Globally, Sharia-compliant, fixed-income capital markets instruments are proving an increasingly attractive investment, thus Islamic finance system is providing solutions to infrastructure deficit in Nigeria. Nigerian Debt Management Office (DMO) has said, the N250 Billion Sovereign Sukuk whose offer opened on December 16, 2021, closed yesterday December 23, 2021, with an unprecedented subscription level of over N865 Billion. This outcome represents a subscription level of 346%.
The Debt Management Office (DMO) Nigeria is a government agency established to centrally coordinate the management of Nigeria’s debt. In September 2017, the DMO commenced issuance of Sukuk as a strategic initiative to support the development of infrastructure, promote financial inclusion and deepen the domestic securities market.
According to press release by the DMO yesterday 24th of December, 2021 noted that, “An analysis of the subscription data by the Debt Management Office (DMO) revealed high levels of subscription from banks and fund managers (including pension funds), as well as non-interest financial institutions, ethical funds, cooperative societies and retail investors.”
Furthermore, the statement indicate that, “The increasing level of participation by a more diverse and larger number of investors is a confirmation that the DMO’s objectives of issuing Sovereign Sukuk to grow the domestic investor base and promote financial inclusion is being achieved. In addition, the high subscription level is proof of investors’ acknowledgement of the impact the USD362.57 Billion Sovereign Sukuk issued between 2017 and 2020 has had on the development of road infrastructure in Nigeria.”
The office also said, the proceeds of the N250 Billion Sovereign Sukuk will be used to finance the rehabilitation and reconstruction of road projects across the six (6) geopolitical zones and the Federal Capital Territory.
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Sukuk are financial products whose terms and structures comply with sharia, with the intention of creating returns similar to those of conventional fixed-income instruments like bonds. Unlike a conventional bond (secured or unsecured), which represents the debt obligation of the issuer, a sukuk technically represents an interest in an underlying funding arrangement structured according to sharia, entitling the holder to a proportionate share of the returns generated by such arrangement and, at a defined future date, the return of the capital.
