Nigeria’s Decentralized Renewable Energy (DRE) Taskforce, which was launched in February to accelerate modern electricity access initiatives, met April 18 to tackle pressing challenges for the DRE sector, including a new tariff on solar panel imports.
The meeting, which was attended by about 35 taskforce members, deliberated on how to accelerate sector growth by removing market barriers, such as a recent code reclassification by the Nigerian Customs Service that imposed a duty on imported solar PV panels. The duty applies a 5-10% tax, despite the Nigerian government designating solar panels exempt.
The new duties have adversely affected the sector and threaten to raise the costs of deploying decentralized renewable energy technologies, while also making it harder for the country to meet its energy access goals and targets. The reclassification has elicited reactions from a variety of stakeholders in the sector, including the Renewable Energy Association of Nigeria (REAN).
As part of its mandate, the task force invited the Nigerian Customs Service and the Federal Ministry of Finance to engage with its members (consisting of private companies, technology providers, investors and civil society) to explain the new duties and offer clarifications on how their potential elimination.
The Nigerian Customs Services was represented at the meeting by the Acting Comptroller for Trade and Tariffs, H.K. Gummi, who sought to clarify that the import duties and tariffs had not changed. Rather, he explained that zero duties were only for solar panels without diodes under the tariff code HN 85.41, while those panels with diodes or other solar panels that are coupled with components were classified under tariff code HN 85.01, which carries a 10% import duty. He added that the duties were in line with the Common External Tariffs of the Economic Community of West African States (ECOWAS).
Mr. Basheer Abdulkadir, Assistant Director, Technical Services Department of the Ministry of Finance also explained to the task force that import duty waivers exist for renewable energy projects which are donor or government-funded. This is line with the policy of the government to end discretionary import duty waivers and focus only on sector-wide import duty waivers, which includes the power sector.
The clarifications provided vital information to the taskforce as well as context on the thinking around the new duties. It also distilled the need for the Nigerian government to create a more cohesive policy-making framework. It was clear from the testimony of businesses owners present that the new duty created an unexpected tax burden on the ability to provide services, and does not ease doing business in Nigeria. The case was also made for how the duties impact several other government commitments in the renewable energy sector and the ability of the government of Nigeria to meet its electrification goals.
The meeting enabled taskforce members to focus on next steps regarding how to engage with on the new policy, with a view to resolving the duty in favor of elimination.
These next steps include requesting the Ministry of Finance to grant zero import duty status to all solar power equipment; requesting a Renewable Energy desk within the ministry in order to fast-track Zero Import Duty Exemption Certificates (IDEC) for solar panels and components; and to develop a framework or handbook on Nigeria Customs clearance procedures for imported solar panels and components.
The taskforce will continue to critically look at how to drive the adoption of decentralised renewables in Nigeria in order to provide clean, modern energy to 93 million people in the country that currently live in energy poverty.
The task force is part of the Scaling Off-Grid Energy (SOGE) Grand Challenge for Development, which is implemented in Nigeria under a partnership between the US Global Development Lab, Power Africa, USAID-Nigeria, FHI360 and Power for All. The partnership aims to provide 20 million households in Sub-Saharan Africa with access to modern, clean and affordable electricity through distributed solutions.
Other components of the SOGE project are DRE 101 workshops with state-level policymakers in the six geopolitical zones of the country and the Platform for Energy Access and Knowledge (PEAK), a market intelligence platform for the DRE sector.
For more information, visit the Nigeria information hub on the Power for All website at www.powerforall.org/nigeria