Osinbajo Advocates Stronger Capital Markets, Increased Global Funding to Boost Investments in Africa’s Green Energy Industry

•Insists gas remains Nigeria’s transition fuel despite campaign against fossil fuels

Peter Uzoho

Nigeria’s immediate-past Vice President, Prof. Yemi Osinbajo, yesterday stressed the need for African leaders to strengthen and deepen the region’s capital markets and financial institutions to be able to attract the right volume of investments into the emerging green energy industry and achieve a climate positive growth in the continent.

Osinbajo, also stated that gas remains Nigeria’s transition fuel amid a global campaign against fossil fuels, describing as correct, the position of successive Nigerian governments that the country must use its abundant gas resources to industrialise and transit to renewable energy thereafter.

The former Nigeria’s number two citizen made the call yesterday in Lagos, during his speech at the 23rd S.L. Edu Memorial Lecture, organised by the Nigerian Conservation Foundation (NCF) and sponsored by Chevron Nigeria Limited.

The Theme of the lecture was, “Greening Africa’s Economies: Can Climate Positive Growth Deliver Prosperity?”

In his list of recommendations for achieving a climate positive and green industrial growth in Africa, Osinbajo said Africa countries needed to speak with one voice to enable them influence global policy to the continent’s advantage.

He said a united voice was key to getting Africa’s agenda recognised and incorporated into emerging global rules and instruments.

He also stressed the need for the continent to organise itself and deal with the obvious governance issues of transparency and accountability, especially in public procurements.

He harped on the need for the protection of democratic processes and the security, not only because of risk perception issues but for the well-being and prosperity of the people of Africa.

The third task for the continent, according to Osinbajo, was to focus Africa’s economic growth and development plans on the emerging green opportunities.

He stressed the need for structuring of internal policies and regulations in such a way that support climate positive trade and industry in the continent.

Osinbajo said, “The fourth point is that we must actively work at harmonising trade, environmental and industrial policies across the continent to ensure a level playing field. Of course, now we have the AFCTA, that’s the African Continental Free Trade Agreement, which is a way of integrating trade policy. And I must say that a lot of progress has been made.

“The Guided Trade Initiative of the AFCTA has shown the great potential that exists in the African Free Trade Zone. And some of the countries that have participated have already shown some progress in trade relations and in their own trade turnovers in their countries.

“Five, we need a stronger and deeper African capital markets. A stronger and deeper African capital markets and African financial institutions are going to be very key to promoting investments in this respect, and that work requires a lot.

“Indeed, it requires a lot of collaboration between our countries and our institutions in order to deepen our capital markets.

“Quite a bit of work has already been done by Afreximbank and by the AfDB in deepening African capital markets, and I think that they all should be commended for some of the good work that they are doing.”

He added that the continent also needed to develop critical infrastructure, especially climate resilient infrastructure to support industry and trade.

He admitted that some great work had been done in green energy parks across Africa, saying there was a lot of collaboration now going on with the AFDB to set up some of the models that countries could work with.

Moreover, the former vice president noted that global cooperation was needed to achieve climate positive growth and make climate-friendly industrial growth a reality.

According to him, “The first is that we need to make the right investments and funding. That is to say that the world has to make the right investments and funding.

“And this is very important because we cannot talk about looking for 2050 zero carbon emissions to save the world by 2050 if the world is not prepared to accept the position that Africa is central to that coming to happen, to that coming to pass.

“It is absolutely important that the rest of the world sees this not just as it is not, and Africa is no longer presenting any kind of victim story. We are saying that we are central to the world achieving its net zero objective.”

As an economic and commercial proposition, Osinbajo called for the modification of the global financial systems currently in place.

He lamented that Africa today faces higher borrowing costs due to real and perceived risks, which cancel out its natural advantages in climate-friendly industry.

Citing the Climate Action Platform for Africa, he said a 20 percent higher cost of capital over the past decade resulted in a missed opportunity of 27 terawatt hours of renewable energy.

“In other words, if we had the advantage of not paying 20 per cent more borrowing costs, we would have been able to produce 27 terawatt hours of renewable energy. So that was lost because of the high cost.

“The cost of borrowing in Africa can sometimes be five times higher than if you are borrowing from other regions. And that just simply means that investment is difficult to realise where cost of borrowing is so high. And this, of course, means that even more projects will never get off the ground,” he explained.

To fix the challenges, Osinbajo proposed  a mix of solutions, which must all be implemented one after the other, among which was that developed countries must fulfill their past promises, including the Paris Agreements and the Paris Commitments.

He said The Loss and Damage Fund agreed upon at the Climate Change Conference of Parties (COP27) should be activated and that the commitment to produce $100 billion per year in climate finance for developing countries per year must be fulfilled.

Osinbajo further advocated, “The second is that there must be a reform of the global financial system. Many of us have heard about the Bridgetown Initiative and the Capital Adequacy Framework, which proposes to strengthen multilateral development banks so that they can lend more to emerging economies.

“There are technical solutions like recycling special growing rights, blended financing, and risk mitigation strategies that can also help to reduce borrowing costs.

“But these are, of course, technical, financial sorts of matters, but they are crucial if we are to reform the global financial system. That is reducing the debt burden on African nations, and this has become so important.

“Most African nations are burdened with debt, and that follows from some of what I’ve said earlier.

“In other words, the cost of borrowing is so high anyway, that the cost of servicing those debts naturally is very high, which is why many African countries are severely indebted and spend too much today on debt repayments, leaving very little room for climate investments.”

Also fielding questions elicited by his lecture, which borders on Nigeria’s green energy initiatives amid controversy around using gas as a source of energy, Osinbajo said a lot of activity was going on in the green industry and in the energy transition journey in the country.

However, the former vice president said Nigeria must use its abundant gas resources to industrialise and then transit to renewable energy thereafter.

He pointed out that a lot of solar plants including the assembly of panels, lithium assembly, lithium batteries, processing of lithium were taking place in Nigeria amid the controversy around using gas as Nigeria’s transition fuel.

“So there is absolutely no reason why we should not use our gas in the transition journey, absolutely no reason. As a matter of fact, many of the countries that are urging that we should not use our gas are countries that in their own multi-decade plans for the transition have gas as a major component. So there is no reason whatsoever why we shouldn’t use gas as transition fuel.

“And I’m completely convinced that the position that has been taken by the Nigerian government over the years is the correct one.

“Now, we have enough gas to use, and we should invest in our gas and use that as we go along, even as we develop our renewable energy industry. The point of the matter, of course, is that one day it will be clear”, he added.