COVID-19: FMDQ, CBI, FSD Africa Seek Alternative Financing For Agribusiness

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Stakeholders in the financial sector have called for creation of financing solution through issuance of green bond by agriculture sector to sustain food security amid COVID-19 pandemic.

They made the call  on Thursday at a webinar oragnised by FMDQ Holdings Plc, Climate Bonds Initiative (CBI) and Financial Sector Deepening (FSD) Africa.

The capacity building webinar had the theme: “Green Financing Opportunities for Agribusiness”.They said that stakeholders in sustainable finance sphere in the Nigerian agribusiness sub-sector would  need to explore opportunities offered by green bond financing to ensure food security.

Mr Bola Onadele, Chief Executive Officer, FMDQ Group, said that the increasing world population and disruptions caused by novel coronavirus had made alternative financing solutions imperative.

“As the world population expands, with increasing rate in Africa, meeting our growing demand and ensuring future environmental security now require creating financing solutions.”

“The agricultural sector in Nigeria play a critical role in the economy, it contributes 25 percent of the  GDP (Gross Domestic Product)  with great potential for employment generation, food security and poverty reduction.”

“Despite being endowed with large vast of very good lands and opportunities within the agricultural sector in Nigeria, that sector remains largely underutilised.”

“In actual fact, Nigeria is ranked seventh in the World Bank’s December 2019 evaluation of countries’ performances in agriculture across Africa,” Onadele said.”

According to him, access to finance has been an impediment for the agricultural sector due to several factors not limited to lack of an enabling environment and high transaction costs.

Onadele added that the COVID-19 pandemic had resulted in interruptions in logistics and global food shortages.

“The agriculture sector also faces immediate challenges to find ways to produce significantly larger amount of food to ensure food security, not neglecting the cash crops as a source of earnings for the nation.”

Ms Justine Leigh-Bell, Deputy Chief Executive Officer and Director, CBI, said that food security was a major concern of everyone in the world due to COVID-19.

Leigh-Bell said that green bonds would enable issuers to raise large amounts of capital to support environmental investments that might not otherwise be available or might have been funded using expensive capital. 

He spoke on the topic:   “Green Bonds: An Opportunity for Agribusiness”. She said that  strong demand for green bonds outstripped supply, adding that it offered access to long-term funds.Mr Victor Nkiiri, Senior Financial Markets Specialist, FSD Africa, said that green bonds would address global challenges.

Nkiiri added that green bonds  would enable investors to balance financial returns with environmental benefits and satisfy environment social and governance  requirements and green investment mandate.

Speaking on: “Why Capital Markets Matter In Africa”, he said that fixed income securities constituted the bulk of pension assets in Nigeria and Kenya.

He noted that pension funds asset allocation of Nigeria in November 2019 showed that about  $27.64 billion was invested in Federal Government securities.

He highlighted the problems affecting green bonds development to include lack of awareness (investors, issuers, intermediaries and regulators) and lack of standardisation in the reporting process.

The News Agency of Nigeria (NAN) reports that FMDQ, FSD Africa and CBI formalised a cooperation agreement in March 2018 to develop  sub-national and non-sovereign green bond market in Nigeria.

The parties also formally launched a three-year Nigerian Green Bond Market Development Programme in June 2018 to support the development of guidelines and listing requirements for green bonds in Nigeria.

Since its launch, the programme has recorded  achievement of some milestones, which include the development of the Green Bond Issuance Rules launched in November 2018 and  issuance of Africa’s first Climate Bond Certified Corporate Green Bond – the Access Bank Plc N15 billion Green Bond in March 2019.

The programme implementation partners have also successfully delivered knowledge bridging and capacity building trainings across capital market stakeholders, impacting over 450 beneficiaries so far.

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