The Nairobi City government is planning to issue a green bond as part of Governor Johnson Sakaja’s revenue mobilisation plans to fund multimillion-shilling infrastructure projects.
The massive resources expected will go towards financing long-term projects like roads, water and waste management as the governor seeks to strengthen the city’s fiscal position in line with its ambitious Vision 2050.
A green bond is a fixed income instrument whose proceeds are earmarked exclusively for projects with environmental benefits, mostly related to climate change mitigation and adaptation.
It also targets projects around natural resources depletion, loss of bio-diversity, and air, water or soil pollution.
Sakaja told the Star that the county is setting the pace for diversification of revenue generation to finance its long-term projects through a green bond that will be floated next financial year.
“We need to offer the residents of Nairobi solutions that clear the mess that has been witnessed over the years. We intend to float a green bond, and what we raise will be used to create order and also open up opportunities for our people and make Nairobi work for everyone," Sakaja said.
The huge leap forward by Sakaja’s government comes at a moment counties face a funding gap, with most of them almost fully reliant on the often-delayed transfers from the National Treasury.
The bond, once floated, will be a first of its kind by any county government in Kenya and will see Nairobi tap into the financial market to raise more funds to finance its mega projects in a more resilient and self-reliant manner.
Sakaja said the green bond will ease the burden on Nairobians at a time Kenyans are wary of imposition of any form of taxation.
“It is also essential, in my view, to seriously explore the possibility of the green bond. The policy options we need to consider—everything from changing how the city moves to how we build, to how we manage our waste—will need to paid for. If we can relieve the people of Nairobi of some of the burden—if we can borrow to spread the cost over time—then we certainly should,” Sakaja said.
Sakaja said resources from the green bond will be used to build a mass transit system and expand the infrastructure for waste management and water distribution across the city.
The governor said the county will partner with the Ministry of Trade and state corporations and agencies as it explores more county financing options through the Nairobi Stock Exchange.
This will facilitate the mobilisation of low-cost and long- term private capital to finance or refinance the county’s projects.
Governor Sakaja said Nairobi Water and Sewerage Company alone will need a capital investment of about Sh30 billion to offer services and develop a proper water and waste management system that will serve the people of Nairobi.
A research done in 2022 by the Financial Sector Deepening Trust Kenya revealed that county bonds, particularly green county bonds, present an opportunity for counties to generate resources for infrastructure development.
A consulting firm that presented its assessment report to the county in November last year noted that the county can approach the bond as an entity, through a special vehicle or through one of its many agencies.
Laikipa county was the first devolved unit to get Treasury and MPs' approval to float a Sh1.16 billion infrastructure bond in the 2022-23 financial year.
This is a unique bond that, unlike a green bond, targets to fund specific infrastructure projects.
Statistics show that Sakaja’s administration has raised the highest revenue ever by a county government through its own sources, reducing its reliance on exchequer releases.
With days to the end of the 2023-24 financial year, Sakaja’s administration has raised well over Sh12 billion, a record amount that has never been mobilised by his predecessors since the advent of devolution.
The figures project that the governor is on track to hitting Sh13 billion by June 30, the highest amount ever to be collected by any county in the country in the past decade.
Nairobi Water also recorded a historic high in collection, past Sh10.3 billion so far, with a few days to the closing of the financial year.
The record revenue mobilisation has been realised through the county government’s digitisation of its dozens of revenue streams and efficiency of the systems recently unveiled.
The performance is also attributed to the cashless policy that has enabled the county to strengthen the revenue systems, which previously had serious technical hitches.
Under the Unified Business Permit, customers are able to pay for their services with ease, sealing loopholes that occasioned massive revenue leakages.
The UBP, launched early this year, combines the business, fire, food, health, and advertising licenses into one and is available on the Nairobi City County Government’s NairobiPay revenue service online portal.
A report by the Controller of Budget shows that during the 2022-23 financial year, Nairobi collected Sh8.16 billion out of the Sh36.8 generated by all the 47 counties.
The county raised Sh7.6 billion in the 2021-22 financial year, while the lowest performer among counties managed to collect Sh46 million.
At the same, Sakaja’s administration is planning to clear its stock of pending bills that run into billions of shillings.
A report by the Controller of Budget as at March 2024 shows that Nairobi county accounted for 68.5 per cent of the stock of pending bills at Sh107 billion.
Most of the pending bills have been accumulated over the years, with lawyers alone handing fee notes amounting to Sh21 billion, although some being questionable.
"Sh21 billion is higher than our equitable share. It is twice our own-source revenue. Many of them are suspicious,"Sakaja said when he appeared before the Senate.