Investors scramble for Nigeria’s Islamic bond, defy religious criticism and bid $2b

ABUJA— Nigeria’s third Sukuk bond has fetched $2.1 billion, an oversubscription of the targeted $533 million offered to investors, despite the paper eliciting religious controversy.

The oversubscription of 446 per cent may reflect the high prospects the Islamic bonds present to Africa’s most populous country.

The sovereign Sukuk is meant to finance 44 critical road projects in the six geopolitical zones of Nigeria. Its launching earlier this year attracted various investors, including ethical funds, insurance companies, fund managers and retail investors.

In Nigeria, the arrangement incensed Christian groups who argue that it is an Islamic financial instrument to raise fund to “Islamise”.

The Christian Association of Nigeria (CAN), an umbrella body of all denominations, has alleged Nigeria wants to turn into an Islamic state.

The General Secretary of CAN, Rev Musa Asake, demanded the abrogation of the framework behind the bond and threatened to seek legal redress if that was not done.

The federal government says it resorted to Sukuk to fund construction and development of key economic infrastructure projects and to diversify the sources of funding. Sukuk it says offers ethical investors an opportunity to invest in government’s issued securities and to achieve a higher level of financial inclusion.

It sees Sukuk as the more convenient way to bridge financial deficits and address infrastructure challenges in the nation that will turn 60 by Oct 1.

The first Sukuk bonds in Nigeria was issued by Osun State in South West Nigeria in 2013. It realised $45.9 million through 42 investors in the Nigeria Stock Exchange to finance projects.

The success of the maiden issue attracted the cash-strapped federal government to float its first Sukuk bond that fetched $325 million in 2017.

The bond, which is due in 2025, was used to fund 25 road projects in South East, South South, South West, North West, North Central and North East.

The federal government’s second issuance of another $327 million was in December 2018.

Nigeria’s Vice President Yemi Osinbajo, one of the pastors in the Redeem Christian Church, denied the Islamisation agenda.

The Sukuk, he said, was essentially like a bond. The US, UK, China, South Africa have all used the Sukuk.

Dr Mamoud Kamara, regional head of Islamic Development Bank in Nigeria, said Sukuk that would involve the World Bank and African Development Bank, would help assuage the sufferings of Nigerians, particularly those who have lost their means of livelihood and were struggling for any means of survival.

The President, Chartered Institute of Stockbrokers, Olatunde Amolegbe, has urged Nigerians to support the government by subscribing to Sukuk, describing the instrument as a profitable.

He urged the public to partner to take advantage of Sukuk to boost their cash flow and assist government’s efforts to invest in infrastructure.



Source: Nam News Network (NNN)