National debt: Invest in Sukuk, others to reduce pressure on Govt spending — Minister

..Says N9.18trn allocated to debt servicing in 2024 budget

The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun has recommended an increased participation in the non-interest market to reduce huge fiscal constraint on the Government.

The Minister explained that Nigeria’s high debt service to revenue ratio was posing significant fiscal constraints on the Federal Government.

Speaking at the opening of the Securities and Exchange Commission (SEC) Nigeria-Islamic Financial Services Board (IFSB) International Forum, Edun further disclosed that the Federal Government in its proposed 2024 budget sets aside a whooping N9.18 trillion out of the total budget of N27.5 trillion for debt servicing is expected to gulp N9.18 trillion.

He noted that the non-interest financial market or Islamic financial market presents a cheaper and sustainable way to raise funding for major infrastructure, adding that Nigeria needs to increase its participation in the global non-interest financial market.

He expressed optimism that the outcome of the forum would “not only strengthen the ties between the Islamic finance community around the world but would also lead to us taking more advantage of the huge funds that are available in the non-interest world so as to have a viable way of financing the green sustainable growth which is the agenda of Nigeria.”

“To attract the investments that would increase the productivity of the economy, grow the economy, create jobs, reduce poverty and help the President meet his promise to Nigerians, a better life for all.”

Also speaking at the forum, the Director General, SEC Nigeria, Mr. Lamido Yuguda pointed out that although there has been significant growth in the non-interest financial sector in Nigeria, it remains very small when compared to the global market.

Yuguda explained that the structure of the market makes it a fair, just and equitable financial market rather than just an Islamic financial market.

He held that in 2022 the Islamic Finance Industry had an estimated size of $ 3.25 trillion, with global Sukuk issuances valued at $182.72 billion,” adding that in Nigeria, the Islamic finance segment of the financial industry reached an estimated size of $2.9 billion as at the end of 2022, with outstanding Sukuk forming the largest part at 57 percent, followed by Islamic banks at 42 percent (total assets), and the remaining 1 percent split between Islamic funds (total assets) and takaful (total contributions)”.

He stated that this “shows that the Nigerian market makes up just 0.9 percent of the global non-interest market, indicating the dire need for more growth. With the country boasting a large population and a significant proportion unbanked, the long-term potential for Islamic finance in Nigeria is immense.”

“The Non-Interest (Islamic) Capital Market in Nigeria has undergone transformative growth, becoming an integral part of our financial framework, offering a distinctive platform for ethical and Shari’ah-compliant investments. The NICM contributes to the diversity of our financial markets in line with our revised capital market Master plan 2021 -2025.

“Since the debut of Sukuk in Nigeria in 2017, the Debt Management Office has raised almost N1 trillion to finance over 5,000 kilometers of critical roads & bridges with all such issuances oversubscribed.

“The oversubscription of the most recent 6th Federal Government of Nigeria Sukuk by 435 percent underscores investor confidence, showcasing the strategic role of Sukuk in infrastructure development and financial inclusion.

“We are all aware that Sukuks backed by assets promote risk sharing in high-risk projects, offer flexibility in project stages and foster public-private partnerships.”

On his part, the Secretary General, IFSB, Dr. Bello Lawal Danbatta said the global non-interest financial sector is expected to grow by 10 percent in 2023-2024 year-on-year.

Dr. Danbatta said Nigeria with its huge population can lead the Africa continent in exploring the potentials presented by the non-interest financial sector.

“We have the opportunity to be able to cut down on the excessive devaluation of our currency through the leveraging of a non-interest capital market to build our own designed infrastructure,” he added.