President Muhammadu Buhari has considered and given approval for one-year deferment of the 35 percent import adjustment tax (levy) imposed on fully built unit (FBU) electricity meters HS Code 9028.30.00.00 under the 2019 fiscal policy measures for the implementation of Economic Community of West African States (ECOWAS) common external tariff (CET) 2017 – 2022.
In the government commitment to tackle the electricity challenge in the country, the approval for the adjustment is specifically predicated on a request by Mrs. Zainab Ahmed, Honourable Minister of Finance, Budget And National Planning, to support the Nigerian Electricity Regulatory Commission (NERC) in rolling three million electricity meters, which is under the meter asset provider (MAP) framework. The request had made reference to a 35 percent import adjustment tax (levy) which was approved in 2015 on the importation of FBU electricity meters which attracted 10 percent import duty rate in the ECOWAS CET.
According to Ahmed, “the 35 percent levy was imposed on the recommendation of the Federal Ministry of Industry, Trade and Investment, to encourage local production, as well as protect investments in the local assembly of electricity meters.
It was noted that: “An important feature of the MAP regulation is a gradual up scaling of the patronage of local manufacturers of electricity meters with an initial minimum local content of 30 percent with the potential of significant job creation in the area of meter assembly, installation and maintenance.” This is as provided in Section 9 of the MAP regulations that “MAPs shall source a minimum of 30 percent of their contracted metering volumes from local meter manufacturing companies in Nigeria. Further changes to the minimum local content thresholds shall be as specified in the NERC local content regulations.
“However, the application of the 35 percent levy on electricity meters – HS Code 9028.30.00.00 has created a significant challenge to the smooth implementation of MAP scheme of NERC. Even though the 35 percent was in existence since 2015, the MAP regulations by NERC in 2018 to bridge current electricity metering gap, did not factor the 35 percent levy in arriving at the regulated cost of electricity meters to end-users (consumers).
It was also noted that electricity consumers have embraced the opportunities presented by the MAP regulations and signed off to pay for electricity meters at the regulated prices approved by NERC. A total of six million consumers have to date been captured to have indicated interest for electricity meters. “Some of the approved investors under the scheme have also, prior to the implementation of the appropriate HS Code 9028.30.00.00 for the importation of electricity meters, proceeded to import a significant stock of meters for roll out. This is in line with the timelines issued by NERC and the service level agreement agreed with the Electricity Distribution Companies (DISCOs).
In view of the local content for the sourcing of electricity meters, “it is approved that 50 percent of the current demand for electricity meters be considered for importation at the ECOWAS CET import duty rate of 10 percent zero levy. This is to immediately bridge the gap between the demand for electricity meters and local supply. It is also envisaged that this will provide protection for local electricity meter manufacturers and the opportunity to ramp local capacity in the production of meters.”
In another development, all deposit money banks (DMBs) are required by Central Bank of Nigeria (CBN) to immediately implement certain actions in collaboration with their customer, DisCos, which is in line with a directive of the Power Sector Coordination Working Group to improve payment discipline in the Nigerian Electricity Supply Industry (NESI), and thereby boost the overall quality of electricity generation, transmission and distribution. The actions are targeted at ensuring that banks providing bank guarantees to Nigeria Bulk Electricity Trading (NBET) Plc and the Transmission Company of Nigeria (TCN), on behalf of Discos, would take full responsibility for: The collections of the concerned DisCos, and the remittances of the DisCos to both NBET and TCN.