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Sukuk (Islamic Bonds) in Nigeria

- by Rasheed Raji - 58 Comments.

Wole Soyinka High School – Proceed of Osun Sukuk
Suzuki (Islamic bonds) Islamic bonds, structured in such a way as to generate returns to investors without infringing Islamic law (that prohibits riba or interest). Sukuk represents undivided shares in the ownership of tangible assets relating to particular projects or special investment activity (from Financial Times Lexicon)
From Europe to America to Asia, sukuk is growing and it is improving developments and FGN and states can tap in like Osun did and FGN recently.

Various types of Sukuk
There are various types of Sukuk structures relating to the nature of the underlying asset. The most commonly used is where the Sukuk relates to a partial ownership of an asset (Sukuk al-ijarah). Other types of these bonds relate to partial ownership in in a debt (Sukuk murabaha), project (sukuk al-istisna), business (Sukuk al-musharaka), or investment (Sukuk al-istithmar).

There are five important differences between Sukuk and traditional bonds:
1. Sukuk indicate ownership of an asset. Bonds indicate a debt obligation.
2. The assets that back Sukuk are compliant with Shariah. Assets backing bonds may include products or services that are against Islam.
3. Sukuk are priced according to the value of the assets backing them. Bond pricing is based on credit rating.
4. Sukuk can increase in value when the assets increase in value. Profits from bonds correspond to fixed interest, making them Riba.
5. When you sell Sukuk, you are selling ownership in the assets backing them. The sale of bonds is the sale of debt.
The main advantage of Sukuk over traditional bondsis that their value increases in relationship to the assets backing the Sukuk certificate. If the asset raises in value, then the value of the ownership of that asset, backed by the Sukuk, increases. Bonds do not have this characteristic. It is not possible to raise the main debt in a bond and increase in revenue from a bond is the direct result of the fixed interest rather than in any kind of tangible increase in value or productivity.

Osun Sukuk for Education
Osun issued the first Islamic bond in Nigeria. Osun is one of the largest sub Saharan Africa’s largest economy and cocoa producing state in the South West of Nigeria. Osun received N11.4bsubscrition in November 2013 for seven years. It is the hope of government that Sukuk will provide means to access large amount of long term investments.
Osun state sukuk’s school projects: The schools listed below will be part of the Osun sukuk’s project and at the time of writing this piece some of them have been completed and the rest at an advance stage of completion. Ogbeni Rauf Aregbesola has promised the state that all the project will be completed before the end of his administration.

The Schools are:

Osun Innovative Steel High School, Wole Soyinka High School, Ejigbo, HIgh School, Ataoja High School, Osogbo High School, Fakunle High School, Unity High School, Osogbo , Oduduwa High School, Ile Ife High School, Ila High School, Ila-Orangun High School, Adventist High School, Ede High School, Iwo High School, Akinorun High School, Ikirun High School and Ayedaade High School, Ikire.

Use of Proceeds
The net proceeds of N10, 970,000,000.00 after deduction of the cost of the offer of N430, 000,000.00 representing 3.77% of the offer) will be utilized for construction of schools as follows:
N billion
%
Completion Period
1
23 No. of High Schools
10.35 94.35
94.35
12 months
2
2 No. of Middle Schools
0.30
2.73
12 months
3
2 No. of Elementary Schools
0.32
2.92
12 months
Total
10.97
100.00

FGN SUKUK
Nigeria Government releases N100 billion Sukuk Bond proceeds for 25 Road Projects
The federal government issued Sovereign Sukuk bond of N100 billion last September, 2017 for seven years. It was successful and oversubscribed to the tune of N105.87 billion.
The proceeds will be used for construction and rehabilitation of 25 key economic roads across the major geo political zones in the country.
Breakdown of the allocation
Minister of Power, Works and Housing, Babatunde Fashola, had said that the federal government would spend the money on reconstruction and rehabilitation of 25 arterial roads

BREAKDOWN OF ALLOCATION OF SUKUK PROCEEDS FOR ROAD PROJECTS IN SIX GEO-POLITICAL ZONES

S/N
Geo-Political Zones
No. of Road Projects
Allocation of sukuk proceed (N’Billion)
1
North Central
5
16.67
2
North East
4
16.67
3
North West
4
16.67
4
South East
4
16.67
5
South South
5
16.67
6
South West
3
16.67

​Below is full list of the projects in order of title, amount and estimated delivery date.
1. ​Construction of Oju/Loko-Oweto bridge over​ ​River Benue to link Loko (Nasarawa state) and Oweto (Benue state) along route F2384
N​144,708,134.18
Estimated completion date: December 2017
2. Dualisation of Abuja-Abaji-Lokoja road section I (international airport link road junction​)​ – Sheda village
N​3,000,000,000.00
Estimated completion date: March 2018
3. Dualisation of Suleja-Minna road in Niger state phase II (km 40+000-km101+000)
N​3,521,958,532,49
Estimated completion date: April 2018
4. Dualisation of Abuja-Abaji-Lokoja road: Section IV Koton Karfe-Lokoja in Kogi state
N​3,500,000,000.00
Estimated completion date: January 2018
5. Dualisation of Lokoja-Benin road: Obajana-Okene in Kogi state
N​2,500,000,000
Estimated completion date: January 2018
6. Dualisation of Kano-Maiduguri road linking Kano-jigawa-Bauchi-Yobe
N​4,166,666,666.67
Estimated completion date: March 2018
7. Dualisation of Kano-Maiduguri road linking Kano-Jigawa-Bauchi-Yobe and Borno states. Section III (Azare-Potiskum) in Bauchi
N​3,500,000,000.00
Estimated completion date: December 2017
8. Dualisation of Kano-Maiduguri road linking Kano-Jigawa-Bauchi-Yobe and Borno states. Section IV (Potiskum-Damaturu road) in Yobe
N​4,000,000,000.00
Estimated completion date: December 2017
9. Dualisation of Kano-Maiduguri road linking Kano-Jigawa-Bauchi-Yobe and Borno states. Section V (Damaturu-Maiduguri)
N​5,000,000,000.00
Estimated completion date: June 2018
10. Dualisation of Kano-Maiduguri road linking Kano-Jigawa-Bauchi-Yobe and Borno states. Section I (Kano-Wudil-Shuari) in Kano
N​5,000,000,000.00
Estimated completion date: June 2018
11. Dualisation of Kano-Katsina road phase I, Kano town at Dawanau roundabout to Katsina border in Kano
N​3,000,000,000.00
Estimated completion date: September2018
12. Construction of Kano western bypass as an extension of dualisation of Kano-Maiduguri road section I
N​4,000,000,000.00
Estimated completion date: May 2018
13. Construction of Kaduna eastern bypass
N​4,666,666,666.67
Estimated completion date: January 2018
14. Rehabilitation of outstanding section of Onitsha-Enugu expressway: Amansea-Enugu border
N​5, 166, 666, 666, 67
Estimated completion date: December 2017
15. Rehabilitation of Enugu-Port Harcourt dual carriage section I: Lokpanta-Umuahia in Abia
N​4,000,000,000.00
Estimated completion date: March 2018
16. Rehabilitation of Enugu-Port Harcourt dual carriage sectionII Umuahia tower-Aba township rail
N​3,750,000,000.00
Estimated completion date: December 2017
17. Rehabilitation of Enugu-Port Harcourt road section III: Enugu-Lokpanta
N​3,750,000,000.00
Estimated completion date: December 2017
18. Rehabilitation of Enugu-Port Harcourt road section IV: Aba-Port Harcourt in Rivers
N​3,500,000,000.00
Estimated completion date: July 2018
19. Dualisation of Yenegwe road junction-Kolo-Otuoke-Bayelsa palm in Bayelsa
N​3,500,000,000.00
Estimated completion date: July 2018
20. Dualisation of Lokoja-Benin road: Obajana junction-Benin section II phase I: Okene-Auchi, Kogi/Edo states
N​3,000,000,000.00
Estimated completion date: December 2017
21. Dualisation of Lokoja-Benin road: Obajana junction-Benin section III phase I: Auchi-Ehor in Edo
N​3,166,666,666.67
Estimated completion date: June 2018
22. Dualisation of Lokoja-Benin road: Obajana junction-Benin section IV phase I: Ehor-Benin city, Edo state
N​3,500,000,000.00
Estimated completion date: December 2017
23. Reconstruction and asphalt overlay of Benin-Ofosu-Ore-Ajebandele-Shagamu dual carriageway phase IV
N​6,000,000,000.00
Estimated completion date: December 2017
24. Reconstruction of outstanding section of sections of Benin-Ofusu-Ore-Ajebandele-Shagamu dual carriageway phase III
N​5,000,000,000.00
Estimated completion date: December 2017
25. Dualisation of Ibadan-Ilorin road. Section II: Oyo -Ogbomosho road in Oyo
N​5,666,666,666.67
Estimated completion date: December 2017
TOTAL​– 100,000,000,000.02

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