Nigerian states have continued to create the enabling environment for sustainable socio-development through policies, developmental plans, and sustainable socio-economic programmes that encourage sustainable investment flows. However, there is a distance to the capabilities of Nigerian sub-national governments to attract sustainable development finance at scale.
This is the kind of financing that could either come as grants or as low interest rate loans, focused on sustainable development needs such as road infrastructure, education, healthcare, clean energy, climate-smart agriculture, food security, small and medium enterprises (SME) funding, digital skills development, acceleration of climate and green jobs, etcetera.
As such, to achieve sustainable socio-economic development and industrialization in Nigeria, there is a need for sub-national bodies such as states to be positioned to attract the required sustainable finance that will catalyse the sustainable socioeconomic development and industrialization of the country.
If our states are unable to attract the required sustainable finance, the capability to build an inclusive and sustainable economy to achieve a modern state where no one is left behind in line with the just transition will suffer.
Nigerian states and sustainable development finance
Sub-national government access to sustainable development funding is indispensable in Nigeria’s journey to achieving sustainable development and sustainable industrialization. Over the past years, there has been an inflow of such funding into Nigeria.
Examples include the Afreximbank US$1 billion funding of the health sector, the World Bank 2.25 billion dollar facility, the investment of about 60 percent Afreximbank energy funding in Nigeria, the Afreximbank US$3.5 billion loan to Cross River State to develop the Bakassi deep seaport, and the US$1.5 billion proposed investment in Imo State.
However, attracting this funding could prove to be tedious as they often include stringent measures due to their dual focus on return on investment and impact as well as their focus on specific development needs. As such, Nigerian states must build capabilities to attract such investments from Multilateral Development Banks (MDBs), Development Finance Institutions (DFIs), and commercial banks, whose interest in development projects with impact is gaining momentum.
Developing the partnership approach and positioning for such funds to catalyse the sustainable development of Nigerian states is important. This would require the development of a sustainable finance framework that articulates financing of projects across sustainability-linked, social, green, blue, and sustainability investments, including capacity building.
Developing a Sustainable Finance Framework
Developing a sustainable finance framework involves a broad consideration of developmental sectors. The sectors could include education, health care, road construction, rail construction, electricity (including solar, considering the Electricity Act of 2023), water infrastructure, affordable housing, etc. A sustainable finance framework should be situated within the following four pillars: use of funds, process for project evaluation and selection, management of funds, and reporting.
Use of Funds: The framework should explicitly state what the funds being sourced will be used for. This component covers the eligibility criteria used to determine the projects and programmes that the funds will be used for, as well as takes into cognizance specific projects the funds will be used for and their sectors. Under the use of funds, the framework will demonstrate the alignment of the projects to the Sustainable Development Goals (SDGs) as well as the social or environmental objectives and benefits, as the case may be. For example, if the funds are to be used for climate or green projects such as solar technology or hydropower for energy generation, the projects selected will have to show their alignment to the SDGs related to these as well as the social and environmental objectives and benefits of the projects. It is imperative to state that the use of funds defines and sets specific financing agendas in a sustainable finance framework.
Process for Project Evaluation and Selection: This pillar should address how the projects included in the framework for financing were evaluated and selected. The framework should be able to show how the project clearly aligns with the eligibility criteria in the use of funds and the process through which the alignment was determined.
Management of Funds: This refers to how the funds for the financing will be managed throughout the life cycle of the projects, which presupposes transparent communication of the project process as it relates to project performance and project impact.
Reporting: Impact reporting is very important as it helps to situate the financing within the context of beneficiaries (individuals and communities) of the projects. An annual impact report on project performance is key to demonstrating that the funds secured have been appropriately and effectively used.
Setting a Sustainable Development Finance Agenda
It is therefore beholding on Nigerian States to set a sustainable development finance agenda through the development of a sustainable finance framework. This will catalyse sustainable socioeconomic development and build resilience for climate change across the country.
Developing a sustainable finance framework will position the sub-national governments to access the required funding for such projects and showcase their readiness to undergo stringent conditions that usually accompany such financing, including a good measure of transparency and accountability throughout the financing circle.
There is no doubt, whatsoever, that it is time for the sub-national governments in Nigeria to pull together catalytic capital that will accelerate the just transition, where no one will be left behind by developing and implementing a sustainable finance framework.
Godson Ikiebey is an advisor on ESG, Sustainable Finance and Development.
