One of the foremost environmental and sustainable development NGOs in Africa, Environmental Rights Action and Friend of the Earth Nigeria (ERA/FoEN), is obviously poised to championing tax rebates and exclusions on renewable energy (RE) products and services in Nigeria.
This is intended to “facilitate development and poverty reduction in the Africa’s most populated country. It is also to significantly decrease its ‘60% to 70% of the 200 million persons who do not have access to electricity”.
Energy demands and supply situation is worst in Nigeria, one of Africa’s worst, where about 70 million of its population have no access to electricity and solely depend on fuelwood for cooking and heating. This results in high deforestation of about 4.5% (about 500,000 hectares), being one of the world’s highest in annual rates. Across the globe, over 1.6 people are without electricity and about 2.4 also depend on fuelwood.
ERA/FoEN had since evolved initiatives to drive the renewable energy scheme in the country, from fossil-energy overdependence to a safer and cost-effective renewable energy regime. The organization, for a couple of years, had been taking very successful advocacy and capacity building activities to the public, through awareness creation, training of young talents in renewable energy technology and training of entrepreneurs, like the Entrepreneurs Training Business Model conference that was recently held in Benin City, Edo State.
Dr. Godwin Uyi Ojo, Executive Director of the organization readily professes to these and of ERA that also promote the activities of Friends of the Earth (FoE), a global charity, to which ERA is a sole representative in the Africa’s most populous country.
Ojo declared these and other assertions in a press briefing and unveiling of a tax reduction policy on renewable energy, held at Abuja, where critical public stakeholders were present.
“On a global scale, most countries derive national revenue from tax regimes on import and export goods and services. In Africa, tax burdens impose obstacles to the promotion of renewable energy for all. It contributes negatively to the implementation of the Sustainable Development Goal 7 for the promotion of clean energy access to all. This policy brief promotes strategies aimed at reduction of tax burdens on renewable energy development, production and consumption in Nigeria”
By the ERA’s perspectives, there is a justification for the tax decline moves as Nigeria is one of the worst amongst African countries, whose energy demands exceed supply, and tariffs increases lead to high transaction costs and a huge burden, often passed on to consumers that seek a just renewable energy changeover. To this, ERA/FoEN advances the elimination of exorbitant tax impositions of 5% Stamp Duty, 5% on Solar Panels and 25% on Batteries and Inverters, which raise the tax burden to about 30%.
And in order to achieve energy access to all, the organization anticipates that the planned 5% to 7% Value Added Tax (VAT) hike in the country, if at all implemented, should not be extended to solar lighting equipment and clean energy cook-stoves. Thereby, the NGO strongly advocated for reduction of VAT to 2%; 5 years moratorium for new renewable energy products and another 5 years Tax Holiday for pioneer’s status and start-up grants from government on indigenous renewable energy businesses.
But, in countries like Norway, India and Kenya friendly tax regime reductions had encouraged successful transition to renewable energy. Norway has also enforced tax on Co2 emissions, a national government grant or reform for private solar installations, which balances out the 25% VAT. There are also provisions in India and Kenya for ten (10) years Tax Holiday for renewable energy businesses. Notably, since 2010 Kenya has removed duties on LED lights and mandated the installations of solar system water heating for new buildings.
ERA/FoEN is wary of that a likely abolition of tax on solar gadgets could make Nigeria a dumping ground. But, it is, nevertheless, rather assured that the country will not be a dumping ground for bad products and services, if the Federal Government encourages state and non-state actors to be involved in the production and supply of renewable energy technologies and products.
Already an agency of the Federal Ministry of Science and Technology, the National Agency for Science and Engineering Infrastructure (NASENI), has gone into the production of solar panels. Nonetheless, it requires more capacity building for efficiency to maximal production. Presently the solar panels with total 7.2 megawatts of installed electricity capacity are produced annually and are more expensive compared to imported ones.
Alongside the Paris Agreement of 2015, several opportunities are derived from reduced tax burdens and a commitment to energy transition from fossil fuels to renewable energy. ERA/FoEN identified the gains as a gradual shift from oil dependency to renewable sources of energy. There is a greater energy access to people and vulnerable groups in solar energy and energy efficient cookstove, thereby the assisting Sustainable Development Goal 7, which is the promotion of clean energy access to all.
Also, it would lead to reduction in frequent national electricity outages in place for a freely reliable energy sources in solar and wind, through the provision, supply and consumption that will also reduce carbon emissions. A decentralized energy democracy and cost effective model can be attained through off-grids and mini-grids systems of electricity supply to households, offices and communities, in addition to generation of green jobs that are less capital intensive.
The ERA/FoEN’s antidotes to renewable energy and its use sounds realistic as a commitment by all to addressing global warming and reduce greenhouse gas emissions. Such commitments are expected to have specific targets that are time bound. These include the decentralization of renewable energy gargets’ production and supply to allow governments, civil society groups, communities and the private sector to participate in the energy sector supply chain.
While a halt should be put to the tax burdens on renewable energy products, by reduced taxation, the proposed VAT increase should also be stopped. In these moves policy makers, like the National Assembly are in the process of being informed by ERA/FoEN and other stakeholders to make laws for more relaxed fiscal policies for renewable energy projects in Nigeria.