The Nigeria Customs Service has clarified that solar panels remain exempt from import duty and VAT. This follows confusion over tariff classifications, with customs confirming the correct classification under specific HS Codes for duty-free status.
Nigeria Customs Clarifies Free Import Duty on Solar Panels
The Nigeria Customs Service (NCS) has recently confirmed that solar panels are still exempted from import duty. This clarification comes after confusion regarding the classification of solar panels under different tariff headings.
In a circular titled "Clarification on the Classification of Solar Panels," signed by Deputy Comptroller CK Niagwan, the customs department addressed the issue to prevent further misunderstanding. According to the circular, some customs units classified solar panels under Heading 85.01 instead of 85.41.
The Nigeria Customs Service confirms that solar panels remain exempt from import duty, clarifying their classification under the correct tariff headings to prevent future misunderstandings.
The customs service noted that this misclassification might have stemmed from the Explanatory Notes of the 7th Edition, which covered the description of solar cells under Heading 85.41. The notes mention that this heading covers solar cells whether or not they are assembled in modules or made into panels.
However, customs clarified that solar panels or modules with elements such as diodes or motors should be classified under specific HS Codes. The correct classification is under HS Code 8541.42.00.00 and 8541.43.00.00, which are subject to 0% duty and VAT-free import according to the ECOWAS Common External Tariff (CET) for 2022-2027.
The Impact of Misclassification on Solar Businesses
The misclassification of solar panels created serious issues for solar companies in Nigeria. One of the most affected individuals was Femi Adeyemo, co-founder of Arnergy Solar Limited. After facing an unexpected 5% duty and 5% VAT on imported solar panels, his disappointment was clear.
Businesses like his, which rely heavily on solar imports to power their operations, were blindsided by customs' sudden change in classification. Many solar operators have already been facing difficulties due to high costs and public distrust of solar technology.
The unexpected duty placed a heavier burden on these businesses. Solar panels are considered essential for the renewable energy sector, and with Nigeria’s ambitious goal to achieve the United Nations Sustainable Development Goals on energy, the issue came at a critical time.
Solar Industry Struggles in Nigeria
The solar industry in Nigeria faces multiple hurdles. Solar infrastructure is expensive, with batteries alone incurring a 20% duty. Moreover, many people mistrust solar technology, as several failed government-backed solar street lighting projects have left a bad impression.
The initial cost of building solar-powered infrastructures, such as a 200kW solar-diesel hybrid mini-grid, can exceed $2 million. Additionally, annual operational costs can reach over $100,000.
Despite these challenges, solar remains a crucial solution for Nigeria, where over 85 million people still lack access to electricity. The potential of solar energy to bring power to rural areas and achieve energy independence is significant. However, customs policies can make or break progress in the renewable energy sector.
Customs' Role in Promoting Solar Energy
Customs plays a vital role in the development of solar energy by regulating the importation of essential equipment like solar panels. The clarification made by the NCS in its circular is a step in the right direction to ensure that solar projects can continue without unnecessary financial burdens.
Customs’ commitment to classifying solar panels correctly under the duty-free and VAT-free categories aligns with Nigeria’s larger energy goals. The correct classification under HS Codes 8541.42.00.00 and 8541.43.00.00 ensures that companies importing solar panels will not face unexpected charges.
The solar energy industry in Nigeria relies on clear customs regulations to thrive. Investors and operators need certainty regarding import duties to plan their business models effectively. The NCS's clarification that solar panels remain duty-free will likely restore confidence among solar operators and investors.
The Nigeria Customs Service has reaffirmed that solar panels remain exempt from import duty, ensuring that solar operators can continue their work without additional financial burdens. This move supports Nigeria’s energy goals and encourages further investment in the solar sector, bringing hope for a brighter, greener future.