DMO Issue New Sovereign Sukuk, Assign Transaction Parties

The Debt Management Office (DMO) has set for another Sovereign Sukuk of between N200 and N250 billion to finance critical road projects across the nation. Also, the DMO appointed Stanbic IBTC Capital Limited, Greenwich Merchant Bank Limited and Vetiva Capital Management Limited issuing houses.

The BURAQ Capital Limited will act as financial adviser, while FBNQuest Trustees Limited and APEL Capital & Trust Limited are trustees to the impending Sukuk issuance, the fourth since 2017, the DMO stated on Tuesday.

While Abdulai, Taiwo & Co. Solicitors and Tsedaqah Attorneys are to act as legal advisers and the transaction parties were designated via the open competitive bidding process.

In September 2017, DMO embarked on the issuance of Sukuk as a strategic initiative to support the development of infrastructure, promote financial inclusion and deepen the domestic securities market in which N100 billion was raised to finance the rehabilitation and construction of twenty-five (25) road projects across the six (6) geopolitical zones.

Likewise, the DMO issued a Sukuk for N100 billion in 2018 and another for N162.557 billion last year. The earnings of these two (2) Sukuk issuances were also rolled out to twenty-eight (28) and forty-four (44) road projects, also in the six (6) geopolitical zones.

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In a statement the DMO says, ” a total of N362.577 billion Sovereign Sukuk have so far been issued between September 2017 and June 2021.”

It further stated that, “since the debut Sovereign Sukuk in September 2017, whose benefit in terms of improved road infrastructure within and outside cities in Nigeria is clearly visible, the Sukuk has been commended as a viable instrument for financing infrastructure.”

“The use of Sukuk has enabled timely completion of the designated projects whilst also delivering the multiplier effects associated with construction of capital projects such as roads” the statement added.

What is Sovereign Sukuk?

The Sovereign Sukuk is non-interest-bearing security. It is an obligation of the Federal Government of Nigeria (FGN). Similar to other FGN Securities, the Sovereign Sukuk is being issued by the Debt Management Office through the FGN Roads Sukuk Company 1 Plc.

According to the DMO, the merits of a Sovereign Sukuk are: Regular cash flow as Rental Income will be paid half-yearly to Sukuk Holders; Rental Income is Tax-free; Safe and risk-free investment as they are a direct obligation of the FGN and backed by the full faith of the FGN; Good security for diversification of asset portfolio; Acceptable as collateral for borrowing from banks and other financial institutions; Classified as Liquid Asset by the Central Bank of Nigeria; Listed and traded on The Nigerian Stock Exchange and the Financial Market Dealers Quotation OTC Securities Exchange thereby providing opportunities for Sukuk holders to buy or sell on any business day; and Good Investment opportunity for ethical investors.

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