Country: Nigeria

Climate finance innovation for Africa

The African continent presents a massive investment opportunity for investors to advance climate solutions in the coming decade, however, a set of barriers to finance have stifled requisite investment to date. In this new report, in collaboration with Climate Finance Innovation for Africa and Climate Policy Initiative, we provide a framework for how innovation in financing structures can leverage strategic deployment of public capital to ‘crowd-in’ private investment at levels not yet seen.

This paper focuses primarily on climate mitigation, which represents the largest investment opportunity for private investors. We refer audiences focused specifically on adaptation to the work done by the Global Center on Adaptation and Climate Policy Initiative on Financial Innovation for Climate Adaptation in Africa.

The Nigerian Green Bond Market Development Programme Impact Report -2018-2021

This report documents a comprehensive overview of the Nigerian Green Bond Market Development Programme, with a focus on market capacity building, policy advisory and technical support for Green Bond issuance.

The report provides a breakdown of the Programme’s activities and how they have supported the use of Green Bonds in financing low carbon infrastructure.

The NGBMDP has successfully organised ten (10) capacity building sessions for Investors, Intermediaries, Regulators, Media, Solicitors, Rating Agency, State Executive Councils and Verifiers.

Also, it has delivered five (5) focused trainings for Banks, the Securities and Exchange Commission, Nigeria (SEC), and National Pension Commission (PenCom), etc.

The Programme has also assisted in the issuance of four (4)
corporate green bonds and issuance/reporting of two (2) sovereign green bonds while supporting five (5) issuers with green bonds verification reports and post issuance impact reports.

As part of its market development and capacity building efforts, the NGBMDP provided support for the development of guidelines and listings requirements for Green Bonds in Nigeria by the SEC, and organised training sessions focused on developing a pool of local Green Bond licensed verifiers, issuers, investors and intermediaries.

The Programme is committed to accelerating the development of the Green Bond market in Nigeria and supporting broader debt capital markets reforms that impact green bond as a financing instrument for the
transition to a climate resilience economy in Nigeria.

The Programme has the overarching objective of developing a non-sovereign green bond market that will entrench the principles of sustainability into the Nigerian capital markets over the next three (3) years.

Private debt markets in Africa

We engaged Lion’s Head Global Partners to conduct a study on Private Debt markets in Africa. While keeping a pan-African perspective, the study focussed on Nigeria, Kenya, Ghana, and Morocco as markets of strategic importance. South Africa was used as a reference market, given the development of the financial sector and the size and scale of the South African institutional investor base.

In addition to desk research and data analysis, the outputs, analysis, and recommendations were driven by stakeholder consultations, workshops, and interviews to both reflect individual positions, but also generate buy-in from stakeholders.

The insights from the study will support FSD Africa’s overarching strategic goal to mobilise long-term finance in local currency to support Africa’s development priorities and inform our transaction support, regulatory initiatives and knowledge and capacity-building engagements under its Africa Private Equity and Private Debt programme. The study will also benefit stakeholders including institutional investors, borrowers, regulators and policymakers, who seek to improve the enabling environment.

FSD Africa Impact Report – 2022

FSD Africa is a specialist development agency working to make finance work for Africa’s future. Set up in 2012, we work on policy and regulatory reform, capacity strengthening and improving financial infrastructure, and addressing systemic challenges in financial markets to spark large-scale and long-term change.

Additionally, we provide risk capital by investing in cutting-edge ideas that we believe have the potential for significant impact. We take on projects that are more complex and riskier than those taken on by typical development finance firms, to unlock additional funding for innovative sectors.

Over the past decade, we’ve seen that investing in financial markets drives economic growth, boosts the income of vulnerable groups and helps to reduce poverty. Through our market-building initiatives, we have directly and indirectly crowded in around £1.9 billion in long-term capital, availing finance for SMEs, affordable housing and sustainable energy projects.

Our work has also enabled development of innovative products, increasing access to financial services for close to 12 million people in Africa. This improved access has been particularly beneficial during the Covid-19 crisis. Between 2020 and 2021, we saw an 87% increase in the use of remittance services to cushion families from the economic effects of the pandemic.

Our programmes have also supported business growth, increasing access to jobs for vulnerable groups such as women. To date, we have created or sustained approximately 67,200 full-time equivalent (FTE) jobs, of which 12% were green jobs and 59% were occupied by women.

Results against five-year targets

The figure below shows our cumulative results against the five-year targets for each of our core indicators.

Impact over 5 years

Innovative finance is essential to tackle barriers to investment in Africa’s climate finance needs – at an average investment of USD 250 billion annually from 2020 to 2030

Posted on by Kihingu Inc

11 August 2022: The African continent presents a massive investment opportunity for investors to advance the deployment of climate solutions in the coming decade according to a new report Climate Finance Innovation for Africa. However, this will require innovation in financing structures and the strategic deployment of public capital to ‘crowd-in’ private investment at levels not yet seen.

Current levels of climate finance in Africa fall far short of needs. Africa’s USD 2.5 trillion of climate finance needed between 2020 and 2030 requires, on average, USD 250 billion each year. Total annual climate finance flows in Africa for 2020, domestic and international, were only USD 30 billion (CPI forthcoming), about 12% of the amount needed.

Barriers related to shallow financial market depth, governance, project-specific characteristics, and enabling skills and infrastructure have stifled private investment in African climate solutions to date.

To overcome these challenges will require innovation in financing structures. But there is no one-size fits all. Public and private investors must tailor their financial instruments and strategies depending on the acute or chronic nature of the barriers identified.

Recommended actions for increasing the deployment of innovative finance include: Identifying and understand barriers constraining finance by sector and geography, matching instruments with barriers, matching instruments with project and technology lifecycles, enhancing engagement and co-financing with local stakeholders, and supporting innovation by establishing conducive policy and regulatory frameworks.

This work provides a framework for how these instruments and strategies can be efficiently deployed to overcome barriers to finance and capitalise climate solutions in Africa.

Read full report here.

Opportunities and barriers to digitising social protection and humanitarian payments in Nigeria

Since the early 2010s, humanitarian organisations, development organisations and the Nigerian government have disbursed both cash and voucher assistance to millions of Nigerians in urgent need of assistance. Extreme poverty fueled by violent conflict, climate shocks and a neo-patrimonial distribution of wealth has left 40% of Nigerians living below the poverty line. While much of Nigeria’s humanitarian aid is delivered in-kind, there is an increased focus on cash and vouchers where feasible and appropriate, which can offer recipients more flexibility to make purchases according to their needs.

The Nigerian government’s social protection cash transfer programming does not use vouchers in most contexts but offers program recipients cash transfers. Where cash transfers are used over vouchers in both the humanitarian and social protection contexts, most are delivered through over-the-counter cash collection instead of directly into recipient electronic wallets.

We commissioned this study in collaboration with Enhancing Financial Innovation and Access (EFInA), Strategic Impact Advisors (SIA) and the GSMA to better understand the opportunities and barriers to digitising humanitarian and social protection transfers in Nigeria through an analysis involving desk research, key informant interviews with mobile financial service providers, humanitarian organisations and government stakeholders, as well as focus group discussions with both humanitarian and social protection cash transfer payment recipients. 

The research focuses primarily on unrestricted cash transfers, instead of vouchers, in both humanitarian and social protection programming. It acknowledges that the use of cash transfers as a tool to support the poor and vulnerable is not feasible in all of the locations where humanitarian and social protection actors work, and that modality decisions must be evidence-based and determined by feasibility and appropriateness.

Key findings and opportunities for stakeholders involved in cash transfer delivery:

This research does not seek to replace that important program design process, but rather to propose steps forward that could enable the development of the local digital cash transfer ecosystem so that a greater breadth of modalities and delivery mechanisms could be considered and used to enable sustained access to relevant digital financial services for program recipients. 

The report dives deeper into the challenges, recommendations and opportunities, and also provides a comprehensive overview of Nigeria’s digital payment ecosystem, the current method of cash transfer delivery, as well as an analysis of the needs and preferences of program recipients.

This roadmap further offers actionable suggestions for improving the ecosystem’s capacity to deliver digital unrestricted cash transfers, and also considers ways e-voucher products could contribute to a more robust merchant payment ecosystem.

Catalytic patient capital provided by FSD Africa Investments for climate venture building

Posted on by Kihingu Inc

Persistent raises $10 Million Equity Round led by Kyuden International and FSD Africa to grow climate venture building in Africa

New York, Nairobi, Tokyo: 12 July 2022 – Today, Persistent Energy Capital LLC announced that it has raised USD 10M in equity in its Series C round.  The raise, which was achieved with the support of two lead institutional investors, Kyuden International Corporation and FSD Africa Investments, will enable Persistent to continue to grow its successful climate venture building business in Africa.

The equity raise took the form of Series C Preferred Units of ownership in Persistent, giving Series C investors a seat on the Board of Directors. The largest investor of this Series C round, Kyuden International Corporation (“Kyuden”), is the overseas business arm of the Japanese Kyushu Electric Power Group. Kyuden has energy investment activities and consulting services across the world and shares with Persistent a strong commitment to renewable energy and building sustainable communities. Investing in Persistent represents a strategic move for Kyuden to expand their overseas business with an established partner in Africa, where the demand for clean power and electric mobility is growing dramatically. Persistent will benefit from the expertise, know-how, and network accumulated from domestic and overseas energy businesses of Kyuden around the globe.

This successful fundraise was also achieved thanks to the catalytic patient capital provided by Financial Sector Deepening Africa Investments Ltd.

We are delighted to support Persistent as it expands its innovative climate venture building model. We look forward to working with the Persistent team to accelerate the investment needed by African entrepreneurs in the nascent and fast-growing climate sectors. The combination of Persistent’s capabilities and approach, together with FSDAi’s expertise, patient capital and focus on green finance represents a very strong proposition in areas where innovation and early-stage equity capital are highly needed.
Anne-Marie Chidzero, CIO – FSD Africa Investments