By Dipo Olowookere
Those wishing to explore the Islamic capital market in Nigeria have been assured of an attractive enabling environment by the Securities and Exchange Commission (SEC).
According to the Chief Executive Officer of the SEC, Mr. Lamido Yuguda, efforts are being made to work with relevant stakeholders to implement recommendations for the non-interest capital markets sector in line with the objectives of the 10-Year Capital Markets Master Plan. Nigerian capital (2015-2025), which includes developing the market segment to contribute at least 25% of the overall capital market capitalization by 2025, with Sukuk contributing 15% of outstanding bond issues.
Yuguda, who spoke at the 2021 African International Conference on Islamic Finance held in Abuja on Wednesday, said Islamic finance instruments are globally recognized as acceptable securities, with lower value-at-risk in because of their asset-based, project-related investment. characteristics.
He noted that for this reason, the industry offers safe, competitive and attractive financial products, adding that many jurisdictions have realized the potential of Islamic finance and positioned themselves to exploit the potential benefits of such financing.
“It should be noted that since Islamic finance relies heavily on the Islamic Capital Market (ICM) as an investment outlet, products such as Sukuk (Islamic Bond), Islamic REITs (I-REITS), Islamic funds (I-Funds) and Exchange- Mirror traded funds (Islamic Equity Index) could all be offered for infrastructure finance purposes, ”said SEC chief, represented by Executive Commissioner Corporate Services SEC , Mr. Ibrahim Boyi.
During the themed event Infrastructure financing, sustainability and the future of African markets 2.0, he added, “Sukuk issues are gaining more and more importance as a true means of financing infrastructure.
“Therefore, a number of countries in the sub-Saharan region of the continent; Sudan, Gambia, Senegal, South Africa, Côte d’Ivoire, Nigeria, Mali and Togo have issued Sovereign Sukuks to finance infrastructure.
“For example, we reviewed existing regulatory frameworks and introduced new ones. In particular, we have published rules on the management of Islamic funds as well as on the issuance of Sukuk.
“These two legal frameworks have encouraged innovation of Islamic products with the registration of ten ethical and sharia compliant funds and the issuance of Nigeria’s sub-national Ijara Sukuk by the state government. Osun in 2013, which was oversubscribed.
“In addition, the federal government, through the Debt Management Office (DMO), has so far issued Ijara Sukuk for over 350 billion naira over the past 3 years. The funds were used to build and rehabilitate infrastructure development projects in the six geopolitical zones of the country.
He noted that the agency recently approved a N30 billion corporate sukuk program and a N10 billion serial issue under the program. This is the first public corporate sukuk issue; commendable, the proceeds should be used to finance housing infrastructure.
Like the sovereign issues, the corporate issue was also oversubscribed. The show was a milestone in the market and we are confident that more companies will begin to enter the market.
According to him, the theme of this year’s conference resonates with an essential function of the capital market, as the market plays a crucial role in providing access to medium and long-term finance better suited to infrastructure development.
“According to the AfDB, Africa needs an annual investment of between 130 and 170 billion dollars per year in infrastructure to reduce its infrastructure deficit. While according to the Global Infrastructure Hub (2020), Africa needed an infrastructure investment of $ 184.03 billion in 2019 and $ 190.1 billion in 2020 to fill its infrastructure deficits.
“The African continent continues to face infrastructure deficits, with governments being the main financier of infrastructure. Unfortunately, governments’ efforts to finance the sector are hampered by large budget deficits, rising public debt and debt sustainability issues, ”he said.
He revealed that the commission is also considering how to set up a Sharia Advisory Board as an expert body to advise the SEC and the market on irrelevant products and their applications.
“In the future, we will focus on public information to encourage subnational and corporate broadcasts and capacity building initiatives. This is what prompted the idea to host 3 webinars on Interest Free Capital Market Products in 2021 and more will be held next year.
“We hope that the state governments represented here take this important opportunity to learn about the type of products that can be issued and how to take advantage of this exciting area of finance to improve the lives of our citizens.”
He reiterated the SEC’s commitment to continue to identify ways to use uninteresting capital market products such as Sukuk as a tool for financing infrastructure development.
“We are committed to facilitating the growth of the non-interest capital market segment through innovation while ensuring a fair, efficient and transparent marketplace.
“We will continue to put in place clear and consistently applied regulatory frameworks and reduce regulatory and operational barriers to ensure the proper functioning of the market,” he added.