The federal government has so far raised some N362.557 billion from three tranches of Sovereign Sukuk, all of which are for the rehabilitation and reconstruction of Road Projects across the six geo-political zones of Nigeria.
Patience Oniha, Director General, Debt Management Office (DMO) announced this Monday in Abuja at the symbolic presentation of N162.557bn cheque to Babatunde Fashola, Minister of Works and Housing for the funding of Forty-Four (44) key Road Projects in the 2020 Appropriation Act. The N162.557bn cheque – the proceed of the third tranche of the sukuk issued in June was presented by Zainab Ahmed, Minister of Finance, Budget and National Planning.
Recall that 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, attracted 446% subscription as investors jostled for the instrument in show of confidence.
Subscription by investors totaled 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. N162.557 billion was finally allotted to investors.
The proceeds of Sukuk Issuances are project-tied and are used to finance specific projects and that of the latest issuance will be used to finance 44 critical Road Projects across the Six (6) Geopolitical Zones of Nigeria.
Oniha said the event was a celebration of successful completion of the Third Sovereign Sukuk and that the strong response by investors indicates confidence in the economy, good market awareness and acceptance of sukuk as a financial product.
She said 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.
“Many road users have confirmed that they have had a better travel experience on the projects financed through Sukuk.
“This is besides the many benefits such as job creation, financial inclusion and development of the domestic capital market arising from the Sukuk Issuance,” she stated.
Oniha announced DMO plans to continue to use Sukuk and Green Bonds, both of which are project-tied, to support the development of infrastructure and other capital projects. She, noted that extent to which the DMO can achieve this, would of course, depend on how much is allocated to projects in the Annual Budgets.
At the event, Finance minister, Ahmed said the N162.557bn is strictly dedicated to the financing of Road Projects in the Revised 2020 Appropriation Act.
“It also means that with the release of N162.557 billion to the Federal Ministry of Works and Housing, the amount appropriated for Road Projects financed by Sukuk in 2020 Budget has been fully released,” she said.
She said Government has been greatly encouraged by the tremendous success recorded with regards to improvements in road infrastructure across the six (6) geo-political zones with the intervention of this special funding.
“Besides the fact that the evidence of the use of the proceeds by way of works done are there for all to see, the comments and feedback received from commuters, transporters, other businesses, investors and other well-meaning Nigerians have been heartwarming.”
Speaking on capital budget implementation in the last two years, Ahmed recalled that despite resource constraints, Government released a total of N1.123trn for capital expenditure for 2018 and also delivered N1.165trn capital expenditure in 2019.
Under the Revised 2020 Budget the Government appropriated N1.347trillion has been earmarked for capital expenditure. With President’s directive that 50% of this amount should be released before the end of July 2020, total capital releases to date is N995.665 billion, including the Sukuk.
In terms of how the fund will be allocated, Fashola explained that the North Central will utilise N26.5 billion; the North East N30.5 billion; North West, N26.5 billion, South East N26 billion; South- South N26 billion and South West N27.05 billion.
He said of all the 44 roads that will benefit from this sukuk, every geo-political zone is taken care of, with the North Central Central getting 8 roads; North East, 8 roads; North West, 7 roads; South East, 5 roads; South-South, 4 roads; and South West, 6 roads.
“All these funds will be injetced into the economy at this period of the covid impact in order to reach the ordinary Nigerians, who supply building and constrution materials, like sand, stones, cement, iron, lactarite.
“Once this money is disbursed, transporters, engineers, labourers who are needed will be mobiolised to sites,” Fashola assured, noting the multiplier effect on the entire economy.
Managing Director, RCC Nigeria Ltd speaking on behalf of the contractors assured they will continue with the projects, taking advantage of the coming dry season to cover the time lost during the COVID-19 lockdown.
“We know that the sukuk is gradually changing the face of the Nigerian roads to the better, and also creating ground for enabling environment for contractors to flourish and continue to create jobs,” he noted.
