Since 2017, the Federal Government of Nigeria has issued six Sovereign Sukuk bonds worth N1.1 trillion ($657.6 million), financing 124 road projects across 5,820 kilometers nationwide. This initiative, highlighted during the International Islamic Capital Market (ICM) Conference in Pakistan, underscores the transformative role of Islamic finance in infrastructure development.
Impact on Infrastructure:
Sukuk proceeds have been deployed to critical federal road projects in all six geopolitical zones, addressing transport bottlenecks and boosting economic connectivity. These bonds have consistently been oversubscribed, with subscription rates peaking at 441%, reflecting robust investor confidence in the Islamic finance model.
Expanding the Islamic Capital Market:
The success of Sukuk has spurred the growth of Nigeria’s Islamic Capital Market (ICM). From a single registered fund in 2008, the sector now boasts 14 Halal mutual funds worth over ₦105 billion as of November 2024. Other innovations include Nigeria’s first Islamic Real Estate Investment Trust (ChapelHill N-REIT) and the NGX Lotus Islamic Index tracking Sharia-compliant equities. Sub-national entities like Lagos and Osun States and corporate bodies such as Family Homes Ltd have leveraged Sukuk for diverse projects like housing and school infrastructure.
Drivers and Challenges:
Key growth drivers include Nigeria’s large Muslim population, regulatory support, and fintech innovations like Sharia-compliant Robo advisory platforms. However, limited public awareness of Islamic finance principles, regulatory misalignments, and a lack of tradable instruments present hurdles.
The Federal Government’s strategic use of Sukuk bonds demonstrates the resilience and versatility of Islamic finance. Beyond infrastructure, the initiative is fostering financial inclusion, spurring economic development, and positioning Nigeria as a leader in the global Islamic finance market. As the sector continues to grow, addressing existing challenges will be critical to sustaining its momentum.
