Assessing the economic fallout: What Nigeria’s possible solar panel import ban means for SMEs

Recent reports that the President Bola Tinubu-led administration plans to ban the importation of photovoltaic solar panels have sparked heated conversations across social media, with reactions channelled to how this declaration — if metamorphosed into a state action — could impact the economy of Africa’s biggest powerhouse. 

With over ₦200 billion already spent on solar panel imports, the government argued that it is time to shift gears. According to Abba Aliyu, Managing Director of the Rural Electrification Agency, the proposed ban is also meant to boost local manufacturing, conserve foreign exchange, and improve economic development by reducing reliance on imported solar panels. 

He added that this aligns with industrial and energy independence goals, including the Presidential Executive Order No. 5, which promotes local content in science, engineering, and technology.

“While there is a need for that importation, one of the key things our agency is striving for is domesticating the manufacturing of this renewable equipment. Lagos, being the centre of excellence, is going to lead a total war in that domestication,” Aliyu maintained, while echoing support for local manufacturing.

Although this move has not come without controversies trailing it, this is not the first time the Nigerian government is making similar moves. In the wee hours of March 2020, Senator Enagi Bima (APC-Niger) proposed a bill that wants a 10-year jail term for generator importers and sellers in the nation. 

In the bill, the legislator said it sought to seek an immediate stoppage of the use of generating sets in order to curb the menace of environmental pollution, which causes serious health hazards in many households. 

Checks show that the proposed law even scaled through the first reading in the National Assembly before it becomes a paper-tiger one. 

If this proposal of banning solar power systems in Nigeria succeeds, there is a public concern that begs for an urgent response: how will small and medium enterprises (SMEs) survive? 

Over the years, many small-scale businesses in Africa’s largest democracy have been forced to use the solar power system to escape the expensive costs and the erratic instability of the grid electricity. In 2024 alone, the national grid experienced nothing less than 12 collapses amidst vandalism of infrastructure — despite huge investment in the power sector with 10 loans worth $4.36bn from the World Bank as at 2024.

In a move termed as improving the downstream power sector, the  Nigerian government has also constantly introduced tariffs which many SMEs find unbearable hence the need for alternatives. 

Making a case for SMEs 

It is noteworthy to state that Small and Medium Enterprises play a vital role in Nigeria’s economy, adding approximately 49.5% to the national gross domestic product (GDP) while increasing job opportunities and tackling poverty alleviation. Despite this contribution, the SMEs sector faces a plethora of hitches which are access to foreign exchange, credit loans, low capital and over-regulation. 

Thus if the government implements and enforces the proposed ban of solar panels, energy experts warn about a potential 150% rise in solar installation costs, which could negatively affect the cost of doing business for SMEs. This decision could worsen energy poverty and muffle the growth of small enterprises that are already battling with energy expenses. 

In a country where internal production capacity is not yet enough to meet local demand, this unexpected change in imports poses a threat that can lead to supply shortages, project delays, and further price hikes, especially as local manufacturers currently match the scale or price of imports in current times. 

For a sector that serves as the lifeline of Nigeria’s economy, the federal government of Nigeria should rather prioritise investing in its growth rather than creating a barrier that further limits its capacity of expansion. 

While it is important for the country to get to energy independence as it goes with global practices, such should not come at the expense of inclusive development especially for an economy that forms a major market employing youth after the state authorities. 

As Nigerians advocate for sustainable development in the energy sector, it is imperative that the government look inward to other alternatives that can be employed to avert such catastrophic impacts of a hasty ban. 

Before this ban should be enforced, the government can direct attention towards supporting SMEs, financing and subsidising taxes for them as a way to free them from price shock even if the transition would eventually happen. 

The Nigerian government can also engage relevant stakeholders and industry experts to deliberate on policies that would benefit both parties, such convergence would protect the interests of the SMEs as they struggle to thrive in a not-so-enabling economic environment. 

While import substitution is a welcome idea, local solar manufacturing in Nigeria — which the country wants to work on — is still not developed and does not have  the required quality to meet current demand.

If the government suddenly implements the proposed ban, such would affect a free market economy where trade is expected to go on freely. 

Currently the Editor-in-Chief of Legit NG, Rahaman Abiola is an experienced journalist and a 2025 free trade fellow at the Ominira Initiative for Economic Advancement.

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