Market News

By Sami Tunji

Nigeria’s borrowing through green bonds rose by N47.36bn within one year, highlighting a gradual shift by the Federal Government towards climate-linked financing as it seeks to diversify funding sources and support sustainable development.

Green bonds are debt instruments issued by governments, companies, or financial institutions to raise money specifically for environmentally friendly projects. They work like regular bonds: investors lend money to the issuer and receive interest payments over time, while the principal is repaid at maturity. The difference is that the funds must be used for projects with environmental or climate benefits.

Data obtained from the Debt Management Office showed that the Federal Government’s green bond stock increased from N15bn as of December 31, 2024, to N62.36bn by December 31, 2025.

The N47.36bn increase represents one of the fastest growth rates among Nigeria’s domestic debt instruments, although green bonds still account for a small fraction of total borrowing.

Figures from the DMO indicated that green bonds made up just 0.02 per cent of total domestic debt in 2024, rising to 0.08 per cent in 2025.

This comes amid a broader expansion in Nigeria’s domestic debt stock, which climbed from N70.41tn in 2024 to N80.49tn in 2025, driven largely by increased issuance of conventional instruments such as FGN bonds and treasury bills.

Despite the growth in green bonds, FGN bonds remained dominant, accounting for about 79 per cent of total domestic debt in 2025, while Nigerian Treasury Bills represented over 17 per cent.

Further findings by The PUNCH showed that the expansion of green bond issuance is part of a deliberate strategy to align public borrowing with environmental and developmental priorities.

The Federal Government’s Sustainable Bond Framework, issued in March 2025 by the Federal Government of Nigeria and obtained by The PUNCH on Friday, provides the policy basis for the issuance of green, social, and sustainability bonds and is implemented through the Federal Ministry of Environment, the Federal Ministry of Finance, and the Debt Management Office.

It stated that Nigeria is “focused on building a resilient and diversified economy,” with investments targeted at “renewable energy, local manufacturing, and the transition towards a green and circular economy.”

According to the document, sustainable bonds are structured to finance projects with measurable environmental and social benefits, noting that “Sustainable Bonds will raise funds exclusively for spending on Eligible Projects… which should have clear environmental and/or social benefits and promote the transition to low-carbon and climate-resilient growth.”

The framework further explained that proceeds from such bonds are ring-fenced for specific uses, stating that “an equivalent amount to the proceeds of each Sustainable Bond will be used to finance and/or refinance eligible green and/or social projects.”

Eligible projects span key sectors of the economy, including renewable energy, sustainable agriculture, clean transportation, and climate adaptation. Examples outlined in the document include solar mini-grid deployment, electrified transport systems, and programmes aimed at building resilience against climate change impacts.

The framework also ties the use of green bonds to Nigeria’s broader climate commitments, including its Nationally Determined Contributions and long-term development plans such as Agenda 2050, which target a transition to a low-carbon economy and improved environmental sustainability.

On governance, the document outlines strict oversight mechanisms for the utilisation of proceeds. It stated that funds are held in dedicated accounts and disbursed only to approved projects, while “implementing MDAs are to submit quarterly implementation reports” to ensure accountability.

It added that “any instance of misapplication or diversion of funds would result in a stop on further utilisation of funds,” reinforcing transparency in the management of the programme.

The institutional framework assigns responsibility for project selection to the Federal Ministry of Environment, while the Ministry of Finance integrates sustainable bonds into the government’s borrowing plan and the DMO oversees issuance and fund management.

The document also noted that Nigeria’s sustainable bond programme, first introduced as a green bond initiative in 2017, “has been part of the domestic borrowing plan and will continue to be” as long as eligible projects exist.

It added that the framework aligns with international standards, having been developed in line with the International Capital Market Association’s Green Bond Principles, Social Bond Principles, and Sustainability Bond Guidelines, with external verification provided by independent reviewers such as TUV Nord.

The Federal Government recently disclosed plans to raise N500bn through the issuance of green bonds in 2026 as part of efforts to scale up financing for climate-related and environmental projects.

Minister of Environment, Balarabe Lawal, made this known in a post on his verified X handle following Nigeria’s participation at Abu Dhabi Sustainability Week.

According to the minister, the proposed green bond issuance shows the government’s commitment to expanding climate financing options and reducing reliance on oil revenues and conventional borrowing to fund development.

He explained that proceeds from the N500bn green bond would be channelled towards projects focused on climate change mitigation and adaptation, environmental protection, renewable energy, sustainable agriculture, and other green initiatives aligned with Nigeria’s climate goals.