Yemisi Izuora
The Centre for the Promotion of Private Enterprise [CPPE], has launched a series of advocacy campaigns aimed at discouraging Nigeria from adopting any policy that would harm its determination to provide alternative energy efficiency.
One of such is a reported plan to ban importation of solar panels which was credited to the Minister of Science and Technology Mr. Uche Nnaji, as a measure to promote domestic production of the panels.
While kicking against such thinking, the CPPE, reminded Government that Nigeria has one of the worst energy accesses with a per capita electricity consumption of about 160kWh, far below the sub-Sahara average of 350Kwh.
The adoption of solar energy solution is one of the most impactful government initiatives to tackle this problem and it has gained remarkable traction and as such a ban on the importation of solar panels in the face of glaringly inadequate domestic production capacity would worsen the country’s energy crisis.
The Director and Chief Executive Officer of the Center, Dr. Muda Yusuf, while highlighting the impact this will have in the sector, said, “It is a complete negation of the government policy to deepen and promote the adoption of renewable energy solutions by households, small businesses, rural communities and government institutions and other corporate organizations.” adding, This adoption of solar solution has gained an impressive momentum in the last two years, especially in the light of the soaring energy cost in the economy”
Yusuf, warned that this would worsen the problem of energy access as it would make the cost of solar energy solutions prohibitive, putting it beyond the average Nigerian.
He argued that a welfare cost of a ban on the importation of solar panels would be incredibly high as a result of the escalation in the cost of acquiring solar solutions.
According to him, “It is bad enough that the current cost of acquisition of solar energy solutions is quite exorbitant. What is desirable at this time is to seek ways to drive affordability, rather than escalate costs.”
While the CPPE shares the Minister’s vision of domestic production of solar panels, which is good for self-reliance and conservation of foreign exchange, it however said that the transition process should be very painstaking, diligent and gradual.
He added that a recourse to a hasty decision of banning importation of solar panels would be very disruptive and counter-productive. It is important to ensure adequate local capacity to fill the supply-demand gaps.
The contemplation of an import ban is a major trade policy decision which demands rigorous, robust and painstaking empirical studies to determine the domestic demand for solar solutions, the domestic capacity to meet those demands, and the implications for the wider economy.
The empirical study should also be undertaken to determine the availability and adequacy of the critical inputs for the production of solar panels. Current local value addition is very low and this would create competitiveness and cost issues.
The Minister’s announcement of a planned importation ban is already generating concerns and anxiety among the renewable energy investing community, the business community, households as well as multilateral organizations.
“It has significantly elevated the policy and political risk of investing in renewable energy solutions in Nigeria. This should be avoided because of the adverse impact on investors’ confidence. Urgent clarification of the government’s position is needed to restore that confidence.” Yusuf urged.
He also informed that banning the importation of solar panels is a fundamental trade policy matter which is not within the remit of the science and technology ministry.
“The conception, formulation and implementation framework for such policy should normally be driven by the coordinating minister of the economy in collaboration with the industry, trade and investment minister and the minister of national planning and budget. There should also be a robust stakeholder consultation for an inclusive policy process. This would allow for a comprehensive analysis of the wider economic and social implications of such a fundamental policy change. “ he said.
Meanwhile, the view of the CPPE is that Nigeria is not ripe for a ban on importation of solar panels given the acute energy deficit in the economy and the glaring domestic capacity limitations for the production of solar panels.
The CPPE recommends that government should rather support investors in the solar panel production with robust fiscal and monetary incentives – tax incentives, tariff concession on intermediate products and concessionary long-term financing at a single-digit interest rate.
Meanwhile, the CPPE urges the government to cut the import duty on batteries, inverters and wind turbines to 5 per cent as this would significantly improve energy access, energy security and productivity in the economy. It would also reduce reliance on national grid for power supply. The current cost of batteries and inverters are very prohibitive.
He highlighted that some of the subsidies given in other climes to promote investment in renewable energy solutions includes investment tax credits, production tax credits, financial grants, power purchase agreements, concessionary financing and support from multilateral institutions,
Meanwhile, he said it is also important to clarify that Executive Order 5, which the minister alluded to, is a procurement policy which directs the MDAs to give preference to Nigerian service providers in their procurement process for goods and services.
It is clearly different from a trade policy measure which has wider economic implications and requires a more rigorous study before policy pronouncements are made, he said.