•Enugu, Port Harcourt, Ibadan, Kano, Maiduguri

Emma Ujah, Abuja Bureau Chief

Ms. Patience Oniha was appointed Director General (DG) of the Debt Management Office (DMO) at a time the President Muhammadu Buhari administration was in dire need of funds for the development of infrastructure across the country.The nation’s economy had been hit hard by recession the previous year and was still struggling to find its feet.

The government, therefore, made it a policy to borrow its way out of the recession. The common sources of borrowing by the Federal Government came under consideration.

Consequently, the DG, a capital market expert, and her management began an unprecedented strategic initiative towards raising funds from the private sector in an open, transparent and accountable method.

It was in the attempt to make investment in government debt instruments more attractive to every segment of the society that SUKUK, a non-interest debt instrument, was introduced by the DMO.

The initiative was greeted with mixed reactions across Nigeria as some hailed the move as an opportunity for Muslim investors who were not willing to invest in interest-bearing instruments to also actively participate in the process of raising private funds for the development of infrastructure projects in the country, while expanding financial inclusion.

However, some expressed worries that the introduction of SUKUK, an Islamic instrument, was a ploy by the Buhari administration to Islamise Nigeria. Oniha and her team had to do a lot of explanations to convince the public that SUKUK had no hidden agenda of Islamising Nigeria.

Many of the prospective investors that the DMO met during the Roadshow indicated great interests in the fact that SUKUK is tied to projects.

SUKUK stands out as an instrument because of its characteristics, particularly the transparency in the utilization of funds raised through that instrument. Funds raised from each SUKUK is expected to be applied to specific project (s) which can be identified by government, investors and members of the society.

Consequently, the DMO commenced the issuance of SUKUK in September 2017 as a strategic initiative to support the development of infrastructure, promote 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 over-subscribed.

The 25 projects funded from the debut SUKUK include the dualisation of Lokoja-Benin Road, Abuja-Abaji-Lokoja Road Sections One, Three and Four, the construction of Oju-Loko-Oweto Bridge over River Benue and the dualisation of Suleja-Minna Road in Niger State, all in the North-Central.

The North-East had four projects namely the dualisation of Kano – Maiduguri Road Sections Two, Three, Four and Five.

Similarly, the North-West had four projects namely the dualisation of Kano-Katsina Road Phase One, and the construction of Kano Western Bypass and Kaduna Eastern Bypass Road.

Four projects benefitted from the funds in South-East namely the rehabilitation of Enugu-Port Harcourt dual carriageway Section Two, Onitsha to Enugu Expressway, Enugu to Port Harcourt dual carriageway Sections One and Three.

For the South-South, five projects were funded including dualisation of Yenagoa-Kolo; Otuoke-Bayelsa Palm Road and rehabilitation of Enugu to Port Harcourt Road Section Four.

Three projects were financed in the South-West namely the reconstruction and asphalt overlay of Benin to Ofosu to Ore to Ajebandele to Shagamu dual carriageway Phases Three and Four, and completion of the dualisation of Ibadan-Ilorin Road Section Two.

Encouraged by the acceptance of the instrument, the DMO issued another SUKUK for N100 billion in 2018 and N162.557 billion in 2019.

The proceeds of the two issuances were deployed to 28 and 44 road projects, across the country respectively.

Last year’s N250 billion was the fourth in the series with the total amount raised through SUKUK standing at N612. 557billion and applied to road infrastructure.

According to the DMO DG, the ethical instrument has been highly 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, SUKUK has been commended as a viable instrument for financing infrastructure”, she said.

“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 utilized, gives investors information that guides their investment decisions whilst also giving them the ability to monitor the utilisation of the SUKUK proceeds after investing, to confirm that funds have been applied as proposed.

To provide additional comfort to investors, the Federal Government 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.

Last year, the DMO raised N250billion, which was shared among the Federal Ministries of Works and Housing, Niger Delta Affairs and the Federal Capital Territory (FCT).

Out of the money, Works and Housing Ministry received N210. 56billion; FCT, N29billion and Niger Delta Ministry N10. 43billion.

At the ceremony to hand over the cheques to the Ministers, an Oniha said, “The introduction of SUKUK as a source of raising funds for 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 cheques 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 said, “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”.

The Minister of Works and Housing, Mr. Babatunde Fashola, commended the DMO for the SUKUK initiative.

“I think some calm came when we explained that the first N100billion 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”, Fashola said.

He described the SUKUK option as a method of Public Private Partnership (PPP) that has become successful in Nigeria.

The Minister’s words, “The first SUKUK of N100 billion was deployed to 25 roads and it delivered a total of N482 km; the second SUKUK in 2018 was deployed to 28 roads and it delivered a total of 643 km ; the third 2020, of N162 billion was deployed to 44 roads and delivered 757 km.

“Many of these roads had been awarded before we came but were not funded. Each year SUKUK came we were told the number of km that we must deliver with this money. “Part of the impact is that it created jobs for 97 construction and contracting companies who are keeping people at work; who are demanding supplies of diesel, bitumen, asphalt and that is how the money is moving round the economy.

“When you pass any of these roads, say a prayer for DMO, say a prayer for the Ministry of Finance and say a prayer for the members of the National Assembly because in government nobody can do it alone.”

The success of SUKUK at the federal level has elicited interests in the instrument among state governments, with a view to utilising it to also raise funds for the development of infrastructure and that tier of government.