The Debt Management Office (DMO) has listed N100 billion Sukuk bonds on the Nigerian Stock Exchange (NSE). The Sukuk is a type of bond that doesn’t apply interest rate but allows an investor to earn profit from investment or rental from the asset.
According to reports, the second Federal Government N100 billion Sukuk was raised at a rental rate of 15.743%, compared to the maiden issuance listed in April 2018 at 16.47%. This is a 73-basis point discount from the first issuance listed last year.
The Sukuk bond is expected to mature by 2025. Issuing the two Sukuk bonds at the capital market is an effort by the administration of President Muhhamdu Buhari to ensure financial inclusion, as investors who partake in the bond mostly don’t transact other investments due to their religious beliefs.
What you need to know: Sukuk is an Arabic term which means ‘financial certificates’. The Sukuk bond applies Shariah principles and concepts, and it’s endorsed by the Shariah Advisory Council which was established in 2007 by the Arab Chamber of Commerce and Industry. Shariah law frowns at the generation of money from money such as interest.
The listing of the Sukuk bond will deepen the investor base for FGN securities, according to the report seen by Nairametrics.
Reacting to the bond listing, Mr. Jude Chiemeka, Head, Trading Business Division of the NSE, said, “At the Exchange, we believe enhancing access to capital for the Federal Government and the private sector is key to national economic growth. This is the motivation behind our commitment to promote and support the growth of the debt market in Nigeria.
“Our efforts are geared towards expanding the NSE’s position as the multi-asset hub, creating ample possibilities for our key stakeholders, while delivering a transparent and liquid market to investors.
“The emerging and frontier markets can expect greater traction in their quest to continually unlock dormant pools of capital. This listing is particularly important in scaling development for these economies characterized by daunting growth in infrastructure and also has a strong bias for Islamic Finance.”