Just Transition Finance in Nigeria: Who Pays for the Cost of the Energy Transition?

Every energy transition has a ledger with two columns. In the first column sit the benefits that make the headlines: cleaner air, lower emissions, new industries, cheaper power. In the second column sit the costs that rarely do: the workers whose jobs disappear, the communities whose local economies depend on the old industry, the public revenues that dry up, the families who bear the disruption. Climate policy has become fairly good at filling in the first column. It remains remarkably poor at the second.

That gap has a name: just transition finance. A recent analysis ahead of COP31 described funding that helps workers and communities navigate the shift to clean energy as overlooked, splintered and poorly tracked, a blindspot that could undermine climate goals. For Nigeria, a country whose economy, public finances and regional politics have been entwined with oil and gas for more than six decades, the blindspot is not a footnote. It is a national risk.

What “just transition” actually means

The phrase is often used loosely, so it is worth defining. A just transition is the idea that the move to a low-carbon economy should be fair: that it should create decent work, protect those who stand to lose from change, involve affected communities in decisions, and share the costs and benefits equitably. It is both an ethical principle and a practical one. Transitions that ignore workers and communities tend to provoke resistance, and resistance can stall the very climate action the transition is meant to deliver.

Just transition finance is the money that makes this possible. It includes retraining and income support for workers; investment in new industries and infrastructure in affected regions; support for local government budgets that rely on the old economy; community development funds; and measures to protect households from higher energy costs. Unlike an investment in a solar farm, this spending rarely generates a commercial return, which is precisely why it is neglected.

Why it is poorly tracked

The word “splintered” is apt. Just transition funding comes from many sources: governments, development banks, bilateral partners, philanthropies, companies. It is spread across programmes with different definitions, reporting formats and timeframes. There is no single, agreed method of counting what counts as just transition finance, so totals are difficult to compare and easy to inflate.

This has predictable consequences. When money is poorly tracked, it is hard to know whether commitments have been met, whether funds are reaching affected people, or whether projects are producing outcomes. Communities cannot hold anyone accountable for a promise that nobody can locate. And donors and governments are tempted to count general development spending as transition finance, which flatters the numbers while leaving the underlying problem untouched.

The pattern will be familiar to anyone who follows climate finance more broadly: large announcements, vague definitions, thin follow-through. The difference is that the people affected by a transition that goes wrong live in specific places, with specific livelihoods, and they will remember what they were promised.

The lessons of the Just Energy Transition Partnerships

The most prominent attempts to finance a just transition in developing countries have been the Just Energy Transition Partnerships. South Africa’s, announced at COP26 in 2021 with an initial pledge of about $8.5 billion from several wealthy countries, was the first, followed by partnerships with Indonesia, Vietnam and Senegal. They were meant to demonstrate that a coal-dependent or fossil-reliant economy could receive international support to shift course.

The experience has been instructive and, in places, sobering. Analysts and affected governments have raised concerns about the high share of loans compared with grants, the slow pace of disbursement, the complexity of the arrangements and the limited visibility of benefits for workers and communities. In some cases, the political commitment of donor countries has also wavered. Whatever one’s view of any individual partnership, the broad lesson is clear: announcing a headline number is the easy part. Building the institutions and the transparency that turn it into support for real people is the hard part.

Nigeria has not been a JETP country, but its policymakers can learn from those that have. The lesson is to demand clarity on terms, insist on measurable outcomes for workers and communities, and build tracking mechanisms before money flows rather than after.

Nigeria’s particular exposure

Several features make Nigeria’s just transition question distinctive.

First, fiscal dependence. Oil and gas have historically accounted for a very large share of the federal government’s revenue and foreign exchange earnings. A faster global shift away from fossil fuels, or a sustained fall in demand, poses real risks to public finances. States and local governments that rely on federal allocations feel those risks too. Planning for a different revenue base is a matter of fiscal prudence, not only environmental policy.

Second, the Niger Delta. The region that produces much of Nigeria’s oil also carries the legacy of decades of pollution, underinvestment and grievance. Any transition affecting oil and gas operations will have consequences for host communities that already have good reason to distrust promises. The Petroleum Industry Act of 2021 created a framework for host community development trusts funded by oil and gas operators, intended to channel a share of operating spending into community development. How well those trusts are working, how transparently they are run and whether communities see tangible benefit are questions central to any credible discussion of fairness. A just transition that leaves the Niger Delta behind, again, would be neither just nor stable.

Third, the informal economy. Much of Nigerian economic life, from petty trading to artisanal refining to transport, sits outside formal employment. Workers in these sectors rarely appear in transition plans, because plans are built around formal jobs. Yet changes to energy prices, fuel availability and industrial structure affect them directly. Fuel subsidy removal in 2023 offered a preview of how energy policy changes can ripple through household budgets and informal livelihoods, and how important it is to pair reform with protection for the vulnerable.

Fourth, energy access. Millions of Nigerians still lack reliable electricity. For them, “transition” is not about replacing a functioning fossil system but about getting any dependable power at all. A just transition in Nigeria must therefore balance decarbonisation with the urgent need to expand access, create jobs and support industrial growth. Claiming that the country should transition without acknowledging these realities invites the charge of hypocrisy from those who have already built their wealth on fossil fuels.

Nigeria has also set a long-term goal of reaching net zero by 2060 through its national Energy Transition Plan, which assumes substantial investment over the decades ahead. The plan, and others like it, will be judged not by the elegance of its targets but by what happens to people in the places most affected by change.

The missing piece: tracking and transparency

If one reform could improve just transition outcomes across Africa, it would be better tracking. The principle is simple: every naira or dollar labelled as just transition finance should be traceable to a beneficiary group, a place, a purpose and a result.

That requires agreement on definitions, so that figures mean the same thing across funders. It requires reporting that separates grants from loans, new money from repackaged existing money, and spending on workers and communities from spending on general infrastructure. It requires public, accessible data, not buried in annexes. And it requires verification of outcomes, not only of expenditure: how many workers were retrained and found work; how many communities gained access to a service; how many livelihoods were protected.

Independent monitoring is essential. When governments and funders are the only parties assessing their own performance, the incentives to report success are strong. Third-party verification and community feedback correct that bias.

What companies can do

The private sector has a direct role, and in Nigeria that includes oil and gas operators, power companies, manufacturers and banks. Companies that benefit from the existing energy system, and those that stand to profit from the new one, share responsibility for how the shift affects people.

Operators can plan for the long-term futures of host communities, not just near-term community projects. That means investing in skills and enterprises that will outlast any individual asset, and engaging communities in decisions rather than informing them afterwards.

Companies can build credible workforce transition plans, giving employees and contractors early notice, retraining opportunities and fair support if roles change.

Banks and investors can recognise that just transition outcomes are a form of risk management. A transition that provokes social unrest or political backlash creates financial risk, and one that brings communities along reduces it.

And all companies can report with discipline. A claim to support a just transition should be accompanied by figures: how much was spent, on whom, with what result, verified by whom.

What government should do

Government holds the main levers. It can build transition planning into fiscal and development strategy, identifying the regions, sectors and groups most exposed. It can ensure that statutory community development arrangements, such as those under the Petroleum Industry Act, operate transparently and deliver visible benefit. It can design social protection that reaches informal workers and low-income households when energy policy changes. And it can publish a clear, regularly updated account of what just transition support has been received and where it has gone.

Government should also involve affected communities, unions, informal-sector associations and local authorities in planning. A just transition imposed from above will be neither just nor durable.

What international partners must change

Wealthy governments and development institutions have a responsibility too. Support for just transitions should lean toward grants and concessional finance, not debt that worsens the fiscal position of countries already under strain. Reporting should be consistent and transparent. Commitments should come with timelines, and disbursement should be tracked publicly. And partners should resist the temptation to relabel general development aid as transition finance.

The argument that developing countries should phase out fossil fuels while receiving far less in transition support than the scale of change requires is difficult to defend on grounds of fairness, and it is not a sound strategy for achieving durable climate outcomes.

A transition we can audit

The phrase “just transition” will be repeated in speeches at COP31 and beyond. The test is whether it appears on a balance sheet. A fair transition is one in which the displaced worker, the host community and the informal trader can see what was promised, what arrived and what difference it made.

Nigeria’s choice is not between transition and no transition. The world is changing, and so will demand for the country’s main export. The real choice is between a transition planned with the affected in mind and one that happens to them. The first requires money, transparency and independent scrutiny. The second requires nothing at all, which is why it is so likely.

A forgotten line item in a climate budget becomes a political crisis in a community. The time to write it in, and to track every naira against it, is before the ledger is called in.