Nigeria’s green bonds are a key step in our sustainable finance agenda

By: Jude Chiemeka, Divisional head, Trading Business, Nigerian Exchange Limited Sep 2021

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.    

While developing countries already face a financing gap for achieving the SDGs, estimated at $2.5 trillion-$3 trillion per year according to the United Nations, the International Monetary Fund (IMF) projects that SSA countries need to spend an additional 18.8% in 2030 in key development areas such as education, health and infrastructure, relative to regional GDP to achieve higher development outcomes. It’s also important to note that SSA remains one of the most vulnerable regions to the risks posed by climate change despite being one of the smallest contributors to climate change, contributing about 4% of annual global greenhouse gas emissions, according to the Heinrich Böll Stiftung Foundation.    

In response to this, Nigerian Exchange Limited. has stood by its long-standing commitment to foster the growth of long-term sustainable finance within its marketplace. NGX has played a leading role in the development of the Nigerian and West African green bond market, creating opportunities for investors to diversify their investment portfolios while contributing to sustainable economic development in Africa’s largest economy.    

The green bond programme  

After the adoption of the Paris Agreement by 196 countries on 12 December, 2015 and subsequent ratification of the Paris Agreement by Nigeria in March, 2017, NGX launched its Green Bond Market Development Programme aimed at galvanizing key stakeholders to develop innovative financial solutions to meet Nigeria’s climate mitigation and adaptation targets. Following a proposal by NGX on the development of the green bond market to the Federal Ministry of Environment, 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 Honourable 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, United Nations Environment Programme (UNEP), International Finance Corporation (IFC), Africa Development Bank (AfDB) and the Climate Bonds Initiative (CBI).    

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 (~US$26 million), 13.48% 5-year sovereign green bond issued in 2017 by the Federal Government of Nigeria (FGN).    

The successful issuance and listing of the inaugural sovereign FGN green bond paved the way for the issuance and listing of corporate green bonds including the N15 billion (~US$36 million), 15.5% 5-year Fixed Rate Senior Unsecured Green Bond issued by Access Bank of Nigeria Plc, the N8.5 billion (~US$21 million), 15.6% 15-year Guaranteed Fixed Rate Senior Green Infrastructure Bond by North South Power Company (NSP), and the Series II N15 billion, 14.5% FGN 7-year sovereign green bond in 2019, which recorded a 220% subscription rate and was oversubscribed by N17.93 billion (~US$44 million).    

Beyond bonds  

Owing to the leadership of NGX, the Nigerian green bond market grew from zero to N49.19 billion (~$120 million) within a 3-year period, recording four issuances and listings. It’s important to note the critical role played by the apex market regulator – the Securities and Exchange Commission (SEC) – in setting the tone and creating the baseline for the green bond market in Nigeria. In line with global best practice, the SEC demonstrated leadership by publishing guidelines to spur the emergence of green bond corporate issues. In addition, starting with a sovereign green bond issuance created a benchmark for market participants and potential future green bond issuances.    

Building on the green bond market successes, NGX signed a Memorandum of Understanding (MoU) with the Luxembourg Stock Exchange (LuxSE) to cooperate in promoting cross-listing and trading of green bonds in Nigeria and Luxembourg in 2019. This partnership has since yielded dividends with its first successful cross-listing of Access Bank’s N15 billion green bond on both NGX and LuxSE.    

As part of NGX’s ongoing plans to go beyond green bonds, steps are in motion to galvanise stakeholders towards the sustainability agenda with NGX supporting capacity development and investor awareness through X-Academy, its specialized learning arm. X-Academy offers bespoke capital market and business courses including courses on development, issuance and listing of labelled bonds and other sustainability-linked instruments. In collaboration with leading market development and advocacy institutions such as Milken Institute, NGX hosts periodic webinars and market development initiatives aimed at further advancing the development of the green finance market in Nigeria and the SSA region as a whole.    

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.  






The views, thoughts and opinions contained in this Focus article belong solely to the author and do not necessarily reflect the WFE’s policy position on the issue, or the WFE’s views or opinions.