Abuja: A professor of Capital Market at Nasarawa State University, Uche Uwaleke, has highlighted the importance of Sukuk as a strategic tool for the Federal Government to obtain project-tied credit facilities. Uwaleke, who also serves as the President of the Association of Capital Market Academics, shared his insights during an interview with the News Agency of Nigeria (NAN) in Abuja.
According to News Agency of Nigeria, Uwaleke commended the recent issuance of N300 billion Sukuk by the Debt Management Office (DMO) on behalf of the Federal Government. He noted that the government’s initial foray into the Sukuk market in 2017 with N100 billion marked a significant shift, and the current issuance reflects an opportunity for investors to diversify their portfolios. Uwaleke emphasized that Sukuk is asset-backed and proceeds are tied to infrastructure, making it a vital instrument for bridging Nigeria’s infrastructure gap.
Uwaleke further noted that despite the potential of Sukuk, its market size in Nigeria remains limited. He urged both federal and subnational governments to increase the use of Sukuk to fund the country’s significant infrastructure needs, which could also help alleviate the national debt burden.
The DMO recently hosted an investor meeting in Abuja to discuss the issuance of the N300 billion series seven Sovereign Sukuk. Patience Oniha, the Director-General of the DMO, remarked that since its inception in 2017, Sukuk has become a preferred product for non-interest investors in the capital market. She stated that the Federal Government has raised a total of N1.09 trillion through Sovereign Sukuk to support infrastructure development.
Oniha explained that for the seventh series, the goal is to raise N300 billion to finance capital projects further. She recounted the success of the first Sukuk issued in September 2017, which received a subscription exceeding its N100 billion target. Since then, the DMO has facilitated the construction or rehabilitation of over 4,100 km of roads and nine bridges across Nigeria.
The Director-General highlighted the substantial benefits of these projects, including reduced travel time, improved road safety, job creation, and enhanced access to markets, education, and healthcare. She also emphasized that the Sukuk’s project-tied nature supports financial inclusion and domestic financial market development.
Oniha noted the acceptance and success of Sukuk, demonstrated by past subscription levels, and explained that investors benefit from contributing to infrastructure development while receiving income returns every six months. She also acknowledged the role of financial advisers in structuring and facilitating the issuance of Sovereign Sukuk for the Federal Government.