Since designing its National Climate Change Policy and Response Strategy in 2012, Nigeria has established a rich policy landscape dedicated to planning for, and responding to, climate change. With greenhouse gas (GHG) emissions rising continually since 2009 – the third highest in Africa after the Democratic Republic of the Congo and South Africa (ClimateWatch, 2019) – Nigeria needs to ensure prospective growth follows a low-emissions development pathway, preventing carbon lock-in as the country undergoes further industrialization and urbanization. At the same time, Nigeria is already highly vulnerable to the impacts of climate change, a consequence of its fragile economy largely dependent upon ecosystems and natural resources (DCC, 2021). As the President, Muhammadu Buhari, cautioned at COP26 in Glasgow, “For Nigeria, climate change is not about the perils of tomorrow but what is happening today.”
This report, part of the State of Climate Finance in Africa series, provides a deep dive analysis of tracked climate finance in Nigeria in 2019/2020. Following a discussion of climate change policies, strategies, and plans enacted in the country to date, it delves into climate finance committed to and within Nigeria, mapping flows along their lifecycles from sources and intermediaries (private and public), the financial instruments used to channel funds (grant, debt or equity), and through to how finance is ultimately used on the ground (mitigation, adaptation or dual benefits). While data gaps limit a fully comprehensive assessment, the key purpose of this case study is to inform and facilitate discussions among policymakers and public and private financiers, identifying gaps and opportunities for scaling climate finance in Nigeria.
In 2019/2020, an average USD 1.9 billion per year of public and private capital was invested in climate-related activities in Nigeria. This is only 11% of the estimated USD 17.7 billion needed annually to meet the conditional Nationally Determined Contribution (NDC) target of reducing emissions 47% below business-as-usual by 2030. More specifically:
- The tracked USD 1.9 billion of climate finance flowing to and within Nigeria is minimal relative to the size of the country’s economy, with a GDP of USD 432 billion (WB, 2020), and the opportunities for low-carbon development.
- Fossil-fuel financing in Nigeria continues to dominate: Nigeria was ranked second in Africa in terms of the number of fossil fuel projects financed between 2016 and 2021, with one liquified natural gas (LNG) project therein receiving USD 2.77 billion alone; more than the total climate finance tracked in 2019/2020 (Geuskens & Butijn, 2022).
- The investment gap for priority sectors looms large in the Nigerian climate finance landscape, given the estimated USD 17.7 billion needed annually to deliver on the conditional NDC.
- At USD 663 million, adaptation finance is not consistent with the extent of the country’s vulnerability to climate change; according to ND GAIN, Nigeria is the 53rd most vulnerable and the 6th least-ready country for adapting to climate change (Nwankpa, 2022). In order to attain the adaptation priorities outlined in, and integral to, Nigeria’s NDC, adaptation finance must be significantly scaled-up in parallel to mitigation finance, which totalled USD 1.1 billion in 2019/2020.
- Concessional debt is predominantly used to channel climate finance (46%), followed by non-concessional debt (25%). Grant- and equity-based finance currently play a relatively minimal role in Nigeria’s climate finance ecosystem, at 5% and 12% respectively.
- Private sector investment significantly lags behind public investment, accounting for 23% of total climate finance committed in 2019/2020.
The following recommendations are derived from the analysis, specific to policy and
finance respectively, with a view towards increasing the quantity and quality of climate
finance in Nigeria.
- Operationalize the various provisions of the New Climate Change Law – including a carbon market – passed by the Government in 2021.
- Develop costed needs analyses across (priority) sectors with accompanying sectoral action plans to identify finance gaps and priority action areas.
- Build on Nigeria’s existing sovereign green bond tagging framework to establish national climate budget tagging with a view towards better understanding, and tracking, domestic climate finance.
- Ensure the National Action Plan on Gender and Climate Change is widely socialized among, and implemented by, relevant stakeholders, such that gender considerations become an integral component of climate finance disbursed across Nigeria.
- Develop a national strategy for technology transfer an integral component for delivering on Nigeria’s conditional Nationally Determined Contribution.
- Actively invest in climate-resilient infrastructure, via public-private partnerships, in a bid to fill the growing infrastructure finance gap in Nigeria, thereby ensuring the country’s development trajectory adapts to prospective climate risks.
- Ensure targeted, strategic use of public finance to a) mobilize private finance at scale and b) invest in underfunded, hard to abate sectors, specifically Industrial Processes & Product Use and Waste in Nigeria.
- Scale up, and sustain, finance for (on/off-grid) solar technologies to achieve energy access and NDC climate goals simultaneously.
- Focus on deploying (public) climate finance in ‘nexus solutions’ – for example, nature-based solutions, or joined-up action on air quality & climate – therein maximizing the efficacy of limited resources.