From Uche Usim, Abuja
For a nation desiring a healthy economy and eyeing global competitiveness, addressing infrastructure challenges is a major step towards realising these lofty goals.
But Nigeria remains a nation battling low production amid institutionalised profligacy and this makes resources available for infrastructural renewal grossly inadequate.
This was the quagmire the Buhari administration found itself in in 2017 when Ms Patience Oniha was appointed the Director-General of the Debt Management Office (DMO).
The cash squeeze was understandable because the nation was still nursing the pains of a wobbly exit from the 2016 recession.
With no time to waste, Oniha, a capital market czar and her management team quickly designed a cocktail of best borrowing options in line with the government’s policy of borrowing its way out of the recession.
She championed what later became the best strategic efforts of raising funds from the private sector in an open, transparent and accountable method.
One of them was the Sukuk, a non-interest debt instrument introduced by DMO in its efforts to make investments in government debt instruments irresistible to every facet of the society.
Sovereign Sukuk is an ethical-based investment in which rent is based on the investment bi-annually and the principal sum paid at the end of the seven year tenor.
Though greeted by initial scorn and disdain as many thought it was a hooded Islamisation product, the DMO relentlessly sensitised the public and divorced the Sukuk from any islamic rhetoric.
Nonetheless, it was applauded in many quarters because aside expanding financial inclusion, the Sukuk created a platform for hitherto lethargic Muslim investors to invest in interest-bearing instruments and actively participate in the process of raising private funds for the development of infrastructure projects in the country.
Preceding the official launch of the Sukuk was a roadshow organised by the DMO and from the outing, prospective investors loved it because it is tied to projects that come with great economic impacts.
At an investors’ forum in Kaduna in 2017, the Central Bank of Nigeria urged Nigerians to take advantage of the sovereign Sukuk being offered by the Federal Government in order to support the country’s infrastructural development, while making money.
The CBN’s Deputy Director, Financial Markets Department, Mr. Demenongu Yanfa, assured participants of the apex bank’s commitment to the smooth running of the Islamic bond.
According to Yanfa, the Sukuk will not only allow Nigerians to take ownership of the roads with half yearly rental incomes, but will also fast-track the building of road infrastructure in the country.
He said, “The world is looking for new areas of investment. As of today, South Africa, Malaysia and some other countries of the world have embraced sukuk; this is to fund the construction and rehabilitation of key sectors of their economies.”
For the DMO boss, Patience Oniha, the Sukuk remains a unique instrument because of its characteristics, particularly the transparency in the utilization of the funds raised through it. Funds raised from each Sukuk is expected to be applied to specific projects which can be identified and assessed by government, investors and the public.
With all encumbrances sorted, the DMO commenced the issuance of Sukuk in September 2017 with a three-prong objective of pooling funds to tackle infrastructure deficit, boost financial inclusion and deepen the domestic securities market.
In the debut Sovereign Sukuk in 2017, N100 billion was raised to finance the rehabilitation and construction of 25 road projects across the six geopolitical zones. That debut Sukuk was heavily oversubscribed.
The 25 projects funded from the debut Sukuk included the dualisation of Lokoja-Benin road, Abuja-Abaji-Lokoja road section one, three and section four and Construction of Oju-Loko-Oweto Bridge over River Benue, and the dualisation of Suleja-Minna Road in Niger state, Phase two, in the North Central.
The North East had four projects namely: the dualisation of Kano to Maiduguri road section two, three, four and five.
Similarly, the North West region had four projects namely the Dualisation of Kano-Katsina Road phase one, Construction of Kano Western bypass and the construction of Kaduna Eastern by-pass road.
Four projects that benefitted from the funds in South East are; the rehabilitation of Enugu-Port Harcourt dual carriageway section two, Onitsha to Enugu expressway, Enugu to Port Harcourt dual carriageway section one, and three.
For the South-South, five projects were funded. They are; dualisation of Yenagowa-Kolo; Otuoke-Bayelsa palm road.
Other projects in the region were the rehabilitation of Enugu to Port Harcourt road section four.
Three projects were financed in the South West region namely; the reconstruction and asphalt overlay of Benin to Ofosu to Ore to Ajebandele to Shagamu dual carriageway phase three and four.
The dualisation of Ibadan-Ilorin Road section two was completed using the raised funds.
With the huge success of the first Sukuk, the DMO was encouraged to issue another instrument for N100 billion in 2018 and N162.557 billion in 2019.
The proceeds of these two Sukuk issuances were also deployed to 28 and 44 road projects, across the country, respectively.
Last year’s N250 billion was the fourth in the series which began in 2017, with the total amount raised through Sukuk standing at N612. 557 billion and has been successfully channeled into various projects as determined by the federal government.
Applauding the Sukuk instrument, the Minister of Works and Housing, Mr. Babatunde Fashola, said it was weird to see how some Nigerians attacked the initiative.
“I think some calm came when we explained that the first N100 billion was going to be applied equally to all the six zones of Nigeria, meaning that each zone was going to get about N16.6 billion and that any zone that felt that it was an attempt to Islamise Nigeria should indicate that they don’t want the funds and that was the beginning of our journey”, he explained.
Fashola added that his ministry has been able to undertake audacious projects that have been stalled since 2015 when the Buhari administration came onboard.
The minister stated that from the first Sukuk funds of N100 billion, released in 2017, 25 roads, covering 482 kilometres length were delivered; the second Sukuk of 2018 had 28 roads covering 643 kilometres length delivered, while the third Sukuk funds of N162 billion covered 44 highway and bridge projects with the total length of 757 kilometres covered across the nation.
Fashola noted that Sukuk financing had enhanced completion of some priority road and bridge projects across the country which includes: the completion of 296km Sokoto-Tambuwal-Jega-Yawuri in Sokoto and Kebbi States, completion of 142km Section II (Shuwarin–Azare) of Kano-Maiduguri road, completion of 106km Section III (Azare-Potiskum) of the Kano-Maiduguri road and the completion of 1.2 kilometer /360m length Ikom bridge.
The minister also explained that the impact of debt and borrowing on the economic lives of the people was significant; pointing out that proper usage of the debt on infrastructure in Nigeria had helped in galvanizing the economy.
In her remarks at a recent Sukuk cheque presentation, the DMO CEO, Oniha explained that the Sukuk has been highly and widely accepted among investing members of the public who have also commended the organisation and the federal government for the initiative.
“Since the debut Sovereign Sukuk in September 2017 whose benefit in terms of improved road infrastructure within and outside cities in Nigeria is clearly visible, the Sukuk has been commended as a viable instrument for financing infrastructure.
“The use of Sukuk, has enabled timely completion of the designated projects whilst also delivering the multiplier effects associated with construction of capital projects such as roads.”
The level of disclosure and transparency for Sukuk financing which requires the issuer to present full details of how funds will be utilised gives investors information that guide their investment decisions while also giving them the ability to monitor the utilisation of the Sukuk proceeds after investing, to confirm that funds have been applied as canvassed.
To provide additional comfort to investors, the FGN has appointed Trustee Firms registered with the Securities and Exchange Commission, who, on behalf of the investors in the Sukuk, monitor the utilisation of the proceeds and the quality of work.
In 2021, the DMO raised N250 billion, which was shared among the Federal Ministries of Works and Housing, Niger Delta Affairs and the Federal Capital Territory.
Out of the current N250 billion, Works and Housing received N210.56 billion; FCT, N29 billion; while Niger Delta got N10.43 billion.
At the ceremony to hand over the cheques to the ministers, Oniha said, “The introduction of Sukuk as a source of raising funds for the government has improved road infrastructure across the six geo-political zones. As you travel each time, it is impossible to travel up to 200 km or 300 km and not see a Sukuk road and even in some cities, as well.
“The acceptance of Sukuk by investors and the verifiable evidence as a means of financing roads has encouraged some state governments to also issue Sukuk, at the sub-national level.”
According to her, the symbolic presentation of the cheque was an indication that the federal government was ready to run with the projects to be funded with the proceeds, as the money was ready for utilization.
She added, “The Sukuk is tied to the development of road infrastructure which is very closely aligned with the strategic objectives of the administration of President Muhammadu Buhari. Needless to say, improvement in infrastructure, because of the multiplier effects it has, is accepted as one of the best ways of creating jobs, supporting and attracting new businesses and promoting overall growth and development.