Climate change remains a pressing global issue as it has significantly affected nearly every aspect of human survival. The agricultural sector is highly vulnerable to climate change because it depends on climatic conditions and natural resources like land and water, which are directly affected by climate variations. The impact on the agro-sector is evident in shifting rainfall patterns, which have led to more frequent floods, droughts, and severe heat waves, resulting in rising food insecurity. These further underscore the critical consequences of climate crises on the agricultural sector.
Agriculture and the Nigerian Economy
The climate crisis and its effect on the agricultural sector are particularly concerning for Nigeria due to the agro-sector’s significance to its economy. Agriculture has consistently played a vital role in GDP contributions and employment, contributing approximately 24% to the Nigerian GDP over the past decade and employing over 70% of the population, as seen in Figure 1.
Figure 1 shows that between 2013 and 2023, agriculture’s contribution to national GDP has been consistent, with the lowest contribution being 22.0% in 2020. This decline is due to the COVID-19 pandemic, which halted almost all economic activities, with the highest being 25.6% in 2022.
Despite this, Nigeria’s agricultural sector faces various challenges that constrain its productivity. These include low levels of irrigation farming, poor land tenure systems, and land degradation, which adversely impact the agroindustry. Additional challenges such as limited access to modern technology, high production costs, inadequate distribution of inputs, high post-harvest losses, poor market access, and recently, climate change and limited climate financing further worsen the situation. However, addressing these climate-related challenges has become essential to safeguard Nigeria’s economic stability, ensure food security, and achieve sustainable agriculture. Achieving this, however, is only possible through increased access to climate financing.
State of Climate Financing in Nigeria
According to the United Nations Development Programme (UNDP), climate finance refers to financial resources and instruments used to support action on climate change. Large-scale investments in transitioning to a low-carbon global economy are critical for addressing climate challenges, as they enhance societal resilience and support adaptation efforts. Its sources include public, private, national, international, bilateral and multilateral financing, and it employs diverse instruments such as grants, equities, donations, debt swaps, green bonds, guarantees, and concessional loans.
In Nigeria, climate finance is still nascent, with significant gaps in access, utilisation, and impact monitoring. While climate finance increased by 32% between 2019 and 2022, from $1.9 billion to $2.5 billion, the increase is still insufficient, given Nigeria's annual climate finance target of $27.2 billion. The tracked $2.5 billion represents less than 1% of Nigeria's GDP compared to the $9.3 billion spent on government fossil fuel subsidies in 2022.
For key players, public actors dominate as the primary providers of climate finance, contributing 70% of the total climate finance, with multilateral development finance institutions providing the largest share of $1.2 billion. Private actors who contributed $0.8 billion take up the remaining 30%. Mitigation makes up the most significant part of Nigeria's climate finance at $1.2 billion in 2022 and is dominated by investments in solar energy. Adaptation got less than one-third of the total climate finance, with half going into agriculture, forestry, and other land uses (AFOLU), amounting to $0.74 billion, which covers just 6% of annual funding. Although mitigation investment dominates Nigeria’s climate finance landscape, the country must address a significant funding gap to meet its climate targets and achieve sustainability in the agricultural sector.
Need for Improving Climate Finance in Nigeria
All sectors of the Nigerian economy are vulnerable to climate change, but the agricultural sector's vulnerability is more concerning due to its significance to the Nigerian economy. Agriculture and forests make up a large part of the country’s natural capital, which provides a direct source of income and employment for a large proportion of the population, upholding its importance in Nigeria’s economic landscape. Despite this, agriculture contributes to climate change challenges, contributing 67% of national emissions. In particular, livestock emissions have constantly increased from 21877 Gg CO2-eq in 2000 to 29375 Gg CO2-eq in 2015, totalling about 34%. With Nigeria facing pressing food security challenges, increasing agricultural productivity has become necessary. However, this expansion brings environmental concerns, particularly greenhouse gas (GHG) emissions from deforestation, fertiliser use, and livestock production. Nigeria must adopt climate-smart agricultural practices that enhance productivity while reducing emissions to achieve sustainable growth.
Agricultural production is inherently biological, and the generation of methane and nitrous oxide is an unavoidable consequence of key processes such as livestock digestion and fertiliser application. These practices raise formidable environmental concerns and call for immediate actions, such as adopting practices that optimise production while minimising GHG emissions, thereby reducing carbon intensity.
However, one challenge remains: mitigating and minimising GHG emissions from agricultural activities requires substantial financing. Significant financial investments remain essential to support the food system and achieve sustainable agricultural practices in Nigeria. Substantial investments are also expedient for climate action, as failure to adapt to current realities will result in severe and widespread impacts on the sector.
Globally, studies highlight that climate change can decline agro-yields by as much as 30% by 2050, while global food demand is expected to increase by 50%. Without targeted climate action, over 500 million smallholder farmers in emerging economies, including Nigeria, will be negatively affected. The Nigerian government has made significant efforts to finance climate adaptation and mitigation by launching and issuing green bonds as an innovative alternative for mobilising climate finance. In addition to this effort, the government released guidelines for Green Bonds, which target about $250 million in climate finance to support national projects in key areas, including environment, agriculture, power, and energy efficiency transportation. Furthermore, the Nigeria Climate Change Policy Response and Strategy (NCCPRS), approved in 2012 with the objectives of promoting low-carbon emissions, high economic growth and development, and building a climate-resilient society, solidifies the government's efforts to address climate financing.
Despite these efforts, it is evident that they are insufficient, as the finances required to respond to climate change challenges effectively are beyond what the government at all levels in Nigeria can provide. This situation underscores the need to increase climate financing in Nigeria through accessing various alternative climate finance sources such as the Global Environment Facility (GEF), the Climate Investment Funds, the Green Climate Fund (GCF), and the Least Developed Countries Fund (LDCF), among others.
Greater access to international finance can help reduce GHG emissions per unit of land and per unit of agricultural output. This reduction can be achieved by introducing GPS, sensors, and artificial intelligence, which optimise the use of fertilisers and water while minimising soil disturbance. With these, Nigeria can achieve an emission level below 45%, setting the stage for sustainable agricultural practices.
Also, increased climate finance can aid in building a more resilient food future. A substantial increase in climate finance to adapt and mitigate climate impact on the agricultural sector can drive agricultural research and development (R&D), which has proven effective in addressing the sector's challenges. Existing public support for agriculture must be redirected toward inclusive, resilient, low-carbon production systems, alongside innovation in technologies and finance to enhance the resilience of small-scale producers, which will assist in achieving sustainability in the sector.
Priority Areas for Climate Finance Investment
Increasing access to climate finance can be valuable in addressing key challenges in the agro-industry, such as the insufficient capacity to manage agricultural risks and high transaction costs, inadequate enabling environments, strengthening the links between financial institutions, smallholder farmers, and SMEs, and capacity building. To achieve this, climate finance interventions should be centred around mitigation and adaptation initiatives.
Mitigation and Adaptation:
A successful climate change response in agriculture requires deliberate, well-planned mitigation and adaptation strategies over short—and long-term periods. These strategies can help build a society capable of withstanding the adverse effects of climate change.
Directing climate finance toward adaptive and mitigative initiatives will strengthen the agricultural sector’s ability to prevent, cope with, and adapt to climate change. This includes fostering efficient research, improving information management, and connecting farmers, businesses, policymakers, and researchers to drive effective responses. Additionally, it can enhance agricultural productivity, improve risk management technologies, and expand adaptation strategies at both farm and community levels.
A typical adaptation strategy for channelling climate finance involves investing in drought-resistant crop varieties, promoting crop diversification, adjusting cropping patterns and planting calendars, conserving soil moisture through appropriate tillage methods, enhancing irrigation efficiency, and implementing afforestation and agroforestry practices. Additionally, climate finance can drive capacity building and facilitate technology transfer, ensuring that a more extensive range of farmers, including women and young people, benefit from these advancements.
By creating a supportive environment for increased climate finance investments, the public and private sectors can actively engage in scaling up adaptation efforts. This will expand access to financing through value-chain projects and financial incentives while strengthening institutional and regulatory capacities to implement and distribute technical solutions for effective agricultural adaptation. To better attract climate financing, it is imperative to align and enhance the capacity of relevant institutions to manage climate-related challenges, promote the roles of states and local governments in climate change governance, and encourage the implementation of mitigation and adaptation initiatives at all levels of governance.
References
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Climate Policy Initiative. (2024). Landscape of climate finance in Nigeria 2024. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/10/Landscape-of-Climate-Finance-in-Nigeria-2024.pdf
Federal Ministry of Environment, Department of Climate Change. (2021). National climate change policy for Nigeria 2021–2030. https://climatechange.gov.ng/wp-content/uploads/2021/08/NCCP_NIGERIA_REVISED_2-JUNE-2021.pdf
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Global Center on Adaptation. (2019). Adapting to climate change could add $7 trillion to the global economy by 2030. https://gca.org/adapting-to-climate-change-could-add-7-trillion-to-the-global-economy-by-2030/
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PwC. (2020). Current state of Nigeria agriculture and agribusiness sector. https://www.pwc.com/ng/en/assets/pdf/afcfta-agribusiness-current-state-nigeria-agriculture-sector.pdf
United Nations. (2024). Climate action. https://www.un.org/en/climatechange/what-is-climate-change
United Nations Development Programme. (2023). What is climate finance and why do we need more of it? https://climatepromise.undp.org/news-and-stories/what-climate-finance-and-why-do-we-need-more-it
World Bank Group. (2024). Making climate finance work in agriculture. https://www.worldbank.org/en/topic/agriculture/publication/making-climate-finance-work-in-agriculture
