By Kadiri Abdulrahman

A professor of Capital Market at the Nasarawa State University in Keffi, Uche Uwaleke, says Sukuk is the route to go by the Federal Government in obtaining project-tied credit facilities.

Uwaleke, who is also the President of Association of Capital Market Accaremics, said this in an interview with the News Agency of Nigeria (NAN) on Wednesday in Abuja.

He spoke against the backdrop of the recent issuance of N300 billion Sukuk by the Debt Management Office (DMO).

According to Uwaleke, the issuance of N300 billion Sukuk by the DMO on behalf of the Fededal Government is highly commendable.

“Recall that when the Federal Government first entered the Sukuk market in 2017, only N100 billion worth of Sukuk was issued.

“So, the current one represents an improvement as investors are given more room to diversify their portfolio.

“I am particularly happy that the government is upscaling the use of Sukuk in plugging the infrastructure gap in Nigeria.

“The advantage that Sukuk has over the conventional bond is that it is asset-backed,” he said.

Uwaleke said that Sukuk proceeds must be tied to infrastructure which is why proceeds have been applied to road construction.

“Given that it is an infrastructure based bond, Sukuk represents a critical instrument for Nigeria’s economic development,” he said.

The expert, however, said that the Sukuk market size in Nigeria was still very small despite the potentials

He urged governments, both at the federal and subnational levels to utilise more of Sukuk when raising funds from the domestic capital market considering the huge infrastructural gap in the country.

“It is by so doing that government borrowing can be more impactful and also work to reduce the country’s debt burden,”he said.

NAN reports that the DMO had on Monday hosted an investor meeting for the issuance of N300 billion series seven Sovereign Sukuk in Abuja.

The Director-General of the DMO, Patience Oniha, said that since inception in 2017, Sukuk had become a product of choice for non- interest investors in the capital market.

According to Oniha, the acceptance of the Sukuk is an attestation of one of the major roles of the DMO to develop the domestic capital market, while also raising funds for the Federal Government.

She said that the Federal Government had been able to raise a total of N1.09 trillion through the Sovereign Sukuk since 2017, to support infrastructure development.

The director-general said that for the seventh series, the plan was to raise N300 billion to be used to further finance capital projects.

She recalled that the first Sukuk was issued in September 2017, adding that after extensive marketing, the offer, which was for N100 billion with a tenor of seven years received a total subscription of N105.878 billion.

She said following the modest success of the first Sukuk and the achievement recorded from Sept. 2017 to Dec. 2023 when the last Sukuk was issued, the DMO had raised a total of N1.09 trillion.

“With this amount, more than 4,100 km of roads and nine bridges across the six geo-political zones in NIgeria and the Federal Capital Territory (FCT) have either been constructed or rehabilitated, ” she said.

Oniha said that the projects had brought substantial benefits, including reduced travel time improved road safety and job creation.

She said that the projects also created improved access to markets for remote farmers, increased access to public services like education and healthcare, and economic development as a whole.

“In addition to those benefits, other reasons for the sustained issuance are the fact that the Sukuk is project-tied, promotes financial inclusion and contributes to the development of the domestic financial market,” she said.

She said that the Sukuk had been well accepted as demonstrated by the level of subscription received in the past.

“Investors get fulfillment of contributing to infrastructure development, and also get a return in terms of income which is paid every six months,” Oniha said.

She said that financial advisers play a crucial role in the issuance of Sovereign Sukuk, assisting the Federal Government of Nigeria through DMO.

“Their responsibilities include advising on the structure of the Sukuk, managing the offering process, and facilitating investor participation,” she said.(NAN) (www.nannews.ng)

Edited by Sadiya Hamza