The N300 billion Sovereign Sukuk is a seven-year Sukuk due 2032; a non-interest, alternative instrument designed in a form of annual rental income. The annual rental income is 19.75 per cent. Sukuk is a non-interest, asset-backed instrument, based on the principles of Islamic finance.
The Debt Management Office (DMO), which oversees Nigeria’s government debt issuances and management, indicated yesterday that the offer would open today with a minimum subscription of N10,000. The offer closes on May 20, 2025.
In addition to diversifying government funding for important national infrastructure projects, the Sukuk also aims to address the demands of ethical investors by growing the local investment market.
With a minimum subscription of N10,000 and subsequent multiples of N1,000, the Sukuk is being issued at N1,000 per unit.
While the bullet payback will be due on the day of maturity, the rental payment will be made every six months.
Under the Trustee Investment Act, trusts may invest in Sukuk since it is a sovereign issuance that is supported by the Federal Government’s full confidence and credit. In terms of the Company Income Tax Act and the Personal Income Tax Act, it also qualifies as government securities, exempting pension funds and other investors from paying taxes. The Central Bank of Nigeria (CBN) has also designated it as a liquid asset, and the CBN’s Financial Regulation Advisory Council of Experts has certified it.
After it is finished, the N300 billion Sukuk would be listed on the FMDQ Securities Exchange Limited and the Nigerian Exchange (NGX).
He asserts that the Sukuk offers a viable path for multiplying investments and accumulating wealth.
This specific instrument has a good rate of return at around 20%, in addition to being a gilt edge bond that is protected by the full faith and credit of the Federal Government. Additionally, it offers a great avenue for ethical investors who don’t want to make interest-based investments, according to Amolegbe.
He asserts that the Sukuk offers a viable path for multiplying investments and accumulating wealth.
This specific instrument has a good rate of return at around 20%, in addition to being a gilt edge bond that is protected by the full faith and credit of the Federal Government. Additionally, it offers a great avenue for ethical investors who don’t want to make interest-based investments, according to Amolegbe.
He pointed out that because Sukuk may be exchanged for cash on securities markets in as little as two days, it is regarded as a liquid asset.
Citing past issuance trends, sources claimed the government might raise around N300 billion.
As a strategic move to encourage financial inclusion, assist the construction of vital infrastructure, and expand the domestic securities market, the federal government began issuing sovereign Sukuk in 2017.
Based on Islamic principles that forbid usury or lending with interest payments, sukuk is a substitute for traditional bonds. Since the issuer uses the certificate’s profits to buy an asset, of which the investor also gains partial ownership, Sukuk does not show that there is a debt obligation.
Oversubscription of N519.12 billion was achieved in Nigeria’s third sovereign Sukuk issue of N150 billion, continuing a trend of oversubscription that began with the first sale in 2017. A seven-year, N150 billion Ijarah Sukuk with an expected annual rental rate of 11.200 percent was issued by the Federal Government in June 2020. The Sukuk was due in June 2027.
In September 2017, the Federal Government offered its first sovereign Sukuk, a seven-year, N100 billion offering with a 16.47% rental rate. There was a 5.8% oversubscription. In 2018, the government implemented a seven-year, N100 billion Sukuk Al Ijarah (lease) at an annual rental rate of 15.743 percent. Additionally, it was oversubscribed.
According to Ms. Patience Oniha, Director General of the Debt Management Office (DMO), the government acknowledged the necessity of issuing more Sukuk bonds because of the alternative non-interest bonds’ growing popularity and robust investor demand.
She claims that the high degree of awareness that has been raised has contributed to the growing success of DMO’s Sukuk project, which is in charge of managing the nation’s debt.
Because the Sukuk bonds are linked to specific projects that can be traced, she said that market participants’ greater confidence was the reason for the Sukuk issuances’ success.In the future, Oniha stated, “we look to support projects that generate revenue to service the Sukuk, but more importantly, we recognize the need to upscale issuances to include other standalone projects beyond road infrastructure.”
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