The Nigerian Sukuk: A Case For Our Continued Existence, By Tobi Sonubi
The Month of September saw Nigeria float a seven year bond based on the Islamic principles of “no riba” and ours’ is in the form of a ?100 billion Sukuk.
The Sukuk is a bond issued basically as a long term loan product and with intention of facilitating specific projects which are solely developmental and tangible proceeds of which is expected to repay with rental income which In this case are biennial at the fixed rate of about 16.47 %.
The fund generated from similar debt instruments in Nigeria has been used to construct notable project like express way in the FCT running all around the Capital city. This sort of finance has been the source of emerging developing nations notable amongst whom is the UAE (Dubai).
The Islamic bond is not a conventional debt Instrument in that it allows for financing critical infrastructures which the lenders are also owners. This 100 billion debt instrument is expected to be deployed to notable projects like the Ibadan-Ilorin Rd, Enugu-Port Harcourt, Kano-Maiduguri Rd.
The Sukuk is first a source of alternative finance for critical Social projects especially on the African Continent. This is so, as frontier economies on the Sub-Saharan continent are already exploring this relatively new but totally benign funding avenue. Champion amongst such are South Africa and Kenya both of which are non-Islamic states.
The Sukuk is a relatively cheap finance source as both lender and borrowers are said to be stakeholders and are risk bearers are repayment of principal and rental income are dependent on the success of the ventures such funds are invested in.
It is no longer news that the 100 billion naira Islamic bond was oversubscribed and by as many divers element as the nation itself housed. From private individuals, who were drawn by the relative pragmatic nature of the loan instrument and the religious appeal contained in the Sukuk, to established institutions like pension administrators, finance institutions and investment bodies. People decided to invest in Nigeria and her unity even when many forces are trying to tear her apart.
I should state that many of this investors are institutions set up solely to invest and make meaningful returns, and for this institutions to have decided to back the entity called Nigeria in this manner means a lot. It shows a calculated venture on the continued existence of the country not just to repay the loan but to be a unified and peaceful entity at the end of the seven year expected life span of this loan.
For a country coming out of recession, with expected growth rate of about 3-5 % in the next half decade, to take the giant steps that will hasten her potential to earn and better business environment at rate relatively similar to current rates of same tenured bonds speaks volume. By the very nature of this financial instrument it appear riskier than other Government loan instruments as it bets on the profitability of the venture irrespective of the relatively uncertain and dicey Nigerian economy, the continued ability of the Nigerian State to meet Her financial obligations taking into cognizance her ability to earn and the responsiveness of the institution of state to honour Contracts and obligations.
For Nigeria to be able to raise this money significantly tells of her ability to assure critical stakeholders in the economy of her resolve to reposition herself and to be ready for the surge in her population and to kick start her manifest destiny in as the leader I the comity of nations on the African Continent.
While we are torn by few divisive elements, some of which are legitimate, our chances of making it becomes larger if we dig in the many opportunities that are available to us citizens of a joint and Unified Nigeria.
The very challenges that Nigeria Face as a sovereign entity are duplicated in the many states that her disintegration intends to create
I strongly hold the opinion that while many constituents units in Nigeria can become autonomous the greatest gains for all concerned are attainable if and when we remain as one. The err of yesteryears are better corrected with a larger committed team of !70 million Nigerians than A 30 million Oduduwa Indegenes, 70 million Arewa or 25 million Biafrans, needless to say the innumerable states that the demise of Nigeria will bring to existence.