Paris Agreement and Nigeria’s new duty on solar panels
Since January this year, the Nigerian Customs Service has been demanding the payment of a five percent duty and five percent VAT on solar panels coming into the country though its regulations specifically grants exemption to solar panels.
The government agency has resorted to using the classification (85013300) meant for Direct Current (DC) Generators with movable parts rather than the normal 85414000 classification hitherto used for solar panels which attracts zero duty. This has serious implications for Nigeria’s quest to cut carbon emissions upon signing the Paris Agreement in 2016.
The customs argues that operators include other parts besides solar panel hence the tariff but this is false as every container content is assessed on the basis of HS Codes.
President Muhammadu Buhari on Tuesday, March 28, 2017 in Abuja signed the instrument of ratification of the Paris Agreement on Climate Change which symbolises Nigeria’s endorsement of the global treaty that took effect on Tuesday, May 16, 2017 when the country officially presented the authorisation. Nigeria emerged the 146th country to endorse the Paris Agreement.
The Paris Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.
To reach these ambitious goals, appropriate financial flows, a new technology framework and an enhanced capacity building framework will be put in place, thus supporting action by developing countries and the most vulnerable countries, in line with their own national objectives.
Some countries upon signing the agreement has ramped up implementation of climate resilience activities to assuage tough realities and have formulated their Nationally Determined Contributions (NDCs) – countries’ individual efforts to achieve climate change goals especially in agriculture and renewable energy adoption.
To this end, Nigeria issued a debut Green bonds, which are fixed income securities issued to finance projects that have positive impact on the environment, to meet its Paris NDC commitments. It realised N10.69 billion in 2017 and the ministry of environment is now targeting the issuance of N150 billion green bonds this year.
Nigeria set a target to generate 30 percent of its power through renewables by 2030. The country enacted a mini-grid regulation which makes a permit optional for a mini-grid operator that distributes up to 100kW but permits for installed generation capacity of up to 1MW. It will also allow investors to generate, transmit and distribute power to willing buyers on market price.
Last year, Nigeria granted solar panel manufacturing a pioneer status to encourage the sector and has a National Agency for Science and Engineering Infrastructure (NASENI) that is supposed to the producing solar panels, even though it is poorly funded, but seems to signify intent.
This new import duty is at variance with these goals. While increased revenue appears to be the motive of this drive, it cannot be done in a way that undermines growth of the sector.
“The import duty waiver on solar panels that Nigeria Customs is undermining should only be the first step of what should be a comprehensive supply and demand side fiscal incentive policy to unlock the renewables sector in Nigeria. The incentives need to be more comprehensive and yet instead they are being rolled back,” said Wieber Boer, CEO of AllOn, a firm helping entrepreneurs with access to funding
The Federal Government and the national assembly must rise to the challenge and rescue this nascent industry from the threat of inept policy.
ISAAC ANYAOGU