N250bn Sukuk, Final Tranche of N3.143trn Domestic Borrowing for 2021, Says DMO

•FCTA, N’Delta, works ministries to share in projects

Ndubuisi Francis in Abuja

The N250 billion Sovereign Sukuk currently on offer by the Debt Management Office (DMO) on behalf of the federal government is being raised as the final tranche of the N3.143 trillion domestic borrowing component provisioned in the 2021 budget, Director General of the DMO, Ms. Patience Oniha, has explained.

Oniha, who spoke at a media briefing and investor meeting in Abuja, yesterday, noted that unlike previous Sukuk offers with only the Federal Ministry of Works and Housing as sole government’s agency to utilise proceeds for road infrastructure, the current N250 billion Sukuk would be shared in addition with two others ministries – Federal Capital Territory Administration (FCTA) and the Ministry of Niger Delta Affairs.

She said: “The purpose of today’s event is to achieve two objectives – sensitise the media on issuance of fourth Sukuk as well as to invite investors within and outside Nigeria to tell them about sovereign sukuk we are about to issue.

“By way of background, the DMO had issued three Sukuk previously- 2017, 2018 and 2020, raising a total of N362.57 billion to finance road projects across the six geo political zones of the country. That has been extremely successful and has both the DMO as the face of government for borrowing and others.

“The average citizen on the road has been impressed with what the sukuk has contributed to the economic growth and development.”

She added: “It has now become one of the instruments with which we raised money for the federal government. Essentially, this event is, DMO on behalf of federal government is offering Sukuk of N250 billion to investors; whether they be retail investors, institution or town associations, cooperative or banks, insurance companies or pension funds.

“We are using sukuk to raise money for the government to finance road projects. Sukuk is different from other securities we issued in the market. You know we issue Nigerian Treasury Bills, we issue government bond. With these ones, we are financing specific projects, and under the requirements for issuing non interest products, we need to tell you what it’s we are financing.

“This is the fourth one; the largest we are issuing so far. They are now three ministries – Ministry of Works and Housing, Federal Capital Territory and Ministry of Niger Delta Affairs as supposed to one previously. The funds are all going into roads projects.”

On how the funds will be allocated among the three ministries, she said: “We have been very transparent with the presentation, the projects that came from the Ministry of Works and Housing. Each one was listed, they were many.

“There is N200 billion, specific projects and the section of the roads were disclosed. Then, for FCT, there are N37 billion disclosed and the projects have been described, and for those of us who live in Abuja, we can tell where those roads are with the description.

“Then there is the Ministry of Niger Delta which has N75 billion included in those roads. So, let’s get the monies and we will allocate.”

The DMO chief executive expressed optimism that the N250 billion target was realisable within one week of the offer which opened on December 16 through December 22, 2021.

“Certainly we believe so; we have set the time as one week, similar to other offers in the market. The reality is just that today is not the time we are talking about Sukuk. If you go back say a month or two, we already started the sensitisation process for the Sukuk. So investors have already set aside funds knowing that the Sukuk is coming.

“The second point is that investors have bought into the concept of Sukuk, so there is awareness and they will support it.

“Then thirdly, don’t forget one the major objective for issuing the Sukuk is for financial inclusion; so there are institutions and individuals who will not invest in our conventional products but will invest in this one, so the market is large.”

In his remarks at the event, the Managing Director of Greenwich Merchant Bank, the financial advisers to the offer, Mr. Bayo Rotimi expressed confidence that it would record oversubscription as previous Sukuk.