Green Bonds: Leverage Pad for Nigeria’s Sustainable Development?

Green Bonds: Leverage Pad for Nigeria’s Sustainable Development?

Having successfully issued N10.69 billion green bonds in 2017, Nigeria envisages issuing N150 billion in 2018. As we are at a juncture where climate fragility and risk remain high, smart mitigative actions would need to be taken. The green bonds, although relatively new, provide a major decision-making approach from the investors’ perspective towards financing sustainable development projects through prioritising environmental stewardship as well as social and economic governance.

Population growth is inevitable and rapidly increasing. So are mitigation and adaptation projects. These projects growth need to be accelerated to keep pace with the climate challenge. According to the Global Commission on the Economy and Climate, US$6.2 trillion of investment is needed annually for new low-carbon infrastructure, which countries must start building now if they are to limit the effects of climate change. Also, according to Moody; a credit ratings and financial risk advisory firm, green bond issuance soared to a record high, accounting for $93.4 billion worth of investment worldwide as at 2016, in comparison to $2.6 billion of 2012, and it keeps soaring high.

The Climate Bonds Initiative an international organisation working solely to mobilise $100 trillion bond market, for climate change solutions, anticipates the labelled green bond market to reach US$300bn of issuance by 2018. China and India have emerged as key markets, with a 73 percent share of green bonds issuances in emerging markets. It is therefore apparent the world is exponentially ricocheting towards sustainability and Nigeria must not be left behind.

While celebrating this boom, state actors would need to analyse and filter the sectors and projects that aptly qualifies for green bond funding because It’s worth considering whether we are moving towards more rigorous standards that set clear limits, or whether the green bonds are a form of greenwashing.

Nigeria’s Ministry of Environment estimates that N142bn would be needed between now and 2030 to meet its climate commitments. Therefore, it would be over-burdening for the government alone to key into green bonds. The private sector has a role to play provided it is given a fair business ambience. Renewable energy which has been the major offshoot of Nigeria’s climate action, has received a boost in terms of its patronage, although this isn’t due to the need by the populace to embrace clean technologies, but simply due to her epileptic system which has left people with no alternative. Whilst this seem promising, Nigerian government would need to orient her citizens and private sectors about this new buy-in for the sustainable development of her country.

   

With an avalanche of solar radiations, Nigeria appears to be a promising destination for solar electricity generation which would strengthen her embracing clean energy technologies. However, the high import duties tariff on the importation of solar components is a misleading step which should be retraced swiftly. European counterparts provide tax credits which has spontaneously propelled not only transition but has also provided a leverage pad for the private sector to push these bonds.

At this dispensation where numerous measures are being taken towards embracing cleaner energy for sustainable development globally, the Nigeria Customs Service increased tax on renewable energy equipment importation. This isn’t only contrary to Nigerian’s clean energy targets but is detrimental to her ability for achieving her signed New Urban Agenda (NUA) agreement as well as the Sustainable Development Goals.

Whilst Nigeria has made a quantum leap by issuing her first fully-certified $10.67bn sovereign bond in tandem with her National Economic Recovery and Growth Plan (ERGP), it is therefore apparent that her efforts should be enhanced through sensitization, tax waivers, incentives and credits towards achieving climate-smart Nigerian cities.

References
  1. Nigeria joins regional race on green bonds. Organization for Economic Co-operation and Development, http://www.oecd.org/environment/cc/financing.htm
  2. Green Bonds Fact Sheet. Debt Management Office Nigeria, https://www.dmo.gov.ng/fgn-bonds/green-bond/2290-green-bond-factsheet
  3. Access Bank Partners with FMDQ, SEC, FSD Africa, and CBI to Launch Nigerian Green Bond Market Development Programme. CSR-in-Action, http://csr-in-action.org/access-bank-partners-fmdq-sec-fsd-africa-cbi-launch-nigerian-green-bond-market-development-programme/
  4. Nigeria to Issue N150b Green Bonds In 2018. The Eagle Online, https://theeagleonline.com.ng/nigeria-to-issue-n150b-green-bonds-in-2018/
  5. Green Bonds, Sustainable Funding. Active Sustainability, 7 March, 2017. https://www.activesustainability.com/opinion/green-bonds-sustainable-funding/
  6. Nigeria joins regional race on green bonds. Financial Times, https://www.ft.com/content/01870140-3364-11e8-ac48-10c6fdc22f03
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