The Centre for the Promotion of Private Enterprise [CPPE] is concerned about the statement credited to the Minister of Science and Technology, Mr. Uche Nnaji about the plan of government to ban the importation of solar panels as a measure to promote domestic production of the panels. The CPPE wishes to advise strongly against this policy proposition for the following reasons:
- Currently, 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.  A ban on the importation of solar panels in the face of glaringly inadequate domestic production capacity would worsen the country’s energy crisis.
- 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. This adoption of solar solutions has gained impressive momentum in the last two years, especially in light of the soaring energy cost in the economy.
- It would worsen the problem of energy access by making the cost of solar energy solutions prohibitive, making them beyond the reach of the average Nigerian.
- The 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. 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.
Way Forward
The CPPE shares the Minister’s vision of domestic solar panel production, which is good for self-reliance and conservation of foreign exchange. But the transition process should be very painstaking, diligent, and gradual. Relying on a hasty decision to ban the importation of solar panels would be very disruptive and counterproductive. 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, and multilateral organizations.Â
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.
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.
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%. 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.
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, 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.
