The Centre for the Promotion of Private Enterprise (CPPE) has advised the federal government that a ban on the importation of solar panels in the face of glaringly inadequate domestic production capacity could worsen the country’s energy crisis.
The CPPE’s advice followed a statement by the Minister of Science and Technology, Mr. Uche Nnaji, which revealed that the government was planning to ban the importation of solar panels as a measure to promote domestic production of the panels.
In a statement issued on Tuesday, the Chief Executive Officer of CPPE, Dr. Muda Yusuf, advised strongly against this policy proposition, stating that the view of the CPPE was that Nigeria was not yet 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.
Yusuf stated: “Currently, Nigeria has one of the worst energy accesses with a per capita electricity consumption of about 160kWh, far below the Sub-Saharan Africa average of 350 Kwh.
“The adoption of solar energy solutions 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.”
He argued that the contemplated ban was a complete negation of the government’s policy to deepen and promote the adoption of renewable energy solutions by households, small businesses, rural communities and government institutions and other corporate organisations, which has gained an impressive momentum in the last two years, especially in the light of the soaring energy cost in the economy.
Yusuf said: “It 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 added that 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.
According to him, what was desirable at this time was to seek ways to drive affordability, rather than escalate costs.
He noted that the CPPE shared the minister’s vision of encouraging domestic production of solar panels but warned that the transition process should be very painstaking, diligent and gradual.
Otherwise, recourse to a hasty decision of banning importation of solar panels would be very disruptive and counter-productive.
Yusuf also argued that the contemplation of an import ban is a major trade policy decision that would require 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.
He added that the empirical study should also be undertaken to determine the availability and adequacy of the critical inputs for the production of solar panels.
He averred that 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 organisations.
“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 Ministry of Science and Technology.
“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.
“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,” Yusuf said.
The CPPE also urged the government to cut the import duty on batteries, inverters and wind turbines to 5.0 per cent to improve energy access, energy security and productivity in the economy.
He also clarified that Executive Order 5, which the minister alluded to, is not a trade policy but a procurement policy which directed Ministries, Departments and Agencies (MDAs) to give preference to Nigerian service providers in their procurement process for goods and services.
