Green Bonds

About the Ministry

Green Bonds

Green Bonds enable capital-raising and investment for new and existing projects with environmental benefits. The nationally determined contributions (NDC) reflect Nigeria's commitment to the COPs of the UNFCCC in reducing the impact of climate change. It has significant overlaps with the nations development objectives and provides a platform to redirect resources in an effective manner that can have a dual impact, key development targets such as power and agriculture and emissions targets in both renewable and energy efficiency.

The resources needed to achieve the targets in the NDCs by 2030 are put at some USD142billion, translating to about USD10billion per annum. Nigeria's confirmed recession and reduction in its main source of income requires creative and directed means to mobilize resources that will fill its funding gap while also ensuring that project implementation achieves the expected outcomes.

The expansion of the global market for Green bonds presents an opportunity to join the momentum to provide resources for the NDCs. Nigeria's relatively developed fixed income market provides a platform for a pilot green bond. However, the fixed income market is dominated by FG debt with a limited slice attributed to the private sector.

A green bond issuance is expected to have multiple objectives:

  1. Issuance of an FG backed Green bond to kick start the market
  2. Achieve greening of FG debt portfolio and budget
  3. Leverage pilot issuance to mobilize private sector issuance of Green bonds with sensitization of operators in order to ensure ownership of the process
  4. Reduction if FG share of fixed income market with larger representation from private sector issuers
  5. Ensuring that the oversight tools are in place to guarantee segmentation of resources and implementation of projects

Objectives of Issuance

The issuance of a Green bond will enable the country achieve the following:

  • Raise awareness of economic benefits of the themes in the NDC
  • Develop framework guidance for subsequent tranches.
  • Increase financial and industry sector confidence in either issuing green bonds or financing green projects.
  • Establish internal capacity to monitor issuer performance and aggregate information to report back to investors and the UNFCCC
  • Leverage partner programs and funds to direct resources towards providing technical support or participation in green bond issuance

Initiatives that will drive implementation

  • Build institutional base within the capital market for regular green bond issuance
  • Build capacity within Federal ministry of Environment for oversight
  • Develop dialogue across relevant MDAs to regularly identify projects and redirect resources to initiate or scale
  • Periodic interface with Ministry of Budget and National Planning and Finance on the outcomes

Guidelines

These Green Bond Guidelines (GBG) are issued by the Federal Ministry of Environment (FMEnv) to guide the process for issuance of green bonds targeted at the Nigeria market. The GBG are intended for broad use by the market: they provide the FMEnv a means to ensure resources raised are channeled towards activities that compliment the NDCs; they provide issuers with guidance on the key components involved in launching a credible Green Bond; they aid investors by promoting availability of information necessary to evaluate the environmental impact of their Green Bond investments; and they assist underwriters by moving the market towards expected disclosures which will facilitate transactions. The GBG recommend a clear process and disclosure for issuers, which investors, banks, investment banks, underwriters, placement agents and others may use to understand the characteristics of any given Green Bond. The GBG emphasize the required transparency, accuracy and integrity of information that will be disclosed and reported by issuers to stakeholders. The GBG has four components:

  • Use of Proceeds
  • Project Eligibility
  • Management of Proceeds
  • Reporting

Use of Proceeds

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