In the bid for Nigeria to achieve her Sustainable Development Goals, she floated Sovereign Green Bond. In this post, we covered: what is a Sovereign Green Bond as one of ways Nigeria Sustainable Development Goals could be attain, Green Bond Projects in Nigeria and achievements, Nigeria Green Bond Framework, Green Bond Principles, Green Bond Program and many more.
Sovereign Green Bond Definition
A Sovereign green bond is a fixed-income investment used to finance environmental and sustainable projects like Net Zero Emission. Sovereign Green bonds can be issued by governments, organizations and companies. These bonds are raised to fund renewable energy (such as wind, solar and hydro), recycling efforts, clean transportation and sustainable forestry.
How Sovereign Green Bonds Work and How to Invest
If a company or government wants to finance a green project, it can issue green bonds to help secure funding. Investors buy the bonds and the company or government pays them back over time with interest. But the investors aren’t often everyday investors — green bonds are usually sold to larger organizations such as pension funds that can buy bonds in bulk.
Read: Nigerian Credibility to Meet Net Zero Target
Individual investors can invest in exchange-traded funds and mutual funds that include green bonds in their offerings, such as the Nigerian Green Bond Fund and other global green bond. If you choose to invest in one of those funds, you can indirectly gain exposure to green bonds. Green bonds themselves are often accessible only to institutional investors, not individuals.
What is Sustainable Development Goals
The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including poverty, inequality, climate change, environmental degradation, peace and justice.
What are the Sustainable Development Goals?
The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity.
The 17 SDGs are integrated—they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability.
Countries have committed to prioritize progress for those who’re furthest behind. The SDGs are designed to end poverty, hunger, AIDS, and discrimination against women and girls.
The creativity, knowhow, technology and financial resources from all of society is necessary to achieve the SDGs in every context.
1. NO POVERTY
2. ZERO HUNGER
3. GOOD HEALTH AND WELL-BEING
4. QUALITY EDUCATION
5. GENDER EQUALITY
6. CLEAN WATER AND SANITATION
7. AFFORDABLE AND CLEAN ENERGY
8. DECENT WORK AND ECONOMIC GROWTH
9. INDUSTRY, INNOVATION AND INFRASTRUCTURE
10. REDUCED INEQUALITIES
11. SUSTAINABLE CITIES AND COMMUNITIES
12. RESPONSIBLE CONSUMPTION AND PRODUCTION
13. CLIMATE ACTION
14. LIFE BELOW WATER
15. LIFE ON LAND
16. PEACE, JUSTICE AND STRONG INSTITUTIONS
17. PARTNERSHIPS FOR THE GOALS
Green Bond Projects in Nigeria
In 2017, Nigeria ratified the Paris agreement and has since, among others, pledged to cut carbon emissions conditionally (with international support) by 45 per cent and unconditionally (without international support) by 20 per cent by 2030 in its first Nationally Determined Contributions to sustain Sustainable Development goals.
Read: Nigerian Plan to Convert Flared Gas into Ammonia
In 2017, Nigeria through the Nigerian Exchange Limited rolled out Green Bond to be the first in West African green bond market. This is for creating opportunities for investors to diversify their investment portfolios while contributing to sustainable economic development in Africa’s largest economy. Nigeria is the fourth nation in the world to issue green bond – after Poland, France, and COP23 President.
In effort to achieve Sustainable Development goal on climate change (energy transition/ net zero emission) for Sustainable Development Goals, the Nigeria Securities Exchanges role out green bonds to raise capital towards the attainment of the goal.
In 2021, during the climate change conference in Glasgow, President Buhari pledged that Nigeria’s plans to achieve Net Zero Emission Target by 2060.
But Vice President Yemi Osinbajo in early 2022 stated that for Nigeria to meet her pledge on Sustainable Development Goals (Net Zero emission by 2060, the Nigeria will require no fewer than $10 billion per year for next 40 years to fund the vision.
Regarding the cost implications of reaching net-zero emissions by 2060 in line with the President’s announcement at COP26 in Glasgow, Osinbajo said, “Our net-zero 2060 pathway also requires around USD 10 billion per year of funding over the next 40 years across the country’s economy, and most of this will be for the power sector.
Achievements: Nigeria’s Green Bonds Market Hits $136m
The value of Nigeria’s green bonds market has hit $136 million within three years with four issuances recorded since the debut issuance by the Federal Government.
According to the Nigerian Exchange Limited (NGX), the issuances and listings include the N10.69 billion, 13.48 per cent five-year sovereign green bond issued in 2017 by the Federal Government of Nigeria (FGN); the N15 billon 15.5 per cent 5-year fixed rate senior unsecured green bond issued by Access Bank of Nigeria Plc.
The Green Bond Programme
After the adoption of the Paris Agreement by 196 countries on 12 December, 2015 and subsequent ratification of the Paris Agreement by Nigeria in March, 2017, NGX launched its Green Bond Market Development Programme aimed at galvanizing key stakeholders to develop innovative financial solutions to meet Nigeria’s climate mitigation and adaptation targets. Following a proposal by NGX on the development of the green bond market to the Federal Ministry of Environment, the Green Bond Advisory Group was set up to drive Nigeria’s ambition to launch its inaugural sovereign green bond.
Read: What Is Net Zero Emission and Its Fullness
The Advisory Group was co-chaired by the then Honourable Minister of Environment Amina Mohammed and Nigerian Exchange Group Plc Group Chief Executive Officer Oscar Onyema, and was made up of stakeholders from local and international organizations, including The World Bank, United Nations Environment Programme (UNEP), International Finance Corporation (IFC), Africa Development Bank (AfDB) and the Climate Bonds Initiative (CBI).
NGX, as co-chair of the Advisory Group, and in collaboration with the Debt Management Office (DMO) and the Federal Ministry of Environment, played a critical role in conceptualizing and developing the green bond product paper that culminated in the issuance of the inaugural N10.69 billion (US$26 million), 13.48% 5-year sovereign green bond issued in 2017 by the Federal Government of Nigeria (FGN).
The successful issuance and listing of the inaugural sovereign FGN green bond paved the way for the issuance and listing of corporate green bonds including the N15 billion (US$36 million), 15.5% 5-year Fixed Rate Senior Unsecured Green Bond issued by Access Bank of Nigeria Plc, the N8.5 billion (US$21 million), 15.6% 15-year Guaranteed Fixed Rate Senior Green Infrastructure Bond by North South Power Company (NSP), and the Series II N15 billion, 14.5% FGN 7-year sovereign green bond in 2019, which recorded a 220% subscription rate and was oversubscribed by N17.93 billion (US$44 million).
Green Bond Principles
The “Green Bond Principles” were established in 2014 by a collective of investment banks to help investors gain insight into the sustainability of their investments. Here are the principles:
- Use of Proceeds: This governs how bond funds can be spent and outlines eligible green projects, such as renewable energy production and transmission, energy efficiency in buildings, pollution prevention and sustainable land management.
- Process for Project Evaluation and Selection: This explains what the green bond issuer should communicate to investors, such as the project’s objectives.
- Management of Proceeds: This indicates how the funds generated by the bond should be handled.
- Reporting: This explains how the green bond’s progress and impact should be recorded. Ideally, issuers will release an impact report with relevant details.
In conclusion:
Nigeria Climate Sovereign Green Bond to achieve her Sustainable Development goal is a big first for Africa and a big step for green finance – Nigeria aligns sovereign issuance to best practice model, pointer for other nations to follow.
The Nigerian Sovereign green bond has gained widespread attention after being formally announced by President Buhari at the October 2016 signing of Nigeria’s Paris Accord NDC commitment during Climate Week NYC.
Since that announcement by the President, support and assistance has come from many quarters with the UNEP Inquiry, Nigerian Stock Exchange (NSE), Citi Bank, Chapel Hill Denham, World Bank and EY all playing a positive role and FSD Africa providing vital funding.
We therefore also call for efficient management of the fund towards the energy transition which the main goal is Net Zero Emission.