From Adanna Nnamani, Abuja
The Federal Government of Nigeria has issued six Sovereign Sukuk bonds worth ₦1.1 trillion ($657.6M) to finance 124 federal road projects, covering over 5,820 kilometres across the six geopolitical zones of the country.
The Director General of the Securities and Exchange Commission (SEC), Dr Emomotimi Agama, disclosed this information during the ongoing 2nd International Islamic Capital Market Conference in Karachi, Pakistan.
According to a statement from the Commission, the DG highlighted the success of these Sukuk issuances, which positions the Islamic Capital Market (ICM) as a resilient and innovative tool for mobilising resources.
Agama described the issuance of Sovereign Sukuk since 2017 as a key factor contributing to the growth of the ICM in Nigeria, noting that these issuances have consistently been oversubscribed, with subscription rates reaching as high as 441%.
He also revealed that sub-national and corporate Sukuk issuances are gaining traction in Nigeria, with notable examples from Osun and Lagos states, Family Homes Ltd, and TAJ Bank Plc, alongside private Sukuk issuances by three other sub-nationals.
The DG explained that these instruments have been vital in funding school infrastructure, housing, and, for the first time in Nigeria, tier 1 capital for a bank, demonstrating the versatility of Sukuk as a financing tool.
“Beyond Sukuk, the ICM segment in Nigeria offers diverse investment opportunities. From one registered fund in 2008, the segment now boasts 14 registered Halal mutual funds with a net asset value exceeding ₦105 billion as of November 2024. The NGX Lotus Islamic Index tracks 11 Shariah-compliant equities, while Nigeria’s first Islamic Real Estate Investment Trust, ChapelHill N-REIT, showcases the potential of real estate investments.”
Agama also highlighted the prospects for Nigeria’s Islamic finance industry, driven by global demographic trends, regulatory support, and Nigeria’s large Muslim population. He emphasised the role of government-backed Sukuk initiatives and growing investor awareness in driving market expansion.
He noted that innovations in fintech present further opportunities for market development. In 2022, the SEC registered Nigeria’s first Robo advisory firm, focused on Shariah-compliant investments.
Agama attributed the success of the ICM in Nigeria to its strategic focus on infrastructure financing, financial inclusion, and sustainability. He explained that the SEC’s engagement with the ICM dates back to 2004, when the SEC joined the Islamic Finance Task Force of the International Organization of Securities Commissions (IOSCO).
The SEC, he said, reinforced its commitment by issuing Islamic fund and Sukuk rules in 2010 and 2013, respectively. This commitment was further solidified through the Non-Interest Capital Market Master Plan (2015–2025), which outlines a 10-year roadmap for expanding the market’s depth and diversity.
According to Agama, “Adopted in 2015 as part of the broader Nigerian Capital Market Master Plan (2015–2025), the Non-Interest Capital Market Master Plan (NICMMP) has been central to the development of the ICM segment in Nigeria. The document sets out a vision for the ICM (also known as the Non-Interest Capital Market) to contribute 25% of total market capitalisation by 2025, with Sukuk accounting for 15%.”
He further explained that the master plan was reviewed in 2021 to refocus on deepening the ICM, with a target of 50 listings of Shariah-compliant products with a market capitalisation of at least ₦5 trillion ($11 billion) by 2025.
“The performance of the NICM Masterplan has been remarkable. Of the 15 initiatives outlined in the roadmap, nine had been fully implemented as of 2022, representing a 70% success rate. Key achievements include improved public awareness, increased retail participation in Sukuk, and the introduction of the Non-Interest Pension Fund (Fund VI) through collaboration with the National Pension Commission (PenCom). Another key achievement was the release of guidelines for taxation of Non-Interest transactions, in collaboration with the Federal Inland Revenue Service (FIRS), which addressed the challenge of double taxation hindering such transactions.”
The SEC DG, however, acknowledged challenges in the growth of the ICM segment, including limited public awareness of Islamic finance principles, a lack of tradable instruments, and regulatory alignment across institutions. He emphasised the importance of capacity-building efforts, particularly in Shariah governance and compliance, to sustain growth.
He also highlighted ongoing efforts to engage stakeholders in the mortgage sector to develop Shariah-compliant housing finance solutions, which will create the needed impetus for developing Shariah-compliant asset-backed instruments to further deepen the capital market.
Looking ahead, Agama noted that the opportunities in Islamic finance are vast, as it solves practical challenges and meets the needs of the Nigerian economy, such as addressing critical infrastructure deficits, promoting financial inclusion, increasing mortgage penetration, and providing alternatives to commercial financing for those with faith-based or ethical concerns.
He emphasised that the increased activity in the Nigerian market and the establishment of benchmarks for corporates and sub-nationals offer significant benefits for ethical investors and foreign capital seeking sustainable investment opportunities.
“As regulators and policymakers continue to refine and expand the regulatory framework, product developers are innovating and offering a variety of instruments to meet market demand. This is the time to stake positions that will undoubtedly produce competitive returns while satisfying ethical and sustainability concerns. The table is set for investing. Foreign participants should take positions and increase their stakes in line with domestic trends. This offers a significant opportunity to contribute to sustainable economic growth and financial inclusion in Nigeria and, by extension, the African continent,” Agama added.