Nigeria seeks affordable capital with first sovereign sukuk

Nigeria’s Securities and Exchange Commission (SEC) said on Thursday that the Nigerian government has set up a committee to advise on issuing the country’s first sovereign sukuk as it explores alternative funding sources in a year it plans to borrow up to $5 billion to fund a budget deficit exacerbated by the slump in global oil prices.

Nigeria has also requested a $1 billion loan from the African Development Bank and has held talks with the World Bank.

“Any time from the first week of March, the committee is expected to submit its report,” SEC spokesman Nalf Abdusalam said on Thursday.

Abdusalam said that the new committee, together with officials from Nigeria’s Debt Management Office (DMO) would advise on the amount to be raised from Islamic bond, the timing and jurisdiction of the issue.

The global market for Sukuk has expanded rapidly in response to increasing demand from governments, organisations and individual investors for Shariah compliant equity. Africa, where Muslims constitute more than 40 percent of the population, received at least $14 billion in Islamic project finance and $1.6 billion from Sukuk issuances on international markets over the period 2005–2012. Sukuk has been issued in Senegal, Sudan, South Africa and Gambia. Kenya recently said it would review all laws governing the industry ahead of a planned issuance of Islamic bond (Sukuk) for the first time.Nigeria is also not left out as SEC had released rules on sukuk issuance since 2013. A state in south west Nigeria issued Nigeria’s first Sukuk in which it raised N11.4 billion. However, no other Sukuk has been raised since then. With Nigeria facing its worst economic crisis in years, the need for affordable capital has never been greater, hence the race to issue Nigeria’s first sovereign Sukuk.

“The need for alternative sources of capital to finance infrastructure becomes increasingly more compelling with fragility of growth from major emerging markets,’’ SEC Director-General, Mounir Gwarzo told Nigeria’s News Agency in the commercial city of Lagos on Wednesday.