Nigeria joins regional race for green bonds

Nigeria is joining a silent revolution. Only three countries have issued a sovereign green bond — Poland, France and Fiji — and now Nigeria is the most recent member of the movement. As an oil-producing giant, the country has long been in search of a trump card against falling crude prices. In December, the government issued a N10.69bn ($29m) green bond to fund local solar and forestry projects.
The fully subscribed bond’s tenor is five years, and investors will receive a 13.48 per cent annual coupon, creating high expectations for the environmental projects linked to the government’s use of proceeds from the bond. Given the strong market uptake, the green bond movement is inspiring a race on the African continent. Last July, the City of Cape Town issued a R1bn ($84m) green bond for which investors offered R4bn — within two hours. Kenya is also paying attention and positioning to do the same.
“We are setting up a framework for issuing a green bond in the fiscal year 2018-19,” said Geoffrey Mwau, director-general of the Kenyan treasury.
Ahead of national elections in 2019, the Nigerian government considered 2018 as perfect timing for doubling down on its first green bond issue. During the Lagos Social Media Week last month, Ahmad Salihijo, a technical assistant to the Nigerian minister of the environment, said the government planned to issue an additional N150bn in green bonds, potentially to finance climate-related work for women and non-state actors in Nigeria.
The green bond issuance marks a breakthrough for Nigeria, contributing towards the commitments it made under the Paris climate change agreement, while also confronting poverty and triggers of insecurity. Muhammad Mamman-Daura, an investment banker at Chapel Hill Denham, the financial adviser for the green bond issue, said the proceeds would be used to provide green electricity to rural communities that had been in darkness, energise education and support a government afforestation initiative.
DNV GL of Norway, a global verification and sustainability group, reviewed the green credentials of each initiative before endorsing the use of bond proceeds for these projects, which come under Nigeria’s ministries of power and environment. Listed on both the Nigerian stock exchange and FMDQ, an over-the-counter exchange, the first $10m tranche of the green bond programme received a GB1 (excellent) rating from Moody’s.
The London-based Climate Bonds Initiative also granted certification, confirming its alignment with the 2-degree global warming limit in the Paris Agreement. Nigeria’s issuance was the first of four sovereign green bonds to be granted the CBI’s best practice distinction, lending confidence to banks, institutional and retail investors who took up the bond. Christiana Figueres, the UN climate czar who was instrumental to the success of the Paris Agreement, has convened Mission 2020, an initiative calling for $1tn of investment in green bonds, a more than 10-fold increase from current levels. Governments in Morocco, Sweden and Belgium are joining the queue to answer the call. Since the first wave of green bonds, issued by the European Investment Bank and World Bank in 2007, entities such as Apple, Toyota and the New York Metropolitan Transport Authority have raised more than $80bn from green bonds. As Nigeria’s federal government promises forthcoming tranches of issuance to help meet this $1tn target, its state governments and private sector are also now jockeying to get on board.

 

Daniel Akinmade Emejulu

Daniel Akinmade Emejulu is a sustainability professional. In 2017, as Nigeria country manager for the UN’s UNEP Inquiry arm, he worked with stakeholders involved in launching the country’s first sovereign green bond.