In Nigeria’s first corporate Sukuk, Family Homes Funds issues N10bn

Family Homes Funds Limited has successfully completed Nigeria’s first Securities and Exchange Commission (SEC) registered corporate Sukuk.

Worth N10 billion and a 7-year 13 percent bond, the Series 1 Ijara Lease Sukuk will be due in 2028 (“Series I Sukuk”) under the company’s N30bn Sukuk Issuance Programme.

A Sukuk is an Islamic financial certificate, similar to a bond in Western finance, which complies with Islamic religious law commonly known as Sharia.

Since the traditional Western interest-paying bond structure is not permissible, the issuer of a Sukuk sells an investor group a certificate, and then uses the proceeds to purchase an asset that the investor group has direct partial ownership interest in. The issuer must also make a contractual promise to buy back the bond at a future date at par value.

The Series 1 Sukuk is the first-ever SEC-registered corporate Sukuk to be issued in Nigeria. It is also the first-ever corporate Sukuk certified by the Financial Regulation Advisory Council of Experts (FRACE) of the Central Bank of Nigeria.

The transaction also represents Family Homes’ debut in the Nigerian Debt Capital Markets.

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The issuance was 2.1x oversubscribed, receiving significant interest from a wide range of high value and quality investors including pension funds, ethical funds, fund managers, Islamic institutions, non-finance trustees, corporates, and high net worth individuals.

The net proceeds from this issue will finance up to 5,000 new homes for Nigerians on low income across this great nation, contributing to the FHF’s objective of developing up to 200,000 homes by December 2022.

“This is a landmark event in the unfolding history of a young organisation with a vision to transform the housing market by making safe decent housing accessible to the overwhelming proportion of our population, particularly those on a low income.

“It is worthy of note that about 64 percent of the subscription were from Pension Funds,” Femi Adewole, chief executive officer of Family Homes said at the historic signing ceremony in Abuja.

The Book Build process for the transaction was launched on June 25, 2021, and was completed on July 6, 2021.

Details received on the debut indicates the total value of orders received during the Book Build was N21.3 billion (representing a 2.1x oversubscription) of the intended N10 billion, despite current market dynamics and volatility.

Launched at a rental rate of 13.00% per annum, the transaction had tremendous support from the debt capital market.

“We are very proud of this landmark transaction, which is the first-ever certified corporate Sukuk issued in Nigeria. The domestic debt capital market has given us the opportunity to further diversify our funding sources and provided the necessary support for our goal of providing affordable homes across Nigeria.

The strong support for this transaction, given the challenging environment, is a reflection of the depth of the market, and investor confidence in Family Homes Fund’s long-term strategy and management team,” Adewole added.

The Series I Sukuk Issuance, according to him reinforces the Company’s commitment to facilitating the provision of affordable homes and diversifying its funding sources, as well as the resilience of the domestic debt capital market.

Family Homes will deploy the net proceeds to finance and develop affordable homes for low-income earners.

To date, Family Homes Funds has financed the development of at least 11,700 homes for low-Income earners across several states in Nigeria Including Delta, Ogun, Kano, Nasarawa, Kaduna, Yobe, Bauchi, Borno, Adamawa, and has created up to 64,000 direct and indirect jobs in the process.

But over the next 4years, specifically through its affordable housing projects, the company aims to invest up to N1.3trn (US$3bn) in the development of 500,000 homes for people on a low income. In the process, the Company also aims to create up to 1,500,000 jobs and enable homeownership through its creative products.

At the event, Suleiman Barau, chairman, Family Homes Fund said with the Sukuk issuance, FHF’s commitment to financing the development of affordable housing in Nigeria is further strengthened and presents a great source of hope for average Nigerians seeking a home of their own.

He said the FHF initiated this issuance as one of the measures towards attaining its strategic objective of bridging the housing gap in Nigeria, providing millions of jobs, and enabling economic growth.

“This is a unique opportunity, not just for Family Homes Funds, but for the entire housing market in Nigeria. We are confident that the success story of Family Homes Funds will spur greater interest and investment in the sector.

“The impressive rate of subscription and participation by a diverse range of investors demonstrate the high level of investor confidence in Family Homes Funds, particularly, because of the progress, it is making in the affordable housing space in Nigeria,” Barau, who is also a former deputy governor at the Central Bank of Nigeria stated.

“With a great sense of duty, we are confident of achieving a lot more within a short period,” he assured.

In her speech, Zainab Ahmed, minister of finance said the issuance is not only historic, but will obviously strengthen Family Homes Funds’ dedication to its core principles and expand its ability to offer wider opportunities for millions of Nigerians who rely on them to realize their homeownership dreams.

“Sustainable funding is very critical for what Family Homes Funds does, and the interest that this Issuance has generated is very significant for what the future of funding in the housing sector may look like.

“The kind of results we are seeking can be hastened through efforts like this, where the private and public sectors can blend in through investments and other forms of partnership” noted Ahmed, who was represented at the event by Aliyu Ahmed, permanent secretary (Finance), Ministry of Finance, Budget and National Planning.