Fed Govt plans more Sukuk bonds to fund projects

The Federal Government plans to upscale its alternative financing programme by issuing more Sukuk bonds to fund projects, building on the back of huge successes recorded on previous issuances.

It had raised N362.6 billion in three previous issuances which were hugely oversubscribed.

Director-General, Debt Management Office (DMO) Ms Patience Oniha, said the government recognises the need to issue more Sukuk bonds given the increasing success and strong investor’s appetite for the alternative non-interest bonds.

According to her, the Sukuk initiative by DMO, which oversees national debt management, has been successful given the strong level of awareness that has been created.

She attributed the success of the Sukuk issuances to the increased confidence from market participants given that the Sukuk bonds are tied to specific projects that can be tracked.

“Looking ahead, we recognise the need to upscale issuances to include other standalone projects beyond road infrastructure, but more importantly, we are looking to support projects that are revenue generating to service the Sukuk,”  Oniha said.

She added that there must be a focus on growing and diversifying the investor base for the Sukuk as well as other investment products.

Oniha spoke at the third Islamic Finance News (IFN) Nigeria Roadshow 2021 hosted by the Nigerian Exchange (NGX) Limited, in collaboration with REDMoney Group. With the them: Systemic restart: Islamic finance in Nigeria, the forum aimed at promoting the growth and development of the Islamic finance industry within the economy, including facilitating the growth of a new asset class in the industry.

Chief Executive Officer, Nigerian Exchange (NGX) Limited, Mr. Temi Popoola   said the Islamic finance sector has continued to grow in Nigeria with increased interests from market participants and a growing number of players including two Islamic banks, four takaful insurance companies and several microfinance banks and managed funds.

He pointed out that fFollowing the issuance of the first Sukuk in Sub-Saharan African, the Osun State N11.4 billion 7-year Ijarah Sukuk in 2013, the increasing demand for ethical investments in Nigeria has further led to three successful Sukuk issuances totalling N362.6 billion by the DMO from 2018 till date, all of which have been listed on NGX.

According to the Islamic Finance Development Report 2020, the Islamic finance industry’s assets grew by 14 per cent in 2019 to $2.88 trillion, returning to its long-term pattern of strong growth after the slowdown in 2018.

Popoola expressed NGX’s commitment to building the Islamic finance asset class, assuring that NGX will continue to provide an efficient and liquid market for investors and businesses in Africa, to save and access Shariah-compliant capital and investments.

“Our collaboration with RedMoney in convening the annual IFN Nigeria forum attests to our belief in the potential and importance of Islamic finance in catalyzing inclusive economic recovery and a more sustainable global economic growth. We will collaborate with all market stakeholders to contribute towards the growth of Islamic finance in Nigeria and Africa at large,” Popoola said

other participants at the forum included Peter Mushangwe, AVP – Analyst, Financial Institutions Group, Moody’s Investors Service; Norfadelizan Abdul Rahman, Managing Director, Taj Bank; Elhadji Ibrahima Thiaw, Country Manager, Senegal, The Islamic Corporation for the Insurance of Investment and Export Credit; Eguarekhide Longe, Managing Director, AIICO Pension Managers Limited; and Rizwan Kanji, Partner, Akin Gump.