Carbon trading is no longer abstract policy talk; it is fast becoming a financial reality for Nigeria. Yet the critical question remains: will the country build a carbon market rooted in integrity and shared value, or will it slip into another fragile system that sidelines local businesses and communities?
Similarly, Africa is entering a decisive phase in the global carbon market debate. The question is no longer whether the continent should participate, but how it can do so with integrity, credibility, and real benefits for its people.
At the centre of this shift lies Article 6 of the Paris Agreement, the framework that allows countries to cooperate in reducing emissions through carbon trading. For Africa, this is both a financial opportunity and a governance test: will carbon markets drive climate finance for development, or will they reproduce old patterns of extraction with little value left on the continent?
The stakes are high. Africa contributes less than 4 per cent of global emissions but bears a disproportionate share of climate impacts. Its forests, peatlands, and savannas are vital carbon sinks. However, governments often lack the tools to regulate and capture value from this asset. Article 6.2, which allows bilateral carbon trade, and Article 6.4, which sets up a United Nations (UN)-supervised mechanism, present routes to monetise these resources. But to succeed, Africa must bring clear rules, strong institutions, and firm priorities.
Trust is the currency. Global buyers, scarred by experiences with “junk credits,” demand transparency. That means open registries showing project ownership, methodologies, and benefit-sharing arrangements. It means governments authorising projects in a way that is publicly visible on UN portals, and domestic regulators empowered to enforce compliance. Without such clarity, investors will hesitate, and Africa risks being locked out of the market.
Nevertheless, many African governments lack reliable data on forest cover, carbon stocks, or ongoing projects. Voluntary carbon markets historically operated outside state oversight, leaving gaps in land rights, benefit-sharing, and institutional control. Infrastructure is weak: few countries have fully functioning registries, verification systems, or trading platforms. Verification and validation are dominated by private firms, leaving governments struggling to balance independence with accountability.
Read also: Carbon trading systems and global climate action
Nigeria’s example and a case for market governance
Back home and over the past three years, Nigeria has laid down important legal and policy foundations. The Climate Change Act of 2021 created the National Council on Climate Change and enshrined the idea of a carbon budget and fund.
In 2024, the government submitted its first Biennial Transparency Report under the Paris Agreement, highlighting a national carbon registry as a priority. Earlier this year, President Bola Ahmed Tinubu announced the finalisation of Nigeria’s Carbon Market Activation Policy, projecting up to $2.5 billion in climate finance by 2030.
Tinubu made the announcement on 23 April 2025 during a high-level virtual dialogue on climate and the just transition, co-hosted by UN Secretary-General António Guterres and Brazilian President Luiz Inácio Lula da Silva, ahead of COP30 in Brazil this November. The policy is reinforced by Nigeria’s pledge to revise its Nationally Determined Contributions (NDCs) by September 2025, in line with the UN Framework Convention on Climate Change.
These are vital building blocks, but until the registry is operational, they remain policy signals rather than functioning systems. The challenge now is execution.
Deborah Bodunde, a climate journalist, in a recent commentary, framed the issue sharply. The focus should shift from avoidance credits to removal projects that take carbon out of the atmosphere. Both compliance and voluntary markets should follow the same rules. And above all, climate finance must serve people, jobs, and development, not speculation.
For businesses, carbon markets are shifting from environmental obligation to competitiveness strategy. Oil and gas operators face methane regulations, cement producers must cut emissions intensity, and even small firms are under pressure to prove sustainability credentials. Still, the barriers for small and medium enterprises (SMEs) remain steep. Aggregation platforms pooling projects – from clean cookstoves to regenerative agriculture – are emerging as a lifeline, reducing transaction costs and connecting local innovation to global finance. Without such mechanisms, SMEs risk being locked out of a market that could otherwise fuel growth, exports, and job creation.
Trust, however, is the hardest currency. Across Africa, carbon trading faces scepticism over “worthless” credits and double-counting. Nigeria must prove it can do better. Experts insist that the forthcoming registry should be open and transparent, publishing details such as project location, ownership, baseline, methodology, and benefit-sharing. Article 6 authorisations must be public and regularly updated on UN platforms.
Equally, communities must not be treated as afterthoughts. Without free, prior, and informed consent, recognition of land rights, and clear agreements on benefit-sharing, projects risk local resistance. Jobs and social outcomes should be tracked with the same rigour as tonnes of carbon removed. Otherwise, climate finance becomes extraction by another name. Latin America offers lessons here: Brazil’s insistence on community inclusion and transparent governance has helped it attract finance while maintaining legitimacy.
This means the carbon market must be anchored in trust, integrity, and inclusive governance. It cannot operate as just another trading space, but as one grounded in the principles of sustainability, equitable development, and a just transition. Both compliance and voluntary markets should adhere to consistent standards. At its core, climate finance is not only about emissions. It is about people, communities, the environment, the creation of decent work, and broader socioeconomic progress, Godson Ikiebey, a sustainability and sustainable finance professional, explained.
Kenya and the global urgency
Lessons can be drawn from Kenya, which launched Africa’s first national carbon registry in 2023. By focusing on removals – reforestation, mangrove restoration, soil carbon – and guaranteeing revenue shares for host communities, Nairobi has built credibility early. For Nigeria, the takeaway is clear: speed matters, but integrity matters more.
The global context reinforces this urgency. Economists like Beata Javorcik, chief economist at the European Bank for Reconstruction, emphasise productivity gains from innovation and trade. Pedro Conceição, director of the Human Development Report office, UNDP, frames human development as the true measure of progress. Eric Parrado, chief economist of the Research Department of the Inter-American Development Bank underscores financial stability in emerging markets. Nigeria’s carbon market sits at the intersection of all three. If governed well, it can channel finance into productive investments, generate jobs, and strengthen fiscal resilience. If not, it risks deepening mistrust and wasting precious time.
Next steps
The way forward is clear. The government must finalise and operationalise the registry, publish an emissions trading roadmap, and fund aggregation platforms that bring SMEs into the fold. Companies must set internal carbon prices, build data pipelines, form buyer clubs, and publicly disclose community contracts. Above all, both government and business must accept that removal projects are the future, while avoidance credits are only a temporary bridge.
For local businesses, this is not a distant climate agenda. It is a chance to scale operations, cut costs, and meet global market demands. For communities, it represents the promise of fair jobs and revenues. For Nigeria, it is a test of whether climate finance can truly double as development finance.
The stakes are high – execution and governance, not just intention, will decide the outcome.
