1. Introduction

Nigeria’s environmental, social, and governance (ESG) regulatory landscape is undergoing significant transformation as it aligns with global sustainability standards while addressing local challenges. This evolution reflects growing recognition that effective ESG practices not only mitigate risks but also create long-term value for businesses, investors, and society. Nigerian companies now face increasingly structured requirements for ESG disclosure and compliance, driven by both domestic regulations and international investor expectations.

2. Regulatory Framework

The regulatory framework for ESG in Nigeria is evolving, with a growing emphasis on integrating sustainability into business practices. While a comprehensive, unified ESG code is still developing, several key regulations and guidelines are shaping the landscape. Here’s a breakdown of some key regulatory components:

  1. Companies and Allied Matters Act (CAMA) 2020
    The CAMA has broadened directors’ duties, requiring them to consider the environmental impact of company operations. This signifies a shift towards incorporating ESG considerations into corporategovernance.
  2. Sector-Specific Regulations
    The oil and gas industry, a crucial sector in Nigeria, is governed by specific regulations, particularly the Petroleum Industry Act (PIA) of 2021. The Act emphasises environmental remediation, community development, and local content, highlighting a commitment to social and environmental responsibility. Also, the Central Bank of Nigeria (CBN) has issued guidelines, such as the Nigerian Sustainable Banking Principles (NSBP), promoting sustainable finance. These guidelines encourage financial institutions to integrate ESG factors into their lending and investment decisions.
  3. Climate Change Act 2021
    The Act demonstrates Nigeria’s commitment to addressing climate change. It mandates reporting on greenhouse gas emissions and the implementation of climate change mitigation and adaptation strategies.
  4. Nigerian Code of Corporate Governance (NCCG) 2018
    The NCCG guides corporate governance best practices, including board oversight of ESG risks and opportunities.
  5. Securities and Exchange Commission (SEC) Guidelines
    The SEC has issued guidelines on sustainable financial principles, requiring regulated entities to report on their ESG implementation frameworks.
  6. Environmental Impact Assessment Act 2004
    The Act mandates the conduction of environmental impact assessments for projects likely to significantly affect the environment.

3. Regulatory Bodies

Several regulatory authorities oversee ESG compliance in Nigeria:

  1. The Securities and Exchange Commission (SEC) is the primary financial market regulator establishing ESG disclosure requirements for public companies.
  2. The Central Bank of Nigeria (CBN) has introduced sustainability banking principles that financial institutions must follow.
  3. The Nigerian Stock Exchange, now the Nigerian Exchange Group, plays a critical role in regulating listed companies through its Sustainability Disclosure Guidelines.
  4. The Federal Ministry of Environment oversees environmental regulations and climate commitments

4. Key ESG Regulations and Requirements

  1. Securities and Exchange Commission Guidelines
    In 2018, the SEC issued Sustainability Reporting Guidelines, requiring public companies to include sustainability reports in their annual reports. These guidelines specify disclosure requirements across environmental, social, governance, and economic impacts. Public Companies must report on:

    Nigerian Exchange Group (NGX) Sustainability Disclosure Guidelines
    • Environmental impact assessments and management systems
    • Labour practices and employee welfare
    • Community relations and social investment
    • Board structure, executive compensation, and shareholder rights
    • Anti-corruption measures and ethical business practices
  2. Nigerian Exchange Group (NGX) Sustainability Disclosure Guidelines
    The NGX’s guidelines, implemented in 2019, establish reporting criteria for listed companies. These guidelines align with global frameworks including the Global Reporting Initiative (GRI) and emphasize:
  3. CBN Sustainable Banking Principles
    The CBN’s Nigerian Sustainable Banking Principles (NSBP) require financial institutions to integrate environmental and social considerations into their operations, service delivery, and risk management processes. Banks must assess and mitigate environmental and social risks in their lending and investment activities.
  4. Climate Change Regulations
    Following Nigeria’s ratification of the Paris Agreement, the country has developed a National Climate Change Policy and Response Strategy. The National Environmental Standards and Regulations Enforcement Agency (NESREA) has established regulations for carbon emissions reporting for highimpact sectors.
  5. Securities and Exchange Commission (SEC) Guidelines
    Industry-Specific Requirements
  • Oil and Gas
    Following Nigeria’s ratification of the Paris Agreement, the country has developed a National Climate Change Policy and Response Strategy. The National Environmental Standards and Regulations Enforcement Agency (NESREA) has established regulations for carbon emissions reporting for highimpact sectors.
    • The Nigerian Content Development and Monitoring Board (NCDMB) mandates local content requirements for social impact.
    • The Department of Petroleum Resources (DPR) enforces environmental regulations specific to petroleum operations.
    • The Nigerian Oil and Gas Industry Content Development Act includes provisions for community development agreements.
  • Financial Services
    Financial institutions must adhere to:
    • CBN’s Sustainable Banking Principles
    • Enhanced governance requirements from the Financial Reporting Council
    • Anti-money laundering provisions with ESG dimensions
  • Manufacturing
    Manufacturing companies must comply with:
    • Industrial emissions standards set by the National Environmental Standards and Regulations Enforcement Agency (NESREA)
    • Labour standards under the Factory Act
    • Extended producer responsibility regulations for waste management

5. Implementation Challenges

Despite regulatory advancements, Nigerian companies face several challenges in ESG implementation:

  1. Capacity and Expertise Gaps: Many companies lack specialized ESG professionals and reporting expertise, particularly medium-sized enterprises.
  2. Data Collection Infrastructure: Inadequate systems for measuring and monitoring ESG metrics hamper reliable reporting.
  3. Cost Implications: Full compliance requires significant investment in systems, expertise, and operational adjustments.
  4. Regulatory Coordination: The multiplicity of regulatory bodies sometimes creates overlapping or inconsistent requirements.

6. Global Standards Integration

Nigerian regulators are increasingly aligning local ESG frameworks with international standards:

  1. Task Force on Climate-related Financial Disclosures (TCFD): The SEC and NGX are encouraging TCFD-aligned climate risk disclosures
  2. Global Reporting Initiative (GRI): The NGX Guidelines reference GRI standards as preferred disclosure frameworks
  3. International Sustainability Standards Board (ISSB): Nigeria is moving toward compatibility with ISSB standards as they develop
  4. Sustainable Development Goals (SDGs): Regulatory frameworks increasingly reference SDG alignment as a reporting expectation.

7. Enforcement Mechanisms

Enforcement of ESG requirements has strengthened in recent years:

  1. NGX Compliance Reporting: Listed companies that fail to meet sustainability disclosure requirements face potential delisting or penalties.
  2. SEC Enforcement Actions: The SEC has begun implementing fines for non-compliance with disclosure requirements.
  3. Public Disclosure of Violations: Regulatory bodies are increasingly publishing non-compliance information, creating reputational risks.
  4. Stakeholder Litigation: Recent court decisions have strengthened the ability of affected communities to bring environmental and social impact cases against companies.

8. Conclusion

Nigeria’s ESG regulatory landscape is evolving rapidly as regulators balance international best practices with local economic and social contexts. Companies operating in Nigeria must develop robust ESG strategies that not only ensure compliance but also create sustainable value. Forward-thinking organizations are moving beyond compliance to leverage ESG as a competitive advantage, particularly for accessing international capital markets and partnerships. The integration of sustainability considerations into corporate strategy and operations is becoming essential rather than optional for businesses seeking long-term success in Nigeria’s increasingly ESG-conscious economy.