In show of investor confidence, Nigeria’s third sukuk records 446% subscription

Nigeria’s sukuk issuance- the third in the series- attracted 446% subscription as investors jostled for the instrument in a show of confidence in the economy, despite a projected 8.91% contraction this year on coronavirus pandemic.

The Debt Management Office (DMO) which issued the sukuk on behalf of the federal government said on Friday that subscriptions by investors totaled some N669.124 billion as against the N150bn that was on offer.

The 7-Year Ijarah Sukuk due June 2027 was offered at a rental rate of 11.200% Per Annum – lower than 15.743% in 2018.

The DMO said it finally allotted N162.557 billion to investors, and further noted that the offer attracted significant interest from a wide range of retail and institutional investors Ethical Funds, Insurance Companies, Fund Managers and Retail Investors amongst others.

“This participation by a wide range of investors is in line with the DMO’s objectives of diversifying the investor base for Government Securities and promoting financial inclusion,” the debt office said in a statement announcing the outcomes of the deal.

The third Sovereign Sukuk, which followed the debut issuance of N100 billion in September 2017 and a second issuance of another N100 billion in December 2018, is based on the DMO’s commitment to using borrowed funds to finance infrastructure.

The proceeds of Sukuk Issuances are project-tied and are used to finance specific projects which are disclosed to investors.

Proceed of the latest issuance will be used to finance 44 critical Road Projects across the Six (6) Geopolitical Zones of Nigeria.

According to the DMO, “benefits from the earlier Sukuk Issuances, which were also used to finance roads, include improved safety on the roads, faster travel times, access to markets for farm produce and opening up parts of the country for development.

“Other important benefits of using Sukuk to finance road projects are job creation and increased level of activity for service providers, many of whom are small businesses.”

The Debt office said it expects to continue to raise funds through Sukuk to support improvement in infrastructure and development of the domestic capital market.