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Despite huge infrastructural deficits in the country, federal and state governments as well as corporate bodies seem to be neglecting green bonds to fund their respective infrastructural projects, LEADERSHIP learnt.
In December 2017, Nigeria became the first country in Africa to issue a sovereign green bond and since then, development and utilisation of this funding tool is slow as the market is valued at a paltry N49.26 billion with four issuances recorded in the last seven years.
Green bonds are a type of fixed-income investment used to fund projects with a positive environmental impact. Like traditional bonds, green bonds offer investors a stated return and a promise to use the proceeds to finance or refinance sustainable projects, either in part or whole.
The federal government, through the Debt Management Office (DMO, has led the way in Africa in this regard by issuing the first sovereign green bond, raising N10.7 billion ($ 29 million) in December 2017. It has since followed up with another N15 billion issuance in June 2019 specifically to fund renewable energy, afforestation and transportation.
North South Power Services Limited and Access Bank raise green bonds worth N8.56 billion and N15 billion respectively to finance various infrastructural projects in the power, water and agriculture sectors of the Nigerian economy.
To this end, stakeholders are calling for continuous expansion of these issuances by locating a need and fashioning appropriate sustainable financing products to meet them.
Speaking on this, the director-general of Securities and Exchange Commission (SEC), Emomotimi Agama said, embracing green finance remains a critical approach to addressing these challenges.
“Consequently, it is crucial to involve key stakeholders like yourselves in conversations that promote green finance. We are at a pivotal moment where we can shape the future of our investment practices to align with environmental, social, and governance (ESG) principles. Transitioning to a green economy is crucial for the sustainable development of Nigeria,” he said.
He explained that “we are witnessing a promising trend of sustainability-themed funds gaining prominence, especially in developed countries. This reflects a growing global adoption of green finance criteria within the investment community, and notably, green finance performance has shown a strong correlation with overall financial performance.
“In Nigeria, we have a significant opportunity to drive positive change by promoting green finance.
At the Securities and Exchange Commission, we are steadfast in our commitment to champion sustainable finance initiatives. Our Rules on Green Bonds have already facilitated a couple of sovereign issues and multiple corporate issues.”
The executive director, Climate Transition Limited, Mr. Olumide Lala said, the transition to a green economy is essential for Nigeria’s sustainable development, and green finance is a critical component of this transition.
Lala said the desertification of the Sahara is impeding the world, as people are moving towards the south, water resources are being compromised and there is climate risk associated with the financial investments people make.
“There is a need to reduce emission, essentially the message today is changed. The regulator is here trying to reassure investors that the governance structure is there to ensure the safety of the money they are investing. The governance structure is constantly being enhanced in line with global values,” he added.
The GMD/CEO of Nigerian Exchange Group Plc, Temi Popoola said, “the limited flow of climate finance remains a major issue for the implementation of mitigation and adaptation actions in Africa, particularly Nigeria. NGX’s collaboration with internationally recognised organisations like the IFC is targeted at sharing valuable green finance experiences and best practices, as well as promoting the development of sustainable finance market segments to support various stakeholders.”
The CEO of Nigerian Exchange, Jude Chiemeka stated that, “NGX recognizes the power and potential of sustainable finance. It is not merely a buzzword but a transformative force that has the potential to shape the economy and society for the better. The Exchange has wholeheartedly embraced this and is taking concrete steps to contribute to the advancement of sustainable finance in Nigeria.”
He added that, through innovative financial instruments, international collaborations, and a commitment to environmental stewardship, NGX is paving the way for a sustainable future for Nigeria, where economic growth and environmental preservation coexist in harmony.
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