FG Plans to Issue First Non-interest Sovereign Bond in 2016

The Federal Government is making plans to issue Nigeria’s maiden sovereign non-interest bond this year as part of efforts to deepen and make the domestic capital market more inclusive and diversified.

Non-interest bond, otherwise known as Sukuk bond, makes returns to the investors through sharing of profit or cash flow from the underlying asset with them in addition to redemption of the principal upon maturity.

Nigeria currently has only one sub-national Sukuk bond issued by the Osun State Government. Two other states, Kebbi and Sokoto states have indicated interests in issuing Sukuk bonds.

The absence of a sovereign Sukuk bond to serve as benchmark for other government and corporate Sukuk issuance has been cited globally as a drawback for the growth of non-interest Sukuk bond market. Standard & Poor’s Rating Services (S & P) estimated that global Sukuk issuance could reach up to $55 billion in 2016.

The two frontal government agencies in charge of bond issuance, the Debt Management Office (DMO), which oversees government’s debt issuance progamme, and Securities and Exchange Commission (SEC), the apex capital market regulator, said they would work together to realise the long-standing goal of issuing Nigeria’s first sovereign Sukuk bond this year.

At their second interactive session in less than three months, both SEC and DMO reiterated their commitments to deepening the domestic debt market by developing the non-interest debt market.

Director General, Debt Management Office (DMO), Abraham Nwankwo said the DMO attaches importance to the development of non-interest products in the Nigerian capital market noting that sovereign Sukuk issuance has been part of the agency’s strategic plan drawn three years ago.

He solicited support from the SEC, especially in the area of capacity building in order to realize the goal of issuing Nigeria’s first sovereign Sukuk within this year.