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Sukuk: When religion supports national finance

Sukuk is a financial concept rooted in Islamic law, adhering to Sharia principles. These instruments represent shared ownership of specific assets, following Islamic guidelines.

Sukuk V1 Announcement

On October 3, 2023, the Debt Management Office (DMO) unveiled its sixth Sovereign Sukuk, valued at ₦150 billion—this offering is known as Sukuk V1.

10-Year Forward Al Ijarah

Sukuk V1 is a 10-year Forward Al Ijarah instrument featuring a rental rate of 15.75%. Investors receive semi-annual payments, with the principal sum paid in a lump sum upon maturity.

Funding Road Projects

The Nigerian Federal Government intends to utilize the net proceeds from Sukuk V1, amounting to ₦150 billion, to finance 53 critical road infrastructure projects nationwide.

Diversifying Funding Sources

In September 2017, the DMO initiated Sukuk issuances to respond to the need for diversified infrastructure funding sources. This move aimed to reduce dependence on traditional financing methods.

Read alsoNigeria’s Sukuk issuance win-win for government, investors, says DMO

Effective Capital Deployment

The DMO has successfully raised ₦742.557 billion from five previous issuances. These funds have been strategically allocated to rehabilitating and constructing over 4,000 kilometres of roads and bridges, spanning all six geopolitical zones and the Federal Capital Territory.

Beyond Infrastructure

It isn’t just about building roads; it serves a more extensive purpose. It attracts ethical investors by offering opportunities to invest in government securities.

It also contributes to financial inclusion, enhances domestic financial markets, and sets benchmarks for corporates and subnational entities, fostering economic development.

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