Nigeria and Africa will need between $22.6-$30 billion annually to fill the energy financing gap, as the world moves to tackle climate change and transition to more renewable energy.

This is even as the Nigerian Government said it will continue to explore Islamic finance tools such as Sukuk to tap into local and international investments.

This was disclosed on Tuesday at the 6th African International Conference on Islamic Finance (AICIF) tagged: ‘Towards a Just Transition’ and organised by The Metropolitan Law Firm and The Metropolitan Skills in collaboration with Africa Finance Corporation, and Security Exchange Commission (SEC).

Speaking at the opening, the Convener and Conference Chair, Ms. Ummahani Amin, said just transition requires the mobilisation of climate funds to vulnerable African countries facing the harsh reality of climate change such as increasing mortality, human displacements, and migration, among other impacts.

Amin who is the Founder of Metropolitan Law Firm, lamented that there are systemic structural deficiencies that continue to inhibit the just transition process in Africa. She listed them to include limited private sector participation, increasing debt vulnerability of the African countries, and lack of transparency and accountability in financial flows, among others.

The CEO of Metropolitan Skills Ltd noted that according to the African Development Bank Group, out of the $29.5 billion of climate finance flows to Africa in 2019/2020, about $9.4 billion. Or 32 per cent of the total, was allocated to energy systems, including energy education and research,  energy consumption and demand efficiency, energy policy, and administrative management or development of hydropower plants.

“This leaves up to $22.6 billion-$30.6 billion annually in the energy financing gap in Africa,” she said but stressed that  “given its nature and with over $2 trillion in global assets, Islamic finance offers a sustainable financing system for delivering Africa’s just transition process”.

“First, Sukuk and Islamic finance lending are two financial products that can be used to deliver clean energy infrastructure and large-scale programmes in African countries, particularly to aid the promotion of natural gas as a transition fuel in countries that can access it. Sukuk presents low risks and guaranteed returns to investors”, she asserted.

Amin said ACIF was an opportunity to strengthen the community of practice on the promotion and development of Islamic finance in shaping the future of sustainable economic practices.

“Our mission is to establish a sustainable endowment fund focused on supporting educational opportunities for the less privileged,” she said.

In the same vein, the Vice President, Kashim Shettima,  represented by a Special Adviser to the President on Economic Matters, Tope Fasua, said despite the huge potential of Islamic financing to drive a more competitive economy, Nigeria’s finance sector is lagging in adopting Islamic financing in its financial market.

He said: “We are committed to designing policies targeted at financial deepening and financial diversification for unlocking private sector financing.

“With global assets under management exceeding $2 trillion and the growing demand for alternative sources of financing, Islamic finance is central to both financial deepening and financial diversification in Nigeria.

“However, Nigeria’s fast-growing Islamic finance assets remain largely insignificant in the over $2 trillion Islamic finance global market, despite Nigeria’s demographic composition and increasing demand for alternative sources of finance such as Islamic finance.

“Hence, we will continue to explore Islamic finance tools such as Sukuk to tap into local and international investments.”

In his keynote speech, former Emir of Kano, Muhammad Sanusi II, while speaking on the theme of the event, “Towards a Just Transition”, said there was a need to switch to a sustainable, net-zero future.

“Since the industrial revolution, fossil fuels have powered extraordinary growth and development, albeit with huge costs to our climate. As a direct result, we are today in a climate emergency. To avert catastrophe, there is a growing concern to radically switch to a sustainable, net-zero future.

“This transition needs to happen fast, but it also has to happen fairly and inclusively. If done right, the transition offers immense opportunities: a systems change in which all communities, workers, and countries are lifted,” he said.