Islamic Finance Magazine | Nigeria/Islamic Financial Market: Govt issues a 150-billion naira Ijarah Sukuk to boost Infrastructural Development

Nigeria/Islamic Financial Market: Govt issues a 150-billion naira Ijarah Sukuk to boost Infrastructural Development

The Nigerian Federal Government has authorised the FGN Roads Sukuk Company 1 Plc (an issuer on her behalf) to issue a 150-billion naira Ijarah (Leave) Sukuk. This facility has a 10-year maturity period. From 3rd October 2023, interested investors are invited to subscribe until 11^th October 2023. The unit cost of the bond is fixed at 1,000 naira, and 10,000 naira is the minimum subscription that can be purchased. With a rental rate pegged at 15.75%, the rental payment will be due half-yearly, with the bullet repayment due on the maturity date.

This Sukuk is structured on a Forward Ijarah (Lease) instrument type in conformity with existing regulations and regulatory bodies. It is noteworthy here that, as its name suggests, this facility guarantees the use of these proceeds to construct and rehabilitate key road projects and bridges across the six geopolitical zones in Nigeria. The Federal government of Nigeria backs this alternative financial instrument as security. After completion, it will be listed on the Nigerian Exchange (NG) and FMDQ Securities Exchange.

This sovereign Sukuk is part of a series of Sukuk initiated in 2017 by the Nigerian government to develop critical infrastructure, promote financial inclusion, and deepen the domestic securities market. It also gives Nigerian investors, de facto, the opportunity to support the infrastructural development of their country. Due to the increasing demand for non-interest bonds, the previous Sukuk issuances have received strong interest from various investors, which materialised in sustained oversubscription. Efforts have also been made to strengthen the public's awareness of this ethical investment instrument.

Furthermore, in Nigeria, sovereign Sukuk bonds are under the supervision of the Debt Management Office, the overseer of Nigeria’s government debt issuances and management. This sukuk bond is the sixth in Nigeria's series of sovereign sukuks. According to the institution, the five previous issuances of sovereign Sukuks bonds, which amount to 742.557 billion, were issued as follows: N100 Bn in 2017, N100 Bn in 2018, N162.557 Bn in 2020, N250 Bn in 2021, and N130 Bn in 2022. The funds were deployed to rehabilitate and construct 4,000 kilometres of roads and bridges across the country.