Nigeria Prepares For First Sovereign Green Bonds

Green bonds is an innovative and alternative source of funding projects that would reduce emissions and provide robust climate infrastructure needed in Nigeria like renewable energy, low carbon transport, water infrastructure and sustainable agriculture in achieving the country’s Nationally Determined Contributions (NDCs) in line with the Paris Agreement.

The bond known as the first sovereign  green bond is expected to open up the space for International bonds to enter Nigeria for greening the economy as well as attracting foreign investors into the country.

The Green projects is expected to cost about N150billion, while the pilot project to be launched by third quarter of this year would cost about N12.384billion even as the balance would spread across the budget.

The pilot projects are Energizing Education Program (EEP) that would gulp N9.5 billion, Renewable Energy Micro Utility (REMU) for N475million and ministry of environment’s  afforestation programme expected to cost N2.3 billion.

Speaking on federal government’s plans, the special assistant on communications and stakeholders’ engagement to the minister of state for environment, Ms Esther Agbarakwe, noted that collaborations between the ministries of environment and finance helped to assemble the institutional partners needed to launch what she described as Africa’s first sovereign green bond and third in the world.

On the Green Bond Advisory Group ( GBAG), she noted that the ministries of environment and finance established GBAG to enable the federal government tap into the wealth of experience of experts.

The GBAG is made up of development partners (World Bank, DfID, AfDB, & IFC), capital market operators (Nigeria Stock Exchange, Capital Assets, Chapel Hill Denham & Stanbic IBTC) and Climate Bonds Initiative, London.

The global market for green bonds kick-started in 2005 where the European Investment Bank (EIB) issued some bonds and since then, it rose to USD80 billion last year just as China dominated  the market.

According to him, “At the process of preparing the bond prospectus, AfDB indicated that its treasury department is keen to provide guidance to the team while a draft template for the project profiles has been prepared and provided to the lead economist to provide feedback on its content, which we believe it will add value to what we are doing.”

He harped on the need for sensitisation in bond markets to enable participants get acquainted with the processes that would be factored on climate change adding that private sectors would participate actively in the long run.

On Calculation of Economic Rate of Return (ERR), he said, “The ERR has been introduced as an alternative to the IRR in preparing profiles of the projects as AfDB has indicated willingness to provide guidance to the team in ensuring that the approach used in calculating the ERR is credible.”