The National Carbon Market Framework: A New Dawn for Nigeria’s Climate Ambitions
At the recent meeting of the National Council on Climate Change, President Bola Tinubu, represented by Vice-President Kashim Shettima, approved the adoption of a National Carbon Market Framework. This move marks a significant step in Nigeria’s efforts to combat climate change and unlock substantial financial resources. Alongside this framework, the government also operationalised the Climate Change Fund and restored the National Council on Climate Change (NCCC) to a budget line. These actions are aimed at establishing and managing Nigeria’s participation in carbon markets, with the goal of generating between $2.5bn and $3bn annually in carbon finance over the next decade.
Understanding Carbon Credits and Their Implications
Carbon credits serve as a financial instrument that allows entities to trade projects that reduce carbon emissions. These credits can be either domestic or internationally transferable. By activating the Climate Change Fund, the government has created a central mechanism to receive and deploy carbon revenues and other climate finance quickly. This development ensures that the NCCC, as the national authority responsible for combating climate change, is now better equipped to oversee these initiatives and make Nigeria eligible for more multilateral climate finance.
This initiative is not just about environmental protection; it is also a strategic move to accelerate Nigeria’s climate ambitions and improve its global standing in the sustainability ecosystem. The government aims to sell Paris-aligned credits and access bilateral and multilateral flows, including mechanisms under Article 6 and voluntary markets, to mobilise green funds.
Opportunities for Economic Growth
The introduction of the National Carbon Market Framework presents several opportunities for Nigeria to convert this development into real economic growth. One key opportunity is consolidating robust governance and legal foundations. This includes clarifying the legal status of carbon credits, ownership of carbon rights, and revenue-sharing rules. Investors and communities need certainty to engage effectively in the carbon market.
Another critical step is investing in high-quality measurement, reporting, and verification (MRV) systems. International buyers are willing to pay a premium for credits with strong environmental integrity. Poor MRV systems can destroy value and reputation. For instance, the clean cook stove production industry in Nigeria benefits from meticulous and transparent MRV systems.
Focusing on Premium Projects
The government must prioritise premium project types that create jobs and resilience. These include low-deforestation agriculture, large-scale reforestation, peatland and mangrove restoration, methane capture, and renewable energy replacements. These projects not only help vulnerable communities adapt but also create economic empowerment and improved livelihoods.
The theme of this year’s Lagos State Climate Summit, “Blue Economy; Green Money,” reflects a new paradigm of sub-national thinking that could enhance national climatic ambition. The NCCC could leverage this interface for a test-run of the new carbon market framework.
Strategic Use of the Climate Change Fund
It is crucial that the Climate Change Fund does not suffer the same fate as the Ecological Fund, which is often seen as opaque. The CCF should be used strategically by ring-fencing a share of carbon revenues for community benefit-sharing, matching finance for bankable green projects, and institutionalising climate adaptation in vulnerable states.
Leveraging International Linkages
Nigeria should leverage Article 6 of the Paris Agreement and other international linkages at the upcoming COP30 in Brazil. This event offers an opportunity to secure bilateral deals and technical partnerships, increasing demand and price discovery in the carbon market.
Developing Domestic Capacity
The Federal Government and the NCCC must develop domestic private-sector capacity and finance instruments. This includes training local project developers, setting up fintech platforms, and institutional carbon credit project verifiers. With the new fiscal independence of Nigerian local government authorities, it is essential to domesticate climate finance governance.
Ensuring Social and Environmental Safeguards
Finally, protecting social and environmental safeguards is crucial. Adopting free, prior, and informed consent, grievance redress, and benefit-sharing rules for communities and indigenous peoples will ensure that resource-blessed communities are protected. This will also safeguard secure social license and access to premium corporate buyers.
By taking these steps, Nigeria can convert its climate ambition into tangible green growth. The path forward requires careful planning, collaboration, and a commitment to sustainable development.