Investor Demand Pushes Subscription for FG’s N150bn Sovereign Sukuk to over N652bn

Ndubuis  i Francis  in Abuja

Strong investor appetite, propelled by growing confidence in the success of the federal government’s Islamic debt instrument has pushed subscriptions for the N150 billion 2023 Series VI Sovereign Sukuk, which was on offer between March 3 and October 11 to N652.827 billion.

The N652.827 billion subscription level represents 435 per cent of the amount (N150 billion) offered by the Debt Management Office (DMO) on behalf of the Federal Government of Nigeria.

The debt management agency confirmed the outcome of the 2023 Ijarah Sukuk, a 10 year-tenored sovereign instrument which has been designed to narrow the gap in road infrastructure financing.

Sukuk is an ethical, non-interest, asset-backed instrument, based on the principles of Islamic finance, and was introduced in the road infrastructure funding mix in Nigeria in 2017.

In a statement yesterday, the DMO said: “The N150 billion Sovereign Sukuk whose Offer for Subscription closed on October 11, 2023, was well received with a total subscription of N652.827 billion.

“This subscription level, which is 435 per cent of the amount offered (N150 billion), shows that the level of awareness of the product has increased and that investors are willing to support the financing of infrastructure. 

“In response to this strong demand for the Sukuk, the Debt Management Office (DMO) has allocated N350 billion to the diverse investors who subscribed to the Sovereign Sukuk. 

“The N350 billion will be used to finance the construction and rehabilitation of roads and bridges across the six (6) geopolitical zones and the Federal Capital Territory.

“The DMO remains committed to meeting the needs of investors while also supporting the development of the domestic capital market.”

The 10-year bonds were offered at 15.75 per cent rental per annum and will be due in October 2033.

They were offered at N1,000 per unit subject to a minimum subscription of N10,000 and in multiples of N1,000.

According to the DMO, the issuance is under the local loans (Registered Stock and Securities) Act, CAP. L17, on the authority of the Federal Government of Nigeria FGN road FGN Road Sukuk Company (FGN RSC 1).

 Greenwich Merchant Bank Limited, Stanbic IBTC Capital Limited, and Vetiva Capital Management Limited were authorised to receive applications for the N150 billion ten-year Ijarah Sukuk.

The Transaction Adviser to the issuance is 

Buraq Capital Limited. Between 2017 and 2022 (with the exception of 2019), Sukuk issuance had provided N742.56 billion to finance road projects nationwide.

With only N350 billion now allocated to various investors, Sukuk financing for road projects would have rallied to over N1 trillion in six years.

The DMO introduced Sukuk, which is an ethical instrument in 2017, to enable investors who would not invest in the conventional instruments to be able to participate in private sector funding of infrastructure across the country.

Nigeria is beset by a critical challenge of huge infrastructure deficit, including roads.

The 2019 Global Competitive Index Report ranked Nigeria 130th out of 141 economies surveyed for quality infrastructure facilities.

The introduction of Sukuk in 2017 was designed to help narrow the gap in road infrastructure funding.