FG raises N1.1tn in 6 Sukuk bonds for 124 road projects

Sukuk-funded road project in Nigeria

FG raises N1.1tn in 6 Sukuk bonds for 124 road projects

The Federal Government has raised N1.1 trillion ($657.6 million) through the issuance of six Sukuk bonds, aimed at financing 124 critical road projects, covering 5,820 kilometers and spread across the six geopolitical zones.

The Director General of the Securities and Exchange Commission, Dr. Emomotimi Agama, disclosed this yesterday at the ongoing 2nd International Islamic Capital Market Conference in Karachi, Pakistan.

According to a statement from the Commission, the DG said the success rate makes the Islamic Capital Market (ICM) stand out as a resilient and innovative tool for mobilising resources.

Agama described the issuance of sovereign Sukuk since 2017 as a key pillar responsible for the growth of the ICM in Nigeria, adding that these issuances have consistently been oversubscribed, with subscription rates reaching as high as 441 per cent.

He disclosed that sub-national and corporate Sukuk issuances are also growing in Nigeria, with notable examples like Osun and Lagos states, Family Homes Ltd and TAJ Bank Plc, along with private Sukuk issuances by three other sub-nationals.

The DG said these instruments have been instrumental in funding school infrastructure, housing, and, for the first time in Nigeria, tier 1 capital for a bank, underscoring the versatility of Sukuk as a financing tool.

“Beyond Sukuk, the ICM segment in Nigeria offers diverse investment opportunities. From one registered fund in 2008, the segment currently boasts 14 registered Halal mutual funds with a net asset value exceeding N105 billion as of November 2024. The NGX Lotus Islamic Index tracks 11 Shariah-compliant equities, while Nigeria’s first Islamic Real Estate Investment Trust – ChapelHill N-REIT – highlights the potential of real estate investments.

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“The performance of the NICM Masterplan has been remarkable. Of the 15 initiatives outlined in the roadmap, nine had been fully implemented as of 2022, representing a 70 per cent success rate. Key achievements include improved public awareness, increased retail participation in Sukuk, and the introduction of the Non-Interest Pension Fund (Fund VI) through collaboration with the National Pension Commission (PenCom). Another key achievement was the release of guidelines for taxation of Non-Interest transactions, in collaboration with the FIRS. This solved the challenge of double taxation hindering such transactions.”

The SEC DG, however, said the growth of the ICM segment within a decade and a half has come with some challenges, including limited public awareness of Islamic finance principles, paucity of tradable instruments, and regulatory alignment across institutions. He said, “Capacity-building efforts, particularly in Shariah governance and compliance, remain critical to sustaining growth. These, of course, are critical areas the SEC is currently implementing strategies to address, with relevant stakeholders, particularly in the public and private sectors, providing targeted and effective solutions.

“Of particular interest is our ongoing effort to engage relevant stakeholders in the mortgage sector to develop Shariah-compliant housing finance solutions. This will create the needed impetus for developing Shariah-compliant asset-backed instruments to deepen our capital market further.”

As the world looks into the future, Agama stated that the opportunities are endless as Islamic finance is solving some practical challenges and needs of the Nigerian economy, such as critical infrastructure deficit, financial exclusion, low mortgage penetration, and disinterest in commercial financing opportunities due to faith-based and/or ethical concerns.

He said the increased level of activity in the Nigerian market and established benchmarks for corporates and sub-nationals portends huge benefits for ethical investors and foreign capital seeking viable and sustainable investment outlets.

“As regulators and policymakers continue to refine and expand the regulatory space, product developers are continuing to innovate and offer a variety of instruments seeking off-takers.

“This is the time to stake positions that will no doubt produce competitive returns and satisfy ethical and sustainability concerns. The table is set for investing. Foreign participants should take positions and increase stakes in tandem with domestic trends. This offers a significant opportunity to contribute to sustainable economic growth and financial inclusion in Nigeria and, by extension, the African continent,” he added.