Nigeria plans solar import ban

From the newsletter

The Nigerian government plans to ban solar panel imports to drive domestic production, citing local capacity and abundant lithium resources. Last month, LPV Technologies became the third company to start local solar panel manufacturing, bringing the current annual manufacturing capacity to 200 MW.

• Solar panel manufacturing hasn't yet taken shape in Africa. Few countries like Egypt, South Africa, and Ethiopia are doing local manufacturing but still rely on imports from China to meet their demand.

• Last year, Nigeria imported 1,300 MW of solar panels from China, three times more than they did in 2022. Demand keeps growing as more than 90 million seek access to electricity.

More details

• The idea behind banning solar panel imports is to encourage Nigeria to build its own factories. This would create more jobs and help the country save money by not having to buy panels from other places. Over time, this could also lead to Nigeria developing its solar technology, tailored to its specific needs, and make the country less dependent on foreign energy supplies.

• The Centre for the Promotion of Private Enterprise (CPPE), however, has raised concerns about the proposed ban. CEO Muda Yusuf warned that Nigeria lacks adequate domestic production capacity and risks worsening its already dire energy access situation. With per capita electricity consumption far below regional averages, Yusuf emphasized that affordable solar solutions are critical for improving energy access in Nigeria.

• Moreover, he added that the announcement has heightened policy risks for renewable energy investors, urging the government to clarify its stance to restore confidence in the sector.

• Given Nigeria's current low solar capacity of 144 MW and the nation's severe energy deficit, an abrupt ban on solar panel imports, while aiming to boost local production, risks exacerbating the energy crisis; instead, fiscal incentives would more effectively support both manufacturing and consumer access, fostering sustainable growth without disrupting the market.

• Moreover, a sudden ban on imported solar panels would likely make them more expensive for Nigerians. Without cheaper imports, families and businesses, especially those with low incomes, might not be able to afford solar power. This could slow down Nigeria's efforts to use more renewable energy. Also, if Nigeria can't make enough panels itself, there could be shortages, making the energy problems even worse and hurting businesses that need affordable power.

• There's a risk that the solar panels made in Nigeria might not be as good at first. Because local factories wouldn't have the same experience as big international companies. Also, changing the rules so suddenly could scare away investors, both from Nigeria and other countries, who might not want to put money into the renewable energy industry anymore. Nigeria also has to think about whether other countries might retaliate and put restrictions on Nigerian goods in return, which could hurt other parts of the economy.

• Ultimately, it's really hard for Nigeria to compete with big, established solar panel makers, especially those in China, who sell panels at very low prices. Other African countries have also found this tough. Instead of stopping all imports, South Africa for example, put a 10% tax on imported panels. This helps local companies a bit, but still lets people buy panels from other countries.

Our take

• Copy South Africa, not China. South Africa’s 10% tariff on imported panels offers a smarter blueprint. It nudges local industry growth without severing access to cheaper imports. Nigeria’s proposed ban, by contrast, ignores market realities, especially regarding China’s cheap solar panels.

• Nigeria should be more pragmatic and focus on strategies that gradually incentivise local production rather than resorting to an immediate import ban. This could involve a combination of targeted incentives such as tax breaks, subsidies, and access to affordable financing for local manufacturers.

• Lastly, Nigeria risks deepening energy poverty by prioritising solar manufacturing over immediate access. 90 million Nigerians lack electricity, yet local factories can only produce 200 MW annually,  far short of the 1,300 MW imported last year. Banning imports now would leave households and businesses stranded without affordable Chinese panels, worsening energy inequality.