Nigeria’s green bonds smell too white

Nigeria seems to have a lot riding on its N20bn Green Bonds set to be issued in the capital markets in April- powering universities, revving up an ailing economy and ramping up renewable energy capacity but local content investments is going to be abysmally low.

On March 9, Ibrahim Usman Jibril, the minister of state for environment paid a working visit to the National Agency for Science and Engineering Infrastructure (NASENI) Solar Energy Ltd (NSEL) plant located in Karshi, Abuja where he learnt it was the only plant that has plans to manufacture solar PVs in Nigeria.

Clean energy as bothersome obligation

Renewable energy is a critical focus area of the green bonds Nigeria looks to launch the first tranche in the first quarter of 2017, but there is no committed action at growing local capacity or even making it easier for investors to deepen activity in the sector.

Proceeds of the bond is planned to be used for environmental projects such as renewable energy micro-utilities in three communities estimated at N10billion to provide an average of 33Kw of power through solar technology.

Nigeria recently provided a-N701billion Power Assurance Guarantee for the Nigerian Bulk Electricity Trader (NBET) to guarantee payment for gas supplied for power generation. Meanwhile there has never been an intervention fund for the renewable energy.

Worse still, a simple matter of re-ordering its battery classification is a reason the Nigerian Customs Service will not support duty waiver on batteries which is charged at 20 percent, a major hindrance to deepening clean energy adoption in the country.

Green bonds are issued to finance projects that will improve energy efficiency, reduce pollution, lead to sustainable agriculture, fishery and forestry and protect aquatic and terrestrial ecosystems.

It is also issued to develop clean transportation using other means apart from fossil fuels, achieve sustainable water management, and the domestication of environmentally friendly technologies.

Green bonds allow for tax exemption creating value for investors as it reduces costs associated with climate investing but without suitable plan to harness local capacity, the bulk of these benefits will go to factories abroad in an economy that shed over 3million jobs in 2016.

Ghana opened its first solar PV module manufacturing plant in April last year. The $50 million solar manufacturing plant is located in Kpone, an industrial area near the port of Tema, just outside the capital city of Accra.

The plant was developed by SPS, a subsidiary of Ghanaian conglomerate Strategic Security System International (3SIL), with the consultancy of Italian solar PV firm Suntime. It has the capacity to produce 30 MW of solar modules a year with plans to ramp up capacity in a few years. It will produce a number of PV modules, including crystalline modules up to 72 cells, some of which will be building-integrated.

The NASENI plant in Nigeria aspires to a 7.5MW capacity that will produce all sizes and capacities of Solar PV module.

To derive maximum benefit from the green bonds, investments must seek to grow local capacity and in-country value addition rather than just imports of finished products, something its modalities seem lost on policy makers at the moment.

ISAAC ANYAOGU