DMO Offers N100 Billion “Sukuk” Bonds At N1,000 Per Unit For Roads Construction

The Debt Management Office (DMO) on Monday announced that it has commenced the sale of a N100 billion Sukuk bond on the local market to fund the construction and rehabilitation of major roads across the country.

According to a memo issued by the Debt Office, the ten-year Islamic bond which is structured as a lease (forward Ijarah) will yield a 15.64 per cent rental rate per annum.

The statement added that the bonds are offered at N1,000 per unit. Subscription to the ten-year-tenured bonds started today and will close on November 29, 2022.

Backed by the FG: The statement by the DMO added that the full faith and credit of the Federal Government is backing the Ijarah Sukuk bond. Part of the statement said:

“Date of an offer is Nov. 21; the closing date is Nov. 29 while the settlement date is Dec. 2. 2032. It is offered at N1,000 per unit subject to a minimum subscription of 10,000 units and in multiples of 1,000 thereafter.

“Rental payment is made half-yearly while bullet payment (principal sum) will be made on the date of maturity. Proceeds will be used solely for the construction and rehabilitation of key road projects across the six geopolitical zones of the country.

“It qualifies as securities in which trustees can invest under the Trustee Investment Act. It also qualifies as government securities within the meaning of Company Income Tax Act and Personal Income Tax Act and for tax exemption for pension funds administrators amongst other investors.”

“It will be listed on the Nigerian Exchange Ltd. and the FMDQ Securities Exchange Ltd. It is classified as a liquid asset by the CBN and certified by the Financial Regulations Advisory Council of Experts of the CBN.”

What you should know: The Ijarah Sukuk, like the FGN bonds and FGN savings bonds, constitutes part of the domestic component of government borrowings. Since it was introduced in 2017, it has provided N612,557 billion for the Federal Government, which has helped in funding 71 roads and six bridges measuring 1,881 kilometres across the country.

The bonds are issued by FGN Roads Sukuk Company PLC through Greenwich Merchant Bank Limited, Stanbic IBTC Capital Limited, and Vetiva Capital Management Limited. DMO added that proceeds would be invested solely in constructing and rehabilitating certain strategic roads across the country.