FRI, JULY 20 2018-theG&BJournal-The Nigerian Stock Exchange (NSE) announced the listing of the N10.69billion, 5-year, Federal Government Sovereign Green Bond at coupon rate of 13.48% on the Exchange by Debt Management Office (DMO) today. The NSE at the same time held a pre-listing conference for market participants, themed, ‘Exploring the Green Financing Opportunity: Green Bonds and Enabling Frameworks’ to highlight the opportunities available within the Green Bond market in Nigeria.
The event had in attendance about 200 market operators, government officials, c-level executives, as well as top officials from the academic and sustainability sector. The event was headlined by Ms. Pat Oniha, DG, DMO, Hon. Ibrahim Usman Jibril, the Honourable Minister of State for Environment, and Ms. Amina J. Mohammed, United Nations Deputy Secretary General, represented by Mr. Edward Kallon, UN Resident/Humanitarian Coordinator and UNDP Resident Representative.
The Sovereign Green Bond is part of a strategic process by the Federal Government to add to the nation’s funding options to catalyse the rebound of the economy and offer the vast majority of Nigerians, a new alternative. The listing of this Sovereign Green Bond, which is the country’s first ever certified green bond and the first in an emerging market, is a testament to NSE’s continued vision of pushing green finance and more broadly, the sustainable development agenda in Nigeria.
Commenting on the listing, the Chief Executive Officer of The Nigerian Stock Exchange, Mr. Oscar N. Onyema OON said, “Admitting the first ever sovereign green bond in an emerging market is yet another milestone for the Exchange and is a further affirmation of our unique platform to support both the Federal Government and businesses to access capital for sustainable initiatives. The listing of the FGN Green Bond represents a new stage in the development of Nigerian capital markets and opens the way for further corporate issuance and international investments. As a member of the UN Sustainable Stock Exchange Initiative, we are committed to developing this enormous opportunity for Nigeria.”
According to Onyema, the growth of the global Green Bonds industry in the past ten years, has been unprecedented. Commencing with the $800m pioneer issuance by the European Investment Bank in 2007; the annual issuance of Green Bonds grew by almost 200x to $160bn in 2017, with issuances for 2018 currently projected to grow to $250bn.
The Issuers of Green Bonds cut across the public and private sectors, and include National Governments such as Poland, France, Fiji, and Nigeria, to Sub-National and Supranational issuers like the City of Cape Town, the City of Los Angeles, and the African Development Bank. Corporate issuers can also be found spread across various industries from healthcare and energy, to transportation and banking. Interestingly, the dispersion of Green bond issuers can also be found spread across multiple geographical jurisdictions.
‘’As yet however, there has been no Green Bond issuer from the Nigerian market, save the Federal Government. We encourage our listed companies and other corporates in Nigeria to consider using our globally recognized platform at the NSE to raise green capital,’’ Oyema said.
In her statement during the listing ceremony, the Director General of DMO, Mrs. Patience Oniha, stated that, “The Green Bond Listing is an opportunity to enable Nigeria tap into the growing global market for green bonds, which as of end of 2016 comprised of $576billion of unlabeled climate-aligned bonds and $118billion of labelled green bonds according to Climate Bonds Initiative in London. The DMO is proud to list the N10.69 billion FGN Green Bond 2022 on the NSE and expects that trading this instrument will not only bring about Climate Change Awareness but will also diversify the Nigerian Capital Market and attract more investors”.
According to the Honourable Minister of State for Environment, Hon. Ibrahim Usman Jibril, “The Sovereign Green Bond further reinforces Nigeria’s reemergence as a major player in the international climate regime, and President Muhammadu Buhari’s strides in moving Nigeria towards being a low-carbon economy. The issuance of a Green Bond by Nigeria delivers on program 47 of its Economic Recovery and Growth Plan (ERGP), in addition to meeting the expectations set out in Article 2 of the Paris Agreement. This places progress on the NDCs targets in sight and lays the foundation for the expansion of the Federal Government’s Green Bond Issuance Program on a recurring basis.”
The Green Bond issuance and listing follows Nigeria’s endorsement of the Paris Agreement on Climate Change on September 21, 2016. The Paris Agreement aims to strengthen the global response to the threat of Climate Change. Since the signing of the Agreement, various countries that are parties to the Agreement have initiated several steps aimed at making the environment better.
Onyema reminded audience that foreign investors with an estimated asset size of over $24trillion, under the aegis of the Institutional Investors Group on Climate Change (IIGCC) have committed to mobilize capital for the actualization of a sustainable and low-carbon economy.
‘’Also, the Investor Group on Climate Change, the Global Investor Coalition on Climate Change, and The Investor Agenda, are other global initiatives comprised of some of the largest pension funds and fund managers in the world who are also working to advocate for policies to facilitate more sustainable economic practices. Some of these organizations have also committed to increasing investments in the sustainable finance sector, and Green bonds provide a ready tool for them to meet their pledged commitments.’’
Green bonds could also afford certain cost benefits to issuers. Data on the World Bank’s Green Bonds suggests that they can be issued at a lower cost relative to conventional bonds. These cost benefits are derived from the excess demand for green investments over and beyond their supply; and as a result, issuers are better able to accept bids with lower yields for bankable projects within the sector.
It will be recalled that, NSE, in collaboration with Federal Ministry Environment, Federal Ministry of Finance and Debt Management Office hosted a high profile conference themed “Green Bonds: Investing in Nigeria’s Sustainable Development” in 2016 that provided an opportunity for the government to engage the capital market stakeholders. The conference was a major step towards the issuance of Nigeria’s first sovereign green bond.
Parties to the transaction include The Ministry of Environment, The Debt Management Office and Chapel Hill Denham, who are the financial advisers to the transaction.
FULL TEXT OF OSCAR ONYEMA’S SPEECH:
Your Excellences, Accomplished Business Leaders, Distinguished Guests, Ladies and Gentlemen; Good morning and welcome.
Where appropriate: specific mentions may include:
- The Honourable Minister of State for Environment
- The Director General, Debt Management Office
On behalf of the National Council, Management and Staff of The Nigerian Stock Exchange, I welcome you all to the Official Listing Ceremony of the Maiden FGN Green Bond.
I would like to heartily congratulate the Federal Government and its agencies, including the Debt Management Office, the Ministry of Environment, the Securities and Exchange Commission and all the members of the Green Bond Advisory Working Group for the successful actualization of this landmark initiative, which is the first Green Bond to be issued by an African Sovereign. Nigeria is the fourth nation in the world to issue Green bonds – after Poland, France, and Fiji.
The growth of the global Green Bonds industry in the past ten years, has been unprecedented. Commencing with the $800m pioneer issuance by the European Investment Bank in 2007; the annual issuance of Green Bonds grew by almost 200x to $160bn in 2017, with issuances for 2018 currently projected to grow to $250bn. Issuers of Green Bonds cut across the public and private sectors, and include National Governments such as Poland, France, Fiji, and Nigeria, to Sub-National and Supranational issuers like the City of Cape Town, the City of Los Angeles, and the African Development Bank. Corporate issuers can also be found spread across various industries from healthcare and energy, to transportation and banking. Interestingly, the dispersion of Green bond issuers can also be found spread across multiple geographical jurisdictions. As yet however, there has been no Green Bond issuer from the Nigerian market, save the Federal Government. We encourage our listed companies and other corporates in Nigeria to consider using our globally recognized platform at the NSE to raise green capital.
Green Bonds represent a turning point and a new paradigm for our markets. As you are all aware, Nigeria – as a party to the Paris Climate Agreement – has committed to achieving specific climate change objectives embedded in her Nationally Determined Contributions. These objectives require huge capital investments, and particularly so for Nigeria – given the huge infrastructural deficit which is estimated at $3trillion over the next 25 years. Fortunately, Green bonds present a unique opportunity for financing our climate change objectives, delivering on critical infrastructure gaps, and unlocking the economic growth potential of this country. The economy of Iceland provides a valid reference point in this regard.
Faced with a banking sector crisis and an economy on the brink of collapse in 2008, Iceland successfully transitioned within ten years into one in which almost 100% of its electricity is generated from hydro, geothermal, and other low-cost, and renewable energy sources. Interestingly, this renewable energy story was initiated and powered by local businesses in an economy which had hitherto been unable to withstand the volatility in world energy prices; a similar situation which can be found in our economy today.
Green bonds also provide a way for issuers to diversify their capital structures and attract a wider base of investors from both domestic and international markets. It is worth mentioning here that foreign investors with an estimated asset size of over $24trillion, under the aegis of the Institutional Investors Group on Climate Change (IIGCC) have committed to mobilize capital for the actualization of a sustainable and low-carbon economy. Also, the Investor Group on Climate Change, the Global Investor Coalition on Climate Change, and The Investor Agenda, are other global initiatives comprised of some of the largest pension funds and fund managers in the world who are also working to advocate for policies to facilitate more sustainable economic practices. Some of these organizations have also committed to increasing investments in the sustainable finance sector, and Green bonds provide a ready tool for them to meet their pledged commitments.
Green bonds could also afford certain cost benefits to issuers. Data on the World Bank’s Green Bonds suggests that they can be issued at a lower cost relative to conventional bonds. These cost benefits are derived from the excess demand for green investments over and beyond their supply; and as a result, issuers are better able to accept bids with lower yields for bankable projects within the sector.
For our markets here in Nigeria and Africa, there are other implications of this climate change narrative. Data from the World Trade Organization shows that over 70% of the exports of Nigeria and Angola are in fuels and mining products and in many other Sub-Saharan Africa economies, the agricultural sector contributes over 15% to GDP. As the world transitions away from a fossil-based economy to a more climate-aware one, it is inevitable that foreign exchange revenues from exports of these products will eventually decline. Green bonds therefore provide a way in which much needed capital can be mobilized to finance the infrastructural requirements needed for sustainable growth, and stave off any impending crisis from demand and supply imbalances in the external sector.
Distinguished guests, the scope of Green bonds in our markets cuts across virtually every facet of our economy, from energy and transport, to waste management and agriculture, and provides distinct opportunities for issuers of Green bonds across various industries. Not only do these projects provide climate-enhancing benefits, they also provide a unique means by which issuers can attract a different crop of investors, and further diversify their capital structures. Green bonds represent a burgeoning asset class, and provide investors a unique way of diversifying their portfolios with the benefits of increased governance, transparency and reporting on the associated investment vehicles.
The Nigerian Stock Exchange for its part recognises the importance of a well-developed capital market in supporting the capital expenditure efforts of public and private sector entities. This realisation informed our efforts at conceptualising and developing the Green Bond Product Paper which was embraced and championed by the former Honourable Minister for Environment – Ms. Amina Mohammed. With the launch of the Green bond, the Government has been able to raise funds for the financing of key capital projects, while also creating a benchmark for the efficient pricing of future issuances from the corporate sector.
We are indeed elated to see the materialisation of Green Bonds in our market, and to observe its adoption by other actors towards the development of the sustainable finance sector in Nigeria. We applaud the Federal Government of Nigeria and the DMO for the unwavering commitment to deepening and developing the Nigerian Capital Market, with today’s listing event. I thank Her Excellency, the Deputy Secretary General of the United Nations, Ms. Amina Mohammed, who was central and immensely instrumental to the success of this landmark initiative, as well as all members of the Green Bond Advisory Group which worked earnestly to actualise this issuance. We also celebrate with other members of the capital market and business community in the drive to facilitate the growth of this industry.
The NSE will continue to provide an efficient and liquid market for investors and businesses in Africa, to save and access capital and promises to continue its collaboration with the various levels of Government and all market stakeholders, to collectively contribute to the economic growth and development of Nigeria and Africa at large.
