Webinar – Sustainability Disclosure Updates from Emerging Markets – Wednesday, 13 July 2022

Nigeria – Issuing sovereign and corporate green bonds to finance NDCs

Nigeria published its Green Bond Guidelines in 2017, followed by the issuance of its first green bond at the end of 2017.

The Guidelines, developed by the Federal Ministry of the Environment with the support of the Ministry of Finance, established how the proceeds of the bonds would be used, the policies and internal control procedures to manage the selection of projects, and the management of the proceeds and reporting. The Guidelines were developed for issuers as well as investors. Subsequently, the first Nigerian sovereign green bond was issued in December 2017, worth $29 million (UNEP Inquiry, 2017).

Nigeria started working toward issuing green bonds in order to finance its Nationally Determined Contributions (NDCs).

The key driver was the need to finance the infrastructure gap in a sustainable way that takes environmental considerations into account. Indeed, in the Guidelines, the eligible projects are connected to NDCs and the first green bond was issued to finance renewable energy and afforestation activities.

Following the issuance of Nigeria’s first green bond, the Securities and Exchange Commission (SEC) of Nigeria began development of a non-sovereign green bond market in Nigeria.

The SEC developed guidelines based on international practices with the assistance of the Climate Bonds Initiative. Toward the end of 2018, the SEC issued a regulatory framework called ‘Green Bond Issuance Rules’ (Independent Newspapers Nigeria, 2018). It complements the work already done by the Federal Government and aims to create a non-sovereign green bond market.

The first Nigerian corporate green bond was issued in 2019 and was the first certified corporate green bond in Africa.

Access Bank Plc issued this first certified green bond, worth $41 million. It is a five-year bond with a 15.5% fixed rate and proves that a financial case can be made for green bonds in Nigeria, which had previously been a challenge (Whiley, 2019).

A lack of knowledge was the main challenge to overcome with the issuance of both types of green bonds, in addition to a lack of capacity at the SEC.

Collaborating with international partners and leveraging international guidelines were critical to the process. The international guidelines provided a strong foundation to build and adapt to the national context, and this made the certification of green bonds easier. The SEC engaged with key international actors in the green bond space, including CBI, UN Environment Program, and IFC. These challenges have been overcome and Nigeria has become as a leader in green finance.