1. INTRODUCTION
In a compressed legislative cycle spanning 2021 to 2025, Nigeria has constructed an ambitious carbon market architecture anchored on the Climate Change Act 2021, the Regulatory Guidance on Nigeria’s Carbon Market Approach (2023), the Carbon Market Activation Policy (2024), and the National Carbon Market Framework (2025). Collectively, these instruments advance a vision to generate between USD2.5 billion and USD3 billion annually in carbon finance by 2030.
This architecture however is beset by a fundamental deficiency as it is predominantly policy declarations rather than legally enforceable obligations created by statute and this deficiency plays a major role in how industry stakeholders react to and interface with the Nigeria carbon market.
In October 2025, President Bola Tinubu approved Nigeria’s National Carbon Market Framework (NCMF), a comprehensive instrument establishing the rules, institutions, and procedures for generating, validating, and trading carbon credits domestically and internationally. This was the most recent attempt at structuring and regulating the Nigerian carbon market, signalling strong ambition to capitalize on its position within the Africa Carbon Markets Initiative (ACMI) framework as one of the continent’s most promising opportunities for high-integrity carbon credit generation.
The NCMF has set a 32.2% reduction in its Nationally Determined Contribution 3.0 (NDC3.0) by 2035 based on the Business-as-Usual (BaU) target of 573.5 MtCO2eq in 2018. This is estimated to have an annual carbon market value of about USD736 million, USD2.5 billion by 2030. While these policy strides are highly commendable, it conceals a structural vulnerability that this article identifies as the enforceability deficit.
This article highlights Nigeria’s existing carbon market legal framework, then diagnoses the enforceability deficit – the lacunae in statutory recognition, institutional authority and compliance architecture that undermine the framework’s credibility both domestically.
and internationally before concluding by proposing legislative reforms that could bridge the gap between policy aspirations and legal enforceability.
2. THE LEGAL ARCHITECTURE OF NIGERIA’S CARBON MARKET
Environmental governance in Nigeria has constitutional roots, though with extremely limited enforceability concerns as they are entrenched within the non-justiciable Fundamental Objectives and Directive Principles of State Policy. Therefore, they are treated as aspirational concerns rather than legally enforceable ones . Section 20 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) charges the State with the responsibility to “protect and improve the environment and safeguard the water, air and land, forest and wildlife of Nigeria.
The Climate Change Act 2021 introduced the first real concerted attempt at blanket statutory governance of climate action in Nigeria. This was a step-up from the previous patchwork governance framework which comprised international treaty obligations, sector-specific statutes, and administrative policies that lacked coherent coordination and enforcement procedure. Nigeria had previously ratified the Paris Agreement in 2017, thereby committing to the cooperative mechanisms of Article 6 and the temperature limitation goals of the Agreement. The domestication of this commitment eventually materialised through the Climate Change Act 2021. Below are some of the laws and policies that are of relevance to the carbon market in Nigeria..
2.1 The Climate Change Act 2021: Foundation and Limitations
This Act establishes the National Council on Climate Change (NCCC), chaired by the President of the Federation and creates a framework for climate governance extending to both public institutions and private entities. The Act advances key provisions relevant to climate action such as, the mandatory preparation of a five-year National Climate Change Action Plan and a carbon budget with quantified annual targets; obligations on private entities with fifty or more employees to designate a Climate Change Officer, to achieve annual carbon emission reduction targets, and file annual compliance reports; and the establishment of the Climate Change Fund as a vehicle for mobilising and deploying climate finance.
While the Act has been lauded for providing a legal foundation for potential climate litigation in Nigeria , the Act is however limited in the specific context of the Nigerian carbon market as it makes no provision for emissions trading, offers no legal definition or recognition of carbon credits as property, contains no Monitoring, Reporting and Verification (MRV) regime adapted to carbon trading, and provides no framework for corresponding adjustments under Article 6 of the Paris Agreement. These omissions create legal ambiguities regarding carbon credit ownership and trading, regulatory compliance and sanctions, carbon project authorizations.
2.2 The NCCC Regulatory Guidance on Nigeria’s Carbon Market Approach (2023)
The NCCC published its Regulatory Guidance on Nigeria’s Carbon Market Approach on the 24th of June 2023. This document establishes a framework for carbon trading, aligned with Article 6.2 of the Paris Agreement, aiming to reduce emissions and support Nigeria’s commitment to climate change mitigation. It introduces the concept of “No-Objection” mechanism requiring NCCC approval before any carbon credits may be issued or transferred across all sectors in the country.
However, the Regulatory Guidance is a policy document issued under administrative authority rather than a statutory instrument thus it does not enjoy statutory flavour and protection. While its provisions create expectations for market participants, they do not, in themselves, constitute enforceable legal obligations.
2.3 The Carbon Market Activation Policy (2025), Carbon Market Manual of Procedures (2025) and the National Carbon Market Framework (2025)
The Carbon Market Activation Policy (CMAP) , released in September 2024 but formally approved by President Bola Tinubu in October 2025, advances Nigeria’s carbon market architecture significantly. This policy document triggered the operation of the Climate Change Fund and the restoration of the NCCC to the Federal Budget line – this being a prerequisite for multilateral climate finance eligibility that had previously been absent for the country. The Carbon Market Manual of Procedures (MoP) also approved alongside the NCMAP acts as the practical guide to implement the NCMAP; it bridges the gap between high-level policy and actual implementation by detailing the exact technical requirements for project registration; including the application process for Letters of No Objection and formal authorizations required under Article 6 of the Paris Agreement.
The NCMF on the other hand, represents the apex of the country’s policy architecture. It projects the US$2.5 to US$3 billion in annual carbon finance flows from up to 124.7 MtCO₂e in reductions by 2030 and contemplates the eventual enactment of dedicated carbon market legislation as a necessary further step, which implicitly recognises the lack of binding statutory force it carries by itself.
2.4 Supplementary Legislative Instruments and Sectoral Frameworks
There are several sectoral statutes which contribute ancillary support to Nigeria’s carbon market architecture. The Electricity Act 2023 financially incentivises renewable energy promotion and integration, which is directly relevant to the generation of renewable energy carbon credits. The National Environmental Standards and Regulations Enforcement Agency (Establishment) Act (NESREA) 2007 provides the enforcement mandate for environmental standards, though its application to carbon market participants is incidental rather than targeted.
3. THE ENFORCEABILITY DEFICIT
To put it simply, the enforceability deficit discourse highlights that, while there are policy intentions, frameworks and a national commitment to reduce emissions, via the Climate Change Act 2021 and subsequent policy documents, there is a significant gap in the legal authority and operational mechanisms to compel compliance, verify emission reductions and penalize violators. This deficit manifests across three interrelated dimensions: (a) the ambiguous legal status of carbon credits as property; (b) institutional fragmentation and authority gaps; and (c) the absence of a binding MRV regime. Each of which are discussed below;
- A) Legal Status of Carbon Credits: The Property Law Vacuum
A foundational question in any carbon market legal framework is the legal nature of a carbon credit. In the absence of statutory clarity, the enforceability of rights associated with carbon credits – including title, transferability, security interests and priority in insolvency, are deeply uncertain. In Nigeria, no statute currently defines a carbon credit as property or specifies its legal classification.
In the absence of statutory definition, legal authors and commentators have sought to characterise carbon credits under Nigerian common law by analogy. The strongest available analogy is the chose in action – a proprietary right enforceable only through legal proceedings rather than physical possession.
The Supreme Court of Nigeria defined a chose in action in ATS & Sons v BEC (Nig.) Ltd as “a proprietary right in personam such as debt owed by another person, a share in a joint stock company or a claim for damages in tort … it is a personal property that one person owns but another person possesses, the owner being able to regain possession through a lawsuit”. Carbon credits, as intangible instruments conferring rights enforceable within a defined regulatory framework, share sufficient characteristics with choses in action to support this classification in principle.
However, this analogy faces constrains in the Nigerian context. This is because, a chose in action derives its force from the legal system’s recognition of the underlying right, whereas carbon credits in Nigeria’s current framework rest on administrative policy rather than statutory authority. Carbon credits have no statutory definition determining whether they constitute sui generis property, choses in action, or financial instruments; the rules governing their creation, transfer, and cancellation are administrative guidelines rather than legally prescribed procedures; there is no statutory registry the entry in which constitutes notice of title; their treatment in insolvency, execution and security law remains entirely uncharted.
The practical consequences above are significant as carbon credits cannot be reliably pledged as collateral without statutory clarity on whether they constitute recognised security interests under Nigerian law. Ownership disputes arising from double-issuance or accounting errors will be difficult to adjudicate without statutory rules on priority and title. Internationally Transferred Mitigation Outcomes (ITMOs) transfers under Article 6 of the Paris Agreement require authorisation processes that presuppose domestic legal recognition of the underlying mitigation outcomes – recognition that Nigeria has not yet legislatively provided.
- B) Institutional Fragmentation and Authority Gaps
Nigeria’s carbon market governance currently involves multiple institutions – the National Council on Climate Change (NCCC), the Climate Change Secretariat, the Carbon Market Office (CMO), the Carbon Market Oversight Body (CMOB), the National Upstream Petroleum Regulatory Commission (NUPRC), National Environmental Standards and Regulations Enforcement Agency (NESREA), the National Revenue Service (NRS) and state-level environmental agencies. All these institutions exercise some sort of oversight function of carbon market participants without a unifying statutory framework that establishes a hierarchy or regulatory competence.
A particularly consequential authority gap exists with respect to the NCCC’s “No-Objection” mechanism. While this creates an important regulatory checkpoint, its operation rests on administrative policy rather than statutory mandate. An NCCC refusal of No-Objection may be challenged through administrative law mechanisms, but the standards governing the decision-making process (approval or refusal) are not legislatively prescribed. There are no statutory criteria for approval, no prescribed time-limit for determination and no appeal mechanism to a recognised or statutory tribunal of law.
This creates a regulatory gap that is incompatible with the investment-grade legal certainty that the carbon finance market and huge sums of money flowing through it require. - C) Absence of a Binding MRV Regime
Monitoring, Reporting and Verification (MRV) is the backbone of any carbon market; without rigorous, binding and independently verifiable measurement of emission reductions, carbon credits lose their environmental integrity and consequently, their commercial value. Nigeria’s current framework lacks a comprehensive, legally binding MRV regime adapted to carbon market operations. While one of the most significant contributions of the Nigeria Carbon Market Manual of Procedures to the Nigeria Carbon Market is its MRV architecture, ultimately, it operates as a system of administrative guidance rather than a system of binding legal obligations. The monitoring report template, the verification checklists, the Validation and Verification Body (VVB) eligibility criteria and the mandatory SDG assessment requirements are prescribed in an administrative manual, not in regulations made under statutory authority. A VVB that submits a deficient verification report, or a Mitigation Activity Proponent that falsifies monitoring data, is subject to whatever administrative consequences the CMO chooses to impose and to criminal liability under general fraud provisions – but not to the specific, calibrated and publicly transparent enforcement regime that statutory MRV obligations in functional carbon markets (including the EU ETS) provide.
4. TOWARDS LEGISLATIVE REFORM
The enforceability deficit is not an intractable problem; it is a legislative gap. Nigeria’s NCMF itself contemplates the enactment of dedicated carbon market legislation and this legislative trajectory should now be accelerated. In the event of future enactment of a dedicated Carbon Market Act, it should at minimum, accomplish four things;
First, it should statutorily define a carbon credit as a distinct category of property with clear rules on creation, title, transfer and cancellation, thereby eliminating the ‘chose in action’ ambiguity and creating a firm foundation for secured lending and insolvency treatment.
Second, it should vest supervisory authority in a single designated regulator, whether the CMO operating under statutory mandate or a reconstituted body, with a clear delineation of concurrent jurisdiction where sectoral regulators such as NUPRC and NESREA retain incidental competence.
Third, it should enact a binding MRV regime by delegating to the designated regulator, the power to make binding regulations on monitoring protocols, verification accreditation and data integrity, with violations attracting defined statutory and criminal consequences.
Fourth, it should codify the already existing No-Objection and Article 6 authorization process, prescribing statutory criteria, timelines and right of appeal to a recognized tribunal, thereby transforming a discretionary administrative process into a rule-of-law procedure.
CONCLUSION
Nigeria’s carbon market ambitions are among the most consequential in sub-Saharan Africa, and the policy architecture constructed between 2021 and 2025 reflects genuine institutional commitment to realizing those ambitions. The Climate Change Act, the Regulatory Guidance, the Carbon Market Activation Policy, and the National Carbon Market Framework collectively represent a sophisticated policy edifice. Yet, policy ambition, however elaborately expressed, cannot substitute for legal enforceability.
Carbon credits without statutory recognition are assets without legal title. A No-Objection mechanism without statutory backing is a checkpoint without due process. An MRV regime without binding statutory force is a checklist without consequence. A multi-institution governance structure without statutory hierarchy may turn out to be coordination without authority.
The enforceability deficit this article highlights is not just a technical deficiency. It is the central vulnerability that separates Nigeria’s carbon market from the investment-grade legal certainty that the billions of dollars in projected carbon finance will require. Bridging that gap demands not another policy document but an Act of the National Assembly that translates Nigeria’s carbon market ambitions into legally enforceable obligations. Until that legislative step is taken, Nigeria’s carbon market will remain a sophisticated aspiration operating on an uncertain legal foundation.
Associate
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