Martins Hile, Editor, Financial Nigeria magazine

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Four key pillars of a sustainable Nigerian economy 21 Dec 2022

One of the keynotes of my column in the November 2022 edition of this publication was the imperative of embracing sustainability as a means for developing more effective and efficient public governance systems in Nigeria. I mentioned that the concept of sustainability is fundamental to getting the country to net-zero carbon emissions (NZE) by mid-century as it will imbue stakeholders with the capabilities to leverage technology, adopt environmentally-friendly practices, become more socially aware, and ultimately aid the achievement of sustainable development.

Sustainable development, as defined by the erstwhile United Nations' Brundtland Commission, is "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." It is an integrated approach that incorporates environmental protection, economic productivity, and broad-based prosperity. Rising inequalities and the growing threat of climate change have made sustainable development the acceptable paradigm for a nation's well-being.

This article highlights four key pillars for arriving at a sustainable Nigerian economy that is strong, productive, competitive, resource-efficient, climate-resilient, and diversified. These pillars are: 1) switch to low-carbon; 2) superior social and economic returns; 3) sustainable finance; and 4) impact measurement.

Switch to low-carbon

The United Nations Environment Programme (UNEP)'s Emissions Gap Report 2022 shows that the Group of 20 (Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union) are responsible for about 75 per cent of global greenhouse gas (GHG) emissions. Nigeria is not part of this group of major polluters whose activities have caused the disproportionate effects of global warming on poorer countries. Nevertheless, Nigeria's carbon dioxide (CO₂) emissions are not inconsequential to the environment.

Nigerian public and private sectors, as well as the 85 million people who lack access to grid electricity, use CO₂-emitting generators and carbon-polluting transportation systems. According to data from Our World in Data, Nigeria’s CO₂ emissions from fossil fuels and industry in 2019 were 130.10 million tonnes, making it the fourth largest emitter of CO₂ in Africa, after South Africa, Egypt, and Algeria.

Apart from the huge moral obligation climate change imposes on everyone to take urgent steps towards cutting emissions, decarbonisation is an economic imperative for a country like Nigeria that is dependent on fossil fuels. The reason is simple. The road to NZE is paved with significant reduction in oil demand. But over the last two decades that diversification mantra has gained traction in Nigeria, public policy discussions on it have mainly only involved developing non-oil sectors – and deriving government revenues from it – to replace oil and gas production. With ongoing global actions aimed at reducing the climate impact of all economic sectors, Nigeria’s economic diversification has another leverage, which is decarbonisation.  

The non-oil sectors have to be climate-resilient. This means building economic sectors that reduce their climate impact, while adapting to the effects of climate change. For example, production in those sectors has to depend on energy-efficient technologies, which entail using less energy or renewables to produce goods and services.

Racing to net zero would require government institutions to embrace innovation and design operations that align with carbon neutrality goals. Businesses and the general public are expected to embrace eco-friendly practices. The government also needs to accelerate efforts to achieve its 30 per cent renewable energy target by 2030, and then set its sights on full decarbonisation of the power sector in the long run.

Superior social and economic returns

The Nigerian economy has been chronically underperforming, particularly over the last seven years. Insecurity and a cost-of-living crisis have led to mass immiseration and caused many Nigerians to leave the country. The transition to net zero provides opportunities for changing this narrative. For one thing, the innovation and investments needed to achieve low-carbon development will not only protect the planet, but it will also accelerate economic growth and optimise the creation of social value.

Decarbonisation requires adoption of new technologies, which will create employment opportunities, leading to increased demand for new knowledge and skills in green transition. For instance, the renewable energy transition in Nigeria will require many citizens to acquire renewable energy technology skills. A green technological revolution in Nigeria will help boost the country's fortunes, driving social progress and enhancing the creation of long-term value. Other new markets that are set to emerge, attract more investments, and reduce poverty include socially and environmentally responsible enterprises.

Indeed, the delivery of positive social and economic returns to the people ought to be a core mandate of every government institution in Nigeria, many of which need to be retooled for more efficiency. Hence, policymakers need to ensure the realisation of the economic opportunities that green transition presents. The benefit for the government in this regard is enhanced public trust and confidence.

Sustainable finance

The new global financial architecture for sustainable growth, called green finance or sustainable finance, continues to grow in scale. According to a biennial report by the Economist Intelligence Unit, global sustainable investment grew by 15 per cent in the 2018-2020 period, reaching $35.3 trillion. This represents more than a third of all assets under management in advanced economies.

A sound economic plan in Nigeria, underpinned by credible net-zero commitments, can boost market credibility and confidence, attract green finance, and close the country's massive funding gaps in energy and other infrastructure, as well as agriculture. Sustainable investor expectations for countries and organisations often include preservation of the environment, social progress, sound corporate governance, and commitment to reporting progress – strong economic and commercial performance notwithstanding.

Impact measurement
Research by Boston Consulting Group (BCG), a global consulting firm, adds a new perspective to the popular maxim that says, "What is not measured cannot be improved," by demonstrating that what is not measured accurately cannot be improved. Findings from a BGC survey published in October 2022 show that only when organisations can accurately measure their GHG emissions can they reduce them further. Only 10 per cent of organisations who took part in the survey measured their emissions comprehensively in 2022, compared to 9 per cent last year. This finding can, in fact, be extrapolated to social progress and any other performance.

Tracking and reporting of emissions and other key sustainability indicators, are fundamental to achieving progress in Nigeria's race to NZE. That being said, such functions should not be outsourced to a particular agency like the National Bureau of Statistics (NBS). Organisations in the public and private sectors need to develop institutional capacities or work with partners to continually measure and report their carbon footprints and social impact.

The Nigerian government has made strong pledges to protect the environment and create a socially equitable country. To date, there are no concrete actions matching the lofty rhetoric. For Nigeria to achieve sustainable development, the gap between those pledges and action needs to close.

Martins Hile is a sustainability strategist and editorial consultant.