ONOME AMUGE
To sustain economic growth, Nigeria must confront the challenge of climate change head-on, requiring a strategic mix of climate-smart investments and climate finance.
With the nation’s national CO2 emissions at 122,750,410 tonnes as shown in 2022, the urgent need to address the increasing impacts of climate change on development cannot be overstated.
However, the mobilisation of climate finance continues to be an elusive quest, as various sources of financing, from public to private to alternative, fail to consistently support mitigation and adaptation actions critical to tackling climate change.
In an assessment that highlights the complex nature of Nigeria’s climate finance conundrum, the International Monetary Fund (IMF) recently highlighted the country’s monumental task in sourcing climate finance, citing its difficulties in attracting climate-related Foreign Direct Investments (FDI) due to persistent issues with parallel foreign exchange rates and policy uncertainties.
The IMF, in a study titled ‘Harnessing Renewables in sub-Saharan Africa: Barriers, Reforms, and Economic Prospects’, highlighted the immense climate finance needs of several African countries, including Nigeria, Ethiopia, Cameroon, South Africa, and Somalia.
The report, prepared by IMF staff members, underlined the urgent need for these countries to secure over $600 billion in climate financing support from financial institutions to realise their clean energy aspirations.
“Nigeria has been active on the climate policy front, passing 12 climate policies between 2007 and 2019, which included feed-in tariffs, strategic planning, and procedures for renewable energy auctions, it has not been able to attract enough FDI, potentially because of policy uncertainty, weak financing mechanisms and other structural weaknesses such as the existence of a parallel exchange rate market in recent years.
“Sub-Saharan Africa can learn from the experiences of successful EMDEs and close the most binding structural gaps, by promoting good governance, trade and capital accounts openness, as well as product market reforms,” the financial agency of the United Nations observed.
In its analysis, the IMF noted that a correlation exists between climate action and the inflow of green Foreign Direct Investment (FDI) in successful Emerging Markets and Developing Economies (EMDEs).
The IMF stressed that in order for African countries to successfully attract green FDI, targeted policy initiatives and favourable preexisting conditions, such as advancements in structural reforms and the suitability of their geographies for renewable energy, are critical.
According to the African Development Bank (AfDB), Nigeria’s public sector is plagued by a dearth of resources to address the country’s ever-worsening climate crisis and the urgent need for a transition to a more sustainable and resilient growth pathway.
The AfDB estimates that Nigeria’s climate financing needs for the decade spanning 2020 to 2030 stands at $247.3 billion, averaging approximately $22.5 billion per year.
The multilateral development finance institution in its “Nigeria Country Focus Report (CFR)”, stressed that the mobilisation of private sector climate finance is vital for Nigeria to achieve its 2030 nationally determined contribution (NDC) targets.
The AfDB underscored the urgent need for an annual investment of $20.5 billion in three critical areas— renewable energy, sustainable transport, and waste management—to mitigate the devastating effects of climate change and pave the way for a more sustainable and resilient growth path for Nigeria.
In response to the climate finance challenges faced by Nigeria, the African Policy Research Institute (APRI) has urged policymakers in the country to rapidly integrate climate action into the nation’s economic planning and budgeting processes.
APRI argued that incorporating climate action into Nigeria’s economic planning and budgeting systems will not only strengthen the country’s climate resilience but also help attract global financial support.
This call to action, according to the institution, is underscored by Nigeria’s persistent challenge of attracting adequate climate finance, despite the country’s stated commitment to address the climate crisis.
According to the APRI, mainstreaming climate considerations across sectors is essential to building a sustainable, climate-resilient economy, allowing Nigeria to achieve its development goals while also addressing the climate crisis.
Chibuikem Agbaegbu, Nigeria focal person for APRI, asserted that the institute is prioritising strategies to help Nigeria implement its National Climate Change Policy (2021-2030) and overcome obstacles that impede the country’s access to climate finance in global markets.
Speaking at a stakeholders dialogue and collaboration workshop in Abuja, Agbaegbu highlighted the need for a comprehensive and coordinated approach that integrates climate considerations across various sectors in order to build a sustainable, climate-resilient economy.
“The global realities of climate change means that the landscape for finance and global geopolitics is changing significantly. As climate and ESG considerations become increasingly important in accessing finance from the Global North, plans that do not have climate action in view are finding it more difficult to attract financing.
“More so is the need by governments to demonstrate concrete efforts on mainstreaming climate in order to attract the level of climate finance and investments required to support their climate ambition. This includes clear policy direction and alignment, effective stakeholder coordination and collaboration, and an increasingly improving enabling environment for climate investments,” APRI stated.
APRI’s findings also identified a lack of policy coherence, coordination, and planning across government institutions as major roadblocks to securing climate finance for Nigeria.
According to Agbaegbu, the absence of a unified strategy that aligns with global climate finance standards, despite the country’s international commitments, is a significant challenge faced by many Nigerian government agencies.
This absence, he explained, hinders the country’s ability to effectively navigate the landscape of global climate finance and secure the funding required to implement climate action measures.
The institute’s report also uncovered a deep dissatisfaction among senior policymakers, particularly in the Federal Ministry of Budget and National Planning (FMBNP), over Nigeria’s failure to tap into large pools of climate finance that are essential for addressing the country’s pressing climate-related challenges.
To effectively address the country’s challenges with climate finance, APRI recommended that Nigeria adopt a combination of Green Budgeting (GB) and Climate-Resilient Budgeting (CRB) frameworks.
According to the institute, this mixed approach will ensure that climate risks and adaptation measures are taken into account when developing the national budget and public financial management systems. This, APRI believes, will enable Nigeria to more effectively prepare for and respond to the impacts of climate change while also positioning the country to attract more climate finance from global sources.
APRI clarified that green budgeting is a process that incorporates environmental sustainability objectives into government expenditure, while climate-resilient budgeting focuses on strengthening Nigeria’s capacity to withstand the adverse effects of climate change.
The institute further emphasised that the strategic engagement of the country’s Ministries of Finance (MoFs) in these processes could greatly enhance the mainstreaming of climate action throughout the national budget cycle.
As part of its climate finance recommendations, APRI also suggested the development of a national measurement, reporting, and verification (MRV) system, which would allow Nigeria to effectively monitor and utilise carbon financing tools while ensuring alignment with its nationally determined contributions (NDCs).
Furthermore, the institute highlighted the importance of integrating climate action across sectors, particularly in the agricultural sector. This, APRI stated, will help the country to address its vulnerability to climate change-induced impacts such as rising temperatures, unpredictable rainfall patterns, and desertification.
APRI recommended that the government prioritise key climate mitigation strategies such as organic agriculture, agroecology, and sustainable deforestation practices.
The institute stressed the need for increased funding for agricultural and climate adaptation programmes, in alignment with the country’s National Agricultural Technology and Innovation Policy (NATIP) for 2022-2027.
APRI also advised that the government should strengthen data collaboration with agencies such as the National Bureau of Statistics (NBS) and the Nigerian Institute of Social and Economic Research (NISER) to facilitate evidence-based climate action planning.
In addition, the institute emphasised the importance of collaboration with state governments to develop localised adaptation and energy transition plans.
APRI further noted that as Nigeria faces mounting pressure from the international community to align with climate priorities, the country’s finance ministries, as well as effective data coordination and stakeholder collaboration, will be pivotal in driving a successful transition towards a low-carbon, climate-resilient future.
