Nigeria’s pension funds’ investments in sustainable financing through green bonds have increased by over 1,500 percent or 17- fold over five years due to rising demand.
The investment by Pension Fund Administrators (PFAs) grew from N13.36 billion in August 2020 to N225.3 billion in August 2024, representing 17 times growth over the period, according to data from the National Pension Commission (PenCom).
Green bonds are fixed income instruments designed to raise funds for projects that have positive environmental climate benefits.
Oguche Aguda, chief executive officer, Pension Fund Operators Association of Nigeria (PenOp), said with the increasing focus on sustainability and the need for Nigeria to invest in climate-resilient infrastructures, pension funds are taking an increasing interest in green bonds to drive sustainable investment.
“Green bonds, which are debt securities issued to raise capital for environmentally-friendly projects, have gained increasing popularity among pension funds and institutional investors as part of a broader trend toward integrating environmental, social, and governance (ESG) factors into investment strategies.
“Over the last four years, allocation to sustainable financing through green bonds has increased by over 1,500 percent from N13.36 billion to N225.3 billion,” Agudah said.
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He said so far, Nigeria has launched two sovereign green bonds, while Access Bank launching its own in 2019. The increasing appetite for green bonds by pension funds should see more issuances of these instruments over the next few years, Aguda said.
Though dropped in August 2021 to N11.5 billion, the figure grew to N58.19 billion in the same period in 2022; N98.55 billion in 2023, and the highest so far, N225.3 billion, in the same period of 2024.
Jude Iregbeyen, an analyst with one the pension fund administrators (PFAs), said this growth reflects a broader shift in the financial landscape, as institutional investors increasingly prioritise environmental, social, and governance (ESG) criteria in their portfolios.
According to him, green bonds, which are designed to finance projects with positive environmental impacts, have become an attractive option for pension funds seeking both financial returns and alignment with sustainability goals.
This surge in pension investments also highlights the increasing integration of climate risk and sustainability into mainstream financial decision-making.
“As governments, businesses, and investors alike turn their attention to climate-related challenges, the demand for green bonds is expected to continue to grow. With pension funds playing a key role in financing sustainable projects, their growing commitment to green bonds is a clear indication of the changing priorities in global financial markets,” Iregbeyen said.
After the adoption of the Paris Agreement by 196 countries on 12 December, 2015, and subsequent ratification of the Paris Agreement by Nigeria in March, 2017, the Nigeria Exchange Group (NGX) launched its Green Bond Market Development Programme aimed at galvanising key stakeholders to develop innovative financial solutions to meet Nigeria’s climate mitigation and adaptation targets.
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“Following a proposal by NGX on the development of the green bond market to the Federal Ministry of Environment, the Green Bond Advisory Group was set up to drive Nigeria’s ambition to launch its inaugural sovereign green bond,” Jude Chiemeka, current CEO of NGX, while serving as divisional head, Trading Business, Nigerian Exchange Limited.
“The Advisory Group was co-chaired by the then Honourable Minister of Environment Amina Mohammed and Nigerian Exchange Group Plc CEO, Oscar Onyema, and was made up of stakeholders from local and international organisations, including The World Bank, United Nations Environment Programme (UNEP), International Finance Corporation (IFC), Africa Development Bank (AfDB) and the Climate Bonds Initiative (CBI).”
He had said, that NGX, as co-chair of the advisory group, and in collaboration with the Debt Management Office (DMO) and the Federal Ministry of Environment, played a critical role in conceptualising and developing the green bond product paper that culminated in the issuance of the inaugural N10.69 billion ($26 million), 13.48 percent 5-year sovereign green bond issued in 2017 by the Federal Government of Nigeria (FGN).
“Nigerian Exchange Limited has stood by its long-standing commitment to foster the growth of long-term sustainable finance within its marketplace, Chiemeka said.
The successful issuance and listing of the inaugural sovereign FGN green bond paved the way for the issuance and listing of corporate green bonds, including the N15 billion ($36 million), 15.5 percent 5-year Fixed Rate Senior Unsecured Green Bond issued by Access Bank of Nigeria Plc, the N8.5 billion ($21 million), 15.6 percent 15-year Guaranteed Fixed Rate Senior Green Infrastructure Bond by North South Power Company (NSP), and the Series II N15 billion, 14.5 percent N 7-year sovereign green bond in 2019, which recorded a 220 percent subscription rate and was oversubscribed by N17.93 billion ($44 million).
