The West African nation of Nigeria is full of irony when it comes to power generation. For a country blessed with oil, so much so that it is one of the major world producers, having power shortage and frequent blackout sure seems ironical.
The typical small businesses and households in Nigerian cities must factor in the price of generators and fuel in their monthly budget if they are to continue running their business without interruption from the chronic main national grid power blackout. Sometimes these blackouts can go for days in a row; not just couple of hours.
Needless to say, the cost of running power generators is high when you factor in the high initial cost of acquiring the machine, its regular maintenance, and the high fuel consumption. The generators are also very noisy and emit a lot of dark smoke thereby defacing the environment they are installed in.
So some small companies across Nigeria have come up buying solar panels and retailing it to the small businesses and homes. These startups are importing solar cells, assembling them, and configuring them before selling to the local market as an alternative to generators.
From these startups’ own admission, it is quite an uphill task to convince the average Nigerian to adopt solar power, as an alternative to generator power backup during the main grid blackouts. However, despite that fact, the solar power retail businesses have registered some good traction.
Well, that was until a recent move by the government through the Nigeria Customs Service (NCS) to illegally set tariffs on the importation of solar panels. All along the federal government set a law – CET code 851.4010.00, a classification for import duty tariffs – “solar cells whether or not in modules or made up into panels” are zero-rated.
With the imposition of the illegal import duty tariffs, you can imagine how more laborious it has become for these small companies to convince the Nigerian market to adopt solar power; which are now retailing more expensive than before thanks to the new tariffs.
The new tariff sparked widespread outrage across the country, with some taking to social media under #NoToSolarDuty hashtag to show their disgust with the government move. Other stakeholders like the Renewable Energy Association of Nigeria (REAN) took it upon themselves to do awareness campaign around the country.
All the while, there was no official address from the NCS about the matter; even after the #NoToSolarDuty trended on Twitter in Nigeria. At some point, it would appear the heat got too much that the Public Relations Offices at NCS, Joseph Attah gave a section of the local media a plausible explanation for the apparent illegal levy.
Attah explained that only solar panels imports come classified under HS Code 8501, which is zero-rated as a government incentive to promote the use of renewable energy. Attah then went further to clarify that solar panels that come with add-ons like electrons and diodes are not under the HS Code 8501 classification, thus attract the import duty.
Experts argue that explanation might sound legitimate from the face of it, but it does not make any sense. Segun Adaju, the President of REAN, discussed the absurdity as follows:
“Solar panels typically come with these diodes and wires behind them, and that is like a global standard. From the factories they are made, these panels ship the same way all over the world, why should they be different when they come to Nigeria? On some rare occasions, the panels can come without diodes but this only for people who assemble. One of our members [at REAN] assembles and subsequently imports panels without diodes, but he was still made to pay the duties.”
The only explanation that seems to hold some water is that the Nigerian government is on an aggressive revenue generation scheme that they have resorted to passing unpopular and regressive
The dishonesty and private business undercutting move by the government
There seems to be more than meets the eye in the seemingly illegal import tariffs by the NCS. Early last month, Governor Nasiru El-Rufai of Kaduna State inaugurated the Blue Camel Renewable Solar Power Assembly Plant and Renewable Energy Training Academy in the state.
The plant is said to have a capacity of assembling more than 10,000 units of various solar products per year. The widespread speculation seems to point to the plant as being the reason for the illegal introduction of the import tariffs on other importers of solar panels.
The Governor of Kaduna State is accused of working with the NCS to see Nigeria discourage the importation of solar panels by other players except for the plant he recently inaugurated. This accusation does not seem too far-fetched as the introduction of the levy coincides with the launch of the assembly plant in Kaduna State.
The move also falls in line with a general Nigeria directive under the Executive Order 003 that enforces support and patronage of local IT products and services. However, critics argue this particular move in the solar energy sector will be counterproductive as the country faces sever main grid power shortage and businesses are plagued with constant long power blackouts.
The government should, therefore, fast-track the adoption of alternative and sustainable energy like solar energy. It also needs all hands it can get on board. Though the move to set up the solar panels assembly plant in Kaduna State is a good one, undercutting other players will only forestall the quick adoption of the affordable and sustainable energy all the while hurting Nigeria’s economy.
“As small as demand is, one Nigerian company may not still be able to meet up. And there’s also the price factor to consider as production and assembly on a controlled level may lead to increase in price even beyond the ones we import,” said Segun.