Towards a framework for accessing climate finance in Nigeria, By Gori Olusina Daniel

The high-level framework proposed provides that this should start with defining funding priorities that align with the updated NDCs, and include soliciting project concepts directly from the ministries, departments and agencies of government, MDAs, while aligning these project concepts with available climate finance sources, elaborating full proposals for project concepts with clear pathways to financing, and ensuring that the efficient approval, implementation and MRV processes are in place to ensure that the intended outcomes…

President Muhammadu Buhari announced Nigeria’s commitment to net zero by 2060 at COP26. On the return to Nigeria, he subsequently signed the Climate Change Bill 2021, passed by the National Assembly in October of that year, which then became law.

Nigeria’s Nationally Determined Contributions (NDCs) provide a high-level strategic vision for climate action in Nigeria. Despite lower-than-expected economic growth, the updated NDCs submitted in July 2021, reflect an increase in ambition from the Intended NDCs submitted in 2015. The updated NDCs reflect an unconditional contribution of 20 per cent below business-as-usual by 2030, and now proposes a 47 per cent lower contribution – around 100 MtCO₂e below 2018 levels. This is more ambitious, and consistent with a global 1.5^oC pathway, but conditional on international support. As such, the mobilisation of the requisite international support and private sector investment is critical to enabling Nigeria meet its commitments and initiate an irreversible downward trend in GHG emissions this decade.

The implementation of climate change mitigation and adaptation efforts in developing nations continue to be constrained by a lack of financial resources. For example, access to finance in developing countries is typically hindered by a lack of bankable projects. While the global community has made a clear commitment to supporting developments in their efforts to adapt and mitigate the impacts of climate change, it is important to note that climate finance is subject to project concepts being well established and developed to be able to scale the finance providers’ bankability requirements.

Climate Finance Mechanisms and Instruments

Climate finance mechanisms and instruments are evolving, growing in significance, and they continue to remain central to achieving low-carbon, climate resilient development. Target funds are projected to come from a range of sources, including financial and non-financial, public and private, national and international (see Fig 1 above). Fundamentally, access to the $100 billion per annum committed by the G8 countries at COP26 and other funding sources, will determine if Nigeria is to achieve its commitment to net zero by 2060.

Developing a Climate Finance Strategy for Infrastructure Development

Irrespective of the climate credentials of prospective projects, the Investment and Credit Committees of most financiers will need to establish (or work to restructure a project to ensure) that it is financially viable. Consequently, all potential projects must follow the acceptable bankability principles before climate finance can be accessed.

With support from UK Nigeria Infrastructure Advisory Facility (UKNIAF), the Foreign, Commonwealth and Development Office (FCDO) funded programme, the Federal Government of Nigeria is developing a Climate Finance Strategy for Infrastructure Development. Developing a country-specific climate finance strategy is critical and must align with the NDCs implementation plan, which is represented in Nigeria by Sector Action Plans, which presumably should have been reflected in the Medium-Term National Development Plan 2021 – 25 (MTNDP 2021-25), that alongside the NDCs, have established the low-carbon transition policy agenda in Nigeria’s medium term planning processes.

The proposed Climate Finance Strategy for Infrastructure Development seeks to build on the government’s commitment to transition to a low carbon, climate-resilient economy, and outlines the sources of climate finance available to Nigeria, and how NDC-aligned project concepts can be positioned to satisfy relevant climate finance provider requirements. It also includes a summary of the emerging institutional landscape for climate finance in Nigeria, which is still evolving (see Table 1), and may need to be revisited as part of the process of finalising the proposed climate finance strategy for infrastructure development.

Implementation considerations for the proposed Climate Finance Strategy

The proposed Climate Finance Strategy for Infrastructure Development is distinct from the broader Climate Finance Strategy being developed by the Federal Ministry of Environment with support from the UNDP, and proffers that an iterative process is adopted to govern the financing of NDC-aligned infrastructure projects as part of the medium-term planning and annual capital budgeting process.

The high-level framework proposed provides that this should start with defining funding priorities that align with the updated NDCs, and include soliciting project concepts directly from the ministries, departments and agencies of government, MDAs, while aligning these project concepts with available climate finance sources, elaborating full proposals for project concepts with clear pathways to financing, and ensuring that the efficient approval, implementation and MRV processes are in place to ensure that the intended outcomes of these projects are monitored, recorded, and validated (see Fig 3 below).

In addition, it is expected that successful implementation of the Climate Finance Strategy for Infrastructure Development will revolve around the following:

• Establishment of the proposed National Council on Climate Change (NCCC), with cross-sectoral representation and engagement, and recognition of the importance of private-sector representation;
• Development and implementation of NDC Sectoral Actions Plans in National (and sub-national) Planning and Budgeting Processes that will form the basis for a credible pipeline of NDC-aligned projects that can be positioned for climate finance;
• Adoption of a “Whole of Government Approach” by harmonising and establishing the complementary roles of the Federal Ministry of Environment, the Federal Ministry of Finance, Budget and National Planning, and others;
• Establishment of a Monitoring Review and Validation process for climate finance with cross-sectoral and cross-agency support and engagement to be overseen by the (NCCC);
• Development of a cross-sector community of practice, and promote incentives and capacity development across the public, private and civil society.

Gori Olusina Daniel is the Infrastructure Finance Lead at UKNIAF, a £72.8m an FCDO funded Infrastructure Advisory Facility committed to supporting the Government of Nigeria’s transition to the planning and implementation of low carbon, climate resilient infrastructure. He can be contacted at Gori.OlusinaDaniel@UKNIAF.ng.