Nigerian Journal of Banking and Financial Issues (NJBFI)

Green Finance For Africa’s Sustainable Development: Trends And Future Opportunities

Abstract

This study is an explorative examination of the recent trends in green finance in Sub-Sahara Africa (SSA) for a period of ten years. We also attempt projections into future trends and opportunities in green finance in Africa. First, we explore the trend of green finance and selected environmental and economic indicators in Africa, the challenges faced by green finance and its future opportunities in the continent. Quantitatively, the paper also investigated whether green finance and the selected indicators have significant causal relationship. We used trend analysis and the Granger causality test to analyze the data for green bonds, carbon emission (CO2), agricultural sector output, per capital income, forest area and child mortality rate from 2012 to 2021 obtained from the World Bank Development Indicators.  We found that trend-wise, despite the rise in green finance between 2020 and 2021, carbon emission (CO2) has been on the increase while forest area has also depleted. Child mortality rate has consistently been on the decline over the years. Agriculture sector output also rose since 2019.  Apart from 2021, Africa’s per capita income has been on a steady decline since 2014. Of all the selected environmental and economic variables, only agricultural sector output has a significant causal relationship with green finance. We also identified salient challenges that are faced by green finance investment in Africa, the way out, opportunities and potentials available for green investment as well as the future outlook of green finance for sustainable development in Africa. We recommend increased development of innovative financing mechanisms, building of more institutional capacity to support green finance, development of specialized green finance units by institutions and promote development of green infrastructure.