FG’s N150bn Sukuk records N669.12bn subscription

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Sukuk Bonds

NIGERIA’s N150 billion third sovereign Sukuk issuance recorded oversubscription of N519.12 billion, sustaining a trend of oversubscription that started with the maiden issuance 2017.

The Debt Management Office (DMO), which oversees debt issuance by the Federal Government, at the weekend indicated that the N150 billion Sukuk recorded overwhelming subscriptions from individual and institutional investors, with subscriptions more than three folds of the offer size.

The Federal Government had on May 21, 2020 opened application list for the N150 billion seven-year Ijarah Sukuk due June 2027 with approximate rental of 11.200 per cent per annum.  Application list for the Sukuk closed on Friday June 05, 2020 while the settlement date was Tuesday, June 9, 2020.

The minimum subscription for the Sukuk is N10,000 at N1,000 per unit and thereafter in multiples of N1,000. The rental will be paid twice a year while the redemption will be bullet payment on the maturity date.

The Nation had earlier reported that there were expectations that the third sovereign Sukuk issuance would be oversubscribed like the previous issuances by the government.

The Federal Government would use the net proceeds of the N150 billion Sukuk solely for the construction and rehabilitation of key roads across the six geopolitical zones of the country.

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.

The Chartered Institute of Stockbrokers (CIS) had described the N150 billion Sukuk as a high-grade investment with high return and almost zero risk.

The CIS, which regulates the practice of stockbroking in Nigeria, said the Sukuk issuance was a wealth-creating opportunity for Nigerians, especially in this period of COVID-19 pandemic.

In a statement jointly signed by its President, Mr Tunde Amolegbe and Chief Executive Officer, Mr Adedeji Ajadi, the CIS explained that Sukuk Ijarah is a fixed income security backed by the Federal Government, which makes it an investment without risk as repayment of investors is guaranteed by the full faith and credit of the Federal Government of Nigeria, hence, the instrument is regarded as a gild hedge.

They noted that Sukuk is highly sought after by ethical Investors as it provides a regular bi-annual tax-free payment for the period of the instrument while principal will be paid at the end of maturity period which is seven years.

”The profit to investors is pre-determined at regular interval to enable them enjoy steady cash flow. Sukuk helps in redistribution of wealth. It is a risk management instrument which is ideal for both speculators and investors. Speculators can sell before maturity. The instrument will help the government to finance large projects,” CIS stated.  – The Nation

– Jun. 15, 2020 @ 12:05 GMT |

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