
services consumed. (Journal of Sustainable Development. [Ref. 18 January
2012].)
30
The following activities and milestones have being carried out some are still on
under the Nigerian Biomass Programme:
Table 6. Short Term Planned Activities and Milestones for Biomass Resource
(2005-2007).
Activities
Description of Activities
Sites Identification
-Indentify
project
all
sites
Year
potential 2005–2007
in the
country and available
Technology Assessment -Assess
and Reviews
necessary
utilization
review 2006–2007
levels
of
of
resource.
countries
biomass
Developed
should
be
approached to promote
the transfer of energy
technology and training to
lift the nation to higher
standards
of
living
to
benefit the entire nation.
31
Table 7. Medium Term Planned Activities and Milestones for Biomass (20082015).
Domestic
Energy
Strategies
Biomass -The direct combustion of 2008–2015
Conversion biomass to produce heat
is the simplest route of
utilizing biomass material.
However,
this
method
misses advantages of the
conversion process, such
as
moisture
reduction,
increase of thermal value
and ease of handling. As
a
result,
combustion
direct
of
unconverted biomass is
relatively
inefficient.
There is therefore the
need
to
appropriate
develop
biomass
conversion systems for
domestic
application.
These strategies include,
anaerobic
digestion,
chipping,
chopping,
grinding, briquetting and
drying
32
Table 8. Long Term Planned Activities and Biomass (2016-2025).
Activities
Description of Activities
Year
Feed Biomass Power into -Power generated from 2016–2025
National Grid.
Biomass can be supplied
to the National grid. The
long-term
aim
increase
overall
is
the
to
nation‟s
electric
power
generation by 35% from
biomass and reduce the
reliance on conventional
sources
for
electricity
generation.
Establishment
of -Government
should
Decentralized
Biomass encourage
through
Energy Plants
incentives,
the
establishment
of
decentralized
biomass
power plants for use in
the industries. The initial
phase
of
development
plants that can generate
as much as 2,500MW of
electricity by the year
2025.
33
3.1.3
Policy measures
Solar Energy
The thrust of the policy here should be the incorporation of solar energy devices
into as many sphere of the economy.
Continuous active support of research and development activities to cater for site
specificity of designs for all parts of the country support of demonstration and pilot
projects to guarantee that the general public become aware of the potentials of
solar energy technologies which will as well assist in creation of markets for solar
energy systems. The Provision of financial incentives, encourage the use of solar
energy systems, particularly in villages where the greatest potential exist and the
introduction of regulatory measures to encourage and protect local capabilities
(A.S.Sambo/ISESCO. 2005).
Wind Energy
The policy and strategies for solar energy are also applicable here. In addition, the
policy should emphasize the exploitation of wind energy for rural water supply and
also for electricity generation. This mean that extra strategies are:
aggressive drive to optimize the components of wind water pumping and electricity
generation and to de-emphasize diesel powered water pumps wherever the wind
speed will allow wind water pumping.
Biomass
The adoption of efficient wood-burning stoves, the active introduction of biogas
digesters to cater for the cooking energy needs of especially large households and
institutions like boarding schools, hospitals, barracks , prisons houses and the
34
development of renewable technologies to supplement wood both as domestic
energy source and also as a building/furniture material.
3.1.4
Creating Environment to Attract Investment
An investment requirement for conventional power sector is big and it is clear that
government will not be able to exclusively fund the sector as has been the case in
the past. That is why private sector participation is necessary. Hence, there will be
need to attract foreign investors in the sector. The needed attractions include:
serious development in the financial performance and existence of favorable
investment environment. Notice of private sector investment will call for; evaluate
existing energy pricing to allow for good return on investment; easing the
difficulties in the procurement of foreign exchange; promoting power conversation
and efficiency measures in all sectors of the economy; Maximizing the operating
performance of obtainable energy supply infrastructure. (A.S.Sambo/ISESCO.
2005).
3.1.5
Renewable Energy Technologies Ready for Local Adoption
A big number of renewable power devices have been developed by Nigerian
researchers in different parts of Nigeria. A.S.Sambo/ISESCO (2005) these devices
are ready for incorporation into the economy.
Solar Cookers
These are box-type arrangements where most local dishes can be cooked within
one hour under average sunshine conditions.
35
Solar Water Heaters
The heaters which are based on flat-plate collectors with appropriate storage units
can produce water at temperatures of up to 80 0C will find applications in
hospitals, hotels, industry and private residences and capable of significant
reduction of electricity.
Water Pumping
Many employees have demonstrated the use of photovoltaic solar modules for
pumping water from wells and boreholes particularly in countryside for proving the
water necessity for entire communities, also good for irrigation purposes.
Storage of Vaccines and Drugs
Photovoltaic power components have also been revealed to sufficiently provide
the electricity for refrigerators and deep freezers in which vaccines and drugs can
carefully stored without losing their potencies.
Production of Biogas
With biogas digesters, which are typically constructed from sheet metal and fed
with slurries of animal dung they can produce biogas and after 2-3 days. This can
be relied upon for the manufacture of gas for domestic cooking. It can also be
used for powering internal combustion engines for electricity generation in rural
areas.
Wind Electricity Generation
In the country, for quite some time, only laboratory trials have been made in the
area of using wind for electricity generation. Lately though, an increasing number
of wind water pumping sets and wind electricity conversion systems have been
installed.
36
3.1.6
Technology Development
The contribution of particular training and development of sound technological
education in the educational system and to ensure that the obtainable pools of
human resources is given the opportunities to “learn – by – doing”. A further
requirement is to increase research and development. Knowledge transfer,
technology transfer from Finland and adapting them for use in Nigeria is a
welcome development. Strategies for increase technology development as follows:
Provision of technological support services needed for the successful training of
personnel; subsidizing the price of technological education; Mobilizing home
expertise and involving them in the planning, designing and construction of power
projects so they can “ learn- by –doing”; Provision of sufficient finance for energy
research, development and demonstration activities; Sponsored trip to abroad to
learn more from developed countries like Finland, Germany, Sweden and others;
Have good collaboration with foreign investors for purpose of technology transfer.
According to The Nigerian National Petroleum Commission (NNPC) they launched
a Renewable Energy Division in 2005, as a result of which the organization
developed a biofuels programme which should see the country saving between
US$ 100 million and US$ 130 million on energy every year. The Renewable
Energy Division is also in charge of coordinating Nigeria‟s activities under the
Clean Development Mechanism of the Kyoto Protocol.
Nigeria‟s focus on increasing its sustainable energy profile is aided by external
partners: in June 2010, the World Bank agreed to allocate US$ 200 million to the
development of renewable energy projects in Nigeria. The US Trade and
Development Agency (USTDA) gave Nigeria US$ 323,000 in June 2010 to help
draw up a framework for using renewable energy in electricity generation.
(Corporate Nigeria. 2010/2011).
37
Integrated Approach to Sustainable Energy Development
The schedule for solving these common problems include the integration of
environmental consideration into energy development plan, create environment to
attract investment and technology development. Because of the tough energyenvironment linkage it is important to integrate the policies affecting the two
sectors for sustainable development. This can be done by incorporating
environmental considerations throughout the planning and implementation stages
of big conventional power projects. The requirements include improving forestry
management by strengthening the institution charged with monitoring forestry
resources. Incorporating environmental impact assessment and for all major
energy projects. Internalizing the external cost in pricing energy products,
designing
and
enforcing
guidelines
for
monitoring
the
environment.
(A.S.Sambo/ISESCO. 2005).
Renewable Energy Systems for Rural Development
The energy needs in the rural and semi-urban areas of the nation can be
categorizes as follows:
Domestic Needs: Cooking, housing light, domestic water pumping and distribution,
television and powering, water heating and Refrigeration.
Agricultural Production: Water pumping and distribution for irrigation, operation of
various agricultural equipment or implements, processing and storage of
agricultural products and drying.
Community Needs: Hospitals, clinics, schools, barracks, prison houses etc.
38
4 ADAPTATION OF 4P’S OF FINNISH BIOMASS POWER
SUPPLIERS TO NIGERIAN MARKETS
4.1 Adaptation of 4P’S Of Finnish Biomass Power Suppliers To Nigerian
Markets
Marketing opportunity exist in Biomass feedstock products. However, what means
of marketing strategy will be used to distribute, promote and price the products?
The decision to manufacture as well as the control of the allocation of necessary
resources must found who will buy the product. Actual and potential customers of
a product define a market. With the aim to obtain business objective a product
must be promoted and distributed to consumers and potential buyers. This
required lot of marketing to have a positive impact.
An estimated 60 million Nigerians now own power generating power sets for their
electricity, while the same number of people spend a staggering #1.56 trillion
($13.35m) to fuel them yearly. I was in Nigeria between September 12th and
November 2nd 2011, l witnessed this problem too, and the country is really
suffering from this low power supply with generating set polluting the environment
during the day by industries and at night by households. (Energy Commission of
Nigeria. [Ref. 7 November 2011].)
Manufacturers operating in the Nigeria business environment have disclosed that
more than #1.8 billion is being spent weekly.
According to Nigerian Tribune Newspaper (2009), the manufacturers who operate
under different trade associations like the manufacturers Association of Nigeria
(MAN) and Nigeria Association of Small Scale Industries (NASSI), they said the
major problem facing them was the lack of power. (Energy Commission of Nigeria.
[Ref. 7 November 2011].)
39
The low purchasing power of the rural and some urban populace must also be
considered with pricing strategy because they constitute the larger part of the
population of the country. The government is also embarking upon different
projects in solar, wind, biomass in order to discourage them from using fuelwood
as an alternative for cooking. The Liquid bio fuels made from biomass holds a vital
hope for rural development because of its potential to create works. More so,
increasing energy security and well being of the rural people is a concern.
According to Felix B. Dayo (2007) generation of power using the carbon neutral
biomass as fuel was described as a clean energy potential .The biomass fuels
considered in the presentation were: agricultural residues generated in the crop
cultivation process and forest residues generated in the lumber industry as well as
in the processing of wood. He went further in evaluating the potentials of using
these different types of residues as fuels for generation in a recent study. The
result is summarized in table 9 below.
40
Table 9. Energy Generation Potentials of Biomass in Nigeria.
Biomass
Biomass
Power
%
Type
Availabl
Generati
Countr
d
Emission
Earnings
e
on
y
cost
Reduction
from Sales
(thousan Potential
Installe
(Million
(tCO2e/annu
of
d
d
US$)
m)
(Million
(MW)
tonnes)
Agricultur
of Estimate Estimated
Estimated
CERs
Capacit
US$/annu
y
m)
35,687
4,113
69.8
5,758
20,959,400
209.59
14,054
1,824
31.0
2,553
9,142,100
91.42
3,249
703
11.9
984
3,522,400
35.22
52,990
6,640
112.7
9,295
33,623,900
336.24
al
Residues
Forest
Residues
Wood
Residues
Total
Source: Felix. B.Dayo. “Opportunities for CDM Projects in Anglophone SSA
countries”, World Bank 2007
41
Table 10. Projected marketed possibility.
S/N
Trend
Market Demand
Per Year (litres)
1
Gasoline (E-10 Blend)- 1.2billion
current
2
-2020
2 billion
Paraffin(Replacement
3.75 billion
With
Ethanol
Based
cooking Gel Fuel)
3
Raw material for Portable 90 million
Ethanol
Total Market Size
4
Current
5.04 billion
market 480 million
possibility(B-20),
Biodiesel
5
Estimated
bio-diesel 900 million
demand by 2020
Source: Azih 2007 Authors‟ modified
42
According to Journal of Sustainable Development 2011, with regards to biofuels
market, records indicate that these commodities have not been use previously for
any commercial fuel application. The projected demands were therefore deduced
from the recent and future gasoline and diesel production in the country. For the
anticipated E-10 ethanol blend in gasoline, about 1.3 billion Litres of ethanol are
required annually. This has been deduced to reach 2.0 billion Litres by 2020 and
beyond. The demand for biodiesel is projected based on 20 per cent blend (B20)
in line with international biodiesels specifications. 900 million Litres would be
required by 2020 compared to the estimated current requirement of 480 million
Litres. The market is anticipated to reach 100 per cent establishment by the year
2020. (Journal of Sustainable Development. [Ref. 18 January 2012].)
4.1.1
Biomass energy case in Nigeria: Agricultural Residues to Energy
According to Felix B.Dayo, table 9 shows the robustness of the potential of
biomass fuelled generation in Nigeria. About 6,640 MW power capacity fuelled by
biomass residues can be implemented in Nigeria. This clean energy potential will
require slightly over US$9 billion putting in place. Apart from profits from sales of
energy, about US$ 336 million per year can be generated from the sales of the
carbon emission reduction when the projects are carried out under Clean
Development Mechanism process.
Barriers that can limit the implementation of Agricultural Residues to Energy as
CDM projects:
Poor Access to and recoverability of Agricultural Residues
The residues manufactured during the organization of cultivated plots and
harvesting of agricultural products in many Nigerian farms are typically located in
areas that may not be easily reachable for gathering. Access to these raw
materials is hard as a result of the poor and in some cases non-existing
43
transportation infrastructure common in many parts of the country. This will to a
certain extent inhibit the recoverability of the agricultural residue.
Residue Pre-Use Transformation Technology Requirements
Usually, residues normally collected from agricultural operations cannot be used in
the form collected as a fuel for energy generation. There may be a need to pre-dry
it before use, size reduction may be needed or there may be a need to briquette
the residues to increase its energy density before being used as a fuel. These are
transformation needs that may require technology skills not usually available in
many developing countries and may constitute a barrier to the use of agricultural
residue as a fuel for energy generation.
Cost of Biomass to Energy Production Compared to Energy Generation
Using Fossil Fuels
According to Felix B. Dayo (2007) he compared fossil fuel fired generation
systems, biomass fuelled systems tend to have higher initial capital cost requiring
higher investment which may constrain firm investment decisions(FID) in a capital
constraint environment such as the one usually found in Nigeria. This may
constitute a barrier to adoption of biomass energy investments in the nation. Apart
from the slightly higher cost of the biomass-energy conversion technologies, most
of the other cost components which are specific to biomass systems examples
extra cost for pre-fired biomass handling and processing can be considered as
incremental cost that must be covered by special financing mechanism if the
biomass energy system is to be competitive relative to other alternatives.
Non-Existing or Weak Power Purchase Agreement
Electricity generation from these biomass projects is likely to be in excess of
electricity requirements of the non-power utility enterprises where the projects are
located. Because the agreements for buy back of power from such generators of
excess power by operators of existing power grids usually are not in place, selling
excess generation to the grid is usually problematic and inability to evacuate
44
power generated has been known to deter investment in such facilities in many
developing countries.
Negative Impact on Agriculture When Residues are collected
Another consideration when evaluating recoverability of agricultural residue
generated is the importance of the residues to agricultural production. In many
agricultural operations, agricultural residues do provide certain functions which
may have implications for agricultural productivity and if collected as a fuel for
energy generation may impair such functions. The important point here is that not
all the residue generated should in principle be recovered as they are needed on
the field as a part of sound agricultural practices. The primary consideration in
agriculture is maintaining the productivity of the soil where crops are grown and to
also promote sustainable development preached by CDM. Felix. B Dayo (2007)
The following Barriers that can limit the potential implantation of forest and
wood processing industry residues to energy as CDM projects in Nigeria:
Access to and Recoverability of forest and Wood Processing Industry Residues
According to Felix .B. Dayo (2007), access to residues generated in the forests
during the harvesting of the round wood and perhaps to a lesser extent for
residues from wood processing industries can be a problem in Nigeria due to the
very bad transportation infrastructure prevalent in many parts of the country. The
situation are however likely to be less of a bottleneck compared to the situation
with agricultural residues. This because in longing operations, access roads are
usually created for the lumber trucks to facilitate the timely evacuation of the
logged round wood. Woody debris left on the ground has been known to deter
erosion and its decomposition; helps maintain soil fertility and tilt.
Pre-Use Transportation Requirements
Residues are normally available for collection after forest logging operations are
usually with high moisture content usually requiring drying before it can be used as
a fuel in energy generation facilities. These are also through true for residues
45
produced in the processing of these woods apart from wet, can also be available
in sizes that requires some amount of size reduction before it can be optimally
used as fuel. The levels of transformation needs may constitute a barrier to the
use of these residues as fuel for energy generation.
Cost of Biomass to Energy Production Compared to Energy Generation Using
Fossil Fuels
According to Doole & Lowe, (1999); Benito & Welch, (1994) one of the most
important decisions organization‟s faces when internationalizing is deciding on
entrance pattern. This is for the reason that any commitments they make will affect
every part of their business for several years. Every mode of entry carries a
degree of commitments, risk and resources. According to Root (1994), entry
modes can be classified into export entry modes, contractual entry modes and
investment entry modes.
First exporting is a relatively easy mode of internationalization and requires limited
investment in terms of time and cost. In export entry modes, the firm‟s final
products are manufactured outside the foreign market. The disadvantages are the
transportation cost of goods, trade barriers, including tariffs and possible lack of
position with overseas sales agents. Many of these troubles can be solved using
contractual entry modes or investment entry modes. However exports entry mode
has low control, low risk and high flexibility. (Hollensen. 2004, 28).
Second, contractual entry modes are also non-equity associations between a firm
and an entity in a foreign target country to form a beneficial business arrangement
for both parties to reach the goals set. Hollensen (2004, 308). Contractual entry
modes can be divided into four major types; Licensing, Franchising, Technology
transfers, Subcontracting and Project operations. The difference between
contractual entry modes and export is that it is a medium for technology transfer or
transfer of individual skills as well as shared level of control and risk. (Hollensen.
2004, 284).
46
Third, investment or equity entry mode can be divided into mostly joint ventures
and foreign direct investment (Acquisitions & Greenfield Investments). Joint
venture is a form of entry mode in which two or more firms‟ carryout a certain a
business contract while remaining independent but set up a jointly owned newly
created company. Johnson & Scholes (1997, 310). Joint Ventures require limited
resources and market knowledge because the foreign partner has this knowledge.
Foreign Direct investment (FDI) as an entry mode enables the company to control
its overseas operation and to profit from location based advantages including
knowledge and capabilities. This is however a high risk entry mode, with high
commitment, requiring substantial financial investments. It is time intense and
complex, and flexibility is very limited because of sunk costs. (Oguji Nnamdi. 2010)
4.2 International Marketing- Adaptation to International Markets
According to Cateora (2006), International marketing can be defined as how
company‟s business activities are planned, priced, promoted and directed to the
customers outside national borders in order to gain profit. It differs from domestic
marketing in simply one clear way; the business is conducted in more than one
country.
Company controls means of competition. Setting those means is influenced by two
levels of uncontrollable elements: domestic environment uncontrollable elements
and foreign environment uncontrollable elements.
4.2.1
Uncontrollable Element in Foreign Environment (Nigeria)
Addition to having to deal with all the uncontrollable factors of the domestic
markets one needs to manage with the same variables in the foreign markets
simultaneously. Depending greatly on the economical development of the country
47
and the differences on the culture the culture shock might be intense. Before
entering into a foreign culture, one should attain as much as information as
possible but still will be difficult to be prepared for problems it may face.
4.2.2
Economic Forces
According to E.N.C. Okafor, C.K.A Joe Uzuegbu (2010) joined with low income per
capita stigma of most African nations; it is practical that economic and financial
barriers may be another main issue to contend with the growth of Renewable
Energy in Nigeria. These challenges occur from lack of access to capital; lack of
means of life support; lack of information by appropriate financial institutions; lack
of investment; scale of energy systems; unsuitable subsidies by government or
other agencies and size of organizations.
Fear of the workability of latest technologies as a result of lack of access to
educational, many financial institutions are not normally willing to invest in the
businesses relating to Renewable Energy. The consequence of this is that both
the potential installer and the end consumer are hungry of the funds for either
early procurement or improve of exiting systems.
Investments in latest technologies are very costly. The price for Renewable
Energy systems in Africa might carry on to be high because of huge financial input
and low profit margin in the course of producing the parts caused by low
patronage and high cost of research and development.
Economic Impacts
According to McGill University the first step in any project always concerns the
evaluation of the costs and the expected revenues. Bioenergy projects always
need to produce energy in a cost-effective way compared to other conventional
methods of energy production. In some cases, bio energy can be undertaken
48
despite the fact that other options seem, on a short term, to be more profitable,
because of declining feedstocks or because of higher social or environmental
benefits that will lead to increased governmental contributions.
Bioenergy projects affect the communities in which they are implanted in various
ways. This can go from improved water quality to the creation of new jobs in
economically depressed region.
Some uses of bioenergy require a feedstock based on dedicated field production
(such as energy crops) or residues from agricultural production. Some agricultural
fields are marginal for food production and bioenergy production could improve
these marginal lands. However, in some cases, the production of energy crops
may have a detrimental effect on food security.
According McGill University, a good example on the social impacts of bioenergy
concerns corn ethanol and rising oil prices. Since corn is an energy-intensive crop
and requires the use of fossil fuels, and increase in the cost of the barrel of oil also
increases the production costs related to corn production. At the same time, this
increase in oil prices increases the profits a farmer can make from the production
of corn ethanol. Under competitive market conditions, the increase in oil prices
limits the supplies of crop feedstocks and favors the transformation of corn
supplies to corn ethanol. These consequences limit the supply of corn for animal
and human consumption and can affect the global prices of corn, making it a less
affordable product. (McGill University. 2011).
4.2.3
Competitive Factors
Competitors already exist in Biomass production in Nigeria. Affordable Energy
Solutions Ltd, AngleLight Consulting, AngleLight Resources Ltd, J-Far Global
Solutions,
Green
Seal
Industrial and
Commercial
Company,
Emmanuel
Resources, ISON Nigeria Limited, Kudo Kings Ltd, Omet Solar Technology and
49
Sonnekraft Technologies Ltd, they specialize in providing Biomass products such
as, biorefinery, composting systems, alternative home and building construction
materials, recycling, waste treatment systems, waste to energy systems, biomass
product supply construction, contractor services, maintenance and repair services,
education and training services. The Biomass market in Nigeria has few players in
the industry. The cost involved in running this programme is expensive. Nigeria
needs more local and foreign investors to invest in agricultural equipments for
good cultivation of the land in order to increase production. The Finnish companies
can set up factories, buy land or cooperate with the local farmers and come with
experts to train people how manage this technology. (Biomass Energy Businesses
in Nigeria. [Ref. 8 February 2012].)
4.2.4
Level of Technology
According to level of technology, Nigeria is rated 94 out of 134. Lack of technical
competence remained and may continue to be a major challenge towards the
development of Biomass energy systems in Nigeria. The technical failures of
Biomass systems can be traced to lack of understanding of local energy
requirement; lack of research and development to adapt technology to local
government conditions, resources and requirements; lack of local skill labor to
install, operate and maintain the equipment properly; and lack of access to spare
parts.
These are the basic technical reasons behind the failure of most pilot programmes
on the development of Biomass systems in Nigeria.
It is on record that most of the pilot programmes are carried out in rural
communities. These communities are quite remote that most initial installers will
not be willing to get back there to render maintenance services. Even when they
do, the professional charges are beyond the capabilities of the beneficiary rural
dwellers.
50
The concept, design, application and the use of Biomass devices are conceived
without any local input, and there is little or no effort to the systems to various
usage requirements. The result is that anytime it becomes difficult to get
assistance in terms of component or intellectual property, as may be required to
maintain or update the Biomass energy systems, the energy system will simply
face redundancy and finally abandonment by the user. (E.N.C. Okafor, C.K.A Joe
Uzuegbu. 2010).
4.2.5
Structure of Distribution
Private service providers include middlemen, traders and transporters, suppliers of
processing equipment, suppliers of packaging materials and, to a limited degree,
financial service providers. Public and development cooperation support is also
provided on behalf of research and extension agencies, most of which focus on
primary production and small-scale processing.
The distribuution channel of biomass
Producer of Biomass (On farm/rural processing to chips) - Processors of Biomass
(Ethanol Production) – Buyers (end product consumer)
The so called ” dry cassava value chain” processes cassava into flour and starch
and further into industrial products such as feedstuff, flour, starch and glucose.
Additional transformation allows for production of ethanol (Biomass) which lately is
picking up, only limited by the low prices for fuel. But with the increase of fuel from
N65 to N97 (January, 2012) could boost the production of enthanol and other
biomass products. (Working Paper 2010. [Ref. 18 January 2012].)
51
4.2.6
Geography and Infrastructure
Nigeria is divided into six Geo-Political zones; North Central, North West, North
East, South West, South South, South East. According to Matthew Uchechukwu
Okorie (2010), Biomass feedstock is in abundance in Nigeria (South East) and
(North Central).
More so, a key determinant for biomass supply is an
infrastructure that ensures economically viable feedstock logistics and handling
from farm to bio-refineries. Other determining factors include cost of inputs,
demand for other uses, local resources (water), and enabling infrastructure (e.g.,
storage and transportation facilities, for feedstocks and liquid fuels).
4.2.7
Political/Legal Factor
According E.N.C. Okafor, C.K.A. Joe Uzuegbu (2010) massive use of alternative
energy systems in Nigeria has huge future if only the right political and legislative
framework can be set in place. Since the skill is far-off, there is requiring placing
proper legislation, to stop rotating the nation into a dumping land by the industrially
advanced countries. Good legislation may see the nation imposing zero taxes to
renewable products, since with zero taxes and huge subsidy, the poorest of the
poor are the main focus and there will be less importation of sub-standard
products. Political approach towards foreign players in the industry as follows:
-
Withholding tax on interest, dividends e.t.c.: Biofuels companies shall be
exempted from taxation, withholding tax and capital gains tax imposed
under Sections 78, 79, and 81 of the companies Income Tax Act in respect
of the interest on foreign loans, dividends and services rendered from
outside Nigeria to biofuels companies by foreigners.
-
Waiver on Customs and Import Duties: Biofuels companies shall be
exempted from the payment of custom duties, taxes and all other charges
of similar nature.
52
4.2.8
Cultural Adaptation
Social acceptance of the Technology is very significant as its lack can be main
challenge. If the home community does not accept the technology, there will be no
requiring of the services. Most Renewable energy installations failed because the
beneficiaries are not conceded during the decision making to deploy the energy
systems to them. Involving the end users may generate more attention as they
tend to profit more, having been given the option to express their very want and
good thoughtful of the project. Cultural reasons for this, is that the ethnic tradition
and culture of Nigeria must be honored, there must be recognition of the royal
fathers, state and local government chairman‟s, a visit to them will go along way
for the business success in that areas. The people can get feedback from their
leaders. (E.N.C Okafor, C.K.A Joe Uzuegbu. 2010).
National Business Biomass and Business Field
Biomass energy business has a main impact on every aspect of our socioeconomic life. It plays a very important role in the economic, political development
of Nigeria. Poor supply of energy restricts socio-economic activities, limits
economic development and unfavorably affects the quality of life. Improvements in
standards of living are manifested in increased food production, increased
industrial output, the provision of efficient transportation, adequate shelter,
healthcare and other human services. These will require improved energy use.
Therefore, the prospect energy requirements will continue to grow with increase in
standards of living, industrialization and a host of other socio-economic factors.
According to Worldbusinessculture.com, industry culture, local Nigerian firms will,
though, have an approach and flavor all of their own. All native Nigerian
companies will display extremely hierarchical tendencies as befits a country rich in
ethnic tradition and culture. Thus the superior expects and receives admiration
from those under them in the structure. As age is extremely valued in Nigerian
culture, managers are frequently of the older generation”age brings wisdom”.
53
Hofstede‟s (1983) definitions of masculinity; masculinity stands for a society in
which social gender roles are clearly distinct. Men are supposed to be assertive,
tough, and focused on material success; women are supposed to be more
modest, tender, and concerned with the quality of life. Nigerian falls under this
definition. Managers are expected to be decisive, emphasis is on equity,
competition and performance and conflicts are resolved by fighting them out.
According to World Business Culture people at a middle-management level will
like to give the feeling that they have great control in the organization, they rarely
do. Decisions are always made right at the apex, so try not to be too much time
trying to force decisions out of more subordinate employees. If possible, go right to
the top.
As a relationship-oriented culture, it is significant to be seen to be trying hard to
develop good contact at all levels within the organization. Nigerians prefer to
develop personal relationship prior to conducting business. Therefore, if this is the
first time you are meeting with a Nigerian company, you should expect to devote a
decent period of time to getting to know people on a personal level. Any attempt to
bypass this protocol will hamper the Finnish business success.
Team members should present a united front at meetings. Any disagreement
between members will be interpreted as meaning that you are not relaying the
entire story and that they should proceed cautiously.
Try to avoid using hyperbole or making exaggerated claims when presenting a
business case as Nigerians are naturally suspicious of a deal that sounds too
good to be true. If you plant to work from an agenda, it is a good idea to send it in
advance of the meeting. Nigerians will generally follow the agenda point by point
and may want to consult with key stakeholders who will not be present prior to the
meeting.
54
While punctuality can be very inconsistent, it is most likely best if you show up on
time.
Be
cautious
to
permit
enough
time
to
negotiate
the
traffic.
(WorldBusinessCulture. [Ref. 14 November 2011].)
Challenges in Nigeria for Finnish Companies
If Finnish is entertaining local business populace, he should make sure he does it
with style in a very good restaurant. The level of generosity directly correlates to
the seriousness of your needs to do trade together.
Nigerians prefer facial expressions that imply empathy and believe an indifferent
facial expression indicates that a person is ignorant.
Communication commences with polite inquires into the welfare of the person and
his family, the use gestures when communicating. The Nigerians may smile to
mask their true feelings, especially when disappointed or confused. Many employ
indirect eye contact to demonstrate their respect for the other person. It is common
to gaze at the forehead or shoulders of someone they do not know well. Very
direct eye contact may be interpreted as being intrusive unless there is a
longstanding personal relationship.
The Finnish should avoid using left hand at meals in Nigeria, both for eating and
for passing thing around the table. As a relationship-oriented culture, it is important
for the Finnish companies to be seen developing good contact at all levels within
the organizations and also attending social functions organize in Nigeria.
While many common problems remain when trying to develop business in Nigeria,
lots of steps have been taken to tackle institutional and corporate corruption”
things appear to be moving in the exact direction”. With introduction of Economic
and Financial Crimes Commission (EFCC) is a Nigerian law enforcement agency
that investigates financial crimes such as advance fee fraud and money
laundering.
55
Under the previous Economic and Financial Crimes Commission chairman Nuhu
Ribadu, the agency has addressed financial corruption by prosecuting and
convicting a number of high-profile corrupt individuals, ranging from Nigeria‟s
former chief law enforcement officer to several bank chief executives. (Economic
and Financial Crimes Commission. [Ref. 19 January 2012].
4.3 Uncontrollable Forces in Domestic Environment (Finland)
The roots of Finnish culture lie deep in the customs and beliefs of the ancient
Finns. They worshipped the many gods and spirits of personified nature and its
various elements. Nature and religious were one. Finland‟s historical links with
countries from east and west have resulted in a combination of these cultures.
Finnish values are a mixture of the Lutheran religion, the protestant working values
of west ( mainly Sweden and Germany) and patience , silence and concern losing
face from the east .The influence of Sweden is more significant and in many ways
wider than that of Russia. Religious, economic and technological traditions are
close to Scandinavia, the United Kingdom and Northern European countries like
Germany.
Working culture and value differences, the same models, value systems and
hierarchy can be found in business life, management styles, in school and
families. Probably the most well known study on cultural difference, and the most
commonly used framework for analysis cultures, is proposed by Geert Hofstede
(1983).
Finland belongs to countries with a short power distance. In Finland everybody
shares the same basic rights and advantages. Society takes care of disadvantage
people and families; all people residing in Finland are entitled to basic social
security and compulsory education between the ages of seven and sixteen.
Democracy and equality are highly valued with little differences between social
56
classes. He said this can be notice in modesty in homes, behavior very calm, they
think before they make speeches, dressing and company facilities.
The hierarchical distance in private companies is minimal. Personnel in the
company generally have access to all levels in the organization and example; they
are encouraged to openly express their views even though they may be in
disagreement with their bosses.
Compared to other European countries Finland has rather feminine values, but is
the most masculine of the Nordic countries and Nigeria where. This can be seen in
education.
Finnish are highly time-oriented. The time concept in Finland is linear, for any
activity the end must be seen and reached. It is very important to be efficient, goalconscious and keep to schedules.
Finland has very strong technical orientation because managerial positions in
industrial companies are dominated by engineers. This can be seen in a very
precise and systematic approach to organization. High value is put on efficiency
and effectiveness. Punctuality is also very important.
According to Sari Laaksonen and Jonna-Amanda Widemark (2004), the Finns
values
characteristic
such
as
trust-worthiness,
reliability,
honesty,
individualism,”sisu” (persistence), quietness, calmness, prudence, patriotism,
punctuality, modesty and equality. They are energetic, essentially inventive, and
creative and they have the zeal to take risk in order to discover things. This will
help the Nigerian energy business with Finland to grow very fast if both countries
can understand each basics cultural and environmental factors.
57
Comparison of Finnish and Nigeria Culture
Cultural description will be based on four cultural dimensions of Geert Hofstede
survey which are comparable to both countries and it could be accessed through
his website.
Power Distance:
Finland has a low power distance and scored 33. Power is
decentralized and managers count on the experience of their team members.
Employees expect to be consulted. Communication is direct and participative while
Nigeria is a very high power distance culture. Nigeria scored 80 which mean that
people accept a hierarchical order in which everybody has a place and which
needs no further justification. Hierarchy in an organization is seen as reflecting
inherent inequality, centralization is popular, subordinates expect to be told what to
do and the ideal boss is a benevolent autocrat.
Individualism: Finland is an individualist culture while Nigeria is a collectivistic
culture. From the survey Finland scored 63. This means there is a high preference
for a loosely-knit social framework in which individuals are expected to take care of
themselves and their families only. More so, the employer/employee relationship is
a contract based on mutual advantage, hiring and promotion decisions are
supposed to be on merit only, management is the management of individuals.
While Nigeria scored 30, this is manifest in a close long term commitment to the
member „group‟, be that a family, extended family, or extended relationships.
Nigeria culture fosters strong relationships where everyone takes responsibility for
fellow members of their group. Also employer/employee relationships are
perceived in moral terms (like a family link), hiring and promotion decisions take
account of the employee‟s in-group, and management is the management of
groups.
Masculinity /Femininity: Finland is a feminine culture. From the survey Finland
scored 26. The implication to business is that the Finnish culture focuses on
“working in order to live” managers strive for consensus, people value equality,
58
solidarity and quality in their working lives. Conflicts are resolved by compromise
and negotiation. An effective manager is a supportive one, and decisions making
is achieved through involvement. While Nigeria is masculinity culture and scored
60, in Nigeria business life people “ live in order to work”, manager are expected to
be decisive and assertive, emphasis is on equity, competition and performance
and conflicts are resolved by fighting them out.
Uncertainty Avoidance: Finland and Nigeria has high uncertainty avoidance. From
the survey Finland scored 59 while Nigeria scored 55. This means that both
countries are afraid of change and try to reject any policy that will lead to change
and uncertainties. They both prefer structure; security is an important element in
individual motivation and old way of doing things. (Geert Hofstede. [Ref. 20
January 2012].)
Time Oriented: Time is very important to Finns and punctuality is a virtue, it means
same as the “Clock Time” to Finns. According to Ann Marie Sabath (1999, 97)
Finns have respect and value for time and expect you to reciprocate.
In Africa, time is seen to be flexible and people come first before time. When a
person is being too conscious of time, he is viewed with suspicion and distrust.
Considering the fact that this is very important in business and life in general,
people who are very conscious of time record little success in Africa owing to the
suspicious and distrust on them. Africans like to spend and control time and do not
see it as a limited commodity. (Robert T. Moran et al. 2007, 615-616.)
However, Nigerians are usually 30 minutes late from the scheduled time either
Meeting or appointment, though things are changing.
59
4.3.1
Competitive Factor
The Finnish Domestic Rivalry in Biomass energy business, Biomass produced
more than 10 per cent, a world record. The companies have creative mindset in
technology, adoption of highly efficient, co-operation between companies‟ couple
with good funding from the Finnish Funding Agency for Technology and Innovation
and other government agencies. This has kept the business going and their
services are needed in all part of Europe, Asia and America.
According to The Finnish Funding Agency for Technology and Innovation, most of
the global manufacturers of forest machines are of Finnish origin. Continuous
development work and operational experience from users have built up the Finnish
biomass energy experience during the last 30 years. Companies like Mesto
Power, Foster Wheeler and Andritz produce over 50 per cent of the world‟s
fluidized bed boilers for biomass. Most of their research and development, design
and manufacturing activities are carried out in Finland. The Wärtsilä Corporation,
renowned for its diesel engines, has a sizeable bioenergy division.
Forest machine manufacturers, such as Finnish-owned Ponsse and John Deere‟s
Finnish-based forestry business, see a lot of business potential in biomass-based
fuel production. On road and off-road transport uses conventional equipment
whenever feasible, but there has been major investment in developing special
equipment such as accumulating felling heads for small tree operations, mobile
and stationary equipment for communicating biomass, bundlers for bailing forest
residues and machines for extraction and crushing of stumps.
In product development, machine manufacturers have closely collaborated with
contractors, operators and researchers. This has contributed to the rapid increase
of the use of forest fuels in Finland.
In Finland a network model is applied in the fuel procurement chain of a district
heating plant or a combined heat and power plant. The network includes
60
representatives from pulp, paper and sawmills that need round wood, from wood
fuel suppliers that are active in the fuel market, from independent entrepreneurs
that are responsible for harvesting, chipping and transportation of wood, and from
private forest owners. There are about 30 notable companies working on wood
fuel and biomass procurement and about 24 companies on fuel processing,
production and refining in Finland.
This companies are doing well in the energy business, they can match any
business in the world; ABB, The Switch, Vacon, HTT- Group, UPC Ltd, MGH
System Oy, Mervento, Greenstream Network Plc, Vaisala Oyj, Suntrica Oy,
Westenergy Oy Ab. Metso Power, Alholmens Kraft, Wisapower , Andritz,
Jyväskylän Voimas, Foster Wheeler, FingoEco, Lahti Energia, Lomellina Energia,
Wärtsilä Biopower, Biokraft etc.
4.3.2
Economic Factors
According to preliminary data from Statistics Finland for 2008, the volume of
Finland‟s GDP grew by 0.9% to €186 billion, which is €35,041 per capita. This
makes Finland‟s average GDP growth rate for the past ten years 3.16%. Growth
rates in 2007 and 2006 were 4.2% and respectively.
However, economic climate can affect on the decision for the company to move it
business abroad. In countries where the economic situation is still weak the
government might have huge impact in terms of finance and facilities.
4.3.3
Political/Legal Factor
Finland‟s National Innovation Strategy brought demand and user-driven
approaches to core of the nation‟s innovation policy. The Proposed renewable
energy target for Finland is 38 per cent of final energy consumption. Government
61
support are high with good execution of projects through TEKES, the corruption
has no impact in the country decision process because the leadership has the
transparency and accountability. This can also mean for example special trade
treaty or possible restrictions that work as a foreign policy. Also you can enjoy
some tax holiday for some years as a starter.
4.4 4Ps and Service (controllable elements)
The concept of 4Ps which was established by Jerome McCarthy in the 1960s has
been used to decide the place of the manufactured goods in the markets. It
creates the major arrangement for the marketing of the product and consists of all
the factors that are considered basic in marketing. Naturally when working in the
international field each market requires its own.
Czinkota and Ronkainen 1997 claim that business to business environment,
defining the 4Ps is essential considering the complexity of the markets. In order to
be successful the manufactured goods needs to be well located and targeted.
According to Czinkota and Ronkainen (1997) the four factors that compose the
marketing mix are;
Product
Product concepts consist of the core project, either service or goods which are
characterized as tangible factors including packaging. Intangible characteristics
include branding and warranty condition. In the industrial markets when buying the
product it usually includes the service as well. By satisfying a need, a product
brings a value to the target customers. In order to gain competitive advantage, a
company should produce and sale products that create more value to the
customer than competitors (Kotler et al., 2002).
62
The use of briquettes, for example, have been investigated as a low-technology,
cost-efficient fuel that could be used in developing countries in order to improve
the efficient of cooking fuel and improve indoor air quality.
More so, other feedstock that is viable and environmental friendly, municipal
waste, crop residues, sawdust; cassava, Sweet corn, Coconut and sugar cane,
cereals are associated with Bio-ethanol, while Sesame, Palm oil, Palm kernel,
Ground nut, Soybean and Cotton seed can generate Biodiesels.
Social acceptance of the Technology is very significant as its lack can be main
challenge. If the home community does not accept the technology, there will be no
requiring of the services. Most Renewable energy installations failed because the
beneficiaries are not conceded during the decision making to deploy the energy
systems to them. Involving the end users may generate more attention as they
tend to profit more, having been given the option to express their very want and
good thoughtful of the project. (E.N.C Okafor, C.K.A Joe Uzuegbu. 2010).
An example of how products need to be adopted, as a relationship-oriented
culture, it is significant to be seen to be trying hard to develop good contact at all
levels within community leaders and the people. A visit to the state, local
government chairman‟s, Emir, Obong and Obi, the people respect their leaders
and listen to them.
More so, for Finnish companies to get a steady control over the Nigeria market,
their production must speak for them positively both social and environment
impact.
63
Price
Price of the product is determined between the manufacturing costs and the
strength of the demand. Price is also influenced by middlemen considering the
special discounts given and the promotion made. It is good to remember that from
the marketing mix price is the only variable generating revenue.
According to Matthew Uchechukwu Okorie (2010) Nigeria government has
expressed intention to deregulate her petroleum industry. When this is done it
means that petroleum refining and marketing will no longer be under the monopoly
of the country‟s Petroleum Corporation, NNPC. If government adopts competitive
market structure for biomass energy products, the implication is that there will be
no control over price and no restriction of entry into the market. Currently
petroleum product pricing is controlled, but with deregulation price control and
subsidy will give way to forces of demand and supply to determine prices. How will
this impact on biomass energy market share?
It is expected that deregulation of the petroleum industry will bring about increase
in prices of petroleum products. As subsidy is removed product prices will adjust to
reflect market price. If the market price of petroleum products is high relative to bio
fuels it will encourage investment in biomass production. This would boost
biomass energy market share as bio fuels could be sold as a substitute or blended
with petroleum products.
Currently, the Nigerian National Petroleum Corporation (NNPC) is investing
heavily in the biomass energy exploitation by initiating a joint-venture setting up
ethanol plants in several parts of the country in a public-private partnership
arrangement that ensures it uptakes all bio fuel production for hybridization
activities. Under this partnership arrangement would bio fuel pricing be market
driven.
64
The low purchasing power of the rural and some urban populace must also be
considered with pricing strategy because they constitute the larger part of the
population of the country. The Finnish companies‟ impact in the Nigeria economy
depends on the price they will fix after considering the uncontrollable element.
Place
Place factor, which is usually referred as the distribution policy, consists of two
components; the channel management and logistics management. Channel
management covers the concept of setting up and operating an organization and
managing the various types of middlemen such as agents, retailers, wholesalers
and facilitators. Logistics management concentrates on providing the product at
appropriate times and places for the customer. This is the most long- term
decision of the marketing mix and is therefore difficult to change in the short term.
Nigeria (North Central and South East) while the North Central and the South East
is the food basket of the country, they stands a good chance of benefiting from
biomass production as nations around the world are looking at biofuels to help
mitigate pollution and global warming. More so, biomass has the potential to
create world class industries and provide employment for Nigerians.
The amounts of sustainably harvestable residues for a specific location will vary
depending upon climate, soil texture, and the production practices used. Corn
produced with conventional tillage requires that more residues be left in the field
than corn produced in no-tillage systems. Likewise, corn grown in rotation with
soybeans requires more remaining residue than continuous corn because
soybeans produce less residue than corn. Crops grown in higher rainfall area,
under irrigation produce more biomass than crops grown in areas with less
precipitation or without irrigation (Gershwin et al., 2007; Wilhelm et al., 2007).
65
The distribution channel of biomass in North Central and South East:
Producer of Biomass (On farm/rural processing to chips) - Processors of Biomass
(Ethanol Production) – Buyers (end product consumer)
The two regions mentioned above are very good location for Finnish companies to
build their factory. They can achieve their goal through either the application of
best management practices.
These regions are nearness to raw materials, there is huge land space, the soils
are good to cultivate to grow crops, and the manpower is available. The logistics
can be done properly well to reach the customers with the best practices to solve
the electricity problems and the atmosphere to be conducive for the nation.
Promotion
Promotion element is the most visible of the marketing mix and its purpose is to
persuade customers. It includes advertising, sales promotion, personal selling and
publicity.
The impact of biomass is an instrument for international cooperation and
development in Nigeria. The Finnish Companies must be ready to promote
biomass at regional and community level by developing sustaining tools and
creating facts and responsiveness about the technology significant, bringing
experts to educate the populace, try to organize training for all, have pilot projects
that will involve the farmers and local companies, large-scale biomass production
could also provide benefits in the form of employment, skills development and
secondary industry. There is a need to visit to the state and local government too.
According to Matthew Uchechukwu Okorie (2010) huge capital investments and
Foreign Direct Investments will be attracted into rural-sited feedstock chain
stretching
from
agricultural
through
agro-industrial
and
petroleum-based
66
enterprises. It will also lead to increased infusion of modern technology in these
sectors. Increased demand for alternative energy light goods such as home
appliances and equipment‟s (stoves, lamps, etc.) will increase the rate of light
goods industrialization in the rural economy. In addition, Nigeria (South East and
North Central) will attract the benefits of the Clean Development Mechanism under
the Kyoto Protocol meant to mitigate the effects of climate change, reduce poverty
and increase rural development.
The inefficient management of the petroleum resources created socio-economic
challenges which the country is grappling with. This should not be the case with
biomass energy resources. Promoting investment climate that ensures energy
security without compromising food security should be pursued.
Try to call up programmes when necessary to show them slides and information
concerning your technology know-how. Also try to sponsors educational
programmes in polytechnics and Universities.
The results gathered from Customer Satisfaction analysis, it became clear that
four factors of marketing mix, product, price place and products were the main
concern of the customers. Considering the geographical distance between Finland
and Nigeria, discovering the most efficient and effective way of distribution channel
in order to be able to compete with the existing competitors on the markets as well
as to prevent the total costs of the product not to be too high is essential. The price
of the raw materials and manufacturing costs are difficult to change but the
opportunity to reduce the cost lies in a well defined distribution channel.
67
Company Case in Finland
According to Westenergy Oy Ab, looking it at Finnish business point of view is
constructing a Waste to Energy plant which will utilize source separated
combustible waste as a fuel. The plant is built using best available techniques and
consideration to the environment and the inhabitants will be taken during the
operation.
Westenergy Oy, Ab is owned by five municipal waste management companies in
the area (Stormossen Oy Ab, Lakeuden Etappi Oy, Vestia Oy, Botniarosk Oy Ab
and Millespakka Oy). The shareholders operate in an area consisting of more than
fifty municipalities. There are more than 400 000 people living in the area.
The plant will produce district heat and electricity in a safe and efficient manner,
replacing a part of coal and oil ad primary district heat fuels. The plant is a long
term solution, taking into account possible tighter emission limits and efficiency
demands of the future as well as the waste disposal bans in 2016 and 2020.
The cooperation partner Vaasan Sähkö Oy will convert the produced steam into
electricity and district heat. Westenergy will produce more than a third of the
annual district heating energy need of Vaasan Sähkö.
The Power Plant will use 150 000 t/a of source separated combustible waste. The
efficiency ratio of the plant will be approx. 85% fuel capacity 61 MWth, electricity
capacity 15 MWe gross, district heating capacity 40 MW and 8000 operation hours
annually. (Westenergy. [Ref. 6 December 2011].)
68
5 CONCLUSIONS
The goal of the thesis is finding out the adapting means of competition of Finnish
Biomass product manufacturers entering Nigerian markets. In course of my
review, the Nigeria has the ability for profitable operation, feedstock supply,
sustainability and has large preserve of expected resources for biomass energy
production.
The Electric Power Reform Act, signed into law in March 2005, forms the basis for
the hopefulness that continuing private investment and management strategies
would give the momentum to turn around the electricity sector, with better
generation and stable energy supply delivery, with biomass energy-based
electricity generation technologies playing a major function. Get hint from other
developing nations like India, China, Indonesia, Thailand, and Kenya indicate that
there are group of potential in the acceptance of these technologies. These
potentials have been inspired by purposeful government policies to give
confidence to the private sector, the second and third tiers of government, local
communities and to install and manage biomass-energy-based electricity
generation plants.
The main advantage of biomass energy solutions includes less stress in
maintenance and simplicity of the technologies.
More so, the country electricity demand is on the high side, the supply has not
meet the needs and the constant to meet the require which left People of Nigerian
with no alternative than to be using their owned fossil fuel power generating
systems and the use of it is expensive and not in nature accepted.
The potential of Alternative energy resources in the nation is put at 1.5 times that
of fossil energy resources. Biomass has great potential in Nigeria and if the
Finnish company Westenergy Oy Ab and other Biomass manufacturers can come
by considering improving on the low supply of power sector in the nation, they
could take advantage of the villages, through adoption and the use of these
69
alternative power resources for growth in the country. The Finnish have the ability
and the technical know-how to turn around the situation.
The implementation of high-efficiency, sophisticated technology has been shown
to be the most dependable way of increasing the use of bioenergy in Finland.
There is good co-operation between companies, research organizations,
universities and public authorities. This has given a solid base for successful
research, development, demonstration and commercialization of new processes.
However, a series of technology development programmes for bioenergy was
launched in 1980‟s (32 years). The programmes of Tekes, the Finnish Funding
Agency for Technology and Innovation, have focused on areas such as
combustion, production of biomass based fuels and environmental impact. Tekes
programmes forums for the exchange of information and networking between
companies and research groups. They provide opportunities to carry out ambitious
Research and Development projects and develop business expertise and
international co-operation. These programmes have been essential part of Finnish
innovation system. This experiences mentioned above are welcome in Nigeria and
this could be another source of profit for them.
70
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