Nigeria’s bourgeoning solar market valued at over N18bn is under threat, operators say, due to the imposition of up to 10% import duty on solar panels despite belonging to a classification system which grants it exemption.
Consequently, discharge of goods from the ports has been hampered and demurrage charges have risen for operators said Segun Adaju, president of the Renewable Energy Association of Nigeria (REAN), a trade group of renewable energy operators in the country, at a press briefing organised in Lagos yesterday.
“This has grave implications for Nigeria’s quest to improve the ease of doing business and deepen energy access for over 70million people with inadequate access to power,” said Adaju
The group is concerned that the imposition of arbitrary port charges will accelerate value destruction within the industry, cause prices to rise to uncompetitive levels for rural dwellers who constitute the bulk of solar energy users and negates the country’s clean energy ambition.
“This arbitrary imposition of import duty will destroy our business model. We have modelled costs based on the absence of an import duty only for our products to arrive and suddenly we were slammed with 10% import duty. How do we recover this cost from customers paying less than N300 a day for power?” said Femi Adeyemo, a co-founder of Arnergy Nigeria Ltd.
Arnergy like other operators have been unable to clear their containers of solar panel since January because of the 5% import duty and 5% VAT introduced this year when the Nigerian Customs decided to use a classification (85013300) meant for Direct Current (DC) Generators with movable parts rather than the normal 85414000 classification hitherto used for solar panels which attracts zero duty.
However, the Nigerian Customs Service told BusinessDay that the 85414000 classification is for photovoltaic cell made up into modules and not for solar panel and it is standard practice in America, Europe and other parts of the world.
“Solar panels is in 8501 called DC generator. It is anything that generates DC and 8501 talks about generators other generating sets. Generating sets are 8502. Solar panels are made up of minute photovoltaic cells and photovoltaic cell put together can be used as a signal and they can also be used for power,” said Anthony Anyalogu, head of classification at the Nigerian Customs Service.
Anyalogu further said, “Where they are used for signal, it is 8541 but where they are used for power generation, they are in 8501, the difference between these two is that 8541 does not have a bypass diode, while 8501 has a bypass diode.
“What is a bypass diode? It makes it to have a constant energy wavelength, without a diode, it does not have a constant energy wavelength and you cannot use it for power because if you put your bulb on, it will be shaking but that of 8501 because of the bypass diode, can have a steady current.
This effectively puts solar panel in the same class diesel generators. Operators however fault this claim insisting that panels are not mechanical component with moving parts. They also said that even if the service wants to reclassify import codes, it should give them a moratorium of at least 6 months instead of arbitrarily imposing duties without regards to their business model.
“In my experience working across several African countries, solar panels have always been duty free. In Ghana it is not only duty free but is given priority clearance at the ports,” said Vera Nwanze, general manager of Azuri Technologies.
In 2016, Nigeria signed the Paris Accord which sought to cut carbon emissions by reducing dependence on fossil fuels and ramping renewables. Nigeria has ambitions to generate 30% of its power through renewables by 2030. This new import duty is at variance with these goals.
Nigeria currently does not have capacity to manufacture solar panels but does limited assembly in volumes that cannot meet up to 10% of market demand by only two plants.
“Locally we don’t even capacity to assembly enough panels to meet demand. Nigeria cannot live in isolation in comparison with other West African countries, imposing this kind of tariff will only move investments to other countries,” said Chuks Umezulora co-founder of Auxano Solar Nigeria limited, who assembly solar panels.
The new duty will increase acquisition cost of solar panels and make other African markets attractive for new investments. East African countries are already miles ahead of Nigeria in terms of solar adoption attracting millions of dollars in new investments.
“We therefore urge the Federal Government to take control of the situation immediately and instruct the Nigerian Customs Service to immediately stop the imposition of these port charges on imported Solar Panels
“We also urge the Federal Ministry of Finance to establish a dedicated task force for Renewable Energy and Energy Efficiency within the Nigerian customs that will fast track screening of RE and EE components coming into the country and streamline the cumbersome importation process. This task force will also ensure that the correct HS codes and Federal Government incentives are applied to imported RE and EE goods,” Adaju said.
