BusinessDay 09 Apr 2018
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Monday <strong>09</strong> <strong>Apr</strong>il <strong>2018</strong><br />
C002D5556<br />
BUSINESS DAY<br />
FEATURE<br />
31<br />
generators and other generating<br />
sets. Generating sets are 8502. Solar<br />
panels are made up of minute photovoltaic<br />
cells and photovoltaic cell<br />
put together can be used as a signal<br />
and they can also be used for power.<br />
“Where they are used for signal,<br />
it is 8541 but where they are used<br />
for power generation, they are in<br />
8501, the difference between these<br />
two is that 8541 does not have a bypass<br />
diode, while 8501 has a bypass<br />
diode,” said Anthony Anyalogu,<br />
head of classification at the Nigerian<br />
Customs Service.<br />
“What is a bypass diode? It makes<br />
it to have a constant energy wavelength,<br />
without a diode, it does not<br />
have a constant energy wavelength<br />
and you cannot use it for power<br />
because if you put your bulb on, it<br />
will be shaking but that of 8501 because<br />
of the bypass diode, can have<br />
a steady current.<br />
This is the technical version,<br />
shorn of all the verbiage; it effectively<br />
puts solar panel in the same<br />
class as diesel generators simply<br />
because the result of its activity is<br />
power generation.<br />
Joseph Attah, Customs PRO, in<br />
response to media questions gives<br />
the nuanced version, equally suffering<br />
a deficit of reason.<br />
“Government in a bid to support<br />
the power sector brought a policy<br />
that says solar panels which are<br />
under HS code 8541 attract zero<br />
percent duty but when you bring<br />
solar panels that have other systems<br />
they have components when it becomes<br />
a set having the electrons,<br />
the diodes. It will no longer be<br />
under 8541, it will be under 8502<br />
and 8502 attracts five percent. This<br />
is what some of them don’t appear<br />
to understand.”<br />
Adeyemo and other operators<br />
disagree. “Solar panels are not<br />
mechanical components with moving<br />
parts, besides the Customs has<br />
always isolated other components<br />
and charged duties without objections<br />
from our members,” he said<br />
shortly before the press conference.<br />
Adaju counsels that even if the<br />
Nigerian Customs Service wants to<br />
reclassify import codes, it should<br />
notify the public and give operators<br />
time to adjust their business plans.<br />
However, Anyalogu insist this is<br />
standard practice in America, Europe<br />
and other parts of the world.<br />
But checks show that the United<br />
L-R: Femi Adeyemo, co-founder/CEO, Arnergy; Vera Nwanze, MD, Azuri; Dotun Tokun, MD/CEO, Solarmate Engineering<br />
Ltd; Chuks Umezulora, co-founder/COO, Auxano Solar Nigeria Ltd, and Segun Adaju, chief energizing officer, Consistesnt<br />
Energy, at a press briefing on imposition of import duty on solar panels in Lagos, on March 28.<br />
States and Germany give their citizens<br />
a rebate for using solar. In many<br />
African countries including Kenya,<br />
Tanzania and Ghana, solar panels<br />
are duty free.<br />
“In my experience working<br />
across several African countries,<br />
solar panels have always been duty<br />
free. In Ghana it is not only duty free<br />
but is given priority clearance at the<br />
ports,” said Vera Nwanze, general<br />
manager of Azuri Technologies.<br />
An analysis of the returns from<br />
investments in solar mini grids show<br />
that operators can make up 12.5<br />
percent returns. Commercial banks<br />
offer loan facility at 22 percent interest<br />
and the imposition of this new<br />
tariff could wipe off 50 percent of<br />
their revenue due to high prices and<br />
consequent slow demand growth.<br />
Meanwhile the Federal Government<br />
sells 5 year bonds at 13.5 percent.<br />
You would have to be charity to<br />
think of investing in the sector now.<br />
“I think the government should<br />
just come out and tell us they don’t<br />
really want this solar thing, so we<br />
can decide what next, maybe to<br />
open a bakery may be better now,”<br />
says Adeyemo.<br />
Nigeria’s clean energy drive<br />
threatened<br />
In 2016, Nigeria signed the Paris<br />
Accord which sought to cut carbon<br />
emissions by reducing dependence<br />
on fossil fuels and ramping renewable<br />
energy adoption.<br />
To this end, Nigeria issued debut<br />
Green bonds to meet its Paris Nationally<br />
Determined Contributions<br />
(NDC). It realised N10.69 billion in<br />
2017 and the ministry of environment<br />
is now targeting the issuance<br />
of N150 billion green bonds this<br />
year.<br />
Nigeria seeks to generate 30%<br />
of its power through renewables by<br />
2030. To this end, pragmatic policy<br />
like the mini-grid regulation was<br />
released in 2016 by the Nigerian<br />
Electricity Regulatory Commission<br />
(NERC), which makes a permit<br />
optional for an operator that distributes<br />
up to 100kW but demands<br />
permit for installed generation capacity<br />
above 1MW. It will also allow<br />
investors to generate, transmit and<br />
distribute power to willing buyers at<br />
market price.<br />
The regulation was specifically<br />
designed to fast-track electrification<br />
in areas without any existing distribution<br />
grid and provides access to<br />
power to areas poorly served or with<br />
non-functional distribution grid.<br />
Investors are only beginning to map<br />
out investments in mini grids and<br />
strategizing on how to develop them<br />
economically before the Customs<br />
came up with a duty on solar panels.<br />
Last year, Nigeria granted solar<br />
panel manufacturing pioneer status<br />
to encourage the sector and has a<br />
National Agency for Science and Engineering<br />
Infrastructure (NASENI)<br />
that is supposed to be producing<br />
solar panels, even though it is poorly<br />
funded, but this seems to signify<br />
intent to drive the sector.<br />
This new import duty is at variance<br />
with these goals. While increased<br />
revenue appears to be the<br />
motive behind this Customs regulation,<br />
it cannot be done in a way that<br />
undermines this nascent sector.<br />
“Instead of short sighted import<br />
duties which undermine sound<br />
Federal Government policy, Nigeria<br />
Customs should consider how much<br />
duty they can collect from imports<br />
for a far more productive economy<br />
in five years with up to $10 billion<br />
of mini grids and 10 million solar<br />
home systems operational and driving<br />
economic growth,” said Boer.<br />
Growing local capacity can’t be<br />
the reason<br />
Nigeria currently does not have<br />
capacity to manufacture solar panels<br />
but does limited assembly in<br />
volumes that cannot meet up to<br />
10% of market demand by only two<br />
operators – Lagos based Auxano<br />
Solar and Blue Carmel Energy Ltd<br />
based in Kaduna.<br />
“Locally, we don’t even have capacity<br />
to assembly enough panels to<br />
meet demand. Nigeria cannot live in<br />
isolation in comparison with other<br />
West African countries, imposing<br />
this kind of tariff will only move<br />
investments to other countries,” said<br />
Chuks Umezulora co-founder of<br />
Auxano Solar Nigeria Limited.<br />
Morocco provides a teaching lesson<br />
on how a responsible government<br />
develops clear strategy to diversify its<br />
energy source. In 20<strong>09</strong>, it adopted a<br />
national energy strategy to improve<br />
Laws were enacted to permit<br />
for auto-generation of electricity<br />
though renewable energy installations<br />
by industrial clients up to 50<br />
MW. Another renewable energy law<br />
allows energy developers to invest<br />
in renewable energy projects and<br />
sell the electricity to a chosen client<br />
– even for export – on the basis of a<br />
negotiated contract.<br />
“Opening up the medium, high<br />
and very high voltage levels for<br />
private power producers this law<br />
brings about competition in electricity<br />
production, though some<br />
developers complain about slow<br />
authorisation procedures, particularly<br />
in terms of technical approval<br />
through ONEE. Also, a decree is still<br />
missing (and currently under preparation)<br />
which is required for projects<br />
on the medium-voltage level,” said<br />
energypadeia.<br />
Morocco has launched one of the<br />
world’s largest solar energy projects<br />
costing an estimated $9 billion.<br />
The aim of the project is to create<br />
2,000 megawatts of solar generation<br />
capacity by the year 2020. The<br />
Moroccan Agency for Solar Energy<br />
(MASEN), a public-private venture,<br />
has been established to lead the<br />
project.<br />
Meanwhile, Nigeria is reversing<br />
gains already made with this new<br />
duty. It will increase acquisition<br />
cost of solar panels and make other<br />
African markets attractive for new<br />
investments.<br />
East African countries are already<br />
miles ahead of Nigeria in<br />
terms of solar adoption attracting<br />
millions of dollars in new investments.<br />
Some of the operators have<br />
confirmed that their partners are<br />
now negotiating exit from Nigeria.<br />
“Since this new duty, I have had<br />
two discussions with partners who<br />
are asking about how we could enter<br />
the East African market,” Ernest<br />
Akale, Abuja-based solar energy<br />
operator says.<br />
REAN is urging the Federal Government<br />
to take control of the<br />
situation immediately and instruct<br />
Thousands of Nigerians shared the message on social media<br />
security of energy supply and affordability,<br />
while also addressing environmental<br />
and safety concerns.<br />
The strategy sought to reach<br />
these goals by diversifying energy<br />
sources, optimizing the electricity<br />
mix, increasing local production<br />
particularly from renewable sources,<br />
promoting energy efficiency,<br />
and advancing regional integration<br />
according to an online energy resource.<br />
It was implemented through<br />
energy sector reforms, including<br />
legislative changes, increased transparency<br />
and competition, as well as<br />
capacity building.<br />
the Nigerian Customs Service to<br />
immediately stop the imposition of<br />
this duty on imported Solar Panels.<br />
“We also urge the Federal Ministry<br />
of Finance to establish a dedicated<br />
task force for Renewable Energy<br />
and Energy Efficiency within the<br />
Nigerian customs that will fast track<br />
screening of RE and EE components<br />
coming into the country and streamline<br />
the cumbersome importation<br />
process. This task force will also<br />
ensure that the correct HS codes<br />
and Federal Government incentives<br />
are applied to imported RE and EE<br />
goods,” Adaju said.