Nigeria’s premier non-interest bank, Jaiz Bank Plc, is working on floating a N150 billion Sukuk issuance, a trail-blazing effort that could redefine corporate non-interest bond issuance.

The planned Sukuk will be the largest non-interest bond issuance in the Nigerian capital market.

According to The Nation, The board of directors of the bank has concluded preliminary discussions on the N150 billion Sukuk issuance and has scheduled consideration and approval of the N150 billion Sukuk as part of the agenda at the bank’s annual general meeting next month.

Shareholders are expected to authorise the board of directors to raise up to N150 billion new capital through issuance of Sukuk. The issuance may be at once or in tranches.

Shareholders are also expected to mandate the board of directors to take all necessary steps and transactions that would enable the bank to achieve its short to long-term growth objectives as well as greater competitiveness. These steps and transactions may include acquisitions, new investments, restructuring; expansion, capital raising and other business arrangements that enhance the bank’s growth trajectory.

S&P Global Ratings projected that total Sukuk issuances may be between $145 billion and $150 billion in 2022, slightly optimistic yew than the previous year.

According to the global rating agency, total Sukuk issuance stabilised at $147.4 billion last year compared with $148.4 billion in 2020 but foreign currency denominated issuance increased 10 per cent.

“We forecast total issuance of about $145 billion-$150 billion in 2022,” S & P Global Ratings stated.

The report noted that Sukuk issuance volumes would be flat at best in 2022 amid lower and more expensive global and regional liquidity, increased complexity, and reduced financing needs for some core Islamic finance countries.

“On a positive note, we see opportunities created by the energy transition in core Islamic finance countries, higher environmental, social and governance (ESG) awareness from regional issuers, and stronger automation using fintech solutions as likely to support future Sukuk market growth,” S & P Global Ratings stated.

Managing Director, Jaiz Bank Plc, Mr. Hassan Usman, had underscored the importance of Sukuk as a funding instrument for private and public sectors in the West African region and beyond.

According to him, many West African countries and companies may fall back on Sukuk to raise non-interest funds to finance infrastructural development and corporate growth plans.

He said there could soon be a frenzy of Sukuk issuance in West Africa as more countries discover the potential of Sukuk as a major leverage for their national development.

He said the envisaged scramble for Sukuk issuance in the nearest future could make the non-interest capital market grow bigger and faster than its banking counterpart.

“This is due to the inherent linkage of Sukuk to an underlying asset. The IMF asserts that with Sukuk, African nations could tap into growing Islamic financial markets to meet infrastructure financing needs instead of using conventional financing from international finance institutions such as the World Bank or the African Development Bank or relying on borrowed Chinese funds,” Usman said.

According to him, non-interest banking (NIB) in West Africa has a lot of potential due to a number of positive indicators, including the  growth in many West African nations supported by improving fundamentals, growing domestic demand and stronger regional integration.

Usman has also underscored the need for the Federal Government to devise a regular Sukuk issuance programme to secure much-needed capital to boost infrastructural development and end the menace of abandoned projects.

According to him; issuance of more Sukuk bonds would provide government with pool of capital finance infrastructural projects across the country while asset-based nature and financial discipline that come with Sukuk bonds will ensure timely completion of any identified project.

He noted that Sukuk ensures discipline in the management of resources because there is always a structure to guide the process. As such, issuance of more Sukuk bonds will not only provide the huge quantum of funds needed to address infrastructural problems in the country but help to improve efficiency in public finance.

“We have so many things that we need to address, from roads to railways, seaports, airports, hospitals, education and so many other things yearning for attention; which the normal budgeting system cannot address. We need to raise quantum of funds to address them. Issuing Sukuk gives you two things-you get the resources and get disciplined around it. Money from Sukuk is dedicated for what it is intended for. It is very unlikely for that money to be diverted out of those projects,” Usman said.

He added that issuance of Sukuk will help Nigeria to address both financial inadequacy and structural deficiencies in public administration as every issuer of Sukuk will need to have a definitive structure in place for the utilization of the fund, which must be followed to the letter.

“That for me is something Nigeria needs, because it would mean the end of abandoned projects. Before you raise Sukuk, you must have done your homework – you have gotten the contractors, you have done the bills of quantity- money is available and the contractor would go to the site and every certificate is paid for. So, Sukuk for me is the way to go to address many of our challenges,” Usman said.

The Federal Government had in September 2017 floated its first sovereign Sukuk, a N100 billion seven-year issue with a rental rate of 16.47 per cent. It was oversubscribed by 5.8 per cent. Government followed in 2018 N100 billion seven-year tenored Sukuk Al Ijarah (Lease) with annual rental rate of 15.743 per cent. It was also oversubscribed. Nigeria’s N150 billion third sovereign Sukuk issuance had recorded oversubscription of N519.12 billion, sustaining a trend of oversubscription that started with the maiden issuance 2017. The Federal Government had in June 2020 issued a N150 billion seven-year Ijarah Sukuk due June 2027 with approximate rental of 11.200 per cent per annum.




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