Date: 26th July 2023

Nigeria, the largest economy in Africa, experienced a 3.3% real GDP growth in 2022. However, due to the economic impact of the COVID-19 pandemic and the aftermath of the war in Ukraine, the country’s growth is projected to slow down slightly to between 3.0% and 3.1% in 2023. In addition, several macroeconomic challenges such as depleted foreign exchange reserves, liquidity issues, and a growing national debt burden have faced the country.  

To sustain consistent economic growth, Nigeria needs to attract climate-smart and private investments. Innovative financing options like climate, green, and blue bonds, as well as loans, can provide the necessary funds and support the achievement of the United Nations Sustainable Development Goals (SDGs). It is crucial to mobilise climate finance to address the increasing climate-related challenges faced by developing countries, considering Nigeria’s national CO2 emissions currently at 115,278 (kt).  

To enable the private sector to contribute effectively and generate the required financing, innovative financing structures must be developed. These structures can improve capital mobilisation and allocation efficiency and overcome various macroeconomic constraints. Additionally, governments should ensure that any new lending is resilient to climate, nature, and health emergencies. This can be achieved by negotiating instruments that allow for short-term debt deferrals in the event of climate related shocks or other crises, such as pandemics or droughts. Such provisions would enable governments to reallocate funds for domestic disaster relief without the risk of defaulting. Effective debt management is also crucial for sustainable financing, and African countries should enhance their debt management capabilities, including the use of up-to-date systems.  

Consequently, FSD Africa will host a series of roundtable discussions with market stakeholders to engage in strategic conversations and foster a comprehensive understanding of the potential of domestic capital markets in mobilising long-term capital. This initiative (in partnership with Pension Funds Operators’ Association of Nigeria, PenOp) aims to enable stakeholders to effectively contribute to sustainable financing in Nigeria.

Objectives  

The goals of this engagement are as follows: 

• Increase awareness on Nigeria’s sustainable economic financing needs, available opportunities and demand from real economies such as agriculture and water and ways of utilising innovative financing structures to mobilise long-term capital.

These opportunities include:  

1. Understanding current opportunities to mobilise long term, sustainable financing through innovative financing structures. How do the current policy reforms impact investor risk perception?
2. Exploring the role of anchor investments from institutional investors and development finance institutions (DFIs) to stimulate long-term finance through blended finance structures.
3. Creating an opportunity to attract institutional funds, such as pension funds, towards sustainable instruments and innovative financing structures.

• Foster market interest in sustainable finance and identify potential issuers and arrangers who can facilitate demonstration transactions using innovative financing instruments.
• Engage with both potential issuers and arrangers to provide practical guidance on accessing innovative financing. Additionally, understand the role of regulators in creating an enabling environment.
• Present live examples of how innovative financing instruments have been successfully utilised locally and in other African markets and how the funds generated are being deployed.