Since the release of FGN Sukuk VII last Monday (12th May 2025) I have been inundated with calls/messages from many concerned Nigerians about what they perceive as a Shariah “irregularity” in the just issued Sukuk.
The whole concern revolves around the return on sukuk, which is fixed at 19.75 %. This is coming from a long-standing misconception of Islamic or Shariah compliant finance as one that has no place for a fixed return, at all. This is absolutely untrue, wrong and misleading.
Whether the return on investment can be fixed or not is determined by the Shariah contract used in structuring a product. In summary, it is only when a product is one that creates partnership between parties, otherwise known as equity based products, that parties are not allowed to fix the rate of return.
So even when a sukuk is structured using any of those Shariah contracts there should be no fixed return. However, we still have many other products of Islamic finance that are not equity based. We have sale based, lease based, service based etc products. And in all these parties can, and even MUST agree on their sale price, rent or service charge as the case may be upfront.
In other words, these products, unlike the equity-based products, allow for fixed returns in a halal way. Like several other sovereign sukuk in different countries, the FGN Sukuk (from 1 to 7) has always adopted a lease-based product (ijarah) in its structure. Just as you and I can fix our rent even before putting our house on lease/rent, parties in an ijarah based sukuk can fix what is going to be the return which in effect represents the rent payable.
Prof. AbdulRazzaq AbdulMajeed Alaro, mni
Professor of Islamic Law of Banking & Finance and former Head of Islamic Law Department, University of Ilorin; & Member, Financial Regulation Advisory Council of Experts, Central Bank of Nigeria.
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