Lagos Carbon Exchange: Key Legal & Market Considerations

The Lagos State Government has announced plans to establish the Lagos Carbon Exchange. From all indications, the Lagos Carbon Exchange would make Lagos the first subnational government in Africa to operate a dedicated carbon trading platform. There is currently no indication that the Lagos Carbon Exchange will operate as a compliance exchange. Based on our analysis of publicly-available information, it appears that the Lagos Carbon Exchange will function as a voluntary, State-led platform.

Although official documentation remains limited, publicly available sources indicate that:

(a) The Lagos Carbon Exchange aims to generate over $1 billion in revenue across 15 years by issuing and trading 1.2 million carbon credits.

(b) The Lagos State Government has launched a  80 Million Credit Float Project (the “Project”) in conjunction with private partners.  Key components of the project include:

(i) Distribution of 80 million eco-loans via a “Pay-to-Cook” clean cooking scheme. Participating households will receive ₦10,000 (~$6.40) annually as an incentive for adopting clean cooking technologies.

(ii) Free distribution of 6 million clean cookstoves, starting with the Makoko area, targeting low-income and climate-vulnerable communities.

(iii) Expansion to include free health insurance, renewable energy subsidies for small businesses, and subsidised food markets for at-risk populations.

(iv) Direct budgetary support of ₦1 billion (~$641,000) annually for each of Lagos’s 57 local councils, earmarked for green development across 1,000 communities.

(v) Planting of 400 million economic trees, aimed at reversing deforestation, enhancing food security, and sequestering carbon.

Comments & Key Observations

1. Strategic Value of Africa’s First Subnational Carbon Exchange

The establishment of the Lagos Carbon Exchange positions Lagos as a continental leader in carbon market infrastructure and significantly shifts the competitive landscape. Until now, project developers in Nigeria have typically pursued registration with foreign carbon credit registries. However, the emergence of the Lagos Carbon Exchange introduces a credible local alternative, one that may encourage developers to opt for domestic registration, certification, and trading of carbon credits.

2.  Importance of MRV, Certification, and Exchange Credibility

For Lagos Carbon Exchange to attract international buyers and institutional capital, it must ensure that its Monitoring, Reporting, and Verification (MRV) systems are robust, transparent, and aligned with global standards. Without this, the credibility and value of its credits may be discounted or disregarded altogether in global markets.

3. Absence of a Lagos Carbon Exchange Law

Currently, there is no legislation establishing Lagos Carbon Exchange as a legal or corporate entity. This creates uncertainty around the governance and ownership of the exchange, the legal enforceability of traded credits and the rights of participants and obligations of the State. A dedicated Lagos Carbon Market Law would institutionalise the exchange, clarify its regulatory powers, and secure the long-term confidence of buyers, investors, and project developers. It may also be useful to evaluate the necessity of a Lagos Climate Finance Law. Amongst others, a Climate Finance Law should help govern allocation of carbon budgeting, revenue and well as support financial accountability and transparency across LGAs.

4. How Will the Exchange Be Financed?

A key consideration for the Lagos State Government will be determining how to raise and structure sustainable capital to operationalise the Lagos Carbon Exchange. While a fully state-funded and state-owned model is conceivable, a public-private partnership, anchored by a competitive procurement process, may offer a more strategic path to building the Exchange’s digital infrastructure and institutional capacity.

5. The Carbon Exchange Rules

As of now, the Lagos Carbon Exchange has not released an operational rulebook. The timely publication of such rules is essential to provide investors and project developers with clarity on how to engage with the platform and whether independent listings will be permitted. Timely clarification of details on project registration and eligibility, measurement, reporting and verification (MRV) procedures, credit issuance and retirement, dispute resolution mechanisms, market transparency, and auction processes will be critical to the credibility and functionality of the Exchange moving forward.

How We Can Help

Our services include: (a) Advising on and structuring compliance with Nigeria’s Climate Change Act and international carbon standards (b) Advising on and structuring carbon projects collaboration agreements and partnerships (c) Preparing project documentation (PDDs), carbon methodologies, and MRV protocols (d) Advising on project registration with domestic and international registries (e) Structuring and Advising on benefit-sharing agreements with local governments and host communities (f) Advising on public–private partnership models for financing exchanges and registries (g) Structuring climate-related funds or SPVs to participate in carbon markets (h) Drafting, review and negotiation of participation agreements, term sheets,  purchase agreements (i) Advising on cross-border credit transfers and corresponding adjustments (j)  Navigating risks related to double counting, permanence, and international legal recognition.