The Debt Management Office has announced the offering of N150bn Ijarah Sukuk bonds for subscriptions.
According to a statement released via the DMO website on Tuesday, the bonds were offered at 15.75 per cent per annum and will be due in October 2033.
The statement added that the bonds were offered at N1,000 per unit subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter.
Subscriptions to the 10-year-tenured bonds started on Tuesday and would close on October 13, 2023.
The statement from the DMO read, “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) offers subscriptions through Greenwich Merchant Bank Limited, Stanbic IBTC Capital Limited, and Vetiva Capital Management Limited are authorized to receive applications for N150bn10-year Ijarah Sukuk due October 2023. Rental rate 15.75 per cent per annum”
The Sukuk is being issued by the FGN Road Sukuk Company on behalf of the Federal Government of Nigeria.
The rental payments are repayable for half a year.
However, bullet redemption can be paid on maturity.
The DMO also noted that funds raised from the offer will be used solely for road construction across the six zones in the country.
Since it was introduced in 2017, Sukuk bonds had provided N742.56bn for the Federal Government and had helped in funding the rehabilitation and construction of roads covering 4,000 kilometres across the country.
With the successful subscription of the new bond offering, the Sukuk loan was expected to hit N892.56bn.
The DMO Director of Portfolio Management, Mr Oladele Afolabi, told The PUNCH in 2022 that the low number of Sukuk bond issuance was due to certain strict limitations on the bond.
He said, “When we offer a Sukuk, we must say what we are using it for. We are going to finance certain roads, and we must list the roads. Because of the restrictions of non-interest finance, you cannot just borrow for general purposes, you must say what you what to do with it.
“The people investing in the Sukuk bond know what they are investing in. There are some restrictions. For instance, one cannot issue a Sukuk bond to build a factory producing beer or cigarettes. It is not illegal but due to ethical considerations, one may not what to finance such activities.”
Afolabi also said although it was a non-interest loan, the government was expected to pay rents on the roads to the Sukuk investors during the tenure of the loan.
The PUNCH recently reported that the amount paid on rentals for Sukuk bonds rose from N8.17bn in the first quarter of 2022 to N33.13bn by the second quarter, showing a 305.51 per cent increase.
The PUNCH also reported that the amount paid on rentals for Sukuk bonds was N8.17bn in the first quarter of 2023.
The Debt Management Office recently announced on its website that it won three awards at the EMEA Finance Achievement Awards 2022.
One of the awards was the Best Local Currency Bond in EMEA for the Federal Government of Nigeria N250bn SUKUK.
