By Ayobami Adedinni
The Federal Government plans to sell a N100 billion ($328mln) debut sovereign sukuk in the local market this month to help fund road projects, the Debt Management Office (DMO) said yesterday.
Sukuk, otherwise known as Islamic bonds is structured in such a way as to generate returns to investors without infringing Islamic law (that prohibits riba or interest). Sukuk represents undivided shares in the ownership of tangible assets relating to particular projects or special investment activity.
According to DMO, the bond with a 7-year tenor will go on sale on June 28 for three days via book building. The bond will be tradable on the Nigerian Stock Exchange and on FMDQ over-the-counter platform.
Nigeria is home to the largest Islamic population in sub-Saharan Africa, with about half of its 180 million people Muslims. It is also home to one of Africa’s fastest-growing consumer and corporate banking sectors.
The DMO said it was “part of the plan to fast track the development of infrastructure and engage in project-tied capital raising.” It said Nigeria has challenges with road, railway and power infrastructures.
The latest issuance is part of plans to develop alternative funding sources for government and to establish a benchmark curve for corporates to follow, the debt office said.
The planned sukuk issue will target retail and institutional investors, with First Bank and Islamic wealth manager Lotus Capital managing the sale.
The government plans to borrow as much as $10 billion from debt markets, with about half of that coming from foreign sources, to help fund a budget deficit worsened by lower oil prices which have slashed government revenues and weakened the naira
It hopes to fund more than half of its budget deficit of 2.36 trillion naira this year from local borrowing. It also plans to tap concessionary sources to fill its funding needs and has been in talks with the World Bank since last year.
Recall that Osun State issued 10 billion naira worth of Sukuk in 2013, but no other sukuk transaction followed.
On Monday, Vice President Yemi Osinbajo, standing in for President Muhammadu Buhari, signed a 7.44-trillion naira spending plan for 2017 into law.
The DMO is on a roadshow this week to Britain, Switzerland and the United States to market a $300 million Diaspora bond to Nigerians living abroad.
It also expects to issue 20 billion naira in “green bond” after it raised $1.5 billion Eurobond in the first quarter and launched a savings bond programme targeted at retail investors.