The Federal Government of Nigeria has taken a pivotal step in addressing the country's infrastructure needs by issuing six Sovereign Sukuk bonds worth ₦1.1 trillion (approximately $657.6 million). This substantial financial move is aimed at financing 124 federal road projects, which will cover over 5,820 kilometers across Nigeria's six geopolitical zones.
The announcement was made by Dr. Emomotimi Agama, the Director-General of the Securities and Exchange Commission (SEC), during the second International Islamic Capital Market Conference held in Karachi, Pakistan.
Sukuk bonds, often referred to as Islamic or Sharia-compliant bonds, are financial certificates that provide investors with partial ownership of an issuer’s assets. This innovative financial instrument has gained traction in Nigeria, with Agama highlighting its success rate and resilience as a tool for mobilizing resources.
He noted that since the introduction of sovereign Sukuk in 2017, these issuances have been consistently oversubscribed, with subscription rates reaching as high as 441 percent. This oversubscription shows the growing confidence and interest in Sukuk as a viable investment option within Nigeria's Islamic Capital Market (ICM).
Agama emphasized the pivotal role that Sukuk has played in the growth of the ICM in Nigeria. Beyond federal initiatives, sub-national and corporate Sukuk issuances are also on the rise. States like Osun and Lagos, along with entities such as Family Homes Ltd. and TAJ Bank Plc, have utilized Sukuk for various projects, including school infrastructure, housing, and even tier-1 capital for banks. This diversification highlights the versatility of Sukuk as a financing tool capable of addressing a wide range of developmental needs.
The SEC has been instrumental in fostering the growth of the Islamic finance sector in Nigeria. As of November 2024, there were 14 registered Halal mutual funds with a net asset value exceeding ₦105 billion.
Additionally, the NGX Lotus Islamic Index tracks 11 Shariah-compliant equities, and ChapelHill N-REIT has emerged as Nigeria’s first Islamic Real Estate Investment Trust. These developments reflect the expanding scope of investment opportunities within the ICM segment.
Agama reiterated the commitment of the SEC to the growth of the Islamic finance sector through its strategic Non-Interest Capital Market Master Plan (2015–2025). This plan aims for Sukuk to contribute 15 percent of the total market capitalization by 2025. He stressed the potential of Islamic finance to address Nigeria’s economic challenges, particularly in critical areas such as infrastructure, financial exclusion, and low mortgage penetration.
"Islamic finance is solving some practical challenges and needs of the Nigerian economy," he remarked, adding that this is an opportune time to invest in positions that promise competitive returns while satisfying ethical and sustainability concerns.
The issuance of the ₦1.1 trillion Sukuk bonds aligns with the Nigerian government's broader infrastructure development goals. According to the 2020 National Integrated Infrastructure Master Plan, Nigeria requires a total infrastructure investment of $2.3 trillion between 2020 and 2043 to elevate its infrastructure stock to the international benchmark of 70% of GDP. The Sukuk bonds are part of a comprehensive strategy to meet these ambitious targets.
In addition to Sukuk, the Nigerian government has explored other financing mechanisms for infrastructure projects. Works Minister David Umahi recently announced that 20 new road projects would be funded through the federal government's Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme.
This initiative involves collaboration with private-sector firms, including Dangote Group, BUA Group, Mainstream Energy Solutions, and MTN, to support the development and refurbishment of critical road infrastructure.
The use of Sukuk bonds for infrastructure financing is not only a testament to the growing acceptance of Islamic finance in Nigeria but also a reflection of the government's commitment to leveraging diverse financial instruments to drive national development. As the world increasingly seeks ethical and inclusive financial solutions, Nigeria's embrace of Sukuk positions it as a leader in the Islamic finance space, offering a model for other countries to follow.
Looking ahead, the continued expansion of the Islamic finance sector in Nigeria is expected to play a crucial role in addressing the country's infrastructure deficit. With a large Muslim population, government-backed Sukuk initiatives, and growing investor awareness, the market is poised for further growth.
Emerging innovations in fintech also present additional opportunities for market development, as evidenced by the registration of the first Robo advisory firm focused on Shari’ah-compliant investments in the Nigerian Capital Market in 2022.
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