Sukuk, a promise kept, says DMO, makes offer for April savings bonds

The Debt Management Office says the sovereign Sukuk represents a promise kept and a step forward in Nigeria’s drive for the development of infrastructure.
According to DMO, this is in line with the Economic Recovery and Growth Plan.
DMO, in a statement obtained from its website on Monday in Abuja, said that Sukuk was a financing instrument that was very appropriate for the development of infrastructure.
The Federal Government had in 2017, raised a N100 billion seven-year debut Sukuk bond for the financing of 25 road projects across the six geopolitical zones of the country.
The statement recalled that the present administration had prioritised investment in infrastructure as a major focus in its plans for the growth of the economy and job creation.
According to the statement, officials of DMO, Ministries of Power, Works and Housing, Finance, and Office of the Accountant-General of the Federation have started inspecting roads being financed with the sovereign Sukuk.
It said: “From the list of road projects made available to the public when the Sukuk was issued, these were major roads that will facilitate the movement of people, goods and services, thereby contributing to economic growth and development.’’
It said that the team visited the Abuja-Abaji-Lokoja road, the Obajana-Okene road, the Suleja-Minna road and the Kaduna Eastern Bypass road.
It said that during the inspection, the team assessed the progress of work done as well as ongoing rehabilitation and construction works on the roads.
DMO said that the team also interacted with the various contractors handling the projects and the inspection revealed that significant amount of work had been done and the contractors expressed their appreciation for Sukuk, which assured them of prompt payment for work done.
It said: “The Sukuk has incentivised the contractors to accelerate work on the selected roads because of the confidence that the government had dedicated funds already to pay them upon completion of milestones.
“Of particular significance was the fact that the funds from the Sukuk had made it possible to construct the Okene bypass.
“It is a new road which would ensure a safer and more convenient journey for travelers and residents by moving traffic away from the township and reducing congestion on the roads within the town.
“Similarly, the Kaduna Eastern bypass, on whice construction had been delayed due to inadequate funding, will ease traffic within the Kaduna metropolis, while also improving the travel experience for persons transiting through Kaduna to other towns.’’
It also said that the delegation would inspect all the Sukuk-financed roads to confirm that the Sukuk funds had been utilised as planned.
DMO added that analysts believe that the debut Sukuk had breathed new life into old projects and provided funding for new ones.
In another development, the Federal Government offered for subscription a two-year savings bond at 10.75 per cent and three-year savings bond at 11.75per cent.
According to the DMO, the two-year savings bonds will be due in April 2020, while the three-year savings bond would be due in April 2021.
The Debt office, however, did not state how much was offered, but the maximum subscription was N50 million at N1,000 per unit, subject to minimum subscription of N5,000 in multiples of N1,000.
According to DMO, the bond is backed by the full faith and credit of the Federal Government, with quarterly coupon payments to bondholders.
The News Agency of Nigeria reports that savings bond issuance is expected to help finance the nation’s budget deficit.
It is also part of the Federal Government’s programme targeted at low-income earners to encourage savings and earn more interest on savings, compared to what accrues on their bank savings.
The offer is expected to close on Friday.