The Federal Government has enlisted no fewer than 28 road contracts that will benefit from the ₦100 billion Sukuk bond issued in December 2018 by the Debt Management Office (DMO).
The fund, according to the Minister of Finance, Zainab S. Ahmed, will be used for Construction and Rehabilitation of 28 key economic Road Projects earlier captured in the 2018 Budget.
The Road Projects are located in the 6 Geo-political Zones of the country with each Zone having a total allocation of ₦16.67 billion.
Ahmed on Thursday, January 10, 2019, presented a symbolic cheque of ₦100 billion Sovereign Sukuk proceeds to the Federal Ministry of Power, Works and Housing in Abuja.
During the presentation, the Finance Minister said the funds will be released to the Federal Ministry of Power, Works and Housing based on the framework agreed with the Trustees in order to ensure transparency and accountability in the use of proceeds.
The President Muhammadu Buhari-led administration had opened an offer for subscription of a ₦100 billion Sukuk bond.
The Sukuk became the second issued by the Federal Government, and the third issued in the country. Osun state, in 2013, issued a ₦10 billion Sukuk bond. The DMO had in September 2017, issued a ₦100 billion Sukuk bond.
Highlights of the issue
- The minimum offer subscription is for ₦10,000 and in multiples of ₦1,000 thereafter.
- The offer opened on December 6, 2018, and closed on 17th of December, 2018.
- The bond has a tenor of 7 years and will mature in 2025.
- Rental rate is 15.743% per annum, payable biannually.
About Sukuk bonds
Sukuk is derived from the word Sakk, which can be translated to mean legal instrument, deed, and cheque. Sakk can also mean to strike a deal on a paper document.
The origin of Sukuk dates back to 7th century AD, where the first Sukuk transaction took place in Damascus, Syria in the Great Mosque of Damascus (Umayyad Mosque).
Due to the fact that Islam prohibits usury – collecting interest from your loans – interest based bonds are banned in Muslim nations.