Moody’s Investors Service has assigned a Green Bond Assessment of GB1 (Excellent) to Nigeria’s senior unsecured green notes.
A statement issued by the rating agency revealed that the GB1 grade is supported by a full allocation of proceeds to renewable energy and afforestation projects that qualify under Nigeria’s domestic green bond guidelines and international green bond taxonomies, including the Green Bond Principles and Climate Bond Initiative’s (CBI) Climate Bond Standard.
On December 18, 2017, Nigeria will launch the Series 1 green bond of 10.69 billion, with precise coupons and maturities to be determined at the time of closing.
The green notes will represent the Nigerian government’s debut offering under its N150 billion green bond program and is expected to be listed on the Nigerian Stock Exchange (NSE). It will also mark the first sovereign green bond issuance in Africa, and the fourth on record globally.
Nigeria is the largest economy is Africa, generating a gross domestic product of $405.9 billion, in nominal terms, last year.
The country is also the continent’s most populous, with an estimated population of over 180 million and has been actively engaged in international climate policy negotiations since it became a Party to the United Nations Convention on Climate Change in 1994, and is a signatory to the Paris Agreement on Climate Change.
“In preparation for Africa’s maiden sovereign green bond, the Government of Nigeria has put in place a comprehensive governance structure and framework that is aligned with the country’s domestic green bond guidelines and international best practices,” says Rahul Ghosh, a Moody’s Senior Vice President.
“Robust disclosure practices, including expectations of ongoing and granular reporting over the life of the bond, will facilitate the implementation of Nigeria’s Paris Agreement commitments,” adds Charles Berckmann, Assistant Vice President and lead analyst in Moody’s Green Bond Assessment team.
Moody’s said further bolstering the GB1 grade is the government’s comprehensive organization and governance structure, which includes a formal green bond framework and explicit guidelines on eligible categories, project evaluation and selection criteria, and oversight from internal bodies and external organizations.
To support the green bond initiative, the government has set up a Green Bond Private Public Sector Advisory that is comprised of external development partners, independent regulators, capital market operators and relevant ministries.
The development partners include the World Bank, International Finance Corporation, African Development Bank, the United Nations Environment Program (UNEP) and the CBI.
The disclosure on use of proceeds practices are robust overall, providing a strong level of detail on project descriptions, applied methodologies, and intended benefits. The government has provided portfolio-level technical reports for each of the three programs that will be financed with the green bond proceeds.
Each report contains comprehensive program descriptions, assessments of the environmental, financial and economic impacts and an evaluation of safeguards and social implications. The funding in place to complete the projects appears adequate, despite the government’s weak fiscal position and recent track record of enacting significant capital expenditure cuts.
