How climate finance can accelerate development in Nigeria, By Ibrahim A. Shelleng

Towards the backdrop of the not too long ago concluded UNFCCC Convention of Events (COP) 29 in Baku, Azerbaijan, it’s evident that local weather change isn’t just an environmental situation however an financial one, with far-reaching implications for Nigeria’s improvement. As the biggest financial system in Africa, Nigeria is at a vital juncture the place local weather finance can play a pivotal function in driving sustainable improvement. With a quickly rising inhabitants, estimated to surpass 400 million by 2050, the necessity for sustainable improvement has by no means been extra pressing. Local weather finance, the funding channeled in the direction of actions that mitigate or adapt to local weather change, provides a singular alternative to handle these challenges whereas unlocking financial progress.

A lot furore has been made concerning the New Collective Quantified Aim (NCQG) on Local weather Finance that was agreed at COP29, with quite a few growing nations, together with Nigeria, registering their displeasure on the USD$300 billion per 12 months pledge made by the developed international locations to help local weather mitigation and adaptation efforts of nations within the world south. This new pledge changed the earlier dedication agreed by developed nations in 2009 to mobilise $100 billion yearly, which ought to have been met by 2020, however was solely realised two years later. While the NCQG fell in need of the approximate USD$1.3 – $2 trillion required yearly by growing international locations, the stark actuality is that Nigeria has been unable to faucet into even one % of the beforehand dedicated funds. In keeping with the African Improvement Financial institution Nation Focus Report 2023, Nigeria’s tracked local weather finance inflows amounted to USD$2 billion for 2019 and 2020.  To satisfy its Nationally Decided Contributions (NDCs), Nigeria must mobilise north of USD$20 billion yearly.

This text goals to lift consciousness concerning the significance of local weather finance in Nigeria. It explores its potential to speed up improvement and urges stakeholders to extend collaboration and harness this chance to create a extra resilient and affluent future. 

Understanding Local weather Finance

Local weather finance refers to native, nationwide, or transnational financing – drawn from public, non-public, and various sources – that seeks to help mitigation and adaptation actions to handle local weather change. Mitigation entails lowering greenhouse gasoline emissions to curb the tempo of local weather change, whereas adaptation focuses on adjusting to the present and anticipated impacts of local weather change. The sources of local weather finance are various, starting from authorities budgets and worldwide improvement funds to non-public sector investments and revolutionary monetary devices like inexperienced bonds and carbon credit.

For Nigeria, a rustic extremely susceptible to the results of local weather change, accessing and using local weather finance is essential. The impacts of local weather change in Nigeria are already evident – starting from desertification, elevated frequency of utmost climate occasions akin to floods and droughts to rising sea ranges threatening coastal communities. These impacts pose important dangers to key sectors of the financial system, together with agriculture, water sources, and vitality, that are all vital for the nation’s improvement. With the fiscal constraints the nation faces as a result of a number of macro and socio-economic components, local weather finance offers a possibility to faucet into these various financing mechanisms to fund inexperienced improvement tasks.

The Function of Local weather Finance in Improvement

Nigeria’s improvement targets, as outlined within the Financial Restoration and Development Plan (ERGP) and the Sustainable Improvement Objectives (SDGs), emphasize the necessity for financial diversification, poverty discount, and inclusive progress. Local weather finance can help these goals by offering the mandatory sources to spend money on sustainable infrastructure, promote inexperienced industries, and improve resilience to local weather impacts.

Supporting Sustainable Agriculture

Agriculture is the spine of Nigeria’s financial system, using over 70 per cent of the inhabitants and contributing considerably to GDP. Nonetheless, the sector is very prone to local weather change, with erratic rainfall patterns, droughts, desertification, and floods threatening meals safety. Local weather finance can help the transition to climate-smart agriculture, which entails adopting practices that improve productiveness, improve resilience, and scale back emissions.

As an illustration, investments in improved irrigation techniques, drought-resistant crops, and agroforestry can assist farmers adapt to altering local weather situations whereas boosting yields. Moreover, local weather finance can facilitate entry to insurance coverage merchandise that shield farmers in opposition to climate-related dangers, thereby guaranteeing their livelihoods and contributing to poverty discount.

Enhancing Power Entry and Transition

Nigeria’s vitality sector is vital for improvement, but it faces important challenges, together with insufficient infrastructure, over-reliance on fossil fuels, and restricted entry to electrical energy in rural areas. Local weather finance can speed up the transition to renewable vitality sources, akin to photo voltaic, wind, and hydroelectric energy, that are ample in Nigeria.

Investing in renewable vitality not solely helps mitigate local weather change by lowering greenhouse gasoline emissions but in addition enhances vitality safety and offers entry to electrical energy for hundreds of thousands of Nigerians. This, in flip, spurs financial improvement by enabling small companies to thrive, bettering healthcare and schooling, and lowering the price of vitality for households.

Constructing Local weather-Resilient Infrastructure

Nigeria’s infrastructure deficit is a major barrier to improvement. Roads, bridges, and buildings are sometimes poorly designed or constructed with out consideration of local weather change impacts, making them susceptible to excessive climate occasions. Local weather finance can be utilized to construct climate-resilient infrastructure that may stand up to the results of local weather change, akin to floods, storms, and rising temperatures.

For instance, local weather finance can help the development of flood defenses, the reinforcement of present infrastructure, and the event of early warning techniques to cut back the affect of pure disasters. By investing in resilient infrastructure, Nigeria can safeguard its improvement beneficial properties and be sure that future progress just isn’t derailed by climate-related shocks.

Selling Inexperienced Industries and Job Creation

The transition to a low-carbon financial system presents a possibility for Nigeria to develop new industries and create jobs. Local weather finance can help the expansion of inexperienced industries, akin to renewable vitality, vitality effectivity, and sustainable transport, which not solely contribute to local weather mitigation but in addition drive financial diversification.

As an illustration, the event of photo voltaic vitality farms can create jobs in manufacturing, set up, and upkeep. Equally, investments in energy-efficient applied sciences can result in the creation of latest markets and the event of abilities in inexperienced engineering and development. By selling inexperienced industries, Nigeria can place itself as a frontrunner within the world inexperienced financial system whereas addressing unemployment and driving inclusive progress. 

The Challenges of Accessing Local weather Finance

Whereas the potential advantages of local weather finance are clear, Nigeria faces a number of challenges in accessing and successfully utilising these funds. One main problem is the lack of know-how and capability amongst stakeholders, together with authorities companies, monetary establishments, and the non-public sector, on accessing and managing local weather finance. That is compounded by the complexity of the worldwide local weather finance structure, which features a myriad of funds, packages, and initiatives with various necessities and standards. The Inexperienced Local weather Fund (GCF), the world’s largest local weather fund, highlighted Nigeria’s “Lack of -human, technical and institutional- capability resulting in the lack of the NDA to coordinate and successfully have interaction with the GCF”. This offers a transparent space of focus for the nation in enhancing entry to local weather finance.

However, the nation not too long ago recorded a major achievement with the Improvement Financial institution of Nigeria (DBN) being the primary Nigerian Establishment to be accredited by the GCF as a Direct Entry Entity. This enables the DBN to obtain undertaking funding for the nation straight from the GCF, which streamlines processes and reduces the excessive transaction prices of utilizing exterior companies. 4 different Nigerian entities are at the moment present process related accreditation processes with the GCF.

One other problem is the restricted availability of knowledge and data on local weather dangers and vulnerabilities in Nigeria. This makes it tough to develop sturdy undertaking proposals that meet the necessities of local weather finance suppliers. Moreover, there’s a want for better coordination amongst stakeholders to make sure that local weather finance is aligned with nationwide improvement priorities and that sources are used successfully and effectively. Too typically, establishments and people throughout the ecosystem, work in silos and potential tasks are unable to fulfill funding necessities as a result of insufficient stakeholder consultations, restricted undertaking scope and sectorial inclusion, and misalignment with nationwide priorities.

The Manner Ahead: Unlocking Local weather Finance for Nigeria

To totally realise the potential of local weather finance in accelerating improvement in Nigeria, a number of coverage measures have to be put in place and present insurance policies aggressively carried out:

Strengthening Institutional Capability

Constructing the capability of presidency companies, monetary establishments, and the non-public sector to entry and handle local weather finance is vital. This contains coaching on undertaking improvement, monetary administration, monitoring & analysis, and establishing devoted local weather finance models inside related ministries and companies. African international locations which have efficiently mobilized important local weather funding, have ensured that the core civil servants are properly outfitted to drive the processes concerned in securing and using financing for long run tasks.  This offers continuity of tasks and programmes past administrations and political appointments. MDAs should additionally improve sectoral and sub-national collaboration to determine vital developmental wants that may very well be funded by way of local weather financing.

The Local weather Change Act (2021) at the moment mandates Ministries, Departments & Companies (MDAs) to “set up a local weather change desk to be supervised by an officer, not beneath the Directorate cadre, who shall be chargeable for guaranteeing integration of local weather change actions into their core mandate”. The Act additionally empowers the Nationwide Council on Local weather Change to arrange zonal and state places of work that permits for higher coordination of local weather motion on the sub-national stage. The implementation of those will assist the mixing of each bottom-up and top-down approaches to fulfilling Nigeria’s local weather targets. This may be achieved by using present authorities constructions with out the necessity for creation of latest entities or extra spending. Nonetheless, there might have to be a evaluation of the Act to align it with present realities.

The non-public sector just isn’t disregarded. The Act mandates non-public sector firms with greater than 50 workers to have measures for carbon emission discount and designate a Local weather Change or Environmental Sustainability Officer, who should submit annual stories on the group’s emission discount efforts. This will likely additionally require a evaluation to seize a broader base of firms which have lower than 50 employees. Ongoing capacity-building workshops for MDAs and the non-public sector will go a great distance in strengthening institutional capability. Nonetheless, there’s a want for better stakeholder collaboration and era of tangible outputs to impress these efforts. The DBN accreditation by GCF offers an encouraging instance for related entities in Nigeria to actively pursue institutional reforms that may prioritize better entry to local weather finance.

Enhancing Knowledge and Info Techniques

Enhancing information assortment, evaluation, and dissemination on local weather dangers and vulnerabilities is crucial for growing sturdy undertaking proposals and making knowledgeable choices. This may be achieved by way of partnerships with analysis establishments, using satellite tv for pc know-how, and the institution of local weather info techniques that present real-time information to decision-makers. Curiously, a few of these information exist inside MDAs and even at native authorities ranges however are sometimes archived and never put to correct use as a result of a mixture of poor ICT infrastructure, insufficient consciousness of its significance, and apathy in the direction of evaluation and dissemination of that information. Admittedly, there’s a want to guard some stage of knowledge that could be deemed vital to Nationwide safety however this may be achieved by way of sturdy and extremely secured database constructions with various levels of safety clearance.

The not too long ago concluded stakeholder consultative workshop on information evaluation in the direction of the preparation of Nigeria’s first Biennial Transparency Report (BTR), hosted by the Nationwide Council on Local weather Change (NCCC) Secretariat and funded by the United Nations Improvement Programme (UNDP), was a superb step in Nationwide coordination of local weather action-related information. Institutionalizing this periodic information collation and evaluation will go a great distance in enhancing transparency and higher identification of local weather motion funding necessities. Nonetheless, the nation should construct inside capability throughout the civil service to additional strengthen this course of, and leverage on technical help from improvement companions to speed up studying. The event of a local weather finance monitoring portal has been on the forefront of the federal government’s local weather agenda and is at the moment in improvement. It will improve transparency and information collation, that are vital elements to accessing local weather finance.

Enhancing Coordination and Collaboration

Efficient stakeholder coordination is essential to making sure that local weather finance is aligned with nationwide improvement priorities and that sources are used effectively. A number of multi-stakeholder platforms have been established that carry collectively authorities, non-public sector, civil society, and improvement companions to debate and coordinate local weather finance actions. Nonetheless, a few of these platforms fail to determine particular, measurable, attainable, lifelike, well timed (SMART) targets that result in tangible outcomes.

Nonetheless, there have been some efforts in that regard on the Nationwide stage. A latest instance can be the NDC Implementation Stocktake, which was hosted by the NCCC Secretariat in partnership with the NDC Partnership and funded by the UK Overseas, Commonwealth and Improvement Workplace (FCDO). The occasion was an essential milestone in mapping efforts of the nation in the direction of local weather change mitigation and adaptation tasks, successfully taking inventory of present tasks and figuring out the gaps to fulfill the Nationally Decided Contributions (NDCs). Nonetheless, there’s a want for better engagement and collaboration with native communities, civil society organisations (CSOs) and non-governmental organisations (NGOs) to determine vital wants and the way local weather financing can tackle them.

Leveraging Non-public Sector Participation

The non-public sector has a vital function to play in mobilising local weather finance and driving the transition to a low-carbon financial system.  The Non-public sector can develop mitigation and adaptation tasks that generate carbon credit and assist the nation in assembly its NDCs. With an estimated $247 billion required to fulfill its local weather change and inexperienced progress goals, the non-public sector may assist bridge that funding hole. The operationalization of the Local weather Change Fund (CCF) will probably be vital to mobilisation of home funding sources to enhance worldwide financing and supply de-risking investments by way of public-private partnerships and blended finance approaches. The perfect construction for the fund can be modeled on world finest practices, with clear use of proceeds and governance frameworks, much like the Nigeria Sovereign Funding Authority (NSIA). It will increase investor confidence, improve non-public sector participation, and improve the number of funding devices and investor profiles.

Participating the Worldwide Neighborhood

Nigeria is actively partaking with the worldwide group to advocate for elevated local weather finance flows to the nation and to make sure that the worldwide local weather finance structure is aware of the wants of nations like Nigeria. This contains participation in worldwide negotiations, contributing to the design of world local weather finance mechanisms, and exploring revolutionary financing choices, akin to carbon markets and inexperienced bonds. The draft coverage for Nigeria’s Carbon Market Activation was not too long ago unveiled on the 79th United Nations Normal Meeting (UNGA) in September, and the draft handbook of procedures introduced on the not too long ago concluded COP29, with a regulatory framework additionally being drafted. This exhibits Nigeria’s dedication to enhancing local weather motion by way of revolutionary finance mechanisms. The adoption of the Article 6 framework on world carbon markets at Baku, will present a possibility for Nigeria to faucet into an rising sector that might generate billions of {dollars} in non-oil income and scale back the burden of multilateral loans that additional put stress on the nation’s fiscal place.

The nation should additionally be sure that it meets its worldwide reporting obligations in a well timed method. Nigeria is required to submit periodic paperwork to the UNFCCC such because the BTR (due each 2 years ranging from thirty first December 2024) and the NDCs, which is revised each 5 years. The subsequent revision is due for submission in February 2025. These paperwork are very important for monitoring and mapping the nation’s efforts to assembly its emissions discount and local weather change targets and communicates Nigeria’s local weather financing wants.

The Land is Inexperienced, and the Future Can Be Vibrant

Local weather finance represents a strong device for Nigeria to speed up its improvement, sustainably and inclusively. By investing in climate-smart agriculture, renewable vitality, resilient infrastructure, and inexperienced industries, Nigeria can’t solely mitigate the impacts of local weather change but in addition unlock new alternatives for financial progress, job creation, and poverty discount.

Nonetheless, unlocking the total potential of local weather finance requires concerted efforts and collaboration from all stakeholders – authorities, non-public sector, civil society, and the worldwide group. By strengthening institutional capability, bettering information techniques, enhancing coordination, and leveraging non-public sector participation, Nigeria can place itself as a frontrunner within the world struggle in opposition to local weather change whereas advancing its improvement targets. The local weather change ecosystem is massive sufficient to accommodate all stakeholders and requires an inclusive method to harness its potential.

The land is inexperienced, and the longer term could be vivid. It’s time for Nigeria to harness the ability of local weather finance to construct a extra resilient, affluent, and sustainable nation for present and future generations.

Ibrahim A. Shelleng is the Senior Particular Assistant to the President on Local weather Finance & Stakeholder Engagement. Mr. Shelleng can be the Secretary of the Intergovernmental Committee on Nationwide Carbon Market Activation Plan (NCMAP) and serves as a member of the Presidential Committee on Local weather Motion and Inexperienced Financial Options, in addition to the Presidential Steering Committee on Mission Evergreen.