Nigeria May Issue First Non-Interest Sovereign Bond In Second Half 2016

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Indications have emerged that the Federal Government may issue Nigeria’s first sovereign non-interest bond in the second half of 2016.

This development is expected to widen the domestic debt market.

To this end, a multi-agency committee to work out the modalities for the maiden sovereign non-interest bond has been set up. The committee includes the Debt Management Office, DMO, Securities and Exchange Commission, SEC, Central Bank of Nigeria, CBN and Infrastructure Concession and Regulatory Agency, ICRA, among others.

A source privy to the plans of the committee confirmed that the timeline for the issuance of the sovereign non-interest bond may be issued in the third quarter, which will then lead to the floatation of the pioneer issuance.

Non-interest bond, otherwise known as Sukuk bond, makes returns to the investors through sharing of profit or cash flow from the underlying asset with them in addition to redemption of the principal upon maturity.

Nigeria currently has only one sub-national Sukuk bond issued by the Osun Sate Government. Two other states, Kebbi and Sokoto States have indicated interests in issuing Sukuk bonds.

The absence of a sovereign Sukuk bond to serve as benchmark for other government and corporate Sukuk issuance has been cited globally as a drawback for the growth of non-interest Sukuk bond market. Standard & Poor’s Rating Services (S & P) estimated that global Sukuk issuance could reach up to $55 billion in 2016.



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