On November 8, 2022, the new Africa Carbon Markets Initiative (ACMI) was inaugurated at the United Nations Climate Change global conference held in Sharm, Egypt, with an objective to scale the production of carbon credit across the continent.

Nigeria and other African countries shared their commitment to collaborating with the ACMI to achieve this objective, and we expect that steps will be taken in Nigeria to implement this objective.

In furtherance of this commitment, it is expected that the Nigerian government will put in place a framework for the implementation of a carbon credit system in Nigeria.

We have set out in this article, a general overview of how carbon credits work in other jurisdictions, as we expect that a similar system will be adopted by our government in developing the framework.

1. What is carbon credit?

Carbon credit is an instrument that represents one (1) tonne of carbon dioxide (CO2) or greenhouse gas (GHG) emissions removed from the atmosphere. Carbon credits are given to companies whose activities benefit the climate either by removing CO2 from the air or preventing it from being emitted in the first place.

Carbon credits were devised as a mechanism to reduce GHG emissions by creating a market in which companies can trade in emissions permits. Under the system, companies get a set number of carbon credits, which decline over time, and can sell any excess to another company.

2. What are the types of carbon credit markets?

There are broadly two types of carbon credit markets in the world right now, the compliance market which is developed as a result of regulatory requirements, and the voluntary market, which allows private companies and individuals to purchase carbon credits voluntarily. We assume that in Nigeria, the first market that will be developed will be the compliance carbon credit market.

3. How do carbon credits work?

Typically, in jurisdictions like the USA, and certain developed nations where regulations exist with respect to the activities governing carbon credits, it is the responsibility of the governing body to create and allocate carbon credits periodically to deserving companies and individuals within that jurisdiction. The number of credits issued to a particular company or organization represents its emissions limit.

In certain jurisdictions, carbon credits are given to companies whose activities pull out emissions from the atmosphere. Companies that want to compensate for their carbon footprint may purchase carbon credits from responsible companies that have accumulated carbon credits.

4. How does a company qualify for carbon credits?

In states in the USA where regulations for carbon credits exist, companies that: i) over time produce less GHG emissions, and ii) embark on projects that prevent GHG emissions or aim to remove GHG emissions from the atmosphere, will be eligible to earn carbon credits.

5. Who can purchase carbon credits and from where?

Carbon credits can be purchased by individuals, companies, non-profit organizations, and governments. Carbon credits can be purchased: directly from private companies with excess carbon credits; through a broker, and on a climate trade marketplace.

6. What are the benefits of carbon credits to companies?

a. It creates monetary incentives for companies that consciously embark on projects to reduce GHG emissions; and for companies that devise methods to reduce its GHG emissions in the course of its activities;

b. It creates a system for the proper measurement and verification of emission reductions; and

c. Addressing climate change will create immense dividends for the African and Nigerian economy.

7. What are the Regulations that affect carbon credits in Nigeria?

The United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol and Paris Agreement, whose objective is to stabilize GHG concentrations in the atmosphere, to which Nigeria is a party.

The Climate Change Act, 2021 which provides a legal framework for achieving low GHG emissions and categorizes climate change actions into national plans and programmes.

It is also interesting to note that Nigeria has launched its Energy Transition Plan, which details a roadmap to achieve net zero emissions by 2060.


It is not clear the category of companies that will be eligible for carbon credit in Nigeria. We, however, expect that the Nigerian government will develop a framework that will outline and govern the implementation of carbon credits in Nigeria in the near future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.