Carbon Trading in Nigeria: Key Considerations for Investors

The carbon trading market is finally taking shape in Nigeria, driven by a series of significant regulatory and policy developments. First, the Department of Climate Change at the Federal Ministry of Environment published the revised National Policy on Climate Change (2021–2030), providing an updated national framework for climate action. Second, the enactment of the Climate Change Act, 2021 (the “Act”) established the National Council on Climate Change (NCCC), the apex body responsible for coordinating climate policy, regulating carbon emissions trading, and enforcing sectoral emissions targets. Third, Nigeria reinforced its global climate commitments by announcing its Net Zero by 2060 target at COP26 in Glasgow. That same year, the government launched its Energy Transition Plan (ETP), developed in partnership with the COP26 Energy Transition Council (ETC), which outlines Nigeria’s pathway to net-zero emissions while lifting 100 million citizens out of poverty.

These initiatives build on Nigeria’s earlier endorsement of the 2015 Paris Agreement, which it ratified in March 2017, marking a decisive shift toward a structured, market-based approach to emissions reduction. Against this backdrop, we set out below the key regulatory and market developments that define the current state of Nigeria’s carbon market.

1. What is Carbon Emissions Trading?

While Nigeria’s Climate Change Act, 2021 does not specifically define carbon emissions trading, the concept is well-established globally. It refers to a market-based mechanism that allows entities to buy and sell rights to emit specific amounts of GHGs within a regulated framework. The concept stems from that, by putting a price on carbon, markets encourage companies to innovate, invest in cleaner technologies, and reduce their overall emissions footprint.

2. Nigeria’s Carbon Market Framework

The National Council on Climate Change (NCCC) as the principal coordinating authority for climate policy, has among its mandates, the creation of a national carbon market framework and the establishment of a National Carbon Registry to track emission reduction projects and credits. At present, however, the registry is still in development, and project activities continue to be recorded across multiple voluntary standards and platforms.

Also, Nigeria currently operates a voluntary carbon market, not a mandatory cap-and-trade system. This means that there is no government-imposed ceiling (cap) on emissions or corresponding allocation of emission allowances to businesses.

3. Current Gaps and Risks

Given the early stage of Nigeria’s market architecture, several challenges persist:

i. Absence of a centralized registry – There is currently no unified national database for recording all carbon credit transactions, increasing the risk of double counting (where a single credit is claimed more than once).

ii. Verification and ownership risks – Without a robust oversight mechanism, the possibility exists that carbon credits may be misrepresented or claimed by multiple entities.

iii. Regulatory uncertainty – While the NCCC provides broad policy direction, there are still limited binding rules governing verification, issuance, and transfer of credits.

4. Ongoing Developments

The NCCC has expressed its intent to issue no-objection certificates for the approval, issuance, and transfer of certified credits in alignment with Article 6.2 of the Paris Agreement (which governs bilateral and cooperative approaches to carbon trading). This indicates a move toward a more structured compliance framework that will enable Nigeria to participate credibly in both domestic and international carbon markets.

5. Opportunities for Investors and Businesses

Despite the regulatory infancy, Nigeria’s carbon market presents growing opportunities for investors, developers, and intermediaries. Participants may engage in the market in several ways:

1. As brokers or aggregators, facilitating credit transactions between buyers and project developers.

2. By establishing exchanges, providing platforms for transparent trading and price discovery.

3. Through direct project investment, financing carbon offset projects (such as reforestation or clean-energy projects) in exchange for rights to the carbon credits generated.

4. By entering into Emission Reduction Purchase Agreements (ERPAs) with project developers to buy verified credits.

Any company intending to operate in this space, whether as a buyer, seller, broker, or exchange , must still comply with Nigeria’s corporate, investment, and tax laws.

Conclusion

Nigeria’s carbon market remains at an early but promising stage of evolution. The Climate Change Act, 2021 provides a legal foundation, and the ongoing work of the NCCC is expected to strengthen governance, transparency, and investor confidence.
For now, market participants operate primarily within voluntary frameworks, but as regulation matures, Nigeria could emerge as a leading carbon market hub in Africa. 

The foregoing insight is not intended to constitute legal advice and is not prepared with a specific context in mind. Kindly seek professional advice specific to your situation. You may also reach out to your usual Balogun Harold contact or via support@balogunharold.com for support.