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SEC, DMO to collaborate on issuance of Nigeria’s first sovereign sukuk

Securities and Exchange Commission (SEC) and the Debt Management Office (DMO) have committed to strengthening collaboration towards issuing Nigeria’s first sovereign sukuk.

This was the major outcome of the visit to the DMO by the SEC director-general, Mounir Gwarzo.

In November last year, the DMO director-general, Abraham Nwankwo, paid a courtesy call on Mounir Gwarzo during which the two chief executives agreed to reinforce partnership to deepen the domestic bond market.

The latest visit, the second meeting in less than three months, is a clear sign of a closer working relationship the two government agencies now enjoy, SEC said in a statement on Tuesday.

While welcoming the SEC delegation, Nwankwo highlighted the importance DMO attached to the non-interest products space and revealed that a sovereign sukuk issuance had been part of the institution’s strategic plan drawn three years ago.

He solicited support from the SEC, especially in the area of capacity building in order to realise the goal of issuing Nigeria’s first sovereign sukuk within the year 2016.

In response, Gwarzo assured the DMO of continued support, pledging to take measures that help enhance the capacity of relevant staff of the DMO including establishing regular interfaces between the DMO and key staff of SEC, who are very knowledgeable in the area of non-interest finance.

The SEC will equally enable nominated staff of DMO to participate at the Capital Market Committee sub-committee on non-interest products to further deepen their capacity.

Gwarzo gave an overview of the leading role the SEC had played in the past to catalyse development of the non-interest capital market in Nigeria. In addition to robust enlightenment programmes, the SEC has notably led the capital market community to develop a blueprint for the growth of non-interest capital market in the country, which forms part of the 10-year capital market master plan currently being implemented by SEC.

Within the context of continued decline in the prices of crude oil in the international markets, attendant drop in both foreign exchange and government revenues as well as fragility of growth from major emerging markets like China, the need for alternative sources of capital to finance infrastructure becomes increasingly more compelling. Both government agencies therefore agreed on the urgent need to begin mobilizing capital in order to address the Nation’s investment needs. Particularly, issuing a sovereign sukuk will attract significant amounts of affordable capital from the Gulf countries and other established Islamic markets around the world into Nigeria.

According to the SEC director-general, issuing a sovereign sukuk will send a much-needed positive message to the market amid the negative investor sentiment that persists currently. He expressed confidence that Nigeria’s maiden sovereign sukuk will be oversubscribed as both domestic and foreign investors have appetite for exposure to Nigeria. He therefore urged the DMO to take advantage of this unique opportunity to make a mark on the sukuk market in spite of the challenging times.

When the SEC released rules on sukuk issuance in 2013, the Osun state Government took advantage of the robust regulatory framework to issue Nigeria’s first sukuk in which it raised N11.4 billion.

While engagements are ongoing to enlighten other state governments to raise funds needed for development by issuing sukuk, an issuance of a sovereign sukuk by the Federal government will help to provide a benchmark for such issuances and spur further interest from other categories of issuers.

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