By Nse Anthony-UKO,
ABUJA, (Sundiata Finance) – The planned issuance of maiden of Nigeria’s maiden Sukuk by the Debt Management Office (DMO) is a major milestone for the country, as it will catalyze the development of non-interest capital market products, the Securities and Exchange Commission (SEC) has said.
SEC confirmed on Tuesday the historic proposed issuance of Nigeria’s N100billion, 7-year Sukuk, which would not only facilitate the mobilization and allocation of funds within the economy, would serve to position the country as a gateway for foreign and domestic investors.
A Sukuk is an Islamic financial certificate, similar to a bond in Western finance that complies with Sharia – Islamic religious law.
In 2013, the SEC had issued Rules on Sukuk Issuance in Nigeria following which the State Government of Osun raised N11billion (about $50 million) in Nigeria’s first Sukuk issuance, which was oversubscribed.
The issuance of this Sukuk follows diligent advocacy efforts from the Securities and Exchange Commission (SEC) on the need to issue the instrument in order to serve as an alternative product for investors.
Sukuk, the non-interest equivalent of bonds, is becoming increasingly attractive as a preferred option for funding infrastructure development and indeed economic growth across the globe. Several countries across diverse continents have increasingly issued non-interest financial instruments to fund their infrastructure deicit. he trend is also fast gaining pace in Africa, with notable Sukuk issuance by South Africa, Senegal, and the Government of Cote d’Ivoire.
As the Federal and State Governments seek alternative funding sources for infrastructure, Sukuk is considered as a viable option. In ensuring that the Nigerian Capital Market plays a significant role in the success of Nigeria’s maiden sovereign Sukuk issuance, the Securities and Exchange Commission (SEC), supported the Debt Management Office (DMO) specifically in the area of capacity building and participation at the Capital Market Committee’s sub-committee on non-interest products. he issuance would also further deepen the Nigerian Capital Market by promoting financial inclusiveness while providing an additional asset class of tradable liquid instruments for investors. “We wish to commend the DMO for this laudable step while appreciating the Central Bank of Nigeria (CBN) for releasing guidelines on granting liquid asset status to Sukuk. he guidelines allow Sukuk instruments issued by State governments to be discounted at CBN discount windows and to be applied by banks in their liquidity ratio computation, similar to conventional State bonds. his will facilitate the emergence of a vibrant secondary market that will encourage more issuance from State governments,” the SEC said. “Also, we commend the National Pension Commission (PENCOM) for approving the new pension regulation which has Sukuk as part of allowable instruments of investment. Thus, Sukuk Instruments issued by eligible state and local governments as an asset class, have now been included in the list of allowable instruments in which PFAs may invest pension Fund Assets under management. his was not mentioned in the 2012 Regulations,” SEC said.