DMO says Nigeria targets N100bn from Islamic bond for budget financing

The Federal Government today (Thursday) commenced activities preparatory to the issuance of N100 billion non-interest bearing Islamic bond, known as Sukuk.
A statement by the Debt Management Office (DMO) said a national roadshow to be led by the Director-General of the DMO, Ms. Patience Oniha, would begin today (Thursday).
The N100 billion targeted from the bond is one of the sources of funding the 2017 budget.
Sukuk is structured in such a way as to generate returns to investors without infringing Islamic law that prohibits riba or interest.
It represents undivided shares in the ownership of tangible assets relating to particular projects or special investment activity.
The roadshow will visit major cities like Kano, Kaduna, Lagos and Port Harcourt. Also to be involved in the show are financial advisers to the issue, Lotus Capital Financial Services Limited and FBN Merchant Bank Plc.
According to the DMO, the roadshow is to create awareness about the sovereign sukuk and sensitise target investors to the features and benefits of the sovereign sukuk.
The DMO had earlier announced its intention to issue a sovereign sukuk in the domestic market as part of measures to fund the 2017 budget deficit.
Apart from serving as alternative source of funding for the government, the sukuk is expected to serve to diversify the investor base for FGN Securities, promote financial inclusion and deepen the domestic capital market.
Proceeds from the sukuk issuance, according to the DMO, will be used to finance specific road projects.
The DMO explained, “Sukuk are asset-based securities and not debt instruments, and represent ownership in a tangible asset, service, project, business or joint venture. This is why sukuk fits into our debt strategy of borrowing to finance capital projects contained in the budget.
“This ensures that government borrowings are used to finance development projects, which have multiple economic and social benefits for citizens.”