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Nigerian Banks and ESG: Between Optics and Practice
SOStainabilityWeekly
Edited by Oke Epia, E-mail: sostainability01@gmail.com | WhatsApp: +234 8034000706
Washing and Hushing
Conversations on Environmental, Social, and Governance (ESG) in Nigeria’s financial services sector are often framed around investor confidence, international rankings, sustainability reports, or green finance commitments. This way, a very important accountability issue is easily turned into a public relations, branding, and marketing gimmick. Sadly, the immediate consequences of weak ESG systems are not borne by shareholders sitting in boardrooms in Lagos, London, or Johannesburg. They are borne by ordinary citizens crushed in the crucibles of scorched earth and broken communities.
They are borne by the fishing communities whose rivers are polluted by projects financed without environmental safeguards. They are borne by women excluded from financial decision-making structures. They are borne by workers trapped in exploitative contract staffing systems. They are borne by communities displaced by extractive projects financed with little to no accountability. And they are borne by a country increasingly vulnerable to climate shocks, while financial institutions continue funding carbon-intensive sectors without credible transition plans.
The recently launched Fair Finance Nigeria policy assessment report, titled “How Four Banks in Nigeria Are Responding to Global Environmental, Social and Governance Compliance Standards?”, offers one of the clearest warnings yet about the state of sustainable finance in Nigeria. Conducted between July and November 2025, the assessment evaluated four leading banks — Access Bank, United Bank for Africa, Zenith Bank, and Standard Chartered Bank against more than 400 international ESG indicators. The findings were alarming. The banks collectively recorded an average ESG performance score of just 1.7 out of 10. That score is not merely a technical rating. It is a reflection of systemic weaknesses in one of Nigeria’s most powerful economic sectors. And it raises urgent questions about accountability, environmental and social justice, financial ethics, and the future of development in Africa’s largest economy.
How the four banks ranked
The temptation is to reduce the findings to a ranking exercise: which bank scored highest or lowest. If the scores were positive, the banks with high rankings would have taken advertorials in newspapers to glamorize. But that misses the deeper issue. The real story is what these scores reveal about the structural culture of banking governance in Nigeria.
For context, Fair Finance Nigeria (FFNG) is the Nigerian chapter of Fair Finance International (FFI), a global network that “assesses, reports on, and campaigns for more responsible investment policies and practices by financial and public institutions. FFNG’s mission is to empower consumers, policymakers, and citizens to hold financial institutions accountable for adopting environmental, socially responsible, fair, and sustainable practices.” The methodology is to benchmark investment policies and practices against international standards in critical areas such as human rights and climate impact. Oxfam, CISLAC, BudgIT, CODE, STEPS, and Policy Alert are the headline civil society groups behind the Nigeria chapter. The assessment exposed major deficiencies in tax transparency, climate responsibility, human rights protections, biodiversity commitments, and public accountability. One of the most troubling findings was that all four banks scored zero on tax transparency. This means the assessed institutions failed to publicly disclose disaggregated country-by-country revenues or provide sufficient clarity regarding relationships with entities operating in tax havens or low-tax jurisdictions.
Tax opacity weakens national economic growth and development. When financial systems lack transparency, illicit financial flows become easier to conceal. Governments lose revenue that could have funded healthcare, education, public infrastructure, flood resilience, and social protection systems. In countries like Nigeria, where millions remain economically vulnerable, tax secrecy is not simply a governance problem but a social justice issue.
The report also found that climate action commitments among the banks were critically weak, with an average score of just 0.9 out of 10. Even though Nigeria is highly vulnerable to climate change impacts, banks continue to finance high-emission sectors, such as oil and gas, without publicly available transition strategies or measurable frameworks for emissions reduction. This contradiction sits at the heart of Nigeria’s sustainability crisis. Financial institutions increasingly publish sustainability reports and make public ESG commitments, yet many continue funding activities that worsen flooding, environmental degradation, pollution, social displacement, and long-term climate vulnerability. The banks are profiting from sectors that contribute to ecological instability, while many of the communities suffering the environmental consequences remain economically marginalized and socially disempowered.
Blighted governance scores…
Interestingly, the assessment showed relatively stronger performance in the governance domain, especially in operational areas such as labour rights, gender policies, and anti-corruption frameworks. This reflects a broader trend within corporate sustainability systems in many developing economies: organizations often prioritize internal administrative compliance because it is easier to measure, communicate, and less disruptive to business models.
It is easier to implement workplace policies than to reform financing practices; it is easier to publish diversity statements than to stop financing environmentally destructive projects; it is even easier to conduct internal ethics training than to disclose climate-related financial risks tied to loan portfolios. This explains why governance-related scores may appear relatively high while external financing impacts are low. However, serious concerns persist in labour practices with questions around contract staffing, wage disparities, workplace welfare, union curtailment, employee mental health, and gender representation in senior leadership. The challenge is that ESG is being viewed from the limited prisms that allow for impressive optics. But ESG accountability demands scrutiny of how banks influence society through the projects they finance, the industries they prioritize, and the risks they externalize onto vulnerable populations and communities. When banks finance environmentally risky projects without adequate safeguards, communities bear the consequences long before financial institutions experience reputational damage.
In the Niger Delta, decades of oil-related environmental degradation have devastated livelihoods, polluted water systems, and weakened public health outcomes. Financial institutions that finance fossil fuel extraction cannot remove liability for adverse impacts. When large construction projects are implemented without proper human rights protections, local populations frequently face displacement, loss of livelihoods, weakened access to natural resources, and environmental degradation. When financial institutions continue to fund carbon-intensive industries without adequate climate-risk assessments and responsibility for accountability, the social costs eventually return to ordinary citizens through rising living costs, disaster losses, food inflation, and public health crises. The victims of weak ESG governance are not abstract stakeholders. They are real people.
Branding and PR gymnastics
Annual sustainability reports of banks discuss inclusion, climate action, governance frameworks, and corporate responsibility. Yet beneath those glossy reports lies a difficult question many financial institutions have not fully answered: How sustainable is a banking system that increasingly depends on unfair labour practices? Across Nigeria’s banking sector, casualization appears to have been normalized. Thousands of workers operate under outsourced arrangements through third-party agencies rather than as full employees of the banks they serve daily with sweat and toil. These workers often occupy frontline positions — marketers, customer service officers, sales agents, recovery agents, and operations staff, and yet many are faced with lower wages, weak job security, limited healthcare protections, unrealistic performance targets, and exclusion from long-term employee benefits. This contradiction strikes at the heart of ESG itself: if the ‘social’ pillar of ESG covers labour dignity, worker welfare, mental health, fair remuneration, gender inclusion, and decent work, then Nigerian banks must confront uncomfortable realities about their employment frameworks. The International Labour Organization (ILO) defines decent work as productive work delivered in conditions of freedom, equity, security, and human dignity. Nigeria’s banking sector, despite its profitability, continues to face criticism over work pressure, contract staffing systems, and aggressive sales cultures that many labour advocates argue undermine employee welfare. These questions matter because the Fair Finance Nigeria assessment reveals that Nigerian banks perform relatively better on internal labour policy disclosures than on broader environmental and governance accountability. Yet disclosure is not the same thing as lived reality.
ESG gaps as financial risks
Globally, financial markets are changing rapidly. Investors, development finance institutions, insurers, and international regulators are placing increasing emphasis on climate-risk disclosure, sustainable finance standards, and ethical investment practices. Weak ESG systems are becoming economic liabilities. Banks that fail to strengthen ESG governance face growing risks of reputational damage, declining investor confidence, international financing restrictions, and reduced competitiveness in global capital markets. The Fair Finance Nigeria report warned that climate integration remains significantly underdeveloped within Nigerian banking. Other assessments have similarly found that only a small fraction of Nigerian financial institutions disclose financed emissions or climate-related credit exposure under international reporting frameworks such as IFRS S2.
This creates serious long-term exposure as the global economy transitions away from carbon-intensive activities. Banks heavily exposed to fossil-fuel-dependent assets could face stranded asset risks. Projects that appear profitable today may become economically unviable under future climate regulations, carbon pricing systems, or changing investor expectations. International investors are also becoming more selective as global capital increasingly flows toward institutions demonstrating credible ESG governance, climate resilience planning, and transparent reporting systems. Weak ESG performance, therefore, threatens Nigeria’s international financial credibility at a time when the country urgently needs sustainable investment inflows.
ESG echoes in London
The questions raised about weak ESG governance in Nigerian banking, labour casualisation, climate accountability, transparency failures, and sustainable finance will resonate at the Nigeria Climate Investment Summit (NCIS) scheduled to be held during the London Climate Action Week in June. Convened by SOStainability and GLOBE Legislators, the Summit is a high-level accountability and investment-focused platform designed to examine whether Nigeria’s climate ambitions, governance systems, financial institutions, and policy frameworks are truly capable of attracting credible global climate finance and delivering a just transition. This is particularly important because the global financial system is rapidly moving toward stricter ESG expectations, climate-risk disclosure systems, transition finance standards, and sustainability-linked investment benchmarks. The reality is that Nigeria’s financial institutions can no longer separate profitability from sustainability accountability as capital markets, institutional investors, development finance institutions, and financial institutions, including deposit money banks, are steadily repositioning portfolios toward sustainable infrastructure, energy transition assets, and climate-resilient economic systems.
Trends and Threads
Beyond the Rebranding of Oil and Gas Companies
For decades, Nigeria’s oil and gas sector has powered the nation’s economy while simultaneously leaving behind polluted rivers, devastated farmlands, communities shadowed by gas flares, unemployment, and serious environmental damage in the Niger Delta. Today, however, the language is changing. Oil companies now speak about “energy transition,” “decarbonization,” “net zero,” “clean energy,” and “sustainability.”
But beyond the glossy sustainability reports and conference speeches, a difficult question remains: is Nigeria witnessing a genuine transition, or merely a strategic repositioning of fossil fuel companies in a world moving away from oil?
This question matters because Nigeria sits at a dangerous crossroads. The country depends heavily on oil revenues, yet the global economy is increasingly shifting toward cleaner energy systems. Nigeria cannot afford to ignore the transition. But it also cannot afford a transition that exists only on paper. The real issue is not whether transition efforts exist. They do. The deeper issue is whether those efforts are bold enough, transparent enough, and people-centered enough to truly transform the country’s energy future.
The reality Nigeria cannot ignore
Nigeria is Africa’s largest oil producer, yet millions of Nigerians still lack reliable electricity. Communities living near oil facilities continue to suffer environmental degradation despite decades of petroleum wealth. Gas flaring, though reduced over the years, remains a major challenge in several oil-producing areas. At the same time, international pressure on fossil fuels is increasing. Investors are demanding Environmental, Social, and Governance (ESG) compliance. Climate financing is increasingly tied to cleaner energy pathways. Conscious financial institutions are becoming more cautious about funding high-carbon projects. Nigeria’s response has been to embrace the concept of a “just” or “fair” energy transition, one that allows the country to continue using gas as a transition fuel while gradually reducing emissions. The Federal Government’s Energy Transition Plan aims for net-zero emissions by 2060 while also expanding energy access and protecting jobs. The government argues that Nigeria cannot simply abandon oil and gas overnight because millions depend on the sector economically. That position is understandable. Yet the transition debate becomes problematic when “transition” is used to justify endless fossil fuel expansion without sufficient investment in cleaner alternatives.
What are oil companies actually doing?
Several oil and gas companies operating in Nigeria have begun repositioning themselves as “energy companies” rather than simply oil producers and marketers.
Seplat Energy, for example, now openly describes itself as supporting Nigeria’s energy transition through gas development and new energy investments. The company has increasingly focused on gas infrastructure and domestic energy supply. Shell Nigeria also states that environmental and social responsibility are central to its operations while increasing investments in gas-related projects. Meanwhile, Nigeria has promoted gas expansion as a major transition strategy. New policy frameworks under the Petroleum Industry Act (PIA) introduced incentives for gas development projects. Reuters recently reported that new gas-focused production agreements are being presented as part of Nigeria’s shift toward a gas-powered economy. The Nigerian Gas Flare Commercialization Programme (NGFCP) is another major initiative intended to reduce gas flaring by converting wasted gas into economic value. Government projections suggest the programme could attract billions of dollars in investment while reducing emissions and generating electricity. On paper, these developments appear promising, but transition efforts cannot be measured by announcements alone. The real test is whether communities can feel the difference.
Can companies claim sustainability while gas flaring persists?
For decades, gas flaring has symbolized the contradiction at the heart of Nigeria’s petroleum industry: enormous energy wealth existing alongside environmental destruction and energy poverty. Although regulatory efforts to stop gas flaring date back to the Associated Gas Re-Injection Act and newer reforms under the PIA, enforcement has historically remained weak. Communities in the Niger Delta continue to raise concerns about polluted air, damaged crops, contaminated water, and health risks linked to oil and gas operations. Discussions across public forums and environmental reporting continue to highlight frustrations about the slow pace of change despite decades of promises. This raises critical questions: If gas flaring still exists after decades of regulation, what exactly has failed: policy, enforcement, infrastructure, or political will? Why should communities trust new “transition” promises when older environmental promises remain unresolved? Can companies genuinely market themselves as climate-conscious while affected communities continue to bear environmental costs? These are not anti-investment questions. They are accountability questions.
Reform or reputation repair?
The Petroleum Industry Act of 2021 was widely presented as a transformative reform for Nigeria’s oil and gas sector. It created new regulatory structures, introduced host community development provisions, and aimed to improve transparency and investor confidence. Supporters argue that the PIA modernizes the industry and creates a more predictable investment climate. However, critics continue to ask whether the law prioritizes investment over environmental justice. Host communities, for instance, still question whether development funds truly compensate for decades of ecological damage and economic neglect. Others worry that the transition narrative is becoming too gas-focused without sufficient urgency around renewable energy investments. Nigeria’s Energy Transition Plan itself acknowledges that long-term fossil fuel demand may decline globally and that oil-sector job losses are expected over time. Yet another difficult question emerges: is Nigeria preparing oil-dependent communities and workers for that future, or merely postponing a crisis? A genuine transition requires more than protecting oil revenues. It requires preparing people for economic change.
Why renewable energy appears second-placed
One major criticism of Nigeria’s transition efforts is that renewable energy development still appears slower and less aggressive than the expansion of oil and gas projects. Government officials repeatedly describe gas as a “transition fuel,” arguing that Nigeria must first solve energy poverty before rapidly phasing down fossil fuels. That argument has merit. Millions of Nigerians still cook with firewood and lack stable electricity. However, critics worry that the gas narrative risks becoming an excuse for prolonging fossil fuel dependence rather than accelerating clean-energy investment. Nigeria possesses enormous solar potential, especially in northern regions. Yet many rural communities still lack affordable solar infrastructure. Renewable financing remains insufficient compared to the scale of need. This raises another uncomfortable but necessary question: if Nigeria truly believes the future is renewable, why does investment in it still appear slower than fossil fuel expansion? The danger is clear. If Nigeria delays serious renewable development for too long, the country risks being left behind in a rapidly changing global energy market.
Beyond public relations
Globally, many oil companies now use the sustainability lexicon. Yet international debates increasingly question whether some transition strategies amount to greenwashing, presenting an environmentally responsible image without substantial structural change. Nigeria must avoid falling into that trap as a true energy transition cannot simply mean producing “cleaner fossil fuels.” It must involve measurable reductions in environmental harm, stronger regulatory enforcement, real investments in renewables, transparent reporting, and meaningful community inclusion. Most importantly, transition efforts must become visible in the lives of ordinary Nigerians. Communities should see cleaner environments; young people should see new economic opportunities. Households should experience improved energy access; workers should receive protection and retraining. Anything less risks turning “energy transition” into another fashionable slogan disconnected from reality.
