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CMA To Support Nairobi City To Issue A Green Bond

BY Jane Muia · January 11, 2023 02:01 pm

KEY POINTS

County financing through the capital markets has been one of the Authority’s key priorities as outlined in the 10-year Capital Market Master Plan which envisions that 30 percent of financing for counties will be drawn from the capital markets.

KEY TAKEAWAYS

Green bonds are a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects. These bonds are typically asset-linked and backed by the issuing entity’s balance sheet, so they usually carry the same credit rating as their issuers’ other debt obligations.​

The Capital Market Authority (CMA) has announced plans to support Nairobi in the issuance of a green bond as the county seeks fundraising opportunities through the capital market.

‘’The Authority will support the Nairobi county government to raise funds through the capital markets. However, it will be important for the County to demonstrate good governance through the prudent application of funds raised, to give confidence to investors for future county capital raising exercises,’’ CMA Chief Executive Officer Wyckliffe Shamiah said.

Nairobi governor Johnson Sakaja had earlier announced that the county government will float a green bond that will be used to build a mass transit system and expand the infrastructure for waste management and water distribution.

The Nairobi boss also pointed out that part of the green board will be used towards solving the garbage issue in the city by converting garbage to energy while creating jobs.

Green bonds are a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects. These bonds are typically asset-linked and backed by the issuing entity’s balance sheet, so they usually carry the same credit rating as their issuers’ other debt obligations.​

Sakaja said that he would source for long-term financing to meet the development needs of the County through the issuance and listing of a green bond while pointing out the potential listing of County agencies such as Nairobi Water and Sewerage Company.

“We need about 17 billion shillings to address the sewerage situation and expand the water pipes to meet Nairobi’s growing population. The County cannot raise these funds from conventional sources such as banks or even from its revenue thus, the capital markets offer an affordable and long-term solution,” said Hon. Sakaja.

County financing through the capital markets has been one of the Authority’s key priorities as outlined in the 10-year Capital Market Master Plan which envisions that 30 percent of financing for counties will be drawn from the capital markets.

The Governor observed that his present focus was to lay the groundwork for the fundraising by addressing the financial status of, its pending bills, and credit rating, to attract investment capital.

The two parties agreed to form a committee that will action the opportunities in the capital markets. CMA will lead engagement with all stakeholders, including where possible, a push for changes to policies and laws to enable counties to borrow above the current limit of 20 percent of their audited annual revenues, for development projects.

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