FG’s metering initiative suffers major setback
There are indications that the massive metering directive announced by the federal government to eliminate estimated billing by Electricity Distribution Companies (DisCos) after it gave approval for tariff hike may have suffered a major setback following revelation that some local meter assembly firms are running out of stock.
One of the major meter assembly firms, MOJEC, through SMS to customers who have already effect-ed payment for pre-paid meters in the escrow account opened for meter payment, revealed that key components used for meter assembly have been held up at the sea ports for over three months.
In the message, MOJEC said, “Dear Customer, We deeply regret our inability to set up and install your Meter despite having received payment for same. This was occasioned by a temporary stock out of meters due to congestion of Key components at Lagos Port.”
This shocking revelation is coming after President Muhammadu Buhari approved a one-year defer-ment of the 35 per cent import adjustment tax (levy) imposed on fully-built unit (FBU) electricity me-ters (HS Code 9028.30.00.00).
The approval was in consonance with the 2019 fiscal policy measures for the implementation of the Economic Community of West African States (ECOWAS) Common External Tariff (CET) 2017 – 2022.
The approval was specifically predicated on a request by the minister of Finance, Budget and National Planning, Mrs Zainab Ahmed to support the Nigerian Electricity Regulatory Commission (NERC) in roll-ing out 3 million electricity meters under the Meter Asset Provider (MAP) framework.
A statement issued by the special adviser and media and communications to the minister, Yunusa Tanko Abdullahi, noted that the request had cited a 35 per cent import adjustment tax (levy), which was approved in 2015 on the importation of FBU electricity meters, which attracted 10 per cent import duty rate in the ECOWAS CET.
The statement noted: “The 35 per cent levy was imposed on the recommendation of the Federal Min-istry of Industry, Trade and Investment, to encourage local production, as well as protect investments in the local assembly of electricity meters.
“An important feature of the MAP regulation is a gradual up scaling of the patronage of local manufac-turers of electricity meters with an initial minimum local content of 30 per cent with the potential of significant job creation in the area of meter assembly, installation and maintenance.”
It noted that this was in consonance with Section 9 of the MAP regulations that MAPs shall source a minimum of 30 per cent of their contracted metering volumes from local meter manufacturing compa-nies in Nigeria.
The statement disclosed that further changes to the minimum local content thresholds shall be as specified in the NERC’s local content regulations.
It further stressed: “However, the application of the 35 per cent 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 per cent levy in arriving at the regulated cost of electricity meters to end-users (consumers).
“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 con-sumers have so far 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 ap-propriate HS Code 9028.30.00.00 for the importation of electricity meters, proceeded to import a sig-nificant stock of meters for roll out.
“This is in line with the timelines issued by NERC and the service level agreement agreed with the Elec-tricity Distribution Companies (DISCOs).”
The statement also pointed out that in view of the local content for the sourcing of electricity meters, the government had approved that 50 per cent of the current demand for electricity meters be con-sidered for importation at the ECOWAS CET import duty rate of 10 per cent zero levies.
“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 oppor-tunity to ramp local capacity in the production of meters,” It further said.
But the Electricity Meter Manufacturers Association of Nigeria (EMMAN) said the policy was inimical to the growth and promotion of local meter production and national industrialisation policy.
EMMAN’s executive secretary, Mr Muhideen Ibrahim, had argued that the directive to defer 35 per cent import duty on imported pre-paid meters was an incentive for mass importation of meters as against upscaling local production capacity.
According to Ibrahim, local meter manufacturers are not being patronised by the off-takers (DisCos in conjunction with MAP) because manufacturers were not prepared to cut corners.
EMMAN, however, warned that the presidential approval on tax deferment for importation of three million finished electricity meters would have negative effects on the power sector.
It said allowing the influx of imported meters over the next 12 months was capable of jeopardising government efforts at industrialising the country.
The Association however advised government that importers should be encouraged to set up facto-ries so as to create a value chain that would provide employment opportunities for Nigerians.
Although spokesman of Ikeja Electric, Mr Felix Ofulue, told our Correspondent that feedback he re-ceived did not show lack of stock by meter assemblers, a source at MOJEC confirmed the develop-ment.
According to the source, key meter assembly, Semi-Knock-Down, SKD, components for meter manu-facturing have been held up at the Lagos sea port due to issues arising from Customs duty charges for more than three months.
The source said, “We have engaged the Federal Ministry of Finance, the NERC and waiver have been granted but we are still in the process of securing their release. We have also notified the DisCos that we are working with because sometimes it is difficult to explain these to customers who have paid.
“We are not in custody of the money paid by customers; we only get paid as soon as we complete in-stallation so we are trying to see how we can resolve all these as quickly as possible”.
Some local assemblers said among the reasons is the extension of the application of a 35 per cent levy introduced by the government on imported meters to components used for meter production.
The managing director of MOJEC International, Chantel Abdul, said that the enforcement of the levy on both imported components and manufactured meters was causing a pile-up of containers loaded with meter parts at the ports, which are in the millions.
Many have criticised a levy on meters in a country where 62 per cent of electricity customers lack ac-cess to meters, but the situation could worsen as even parts to manufacture millions of meters have been stranded at the ports for months because local manufacturers consider the levy prohibitive.
Abdul alleged that there are hundreds of cargoes of meter components for production stuck at the ports because the Nigerian Customs was demanding a 35 per cent levy before they can clear them.