Debt Management Office opens N150 billion Sukuk bond today

The Debt Management Office (DMO) on behalf of the Federal Government today opened an offer for subscription of N150 billion Sukuk bond

Highlights of the Issue include 

ISSUER: FGN Roads Sukuk Company 1 Plc. on behalf of the Federal Government of Nigeria.

UNITS OF SALE: N1,000  per unit subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter.

SECURITY:  Backed by the full faith and credit of the Federal Government of Nigeria.

USE OF PROCEEDS: Proceeds will be used solely for the construction and rehabilitation of key roads across the six geopolitical zones of the country.

READ ALSO: Nigeria needs $100 billion annually to fix infrastructural deficit – Finance Minister 

TENOR; Rental rate is 11.20 % per annum, payable half-yearly. The bond has a tenor of 7 years and will mature in June 2027.

(READ MORE: Nigerian Treasury Bills fall to 3.84% per annum)

About Sukuk bonds  

Sukuk is derived from the word Sakk, which can be translated to mean legal instrument, deed, and cheque. Sakk can also mean to strike a deal on a paper document.

The origin of Sukuk dates to 7th century AD, where the first Sukuk transaction took place in Damascus, Syria in the Great Mosque of Damascus (Umayyad Mosque).

Since Islam prohibits usury – collecting interest from your loans – interest-based bonds are banned in Muslim nations.

READ MORE: CBN’s N154.38 billion T-bills auction over subscribed by 46% as rates fall marginally  

Difference between Sukuk and regular bonds

Sukuk indicates ownership of an asset. The assets that back Sukuk are compliant with Shariah, i.e. the avoidance of Islamic prohibitions on gambling, alcohol, tobacco, narcotics, and adult entertainment products and services.

Sukuk notes pay a fixed percentage return as a profit-sharing percentage of the underlying assets’ revenues.

Regular bonds, on the other hand, pay a fixed rate of return as interest (coupon) semi-annually or annually.