Tuesday, November 09, 2021   /  10:50 AM / by NGX / Header Image Credit: Invest Data

Nigeriajoined the global community two weeks ago to review and assess progress beingmade in the quest to tame climate change and achieve sustainable development.One of the prominent features was the understanding of the importance of thefinancial system in the climate change debate. 

OnOctober 28, 2021, Nigerian Exchange Limited participated in the Africa GreenBonds intensive UK & Europe Forum, which brought together policymakers,regulators, issuers, investors and professionals at the forefront of greenbonds, ESG performance, climate risk analytics and sustainable investing inAfrica and globally.

NGXparticipated on the panel on 'How Exchanges are accelerating the Growth ofSustainable Bonds Market' alongside representatives from Nairobi Stock Exchange,JSE and United Nations Sustainable Stock Exchanges. It is noteworthy that theExchange supports capacity development and investor awareness throughX-Academy, its specialized learning centre that offers bespoke capital marketand business courses including courses across the Sustainable Finance theme.

NigerianExchange Limited is currently working with leading market stakeholders to buildthe capacity of existing and potential corporate green bond issuers on greenbond issuance process and reporting best practices and also working closelywith the Federal Ministry of Environment and Debt Management Office on theissuance of the third Sovereign Green Bond in Nigeria.

Globally,climate change is recognised as a real and potentially destabilising threat toeconomies and the well-being of people, particularly the most vulnerable.

Securitiesexchanges have a critical role to play in reallocating capital towards theachievement of Sustainable Development Goals (SDGs) and the targets of theParis Agreement on climate change. This is even more important in Sub-SaharanAfrica (SSA) where countries are lagging all other regions in the world acrossvarious development indicators, including the Sustainable Development Goalglobal index and the Human Development Index. 

Inresponse to this, Nigerian Exchange Limited, as a member of the SustainableStock Exchange Initiative (SSE) since 2013, has a long-standing commitment tofoster the growth of sustainable finance in Nigeria. The Exchange recognisesthe critical need to drive sustainable finance as a tool to accelerate progresstowards the achievement of the Sustainable Development Goals (SDGs) and combatclimate change and its impact as enshrined in the Paris Agreement on ClimateChange.

Efforts Of NGX 

Consistentwith this commitment and in recognition of the huge infrastructural needsparticularly in Nigeria, NGX, in 2016, conceptualized, developed and shared aproposal to develop a Green Bond market with the Federal Ministry ofEnvironment. The initiative was embraced and championed by the Debt ManagementOffice (DMO) and the Federal Ministry of Environment.

Accordingto NGX, the Green Bond Advisory Group was set up to drive Nigeria's ambition tolaunch its inaugural sovereign green bond. The Advisory Group was co-chaired bythe then Minister of Environment, Amina Mohammed and Nigerian Exchange GroupPlc Group Chief Executive Officer, Oscar Onyema, and was made up ofstakeholders from local and international organisations, including the WorldBank etc.

"NGX,as co-chair of the Advisory Group, and in collaboration with the DebtManagement Office (DMO) and the Federal Ministry of Environment, played acritical role in conceptualizing and developing the green bond product paperthat culminated in the issuance of the inaugural N10.69 billion 13.48 per centfive-year sovereign green bond issued on December 22, 2017 to fund projects todevelop renewable energy and afforestation program.

"Thiswas sequel to the ratification of the Paris Climate Agreement by the FederalGovernment of Nigeria in March 2017 which necessitated the need for long termcapital to fulfil the Nigeria's Nationally Determined Contributions (NDCs) inreducing greenhouse gas emissions and ending gas flaring by 2030."

The Green Bond Programme 

TheExchange noted that "Since then, we have seen a gradual uptake in the NigerianGreen Bond market with subsequent issuance of a seven-year, N15 billion, 14.50percent sovereign Green Bond in June 2019 which was over-subscribed. The secondtranche was issued to finance renewable energy, afforestation, and transportationprojects.

"OnFebruary 27, 2019, North South Power Company (NSP) Limited, a pan African powergeneration company, issue its first N8.5 billion 15-year 15.6 percent Seriesone Guaranteed Fixed Rate Senior Green Infrastructure Bonds, due 2034 from thecapital market. The bond was oversubscribed by 60 percent and the proceeds wereused to re-finance existing domestic and foreign currency debts as well asfinance scheduled overhaul maintenance of turbine four of the ShiroroHydroelectric Power Plants.

"InMarch 2019, Access Bank Plc issued its N15 billion five-year 15.5 percent FixedRate Senior Unsecured Green Bond due 2024 and listed the bond subsequently onthe 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 SeniorGreen Bonds due 2031. It is noteworthy that all the corporate and sovereignGreen Bonds are listed on the Nigerian Exchange Limited. These follow-onissuances have further increased investible instruments and deepened theNigerian Green Bond market. The size of the Green Bond market is currentlyN55.52 billion."

Intensifying Efforts 

TheExchange stated that "Building on these advances, the Nigerian Exchange inOctober 2019 signed a Memorandum of Understanding with the Luxembourg StockExchange (LuxSE) to cooperate in promoting cross-listing and trading of greenbonds in Nigeria and Luxembourg. This partnership secured its first listingwith the successful cross-listing of Access Bank's N15 Billion Green Bond onthe NGX Exchange and LuxSE."

Itadded that "As part of its capacity building efforts, the Nigerian Exchange incollaboration with the Milken Institute held the inaugural edition of itswebinar series on Sustainable Capital Markets for West Africa on June 5, 2020.

"Theforum provided a platform for policy makers, Government, regulators, WestAfrican financial market participants, domestic and international thoughtleaders on green finance, investors and other market stakeholders to sharevaluable experiences and best practices on green finance, and promote thedevelopment of sustainable finance market segments in the region."

Forgingahead, NGX continues to leverage available guidelines, frameworks and resourcesin line with global best practices as we continue to facilitate and engagerelevant stakeholders in the development of the sustainable finance markets inNigeria and Africa at large.

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