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Nigeria’s N10.69bn debut sovereign green bonds due for issuance on December 18, 2017 would be priced in reference to Federal Government bonds of similar tenor.
The bond, the first in Nigeria and West Africa, second in emerging markets and fourth globally is a five-year tenored instrument being issued to raise funds for specific green projects across the country, according to government authorities.
Nigeria intends to spend the proceeds of the bonds on Renewable Energy Micro-Utilities (REMU), Energising Education, as well as Afforestation Programme, according to the transaction details released by authorities on Thursday.
The NGN10.69 billion is the first Series under the N150 billion green bond programme.
According to the transaction timelines seen by BusinessDay, the Federal Government will open the issue next Monday and close the transactions two days later. The bond will then be listed on the Nigerian Stock Exchange on January 10, 2018.
At the first investor forum for the bond hosted by the Debt Management Office, Ministries of Finance and Environment Thursdayin Abuja, Patience Oniha, Director General, DMO, said the bonds will come as fixed rate notes and will be “direct, unconditional, general and unsecured obligations of the FGN and will rank paripassu with all other outstanding unsecured and unsubordinated Obligations of the FGN.
“We are meeting the people who will invest in the bonds to sensitise them about the bond program.
“Government is going to use the money from Green bonds for specific projects. It is for green projects that have been classified as green and it’s also project-tied.
“So, it’s not money going to government for general spending, it is going for specific projects that have significant benefits for the environment,” Oniha stated.
The DMO DG explained that the delay in issuing the bond was as a result of the many processes involved in floating the instruments.
She added, “There are several processes that you have to go through before the bond is issued.
“For instance, Moodys has rated the projects as being qualified for green instruments and it’s a process we have to go through. But now, definitely next week, we are issuing the green bonds”
Oniha said key investment considerations included the fact that it is a maiden issuance in Nigeria and West Africa.
She also noted that the segregation of issue proceeds would be applied towards ring-fenced projects and provides competitive investment returns relative to conventional bonds.
Besides, the bond has a great element of sovereign risk exposure, as well as strong investment grade ratings, particularly by Moodys which has assessed and categorised it GB1 (Excellent). This will be the first time a green bond assessment has been assigned to a sovereign green bond in Africa by Moody’s.
Moody’s Senior Vice President, Rahul Ghosh, said in a statement, “In preparation for Africa’s maiden Sovereign Green Bond, the Government of Nigeria has put in place a comprehensive governance structure and framework that is aligned with the country’s domestic green bond guidelines and international best practices.”
According to the presentation at the investment forum, the government intends to fund the Energizing Education Program (EEP), which has been estimated to cost $235.2m (N8.55 billion) or 79.5%, from the Green Bond proceeds. Under the EEP, the government intends to fund a rural electrification programme that seeks to develop off grid Independent Power Plant-type projects for the generation and provision of adequate power supply to 37 federal universities and seven teaching hospitals across the country.
The projects are developed to strengthen the electricity distribution within the selected universities and over 240,000 individuals, translating to an estimated 40,000 households are expected to be impacted by the programme.
Besides, over 7,000 jobs are expected to be created from the construction, operation and maintenance of the power plants, according to government estimation.
The Afforestation Programme is expected to gulp N1.99 billion or 18.5% of the total bond proceeds. The programme aims to increase forest coverage through the plantation of seedlings to cover 131,000 hectares of land. It will help reduce net emissions and work towards achieving the objectives of Nigeria’s Nationally Determined Contributions (NDC) while also supporting the livelihoods of rural communities.
Besides, aiming to achieve economic and climate benefits, seeks to positively impact an estimated 3.8 million members of the public across 26 states in Nigeria.
The Renewable Energy Micro-Utilities (REMU) programme aims to provide electricity to 300,000 individuals in 45 unserved communities across Nigeria by providing mini-grids with distributed loads of between 33-50kw per community. A pilot programme will be implemented in 3 communities at an estimated cost of N150m.
Authorities say it is based on the combination of an operational pilot scheme in Sherape, and rural electrification needs of other communities in Nigeria.
According to them, 667 jobs are expected to be created from the programme through the installation, maintenance and replacement of solar panels, as revenue is expected to be generated from taxes on electricity tariffs and service charges.
As part of its effort to align with the global objective of expanding the market for climate finance. This is in keeping with President Muhammadu Buhari’s commitment to support Nigeria’s transition towards a low carbon, green economy.
Speaking in Paris, France at the One Planet Summit, hosted by President Emmanuel Macron, President Buhari said that for “Nigeria to respond effectively to climate change mitigation and adaptation challenges, critical mass of financial resources beyond what we can provide from our national resources will be required.” On steps Nigeria has taken to meet its national goal in this respect, The President said the country “embraced the issuance of the green bond as an innovative and alternative source of project funding that would help reduce emissions and provide robust climate infrastructure, such as renewable energy, low carbon transport, water infrastructure and sustainable agriculture in line with the Paris Agreement”.
The Minister for State, Ibrahim Usman Jibril said Climate Change is real and business, government and the capital market need to work together to slow its effects. “This pilot green bond, which we expect to be the first of many more, has developed the platform to address the nation’s target of reducing its emissions by 20% unconditionally and 45% conditionally by 2030”.
Green bonds have been the subject of increasing government, investor and media interest, driven by the prospect of matching large low‑carbon investment requirements with the trillions of dollars in global bond markets held by institutional investors.
ONYINYE NWACHUKWU, ABUJA And HOPE MOSES-ASIKE
