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Nigeria’s third SUKUK bonds oversubscribed- DMO



The third Sovereign SUKUK issue by the Debt Management Office (DMO) was over-subscribed by over 446 per cent, the debt management agency has announced.

The sale of the third tranche of the seven-year Islamic Sukuk, also known as as Ijarah, at a rate of 11.2 per cent opened in May.

The sale of the Sovereign Sukuk, valued at about N150 billion offer to investors, has a June 2027 maturity date.

Announcing the result of the subscription of the offer on Friday, the DMO said the total subscription by investors was about N669.1 billion, representing a subscription level of 446 per cent.

With the latest issue, the Federal Government has issued a total of N350 billion seven-year debut Sukuk bonds used in financing the construction of almost 100 roads across the country geo-political zones since the programme began in 2017.

The DMO said the demand for the Sukuk came from a wide range of investors, including ethical funds, insurance companies, fund managers and retail investors, amongst others.

The DMO said the participation by a wide range of investors aligned with its objectives to diversify the investor base for the Federal Government Securities and promoting financial inclusion.

“The issuance of the third Sovereign Sukuk followed the debut issuance of N100 billion in September 2017, and the second issuance of another N100 billion in December 2018.

“These are based on the DMO’s commitment to using borrowed funds to finance infrastructure development. The Sukuk Issuances are project-tied and are used to finance specific projects which are disclosed to investors,” the DMO said.

Details of the offer showed that about N162.6 billion was allotted to investors, with the proceeds of the issuance expected to be used to finance 44 critical road projects across the six geopolitical zones of Nigeria.

The DMO said the benefits from the earlier Sukuk issuances, which were also used to finance roads construction, “included improved safety on the roads, faster travel times, access to markets for farm produce and opening up of parts of the country for development”.

Other benefits of the Sukuk include financing road projects to create jobs and increase the level of activity for service providers, many of which are small and medium businesses.

The DMO said it expects to continue to raise funds through Sukuk to support improvement in infrastructure and development of the domestic capital market.

Nigeria’s sovereign SUKUK is an Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia Islamic religious law.

Under a Sukuk, the issuer sells an investor group the certificate, which then rents it back to the issuer for a predetermined rental fee, while the issuer also makes a contractual promise to buy back the bonds at a future date at par value.

In 2017, the federal government also raised a N100 billion seven-year debut Sukuk bond for the financing of 25 road projects across the six geopolitical zones of the country.

It raised another N100 billion in 2018 for a seven-year period for the same purpose, making it N200 billion raised for the Sukuk bonds.