Green Bonds to finance Nigeria’s $142bn climate improvement plan

A stakeholders’ consultation on the pilot issuance of Green bonds to finance US$142 billion needed by Nigeria between now and 2030 as its contribution towards climate improvement and a low carbon path to the nation’s progress, was held by the Federal Ministry of Environment over the weekend.

A green bond is a tax-exempt bond issued by federally qualified organisations for the development of areas of land that are underutilised, have abandoned buildings or are underdeveloped, often containing low levels of industrial pollution.

The Honourable Minister of Environment, Mrs.  Amina J. Mohammed. OFR who piloted the event said the forum was held as part of a continuing collaboration between the Ministry of Environment and the Ministry of Finance to explore and develop a product that can leverage and channel resources towards viable Green projects but can also contribute to the achievement of the nation’s development objectives.

Nigeria like most countries around the world, faces vast investment needs for the transition to a sustainable, low-carbon and climate resilient economy. The government has made it clear that private sources of finance are needed. “Tapping into the international capital markets, as well as domestic capital, is crucial.” she said

According to the Honourable Minister, the issuance of Green bonds which have grown from US $3 billion per annum since 2012 to an estimated US$100  billion for 2016 present a viable option to raise  Nigeria’s Intended Nationally Determined Contribution’s (INDC).

Speaking at the forum, Mr. Oscar Onyema, Chief Executive Officer of the Nigerian Stock Exchange, Mr. Oscar Onyema said that there is significant market potential for Green Bonds in Nigeria as a developing market with a population in excess of 180 Million people, with projected annual emissions of 900m tonnes requires significant capital to develop mitigation and adaptation interventions that will reduce it.

He further stated that green bonds could mobilise funds from investors who have strong environmental focus, require transparency and have lower risk appetite.

It should be recalled that on Tuesday 17th May 2016, the Honorable Minister of Environment, Amina Mohammed was presented with a Proposal by the Nigerian Stock Exchange (NSE) in Lagos on the issuance of green bonds in Nigeria, after which several consultations with Federal Government entities, NSE, SEC and UNEP was held to critically look into the potential of financing Nigeria’s INDC implementation through Green Bonds and other muti-laterals funding mechanisms.

Green bonds have been the subject of increasing government, investor and media interest and expectations, driven by the prospect of matching large low-carbon investment requirements with the trillions of dollars in global bond markets held by institutional investors. The NSE boss added that a sensitization workshop is to be held in Lagos for Capital Market Operators in Nigeria as a follow up.

According to UNEP, Green bonds have the potential to deliver the low carbon, climate resilient infrastructure needed in Nigeria (e.g. renewable energy, lowcarbon transport, water infrastructure, sustainable agriculture and more) with access to private capital at scale through the international (and domestic) bond markets. Access to private capital is essential to substantially lower the cost of capital for green projects, and enable Nigeria to move to a less emissions intensive growth path.

The event was attended by Hon. Minister of State, Environment, Ibrahim Jibril, Director General, Debt Management Office, Dr. Abraham Nwankwo who also represented the Hon. Minister of Finance, Mrs. KemiAdeosun, Chairman Senate committee on Ecology & Climate Change Senator Bukar Abba Ibrahim, Chairman House Committee on Climate Change, Hon. Samuel Onuigbo and Chairman House Committee on Environment, Hon. ObinnaChidoka.

The stakeholders Consultation also drew participants from Federal Ministry of Finance, Federal Ministry of Budget and National Planning, Ministry of Trade and Investment, Nigerian Stock Exchange (NSE), Debt Management Office (DMO), Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), National Assembly, Africa Finance Corporation, World Bank, UNEP, UNDP, McKingsey& Company, Chapel Hill Denham, Stanbic IBTC, DFID/NIAF and other private sector representatives.

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