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Finance | Islamic Finance

Nigeria's Energy Transition Plan and The Role of Green Sukuk Financing

Oct 07, 2022   •   by Opeyemi Aranseoluwa   •   Source: WebTV   •   eye-icon 366 views

The Green Sukuk has been described as a powerful financial instrument that can be leveraged to support Nigeria's 2060 Energy Transition PlanMr. Adeoluwa Adejumo, MD/CEO of Guaranteed Power Limited, made this point while providing his perspective on "Nigeria's Energy Transition Plan: Role of Green Sukuk Financing." 

According to him, Green Sukuk is a Shariah-compliant fixed-income instrument structured to use the proceeds towards climate change integration, adaptation and environmental conservation projects.

It also finances renewable energy, waste management, recycling, and energy projects that add to the environmental infrastructure, positively impacting the environment. The main difference is the focus on climate change,  so the proceeds are applied to climate or environment-friendly projects.

He acknowledged that the Nigerian energy transition plan has set a target of universal energy access by 2060 and is, in the mid-term, looking at generating 40,000 jobs by 2030. He said, "I think it is a plan we can get around, and Sukuk is a viable option for attracting surplus funds." 

"As earlier mentioned, we need about US$410bn to execute the plan. This is money we currently don't have in the country, so it means Sukuk is a viable way to attract surplus funds from the corporates and other stakeholders in the private sector".  

Speaking further, he said countries like Bahrain, Qatar and Saudi Arabia, etc., have created their sovereign wealth funds to gather their surplus funds and channel the infrastructure investments to enable their respective economies to diversify from oil. He noted that the Green Sukuk was appealing to investors because of the adopted corporate governance level

He believed the Green Sukuk is a viable instrument that could provide sizable returns for investors that are ethical in their approach and are in for the long term. "So, in essence, clear data transparency, feedback and timeline are important so that stakeholders know exactly what to expect, which also provides certainty for the projects," he said. 

He emphasized the need for government guarantees because the projects require huge funds, and the government's backing will reassure investors. Nigeria is Africa's leading destination for Sukuk Issuance and could also take the lead in Green Sukuk financing as the global economy shifts from fossil fuels to renewable energy.

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