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Green bonds: Nigeria’s path to a sustainable future

Green Bonds

Green bonds: Nigeria’s path to a sustainable future

Green bonds have become an important step toward a more sustainable future for many countries throughout the world, including Nigeria. To better comprehend green bonds, let us first explain how they function. 


We understand that sustainable finance has become critical to projects aimed at mitigating the terrible effects of the climate issue. Green bonds, on the other hand, are regarded as one of its most important vehicles, a type of environmentally friendly financing provided by public and commercial businesses. 


Green bonds are a type of debt instrument issued by both public and private companies to fund environmentally friendly projects. They are a booming form of long-term investment. 


Climate change is a critical menace to humanity. Global warming of 1.5°C in the short future would result in inescapable increases in several climate hazards, posing numerous threats to ecosystems and humanity.  According to the IPCC, Nigeria is one of the world’s top ten most vulnerable countries to climate change. 


The IPCC’s sixth assessment report published in March 2022 presents an alarming outlook on the world’s climate change path: first, global warming is occurring faster than previously thought, and second, its implications are becoming more adverse at smaller temperature rises.


Green bonds are a sort of financial instrument designed primarily to raise funding for environmentally friendly projects. These projects could include renewable energy efforts, energy efficiency upgrades, sustainable agriculture, and other environmentally friendly activities. The purpose is to encourage investment in projects that promote environmental sustainability. 


Impacts of Nigerian Green Bonds


Nigeria issued two green bonds in December 2017 and June 2019, totalling N10.69 billion and N15 billion, respectively. It was hailed as the most ambitious endeavor of its sort on the continent of Africa at the time. Nigeria, Africa’s most populous country, became the first African country, and fourth globally, following Poland, France, and COP 23 President Fiji, to issue a debt instrument solely to finance climate-smart (mitigation and adaptation) projects. 


The initiative aimed to accelerate Nigeria’s low-carbon development promises, as outlined in the Nationally Determined Contribution (NDC) statement presented to the United Nations Framework Convention on Climate Change, while creating significant job possibilities for residents. 


According to the Nigerian Green Bond Market Development Program, the country has issued green bonds totalling more than 50 billion Naira as of December 2020. Part of these projects includes the establishment of the Energizing Education Programme (EEP), which will offer a consistent power supply to 37 federal universities and seven university teaching hospitals across Nigeria.   


In addition, afforestation was the second major area of intervention sponsored by the first series of green bonds in Nigeria. The Ministry of Environment’s nationwide afforestation initiative aims to expand forest cover by planting seedlings on 131,000 hectares of land. Three sites in Old Oyo National Park (OONP) were selected for the first phase of the green bond-funded initiative among other projects.  


Solar power was the largest beneficiary of the pilot bond, receiving 81% of the proceeds. Two projects were selected: the Energizing Education Programme, which would support solar electricity for seven colleges, and the Renewable Energy Micro Utility, which will supply solar power to off-grid areas.


The fund sponsored afforestation, which restores carbon cover and improves rural livelihoods by planting trees for farmers and communities to use. While The country has done a lot with the green bonds, this does not go without saying that the green bonds have many setbacks which include implementation. 


It is vital to emphasize that the actual impact of green bonds in Nigeria will be determined by the effective implementation of the financing strategy, the success of the projects sponsored, and the continued commitment to sustainability at both the governmental and corporate levels. To examine the precise implications, look to the most recent reports, research, and statements by Nigerian officials and groups. 

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