The Debt Management Office (DMO) has said that the country has planned to sell a 100 billion naira ($328 million) debut sovereign sukuk in the local market this month to help fund road projects. This is yet another debt offering from Nigeria, who has been looking for all possible ways of funding its deficit budget and triggering the revival of its economy which is still in recession. With the upcoming sukuk bond, however, what should Nigerians expect?
- According to Lexicon, sukuk are Islamic bonds, structured in such a way as to generate returns to investors without infringing Islamic law that prohibits riba or interest.
- Nigeria’s sukuk bond makes a lot of sense considering that the country is home to the largest Islamic population in sub-Saharan Africa, with about half of its 180 million people Muslims. Therefore, generating interest in the bond should not be much of a problem
- The bond will have a 7-year tenor and is billed to go on sale on June 28 for three days via book building. Subsequent to its sale, the bond will be tradable on the Nigerian Stock Exchange and on FMDQ over-the-counter platform.
- The bond will target retail and institutional investors and First Bank and Islamic wealth manager Lotus Capital will act as managers for the sale.
- Although this is the first sukuk on a Federal level, it is not the first in Nigeria. Osun State, had in 2013, issued 10-billion-naira worth of sukuk. The bond was successfully completed and over-subscribed by 20%.
- The sukuk represents the form of alternative funding the Federal Government is looking to, in order to raise as much as $5 billion from the foreign debt markets. A $300 million ‘diaspora bond’ currently on a roadshow to Britain, Switzerland and the United States and an expected N20 billion ‘green bond’ are expected to follow a $1.5 billion Eurobond and the FGN savings bond program.