Sukuk projects and President Buhari
The dynamism of the Sukuk market contributes towards strengthening financial stability and in facilitating the expansion of inter-regional investment flows. As we move towards increasing this internationalisation of Islamic finance, and thus towards greater global financial integration, it will contribute towards a global growth process and financial stability that will be mutually reinforcing. The Federal […]
The dynamism of the Sukuk market contributes towards strengthening financial stability and in facilitating the expansion of inter-regional investment flows. As we move towards increasing this internationalisation of Islamic finance, and thus towards greater global financial integration, it will contribute towards a global growth process and financial stability that will be mutually reinforcing.
The Federal Government has released the proceeds of the N100 billion Sukuk bond to 25 key economic road projects of the Federal Ministry of Power, Works and Housing. Former Finance Minister Mrs. Kemi Adeosun, handed over the cheque to Minister of Power, Works and Housing, Babatunde Fashola. The government issued the Sovereign debut Sukuk of N100 billion in September 2018. The offer was oversubscribed at N105.87 billion. The milestone was a sign of confidence in the Nigerian economy and the administration of President Muhammadu Buhari. She added that the Sukuk proceeds would unlock Nigeria’s potential. “This is the first Sukuk bond issuance for Federal Government Nigeria and second Sukuk bond because Osun State was the first to issue Sukuk bond in 2013. It is about financial inclusion and deepening of our financial markets. The proceeds will be used to further support government capital spending for 2017 – the construction and rehabilitation of 25 key economic roads across the six geo-political zones of the country. Each of the geo-political zones is expected to receive N16.67 billion for roads in their zones. The North Central and Southsouth accounted for five each of the 25 key roads. The Northeast, Northwest and Southeast have four each. Three projects are to receive funding from the Sovereign Sukuk proceeds in the Southwest. The Northcentral has five – dualisation of Lokoja-Benin road, Abuja-Abaji-Lokoja road section one, three and section four and Construction of Oju-Loko-Oweto Bridge over River Benue.
The question today then is: are there implications of Islamic financing of these roads and their subsequent ownership by the Sukuk holders? Christians Association of Nigeria fears that the Islamic financial institutions will own the 25 major roads after construction. There is answer to that fear which is no. The FGN’s Sukuk issuance is the first attempt by the FG to raise funds through the non interest capital market. The Aregbesola’s sukuk issue was targeted at infrastructure development and financial inclusion.
FGN Sukuk offer was deployed to the construction of twenty-five major federal roads and bridges across Nigeria’s six geopolitical zones like Osun sukuk. Information on the use of proceeds is provided in greater detail in the prospectus.
The Northeast has four – dualisation of Kano-Maiduguri road section two, three, four and five. The Northeast has four projects, dualisation of Kano to Katsina road phase one, dualisation of Suleja to Minna roads in Niger State, phase two, construction of Kano Western bypass and the construction of Kaduna Eastern by-pass road.
Four projects will benefit from the Southeast. They are rehabilitation of Enugu-Port Harcourt dual carriageway section two, Onitsha to Enugu expressway, Enugu to Port Harcourt dual carriageway section one, and three. For the Southsouth, five projects will benefit from the fund. They are dualisation of Yenegoa to Kolo to Otuoke to Bayelsa palm road.
Other projects in the region are the rehabilitation of Enugu – Port Harcourt road section four and the dualisation of Lokoja-Benin road section two, three and four and five. Three projects will be executed in the Southwest – reconstruction and asphalt overlay of Benin – Ofosu – Ore – Ajebandele – Shagamu dual carriageway phases three and four.
Considering the huge infrastructural deficit facing Nigeria, and the challenges being faced by the Federal Government of Nigeria due to a decline in oil revenue amongst other related issues, it has become imperative for State Governments and corporate to access alternative financing techniques to meet their capital development needs.
There is no doubt about the potentials for using sukuk as a tool for capital raising and infrastructural development in Nigeria. The issuance of the first state sukuk by Osun Sukuk Company Plc attests to the huge potentials for Islamic Finance in Nigeria, while its subsequent international acclaim creates integrity within the market which has the propensity to promote foreign direct investment. With the right team of professional advisers, it is clear that focusing on substance over form can contribute significantly to the rapid development of the Nigerian economy through the issuance of Islamic Finance products. Nigeria should not miss out on this opportunity.
Inwalomhe Donald writes from Benin City.