CLIMATETRACKER.

ORG COP 23, BONN, GERMANY,

NOVEMBER, 2017

Paying for our Climate in Developing

World: Nigeria as a Case Study

ONAWOLE TEMITOPE
Onawogogle@gmail.com

Climate Tracker Contestant

Executive Summary
The article review the existing climate finances mechanism from a global perspective as
well as fund available to Africans regions, especially the sub-saharan regions. It
highlighted the challenges bedeviling climate change financing in Nigeria. There are
serious challenges associated with directing finance to the sector and the people most
vulnerable to climate change. In tackling these challenges, there is need for the Nigeria
government to mobilize resources for both climate change mitigation and adaptation
through internal reform.

Introduction
The contribution of Africa to global greenhouse gas emissions is minimal. However, the
combination of certain geographical and economic factors and its dependence on natural
resources make Africa the continent most vulnerable to the adverse effects of climate
change. This vulnerability compromises the continent's development and threatens
millions of Africans and their livelihoods. According to current estimates, the negative
effects of climate change are already reducing Africa's GDP by about 1.4 per cent, and

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the costs arising from adaptation to climate change are set to reach an annual three per
cent of GDP by 2030. Climate change may allude to an adjustment in normal climate
conditions, or in the time variety of climate around longer-term normal conditions (i.e.,
increasingly or less extraordinary climate occasions). Environmental Climate change is
caused by elements, for example, biotic procedures, varieties in sun powered radiation
got by Earth, plate tectonics, and volcanic eruption. Certain human activities (pollution,
over exploitation, deforestation, desertification, etc.) have been distinguished as essential
drivers of the continuous change, often referred to as global warming.

Figure 1: Area most at risk from Climate Change in Africa

It is now generally recognized that climate change is the greatest challenge to sustainable
development, particularly in a developing country such as Nigeria. Climate change
impacts could lead to widespread ecosystem degradation, threats to social and economic
development efforts and disruption of livelihoods, living conditions, health and well-
being of a large proportion of the population, particularly the vulnerable groups, such as
the poor, women, children and the elderly who depend on natural resources for their
livelihood and live in marginal environments. The challenge now is to keep climate
change from reversing all the development gains accumulated in the last few decades.
Responding to climate change from both mitigation and adaptation angles require climate
finance.

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Figure 2: Spatial Variation in Relative Sensitivity to Climate Change in
Nigeria

Financing climate change is technically difficult to leverage upon because of the

expertise required to access the finance and the challenge of paying back the money
sometime in the future. Financing climate change is concerned with the process of
making finances available for projects geared towards climate change mitigation and
adaptation. However, it is imperative to understand the difference between funding and
financing for climate change. Funding refers to money gotten from federal grants, state
grants, local revenue and philanthropic sources which will not be repaid while financing
sources for climate change solutions refers to money gotten from sources like
government financing and private financing which will be repaid. Funding sources are
usually in silos and piecemeal which does not fit-in together to create a comprehensive
adaptation and mitigation solution. The process of allocation of grants to fund projects is
usually very competitive. This means that a lot of resources will be spent on the
application process and most of the applications do not win the grants. The implication is
that grant-applicants with fewer resources and less financial strength are at a competitive
disadvantage.

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Climate finance can come from a wide range of both private and public sources and can
flow domestically or internationally and other innovative finance sources such as market
mechanism. Developed countries have made concrete agreements to provide financial
resources to assist developing countries in meeting climate objectives, recognizing that
some countries have contributed to the causes of climate change more than others and
that countries have different capacities to financially contribute towards climate
objectives. Domestic public finance could come from local taxes and service charge,
transfers from the federal or state governments, borrowing from domestic financial
institutions, bond and equity finance from capital market, etc. Revenues from local taxes
and service charge are a very stable source of finance but are usually very limited.
Collection of service fees is also a major source of revenue for cities. Cities provide
public services such as transport, waste collection and disposal, drinking water supply,
etc. These sources generate additional revenue that can be channeled to climate change
adaptation and mitigation. National development banks are also a source of domestic
public finance for climate change solutions. These banks provide a major option for
financing climate change solutions. National development banks can play important roles
as agents of government to provide long term finance for climate change solutions. States
and local governments may apply to these national development banks for resources to
implement climate change adaptation and mitigation. Federal, state and local government
bonds provides another source of domestic public finance. The bond issuer will specify
what the proceeds will be used for as well as the sources of funds for repayment. This
will enable the bond to be focused on climate change responses.

International public finance is another major source for financing climate change
solutions. Over time, some bilateral and multilateral donors have focused their attention
on providing finance specifically for climate change adaptation and mitigation. Some of
the international public funds dedicated to climate change include: Global Environment
Facility, Climate Investment Funds, Green Climate Funds, Least Developed Countries
Fund, Special Climate Change Fund, Adaptation Fund, Global Facility for Disaster
Reduction and Recovery, Nationally Appropriate Mitigation Action Fund, etc. Most
international donors and funds channel their resources through national governments of
the recipient country. This is the reason for the central role of the national government in
the distribution of multilateral funding to sub-national actors. The activities of
international donors usually follow agreements negotiated with national governments.
Internationally funded projects need to be planned and implemented in a manner
consistent with national development plans which must have being disclosed to funders
before monies were awarded. Nevertheless, donors can still deal directly with state
governments, non-governmental organizations and private sector.

Market mechanisms and other innovative finance sources are also used to finance climate
change solutions. The Clean Development Mechanism is a very flexible mechanism
whose objective is to assist developing nations in achieving sustainable development and
reducing emission of green house gases. The CDM aims at assisting industrialized

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countries to achieve compliance with their quantified emission reduction. City-level
emission trading systems can also be done. This is a mitigation approach to encourage
municipal governments and private sector to carry out low-carbon projects.

Figure 3: Current Climate Financing Architecture Built around the

Clean Development Mechanism (CDM) of the United Nations
Framework Convention on Climate Change (UNFCCC)

Six large multilateral development banks (MDBs) and the International Development
Finance Club (IDFC) a network of national, regional and international development
banks have agreed on a common set of principles to track climate finance. The ability
to track systematically the flows of finance that support climate adaptation makes an
important contribution to helping societies deal more effectively with the negative effects
of climate change. The initiative is called, the Common Principles for Climate Change
Adaptation Finance Tracking, and it builds on a similar agreement earlier this year to
define and track mitigation finance, the funding aimed at combating climate change. By
increasing transparency of climate finance flows, the agreement on the two common
principles for tracking climate finance will help to build confidence that money is
flowing to help deal with this major global challenge.

The multilateral banks include the African Development Bank (AfDB), the Asian
Development Bank (ADB), the European Bank for Reconstruction and Development
(EBRD), the European Investment Bank (EIB), the Inter-American Development Bank
(IDB) and the World Bank Group. Rachel Kyte, World Bank Group Vice President and
Special Envoy for Climate Change, said: This represents a significant milestone in
global climate action. It brings development finance institutions together on how we track
finance flowing to countries, as they adapt to the impacts of climate change. The
agreement paves the way for greater transparency in financial flows and hopefully will

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help underpin greater commitment in Paris A statement by the IDFC said: This
worldwide cooperation between national and international financial institutions brings a
unique value to address the development needs of vulnerable countries.

In the same vein, the MDBs said that they had delivered US$5 billion in financing last
year to help developing countries and emerging economies adapt to the challenges of
climate change. Similarly, IDFC members reported in their last green finance mapping
report a contribution of US$15.8 billion to adaptation projects in developing countries in
2013. Knowing how the money is flowing is critical for reaching areas of opportunity and
need, because what gets measured gets managed. Nonetheless, IDFC and MDBs agree
that increased support for more climate resilient infrastructure, natural ecosystem and
other adaptation measures is urgently needed. According to the newly agreed common
principles document, the MDBs and IDFC are fully committed to promoting and
supporting climate resilient development as an essential element of the sustainability of
their investments. They plan to do this, the document says, by integrating climate
resilience and adaption into their investments, operations and initiatives.

Figure 4: Contribution of the various Multilateral Banks to Climate

Change

As of late, there has been a deferral in funds from the Climate Vulnerability Forum
(CVF) which met in Paris in 2015. Additionally, the United State, a noteworthy supporter
to Climate financing has reported its choice to pull back from the Paris climate accord as
well as stop contributing to the Green Climate Fund- a unique global initiative to react to
climate change by investing into low-emission and climate-resilient development.

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Figure 5: Financial Contribution of the various Developed Countries to
Climate Change

Source: Green Climate Fund

Green Climate Fund was set up by 194 governments to limit or reduce greenhouse gas
emissions in developing countries, and to help adapt vulnerable societies to the
unavoidable impacts of climate change. Given the urgency and seriousness of the
challenge, the Fund is mandated to make an ambitious contribution to the united global
response to climate change. However, the withdrawal of the United State from
contributing to GCF will be more challenging to Countries prone to massive flooding,
long drought and extreme weather that scientists have connected to a changing climate.
Although a few reasons were ascribed to the to the decision, nonetheless, it is highly
imperative to sustain climate financing as this will go a long way in ensuring a tranquil
determination of problems related with climate change.

Climate finance to Africa has been growing considerably. Recent data indicates that USD
2.3 billion has been approved for 453 projects and programs throughout Sub-Saharan
Africa since 2003. However, only 45% of approved funding is delivered for adaptation

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measures. In 2011, the African Development Bank (AfDB) mobilised $US 596 million
for its regional member countries (RMCs) to use on adaptation projects and another $US
925 million for mitigation projects. Figures which in 2012 reached $US 523 million for
adaptation and $US 1,708 million for mitigation, thus making AfDB the foremost
institution for financing low-carbon development on the continent. This has been made
possible thanks to climate finance instruments created and/or administered by the Bank,
such as the Climate Investment Funds (CIFs), the Global Environment Facility
(GEF), the Sustainable Energy Fund for Africa (SEFA), the Africa Water Facility
(AWF) and the Congo Basin Forest Fund (CBFF). The Bank has already made
significant achievements in financing climate-change resilient and low-carbon growth in
the region. In comparison with other continents, however, Africa receives only a meagre
share of climate funding.

Also, in line with its ten-year strategy 2013-2022, which is particularly focused on a
transition to greener growth, the Bank's Board of Directors approved the creation of the
Africa Climate Change Fund (ACCF) in April 2014. The ACCF complements AfDB's
own resources and the climate-change related trust funds managed by the Bank ((SEFA,
CBFF, Clim-Dev, etc.) The ACCF intends to increase climate funding mobilised for
activities that take account of climate change in African countries. Thus, the fund was
designed to become a catalyst with a scope broad enough to cover a wide range of
climate-resilience and low-carbon activities.

Forests and woodlands occupy more than 20% of the land area in Africa, especially in
Central Africa where the Congo Basin holds the worlds second largest continuous block
of tropical rain forest. Climate Funds Update (CFU) data reports show about 40 projects
in SSA, 10 of which have been approved in 2011 for a total committed funding of $119
million. Funds have been disbursed for 32 of these projects for a total amount of $47
million. The main dedicated funding initiative in the region is the Congo Basin Forest
Fund (CBFF). The CBFF, which is managed and implemented by the AfDB, supports
relatively small-scale projects that range from promoting land tenure rights, to
incentivizing innovative forms of community controlled protected areas. Some 13
projects for a total amount of $14 million are currently being implemented under the
fund. The Forest Investment Program (FIP) of the World Bank CIFs has committed the
largest amount of finance to REDD+ in Africa to date. A $32 million FIP program in
Burkina Faso was approved in 2011, which will support the decentralization of
sustainable forest management, the protection of state forest reserves, and information
sharing. In addition, a $60 million program was endorsed for the Democratic Republic of
Congo to address deforestation and degradation and provide small grants to promising
small-scale initiatives. A FIP investment plan for Ghana is also under development. The
World Banks Forest Carbon Partnership Facility (FCPF) is actively engaged in the
region, with 8 projects approved and 7 disbursed, but has very limited resources with a
budget of less than $1 million per project. Finally, the UN-REDD Programme is working
with Tanzania, the Democratic Republic of the Congo, and Zambia, and has disbursed

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$13 million for the preparation and implementation of National Programs with the
technical support of the Food and Agriculture Organisation, the UN Environment
Programme, and UN Development Programme.

Figure 6: Breakdown of climate finance by sectors (USD billion) during

the United Nation Summit

Global Efforts to Divest from Fossil Fuel

The costs of responding to climate change in Nigeria will be significant. The World Bank
estimates that measures to adapt to climate change already built into the climate system
could be $0.7bn to $1.2bn per year over the next 40 years (summing to almost $50 bn).
These will be much higher again without a substantial scale-up of global efforts to reduce
emissions. Furthermore, many of the mitigation options suitable for the country
especially in the oil and gas, power and transport sectors will require significant
finance. Nigeria has always relied heavily on international climate financing and this has
been very crucial to her significant progress towards achieving climate objectives, as this
often requires large-scale infrastructure and the engagement of large portions of
population, both of which can require high levels of investment. As at 2015, Nigeria has
leveraged $63 million of multilateral funds for climate change projects. This is broadly
equal to that of Rwanda, whose population is roughly 7 per cent of Nigerias, and is just

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over a tenth of the funding approved for South Africa. This figure is less than one might
expect for Nigeria considering Nigerias level of GHG emissions, its vulnerability to the
impacts of climate change and the amount of funding provided to developing countries as
a whole. Additional factors, such as the withdrawal of the U.S. contribution to the Green
Climate Fund, further curb the implementation of Nigerias and other CVF-members
climate action strategies, leaving them vulnerable to the extreme effects of climate
change.

Nigeria is actively involved in the climate change related activities of ECOWAS and AU
to source additional and complimentary flow of financial resources to tackle climate
change at the regional level. Nigeria has recognized that its national resources are not
enough to respond effectively to the impact of climate change. To this end, the Federal
Government is in the process of putting in place a Nationally Strategic Climate Change
Trust Fund (NSCCTF) as a response to the need to broaden the scope of national
interventions for impact at all levels of governance. This is to be done through strategic
alliances among development partners and mobilization of additional resources for the
sustainability of activities to check the climate chaos. The niche for the proposed Fund
will consist of partnership building, fungible programme components, extensive
stakeholder participation, cognate technical expertise and broad range of contribution
from traditional and non-traditional sources.

Financing climate change is the major challenge of Africa, especially, Nigeria. Larger
part of the nations affected by climate change often addresses the problem with funds
from private investors, international donors or support from developed countries. The
climate fund from the Paris agreement in 2015 is yet to be remitted to affected countries.
This situation calls for a critical appraisal of dangers inherent in lack of climate financing
to threat prone areas. A major hindrance to investment in climate finance is the
transaction costs of small-scale projects that are often required in the poorest regions and
for the advantage of the poorest, most vulnerable population groups, such as women and
Indigenous Peoples. It is an immense challenge to design and implement programs in
ways that are financially viable, and can also be scaled-up and replicated. This challenge
is further intensified by the poor investment climate in many African countries, the
aforementioned weak capacity of government institutions to manage finance, political
instability and governance problems. Historically, Nigeria has not been as successful as
many other developing countries in accessing available international resources to help
meet these needs. A lack of understanding of climate finance funding opportunities;
difficulties in crafting concept notes and applications that reflect the requirements of
providers; and challenges in coordinating activities across the government so as to
present a coherent vision of Nigerias climate finance priorities have all held back climate
finance flows.

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Although,there is an increasing national awareness about the need to mainstream climate
change into national development in Nigeria. Thus, the Federal Government is
increasingly devoting a significant proportion of its national budget to climate change or
climate change sensitive sectors of the economy. There is an on-going assessment of the
national budget in the last five years to determine the quantity of national resources that
have been devoted to issues of climate change. At the State level, some States of the
Federation have taken keen interest in addressing issues of climate change. Lagos State,
for instance, has hosted regional summits on climate change in 2009 and 2010, and is
devoting a substantial proportion of its annual budget to study the impacts of sea level
rise on its coastal and marine environment. Delta State is also actively involved in the
activities of TACC. All these efforts point to the increasing recognition of the imperative
to carry the issues of climate change along with national development needs, a fact that
should facilitate the mobilization of internal resources for climate change in the country.

Figure 7: Cross section of participants during the opening of the 7th

Lagos State Climate Change Summit

In tackling the lingering challenge of climate change financing, Nigeria need to seek an
alternative to financing its climate, all the tiers of government needs to meet, discuss and
strategize ways to secure funds domestically from both private and public sources
combined with funds provided by the government. Another strategy to secure climate
funds locally is to create an awareness to public on the shortage of climate funds from the

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international climate finance and its implication on the nation, hence sensitizing the
public (illiterate and literate) in various local languages about the consequences of their
actions on the climate will go a long way in keeping the Sub-Saharan Africa alive. There
is the need to effectively quantify the ecological footprints of individuals or organizations
in terms of monetary cost and such should be compelled to pay. Also, efforts that
contribute to mitigation of climate change should be rewarded as well. The government
needs to be transparent on how the donated climate funds are spent with general public
fully informed. This will help Nigeria not to totally depend on international financing but
see it as a support to achieving the climate objective. This will be a great contribution to
the international financing in combating the threat to our environment due to climate
change. Mitigating and adapting to climate change increases the cost of development.
The emerging and yet incomplete cost estimates of additional investments needed in
Nigeria can be sourced from national, regional and international levels. In conclusion,
there is need for the Nigeria government to mobilize resources for both climate change
mitigation and adaptation through internal reform (e.g., putting resources aside out of
core budget or fiscal or pricing reform). In addition, non-concessional financial and
investment flows in the public sector and private sector should be encouraged, as well as
facilitating philanthropic donations.

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REFERENCES
Adesina, F.A., T. Odekunle, M. Balarabe, A. Dami, L. Bulus, M. Ambio and N.
Gworgor, 2010: An Assessment of Vulnerability, Impact and Adaptation to
Climate Change in Nigeria Report prepared for the Second National
Communication on Climate Change.

Babatunde,O (2015) : Nigeria: Paying for our Climate

DFID (Department for International Development), 2009: Impact of Climate Change on

Nigerias Economy.

FMEAN (Federal Ministry of Environment Abuja,Nigeria (2010) National

Environmental Economic and Development Study (NEEDS) for Climate Change
in Nigeria

http://www.financialnigeria.com/development-banks-agree-on-initiative-to-track-climate-
finance-sustainable-45.html

http://www.undp.org/content/undp/en/home/blog/2015/4/23/Africa-and-Climate-Finance-
The-state-of-the-debate.html

https://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/africa-climate-
change-fund/

Jack, K (2015), Introduction to Climate Finance in Nigeria , Nigeria Infrastructure

Advisory Facility,Vol 18

Parry, M., N. Arnell, P. Berry, D. Dodman, S. Fanklhauster, C. Hope, S. Kovats, R.

Nicholls, D. Satterthwaite, R. Tiffin and T. Wheeler. 2009: Assessing the costs of
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