The federal government plans to issue new green bond in 2023 as government explores widely diversified, alternative funding sources to finance its N10.78 trillion budget deficit.
The Debt Management Office (DMO), the agency that oversees issuance and management of the national debts, at the weekend indicated that new green bond will be issued in 2023.
The planned green bond issue in 2023 comes nearly four years after the government issued its last green bond.
Director General, Debt Management Office (DMO), Ms Patience Oniha, said green bond issuance was part of the government’s debt strategy in 2023, although major details such as size and time have not been concluded.
She noted that the government had raised N25.59 billion through similar green bonds between December 2017 and June 2019 to fund seven projects including renewable energy, afforestation, agriculture, water and transportation.
Oniha spoke at the annual conference of the Capital Market Correspondents Association of Nigeria (CAMCAN) at the weekend in Lagos. The theme of the conference was: “Nigeria’s Public Debt and the Capital Market”.
Globally, the green bond market has shown exponential growth as corporate entities and governments are raising funds from the debt capital markets to finance environmentally friendly projects to support the development of their countries.
Green Bonds are any type of bond instruments which proceeds are exclusively applied to finance or re-finance, in part or in full, new and existing eligible green projects that align with the four core components of the Green Bond Principles (GBP).
These eligible green projects can be classified under three themes within the green bond framework, namely: renewable energy, afforestation, and transportation.
Nigeria had successfully launched its debut green bond issuance of N10.69 billion or $30 million in December 2017, by which Nigeria became the first African country to issue a green bond. It followed with N15 billion Series II Green Bond in 2019.
The launch of Nigeria’s green bond followed the ratification of the Paris Climate Agreement by the Federal Government of Nigeria which necessitated the need for long term capital to fulfill Nigeria’s Nationally Determined Contributions (NDCs) in reducing greenhouse gas emissions and ending gas flaring by 2030.
The success of the sovereign green bond issuance led to corporate issuances including the N15 billion, 15.5 per cent five-year fixed rate senior unsecured green bond by Access Bank and N8.5 billion, 15.6 per cent 15-year guaranteed fixed rate senior green infrastructure bond by North South Power Company.
The federal government plans to fund the estimated N10.78 trillion deficit for the proposed 2023 budget largely through domestic bond issues.
The government had proposed a budget size of N20.51 trillion on a total revenue of N9.73 trillion in 2023, implying N10.78 trillion deficit in 2023.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, at the public presentation of the breakdown and highlights of the 2023 budget proposal, said the overall budget deficit of N10.78 trillion for 2023 would largely be financed through domestic loans.
She outlined that the budget deficit will be financed mainly by borrowings including domestic sources, N7.04 trillion; foreign sources, N1.76 trillion; multilateral and bi-lateral loan drawdowns, N1.77 billion and expected N206.18 billion proceeds from privatization of national assets.
“There is a continuing need to exceed this threshold considering the existential security challenges facing the country,” Ahmed said.
She said Nigeria has no plan to restructure its debt as government remains committed to meeting its domestic and external debt obligations.
According to her, government will continue to utilize appropriate debt management tools to streamline the cost and risk profile in the debt portfolio, including through concessional loans, spreading out of debt maturities to avoid bunching, and re-profiling of the debt maturities by refinancing short-term debt using long-term debt instruments.