Two weeks ago, Nigeria joined the global community to review and assess progress being made in the quest to tame climate change and achieve sustainable development. One of the prominent features was the understanding of the importance of the financial system in the climate change debate.
On October 28, 2021, Nigerian Exchange Limited participated in the Africa Green Bonds intensive UK & Europe Forum, which brought together policymakers, regulators, issuers, investors and professionals at the forefront of green bonds, ESG performance, climate risk analytics and sustainable investing in Africa and globally.
NGX participated on the panel on ‘How Exchanges are accelerating the Growth of Sustainable Bonds Market’ alongside representatives from Nairobi Stock Exchange, JSE and United Nations Sustainable Stock Exchanges. It is noteworthy that the Exchange supports capacity development and investor awareness through X-Academy, its specialized learning centre that offers bespoke capital market and business courses including courses across the Sustainable Finance theme.
Nigerian Exchange Limited is currently working with leading market stakeholders to build the capacity of existing and potential corporate green bond issuers on green bond issuance process and reporting best practices and also working closely with the Federal Ministry of Environment and Debt Management Office on the issuance of the third Sovereign Green Bond in Nigeria.
Globally, climate change is recognised as a real and potentially destabilising threat to economies and the well-being of people, particularly the most vulnerable.
Securities exchanges have a critical role to play in reallocating capital towards the achievement of Sustainable Development Goals (SDGs) and the targets of the Paris Agreement on climate change. This is even more important in Sub-Saharan Africa (SSA) where countries are lagging all other regions in the world across various development indicators, including the Sustainable Development Goal global index and the Human Development Index.
In response to this, Nigerian Exchange Limited, as a member of the Sustainable Stock Exchange Initiative (SSE) since 2013, has a long-standing commitment to foster the growth of sustainable finance in Nigeria. The Exchange recognises the critical need to drive sustainable finance as a tool to accelerate progress towards the achievement of the Sustainable Development Goals (SDGs) and combat climate change and its impact as enshrined in the Paris Agreement on Climate Change.
Efforts of NGX
Consistent with this commitment and in recognition of the huge infrastructural needs particularly in Nigeria, NGX, in 2016, conceptualized, developed and shared a proposal to develop a Green Bond market with the Federal Ministry of Environment. The initiative was embraced and championed by the Debt Management Office (DMO) and the Federal Ministry of Environment.
According to NGX, the Green Bond Advisory Group was set up to drive Nigeria’s ambition to launch its inaugural sovereign green bond. The Advisory Group was co-chaired by the then 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 organisations, including the World Bank etc.
“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 13.48 per cent five-year sovereign green bond issued on December 22, 2017, to fund projects to develop renewable energy and afforestation program.
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“This was sequel to the ratification of the Paris Climate Agreement by the Federal Government of Nigeria in March 2017 which necessitated the need for long term capital to fulfil the Nigeria’s Nationally Determined Contributions (NDCs) in reducing greenhouse gas emissions and ending gas flaring by 2030.”
The Green Bond Programme
The Exchange noted that “Since then, we have seen a gradual uptake in the Nigerian Green Bond market with subsequent issuance of a seven-year, N15 billion, 14.50 percent sovereign Green Bond in June 2019 which was over-subscribed. The second tranche was issued to finance renewable energy, afforestation, and transportation projects.
“On February 27, 2019, North-South Power Company (NSP) Limited, a pan African power generation company, issue its first N8.5 billion 15-year 15.6 percent Series one Guaranteed Fixed Rate Senior Green Infrastructure Bonds, due 2034 from the capital market. The bond was oversubscribed by 60 percent and the proceeds were used to re-finance existing domestic and foreign currency debts as well as finance scheduled overhaul maintenance of turbine four of the Shiroro Hydroelectric Power Plants.
“In March 2019, Access Bank Plc issued its N15 billion five-year 15.5 percent Fixed Rate Senior Unsecured Green Bond due 2024 and listed the bond subsequently on the Nigerian Exchange. In April 15, 2021, North-South Power Company (NSP) issued its second N6.33 billion 10-year 12 percent Fixed Rate Series two Senior Green Bonds due 2031. It is noteworthy that all the corporate and sovereign Green Bonds are listed on the Nigerian Exchange Limited. These follow-on issuances have further increased investible instruments and deepened the Nigerian Green Bond market. The size of the Green Bond market is currently N55.52 billion.”
Intensifying Efforts
The Exchange stated that “Building on these advances, the Nigerian Exchange in October 2019 signed a Memorandum of Understanding with the Luxembourg Stock Exchange (LuxSE) to cooperate in promoting cross-listing and trading of green bonds in Nigeria and Luxembourg. This partnership secured its first listing with the successful cross-listing of Access Bank’s N15 Billion Green Bond on the NGX Exchange and LuxSE.”
It added that “As part of its capacity-building efforts, the Nigerian Exchange in collaboration with the Milken Institute held the inaugural edition of its webinar series on Sustainable Capital Markets for West Africa on June 5, 2020.
“The forum provided a platform for policymakers, government, regulators, West African financial market participants, domestic and international thought leaders on green finance, investors and other market stakeholders to share valuable experiences and best practices on green finance, and promote the development of sustainable finance market segments in the region.”
Forging ahead, NGX continues to leverage available guidelines, frameworks and resources in line with global best practices as we continue to facilitate and engage relevant stakeholders in the development of the sustainable finance markets in Nigeria and Africa at large.
