In a noteworthy milestone for Nigeria's Islamic finance sector, the country's first-ever sovereign Sukuk, issued in 2017, has reached maturity and has been fully settled. This 7-year Islamic bond, valued at 100 billion naira, was issued on September 26, 2017, with proceeds dedicated to financing 25 road projects across Nigeria's six geopolitical zones. The projects align with the government's commitment to enhancing the movement of people, goods, and services—thereby contributing to economic growth and development.

The successful maturity and settlement of this Sukuk marks a significant achievement, demonstrating the efficiency and sustainability of Islamic finance in supporting infrastructural development. The bond's rental rate of 16.47% was paid biannually, with the final payment completed on September 26, 2024. This milestone reflects Nigeria's dedication to meeting its financial obligations, instilling confidence in both domestic and international investors interested in the country's Islamic capital market.

Strengthening Trust and Promoting Growth

This successful Sukuk issuance and its eventual maturity have further boosted investor trust in Islamic finance as a reliable and ethical mechanism for funding development projects. By demonstrating the government's adherence to its financial obligations, the Sukuk enhances the attractiveness of Islamic financial instruments in the Nigerian market, setting a precedent for future issuances.

Renowned Islamic finance expert, Professor AbdulRazzaq AbdulMajeed Alaro, commended all stakeholders involved in this achievement. He emphasised that the successful settlement of the Sukuk means that the underlying assets—road projects across the six geopolitical zones—have been reacquired by from investors.

“It also means that FGN, as the originator/obligor in this case, has not defaulted on its obligation under the sukuk contract, and this is especially important for boosting both domestic and international investors' confidence in the emerging Nigerian sukuk market.”

A History of Success

Since the introduction of Nigeria's first Sukuk in 2017, the country has issued five additional sovereign Sukuks, collectively raising about 1.092 trillion naira. These Sukuks have consistently attracted significant interest from investors, with each issuance being oversubscribed. This trend highlights the demand for alternative, Shariah-compliant investment vehicles and underscores the increasing confidence in the Islamic finance industry.

The funds raised through these Sukuks have been allocated towards vital infrastructure projects, including the construction and rehabilitation of over 4,000 kilometres of roads and bridges across Nigeria. Notable projects financed include the Abuja-Abaji-Lokoja Road, Suleja-Minna Road, and the Kaduna Eastern Bypass.

A Global Perspective

Nigeria's success in utilising Sukuk financing for infrastructure aligns with similar developments in other parts of the world. Countries such as Indonesia, Malaysia, and Saudi Arabia have leveraged Sukuk as a means to finance infrastructure, reduce budget deficits, and promote sustainable development. By achieving the successful settlement of its first Sukuk, Nigeria joins these nations in demonstrating that Islamic bonds are not only a viable financing tool but also an efficient means to drive national growth.

Impact on Stakeholders

This landmark event offers significant benefits to all stakeholders involved. For investors, Muslims and non-Muslims alike, it reaffirms the credibility and reliability of the Nigerian government in meeting its financial commitments. For the public, it underscores the government's dedication to infrastructure development, resulting in improved road networks and enhanced economic activities. Finally, for the Islamic finance community, this development is a powerful endorsement of Sukuk as a sustainable financing model, promoting further innovation and expansion in the sector.

Looking Ahead

The successful maturity and settlement of Nigeria's first sovereign Sukuk bond mark a significant milestone in the country's Islamic finance journey. This achievement demonstrates the viability and effectiveness of Islamic financial instruments in supporting infrastructure development and promoting economic growth. As Nigeria continues to embrace Islamic finance, it is poised to become a leading player in the global Islamic finance landscape.

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