Islamization Rhetorics: A Deliberate Attempt To Create Division And Mutual Suspicion

By Rotimi Ayanwale

Human beings can at best be described as homo economicus: path dependent, self-interested, utility maximizers and rational. Although the level of rationality every human has is contingent on the amount of information he is privy to.

This general definition makes the news making the rounds about Islamization agenda by a person or few in a sovereign secular nation understandable. This parochial mindset can probably be tolerated from some individuals but not from religious institutions that are expected to hold high values and express views capable of fostering Nigeria’s unity.

No, doubt, Nigeria’s Vice President Yemi Osinbajo (SAN), is a talented man who has traversed the private sector, the church, the public service and ultimately holding the second highest office of the land. His journey, no doubt would have transformed him to a realistic man by virtue of his interaction with virtually all social class in Nigeria. He is equally a Pastor who stands by his faith in a secular Nigeria where people have the right to worship without fear.

One does not need to look too far before seeing tendencies of organized political capture and path dependence in Nigeria. A development worsened because of the support it receives from bodies which are supposed to hold high societal values.

The story of Nigeria in the past years have been that of monumental and systemic corruption which has risen to an alarming level and posing existential treat. There is no nation that can deliver when the monies meant for all kinds of social services ends up in private pockets. The beneficiaries of this ugly trend prefers status quo and can do anything to achieve this situation that keep huge percentage of Nigeria in a state of despair and abject poverty while a privileged few enjoy our commonwealth. This must stop! The avenue to sustaining this shameful position must be challenged.

Prof. Osinbajo’s position is that faith leaders must uphold high moral standard and the church particularly should avoid been politicized but inculcate in people enviable values and norms. The church must not be turned into one that creates division and hatred amongst members of the society. The church must speak to the truth no matter what and at all times steaming the values of Christ. The church must realise that Nigeria cannot and can never be islamised and should shift focus and attention to endeavors capable for prompting brotherliness and national collective action.

The infrastructure gap that exists in Nigeria is visible all over the country and there is need for innovative financing model to bridge the gap.

The need for out-of-the-box solutions brought SUKUK financing model to the fore. The funds mobilized through SUKUK bonds have since been allocated to finance road projects across the geopolitical zones of the country which will jump-start economic development around those corridors and foster broad-based growth.

As Nigerians, we must be opened to innovations especially ones that can unleash our national economic potential. As it were, the United Kingdom, issued SUKUK bonds which attracted over $2bn to finance critical projects and no nation have developed without strategically tapping into new models, new ideas, breaking path dependence and adopting creating destruction.

People are poor, Nigerians are yearning for development and it is the duty of the elite across all social organizations to support government to deliver on its core mandate of delivering public goods and lifting people out of poverty in a bid to create a prosperous country. To achieve this, places of worship must continually spread messages that will enhance national cooperation which is an ingredient for national development.

As it is today, aside government, places of worship must speak against our common enemy which is corruption. It has become a way of life and norm. Nigeria cannot survive if the rate is not lessened for the dual goals of building resilient and respected country as well as highly celebrated religious leaders who will live a life of example and desist from talks capable of tearing Nigeria apart.

Rotimi Ayanwale, a Public Affairs analyst, writes from Abuja, Nigeria.

 

EDITORIAL: Perishing For Lack Of Knowledge

The Bible never fails to illuminate. A famous forewarning points out the folly of perishing for lack of knowledge. Those who, through the centuries have sensibly heeded to this injunction have kept out of harm’s way and thereby had more purposeful lives.

The Christian Association of Nigeria (CAN) have regrettably not heeded this sensible admonition with their ill-thought out allegation that the floating of the Sukuk Islamic bond by the federal government is meant to Islamise the country through the back door.

CAN, in a statement on Tuesday in Abuja by its General Secretary, Rev Musa Asake, demanded the abrogation of the laws and framework behind the bond and threatened to seek legal redress if that was not done.

This ludicrous position must be repudiated by both Christians and Moslems, as it is aimed at stultifying the sustainable development of the economy. For a start, Islamic finance products have grown by leaps and bounds in the past few decades across the world. This is because it has met a need and closed a gap in the market. A few years ago, the Bank of England, the Central Bank of United Kingdom set up a dedicated Islamic finance desk which has grown in geometrical proportions, way ahead of expectations. Revered international institutions such as Goldman Sachs and so forth also have fast growing dedicated Islamic finance desks. At home in Nigeria, over 73% of the customers of Jaiz bank, an Islamic institution are Igbo traders who are virtually all Christians.

This also confirms the foresight of the Governor of the State of Osun Ogbeni Rauf Aregbesola. We may care to recall that Osun, under Aregbesola had in 2013 floated a N11.4bN Sukuk bond to fund government’s massive education infrastructure provision projects.

Modern international banking itself arose out of the Crusades and the attempts to capture Jerusalem in the middle ages. The knights Chevaliers, a Roman Catholic holy order benedicted by the Pope, created such things as letters of Credits, Bankers Acceptances and so forth as they swept across ill-defined, not yet national borders. Do we now call investment banking Roman Catholic banking which should not be used by other Christian denominations as well as Moslems, Hindus and other religious groups?

Nigeria inherited the present Anglo-Saxon banking model from British colonialism and it has largely failed to deliver the development goods. Even in the Anglo-Saxon heartlands, it has long been seen as a problem.

For example, in 1945, a left-wing socialist government in the United Kingdom, created the World’s first Venture Capital Company – Investors In Industry, as a response to the perceived weakness of the British banking industry to bring in the necessary impetus to rebuild Brittan’s post second world war economy.

Furthermore, in a famous series of articles in the British Sunday Times in 1978, a former Financial Secretary to the British government, Harold Lever, effectively accused the British banking system of acting as a brake on the development of the prospects of British industry. In contradistinction, he pointed out, the ‘Lander’ banking system in British industry’s great competitor, Germany, by emphasising close long-term relationships and low interest rates was taking British industry to the cleaners. The New Deal of President Franklin Delano Roosevelt and the more recent Obama fiscal stimulus both represented an attempt to navigate around the inadequacies of the short-termism of the Anglo-Saxon banking model.

Faced with the need to rebuild the economy, Nigeria must adapt to innovation, new ideas and try to adopt new models. Demagoguery does not help. If the indecorous position of CAN is to be taking seriously, Christian schools must henceforth stop teaching Algebra. As every school boy is aware, Algebra came about from the work of Islamic judges as they tried to navigate their way around the intricacies involved in solving problems arising from implementing the Islamic law of inheritance.

The times call for fresh ideas and innovation, thinking outside of the box and not childish or self-serving.

International Financial Experts Applaud Aregbesola For Judicious Use of SUKUK Bond

Governor of the State of Osun, Ogbeni Rauf Aregbesola has been applauded for his use of Sukuk Bond by the Managing Director, United Insurance, Sudan,Dr. Tarig Khalil, Professor Ziyaad Mahomed of IFISA, Mounir Aliya from Saudi Arabia and Dr Umar Abdul Mutallab who expressed their satisfaction at the African International Conference on Islamic Finance, in Abuja.

At the event, Dr. Umar Abdul Mutallab who described Aregbesola as fairless, transparent and prudent in financial resources said
“Aregbesola embraced SUKUK when many States and Countries lack the deep understanding of what SUKUK really stands for and utilise the opportunity judiciously. State of Osun under the administration of Rauf Aregbesola has become a reference points to states and Countries ín West Africa which the Federal Government of Nigeria has just key into recently with One hundred billion naira SUKUK bond”.

Meanwhile, Ogbeni Rauf Aregbesola who was represented by the Commissioner of Finance, explained that the decision to have a combination of both the conventional and faith -based bond in its Bond Issuance programme in 2013 was borne out of the desire to ensure easy marketability of the bond and also to further exhibit the current administration’s transparency and accountability in her various financial transactions.

EDITORIAL: Still On The Debt Issue

Much as the crisis of confidence over the growing debt would seem a natural corollary to the severe strain in the nation’s public finance system in general, we hasten to warn about the terrible cynicism that seeks to severely constrict the options available to the governments across the federation to deal with crisis even when tough choices become inevitable.

We refer to concerns being expressed of late, not just about the hunger for debts but its sustainability. The clamour, across the board is that governments – federal and states – should not be allowed to pile up more debts. The argument here is that the debts have reached the level of sustainability. Although, Nigeria’s debt to GDP ratio currently standing at 19 per cent is said to compare with its peers across the globe, commentators readily point to the revenue-to-debt servicing-cost ratio, hovering around the 80 per cent mark, as rendering the prospects of additional loans quite problematic. We recall the Islamic Development Bank (IDB) representative in Nigeria, Abdallah Mohammed Kiliaki specifically putting the country’s revenue-to-debt servicing-cost of between 75 to 80 per cent to underscore why the country should be wary of new loans. A more telling illustration of the crisis is the N1.663 trillion allocated to debt service in the 2017 budget, representing a whopping 32.73 per cent of the total outlay.

We agree that the federal and the states have a lot of lessons to learn from the terrible mismanagement of past loans. Again, what we do not accept is that the situation should needlessly tie the hands of the managers of the economy from such options that are not only pragmatic but reasonable in the circumstances that the country has found itself.

The terrible reality of course, is that the country’s revenue is down. Today, the very infrastructures needed to get the economy up and running are in shambles. Our roads – whether inter-state or rural sorely needed to convey agricultural products to the market are virtually non-existent. Our electricity situation, currently precarious is in no position to fire the economy on all cylinders. Many of our industries are either dead or dying. School infrastructure, a veritable tool for creating the economy of the future require the fresh touch that only a serious government can bring to bear. The situation, to put it mildly, is grim.

What do we do? Do we simply foreclose the debt option simply because the country has had some nasty experience in the past? Should the federal and state governments fold their hands and hence do nothing, hoping against hope that revenue will somehow improve? What is so alarming or even esoteric about the so-called issue of revenue-to-debt servicing-cost that cannot be brought down by deliberate efforts in the medium term to grow the tax revenue? The real challenge is to ensure that debts are kept within responsible limits and are well deployed in such ways and manners to deliver value to the people. That way, it can pay its way.

Worth recalling in this regard is the needlessly acrimonious debate over whether or not the State of Osun should take the Sukuk Bond to upgrade its school infrastructure. Today, with the benefit of hindsight, the debate, given the massive upgrade in the public school system, has become, quite frankly, superfluous. Few years after the Rauf Aregbesola-led administration chose to plod on to the consternation of its critics, citizens currently shudder at what could have been, had the government not taken that bold and sensible option.  

We agree that the debate on the debt is legitimate. Only that it should not be closed – or its aversion, a fetish.

The Sukuk Bond And Garland For Aregbesola!

By Bicci Alli

As the Guest Columnist of THISDAY Newspaperon Monday, September 18, 2017, Ms. Patience Oniha, Director General, Debt Management Office, wrote a well-articulated submission, titled “The Case for Nigerian Sukuk”. There is no doubt that her well thought and presentable piece was a delight, especially to the investing public.

As the title indicated, the piece x-rayed the recent public-financing tools, SUKUK, which was offered to the investing public between September 14, 2017 to September 18, 2017.Incidentally, the Guest Columnist, Ms. Patience Oniha is the Director-General of DMO that anchored the Islamic Bond.

As stated earlier, the offer for Nigeria’s debut sovereign SUKUK in the sum of N100 billion opened on September 14, 2017. This followed a roadshow, which took the (DMO), Ministry of Power, Works and Housing, Central Bank of Nigeria (CBN) and the transaction parties to Lagos, Port Harcourt, Abuja, Kano and Kaduna to engage with prospective investors on the issuance. The article was as a result of the need to throw more light on the issuanceof SUKUK. Madam DG explained the principle, rules, regulations and operating modalities of SUKUK. She explained further the benefits derivable from the issuance of SUKUK with specific mention of the fact that the SUKUK will be used to raise funds to finance infrastructure whichcontributes directly to achieving the objectiveof the Economic Recovery and Growth Plan (2017-2020).This is to build a globally competitive economy and one of the plans for achieving this is by investing in infrastructure which the SUKUK tends to provide. According to her, the proceeds from the issuance of the N100 billion SUKUK will be used to construct and rehabilitate 25 roads in Nigeria’s six geopolitical zones. These roads have been selected by the Ministry of Power, Works and Housing because of their strategic economic importance. The deployment of the SUKUK proceeds to these projects would improve road infrastructure, which because of the multiplier effect of good infrastructure, will translate to many benefits all over the country.

As explicitly stated in the article, good roads are important for Nigeria’s Economic Development and Growth; they actually connect different parts of the country; facilitate and foster trade relationship among different regions with each factoring its comparative advantages on natural and human resources; provide access to markets for farms produces onward to cities and townsand link villages, farmlands and remote areas to essential social services such as primary and secondary education rural dwellers; and primary and comprehensive health services. The goodness and greatness of Sukuk is that it is tied to projects and enquired about the specific roads towards which the N100 billion Sukuk would be applied. The level of disclosure and transparency for Sukuk financing which requires the issuer to present full details of how funds will be utilised gives investors information that will guide their investment decision whilst also giving them the ability to monitor the utilisation of the Sukuk proceeds after investing, to confirm that funds have been applied as proposed.

Other benefits of SUKUK was highlighted by the guest columnist, they include, deepening Nigeria’s financial market by increasing the variety of instruments available for issuers and investors; and benchmark for the pricing of future Sukuks that may be issued by other tiers of governments, corporate institutions and multilaterals. It should be noted that of the N100 billion, Sovereign Sukuk include the rental income, which will be paid to investors in the bond every six months at a rate of 16.47% per annum. It is a safe low-risk investment, as it is a direct obligation of the FGN, which is fully responsible for the payment of the rental income and the repayment of the principal at maturity. It is also backed by the full faith and credit of the federal government. On a final note, the CBN has conferred a liquid asset status, meaning that the low risk of the Sukuk and the liquid asset status make it relatively easy for investors to use the Sukuk holdings as collateral. This is to encourage the investment culture and mobilise savings; the rental income on the Sukuk is tax-exempt and will be listed on the Nigerian Stock Exchange (NSE) and the FMDQ OTC Securities Exchange to provide an avenue for investors that may wish to sell part or all of their investment in the SUKUK before maturity.

Sadly enough, Madam D.G. and other writers have failed to acknowledge the pioneering efforts and achievements of the Osun government in deepening the financial market in Nigeria through Sukuk. Ogbeni Rauf Aregbesola led Government of the State of Osun pioneered issuance of SUKUK in the country in 2013, four years long before the Federal Government of Nigeria explored the opportunity as a public financing alternative. The DG DMO and other enlightened commentators made no reference to his pioneering efforts of Aregbesola. Having laid the foundation, teething problems surfaced with issuance of SUKUK and verifiable solutions were proffered by Ogbeni Aregbesola, his government, advisers and transaction parties. It is a notorious fact that several pioneering programmes of the State have been Internationally recognized and emulated by the Federal Government and others States; these programmes include but not limited to School feedings, Tablet of Knowledge (Opon Imo), Free provision of School Uniforms, Agba Osun, OYES, at least one or more is replicated in KEBBI, KADUNA, ONDO States and by the Federal Government of Nigeria. Various pioneering programmes and models of Aregbesola have no doubt raised the bar and become point of reference of good governance in Nigeria. Again, garland for Ogbeni for deepening the Nigerian Financial Market through issuance of Sukuk. He was called all sort of unprintable names but his doggedness, visionary leadership and uncommon managerial (to some controversial) style saw the Osun Sukuk through against all odds.

It would be recalled that on 10th October 2013, the State of Osun issued N11.4 billion ($70.6 million) seven year SUKUK under the Osun State N60 Billion Debt Issuance Programme to fund the development of 20 High Schools, 2 Middle Schools and 2 Elementary Schools in the State. The SUKUK was issued at a rate of 14.75% per annum at N 1,000 per unit and matures on 08 October, 2020. Although two other African countries (The Gambia and Sudan) are known to have issued small amounts of SUKUK in their domestic markets; the State of Osun SUKUK is widely viewed as the first SUKUK to be issued by the government of a major African economy. The SUKUK is structured as a SUKUKAL-IJARA, a commonly used structure by sovereign issuers, which is based on a lease arrangement supported by rental payments generated from the underlying SUKUK assets. Using this structure, Osun State incorporated a special purpose vehicle, Osun Sukuk Company Plc (the SPV), to which it transferred the land for construction of the schools. Official rating for investors was done for the SUKUK and it was rated ‘A’ by Agusto& Co, a local credit rating Agency, and listed on the Nigerian Stock Exchange. It is understood to have been taken up by local banks, fund managers, insurance companies and high-net-worth individuals will eventually pay SUKUK holders a fixed return of 14.75%. Though the Pension Funds Administrators (PFA’S) were disallowed from investing in the SUKUK as the National Pension Commission (NPC) then maintained that existing regulations on the investment of pension assets did not explicitly provide for pension fund investment in Islamic financial instruments; it would have been massively subscribed by them. For right and appropriate financial and management decision, and as required by the Securities Exchange Commission, the transaction was signed off on by Dr. Mohamed El-Gari, Prof MonzerKahf and Prof. M.L Bashar as Shariah Adviser.

State of Osun SUKUK Bond did not happen without its challenges; sources close to the offering revealed some of the challenges that were encountered in structuring and successfully marketing the SUKUK. Some of the challenges noted were the lack of a solid regulatory framework in Nigeria, institutional investors’ limited understanding of certain structuring aspects of a SUKUK when compared to conventional bonds, and a general lack of awareness of Islamic finance as an alternative source of public funding.

The subscription rate was very high andthe product was well received. The SUKUK Bond was oversubscribed by N1.4bn ($8.7m), which appears to indicate a measure of appetite for that asset class in Nigeria as well as a measure of confidence by market participants in the structures that are already in place in Nigeria to support Islamic finance. We should be reminded that Osun Sukuk Company Plc; the SPC, carried out the investment transaction. Osun Sukuk Company Plc is a wholly owned Special Purpose Company of the Osun State Government incorporated with an authorised share capital of N1, 000,000.00 (One Million Naira) with 99 per cent of the shares held by the Osun State Government and One per cent held in trust by the Attorney General of Osun State on behalf of the State, owing to the fact that a Nigerian Company must have at least 2 Shareholders. It is worthy to mention that the Osun Sukuk Company Plc. issued SUKUK certificates to the investors and the SUKUK investors’ payment for the certificates represents the cost of construction of the schools. In accordance with Islamic law principles, each certificate represents an undivided beneficial ownership interest in the SUKUK assets, that is the School.

The SUKUK assets are however, held in trust for the SUKUK investors by the Issuer, the Osun Sukuk Company Plc. Also, the land upon which the schools will be built was transferred by the State of Osun Government to the Special Purpose Company and a Certificate was issued under an Agency Agreement; appointed the State of Osun Government as its agent to inter alia engage a construction company to construct the schools, obtain all government approvals, manage the operational and financial aspects of the construction for a prescribed fee and transferred the agreed cost of construction to the State of Osun Government. The SPC leases the schools to the State Government against rental payments which will be remitted to the Issuer to make distributions to the SUKUK investors; thus earning income for the investors during the construction of the schools. However, a Purchase Undertaking was executed by the State of Osun Government in favour of the Issuer to give assurances that at the end of the lease or maturity of the SUKUK or upon the occurrence of an event of default or early termination of the lease under the Ijara Agreement, the State of Osun Government will purchase the SUKUK assets; with the purchase price being used by the Issuer to redeem the SUKUK certificates at maturity.

It is no doubt that the success of the Government of Osun actually attracted the Federal Government of Nigeria as such Ogbeni’s achievements could not but be noticed and commended. That kudos and recognition should be given to Ogbeni Aregbesola cannot be a thought  wrongly conceived. True and resourceful leaders need to be celebrated while they are live.

Having tolled the same line with confronted challenges which were well addressed, there is a lot more that the Federal Government can learn from Ogbeni Aregbesola on the workability of SUKUK; challenges will sure arise from the N100 billions SUKUK Bond but same can be resolved same way Ogbeni and his team handled the N1.4bn ($8.7m) oversubscribed SUKUK in the State of Osun and for once Ogbeni will receive the accolades.

SUKUK: FG Releases N100bn To 36 States

The sum of N16.67 billion each has been released to fund the construction and rehabilitation of 25 road projects across the six geo-political zones of the country.

Minister of Finance Mrs Kemi Adeosun on Thursday in Abuja handed over the cheque to the Minister of Power, Works and Housing, Babatunde Fashola.

Sukuk Bond with a tenor of seven years was oversubscribed to the tune of N105.87bn according to the Minister of Finance.

She said the milestone was a sign of confidence on the Nigerian economy and the administration of President Muhammadu Buhari.

Her words, “This is the first Sukuk Bond issuance in Nigeria. It is about financial inclusion and deepening of our financial market”.

She further stated that the roads will ease commuting, spur economic activities across the country and further close our infrastructural gap.

Five projects are to be carried out in the North central zone of the country.

These include: construction of loto Oweto bridge, dualisation of Abuja-Lokoja Road, dualization of Suleja-Minna road and dualisation of Lokoja-Benin road.

In the North East zone, four projects are to be carried out, including dualisation of Kano-Maiduguri road.

Four projects will be carried out in the North West zone. They include: dualisation of Kano-Maiduguri road, dualisation of Kano-Katsina road, construction of Kano western bypass and Kaduna eastern bypass.

Also, four projects will be carried out in the South East zone. They include: rehabilitation of the Onitsha-Enugu expressway and rehabilitation of Enugu-Port Harcourt road.

Five projects will be carried out in the south south zone; Rehabilitation of Enugu-Port Harcourt road, dualisation of Yenegwe road junction to Kolo-Otuoke Bayelsa palm and dualisation of Lokoja-Benin road.

In the South West zone, three projects are to be carried out. They include: Reconstruction of Benin-Ofosu to Ore-Ajebandele –Shagamu dual carriageway (Phase two and three) and dualisation of Ibadan-Ilorin road.

SUKUK: ‘Christianize’ Nigeria Too, Falana Tells CAN

agos-based lawyer and Senior Advocate of Nigeria, Mr. Femi Falana, has called on the Christian Association of Nigeria, CAN, to “Christianize” Nigeria.

Mr. Falana spoke at the strategic dialogue roundtable organized by the Social Economic Rights and Accountability, SERAP, held in Lagos on Thursday.

The lawyer was reacting to the controversy surrounding the N100 billion Sukuk bond offered by the Nigerian government.

CAN had in reaction to the offer said the move was an attempt to Islamize Nigeria.

But Mr. Falana, on Thursday, said the Sukuk bond was a legitimate means through which government could generate funds, as practiced in many countries of the world.

He called on religious leaders not to set Nigerians against themselves based on religion.

“I am challenging CAN to Christianize Nigerians; Christianize us by setting up interest-free banks…” he said.

He said religious leaders must be careful in their handling of issues, stressing that suspected kidnapper, Evans, had clerics who worked for him.

“Evans has a pastor, a Muslim cleric, and traditional priest…because all the prayers are needed,” he said.

Source: Sahara Reporters

Again, Garland For Ogbeni Rauf Aregbesola!

By Bicci Alli

 

As the Guest Columnist of THISDAY Newspaper on Monday, September 18, 2017, Ms. Patience Oniha, Director General, Debt Management Office, wrote a well-articulated submission, titled “The Case for Nigerian Sukuk”. There is no doubt that her well thought and presentable piece was a delight, especially to the investing public.

 

As the title indicated, the piece x-rayed the recent public-financing tools, SUKUK, which was offered to the investing public between September 14, 2017 to September 18, 2017.Incidentally, the Guest Columnist, Ms. Patience Oniha is the Director-General of Debt Management Office that anchored the Islamic Bond. As stated earlier, the offer for Nigeria’s debut sovereign SUKUK in the sum of N100 billion opened on September 14, 2017. This followed a roadshow, which took the Debt Management Office (DMO), Ministry of Power, Works and Housing, Central Bank of Nigeria (CBN) and the transaction parties to Lagos, Port Harcourt, Abuja, Kano and Kaduna to engage with prospective investors on the issuance. The article was as a result of the need to throw more light on the issuance of SUKUK. Madam DG explained the principle, rules, regulations and operating modalities of SUKUK. She explained further the benefits derivable from the issuance of SUKUK with specific mention of the fact that the SUKUK will be used to raise funds to finance infrastructure which contributes directly to achieving the objective of the Economic Recovery and Growth Plan (2017-2020). This is to build a globally competitive economy and one of the plans for achieving this is by investing in infrastructure which the SUKUK tends to provide. According to her, the proceeds from the issuance of the N100 billion SUKUK will be used to construct and rehabilitate 25 roads in Nigeria’s six geopolitical zones. These roads have been selected by the Ministry of Power, Works and Housing because of their strategic economic importance. The deployment of the SUKUK proceeds to these projects would improve road infrastructure, which because of the multiplier effect of good infrastructure, will translate to many benefits all over the country.

 

As explicitly stated in the article, good roads are important for Nigeria’s Economic Development and Growth; they actually connect different parts of the country; facilitate and foster trade relationship among different regions with each factoring its comparative advantages on natural and human resources; provide access to markets for farms produces onward to cities and towns and link villages, farmlands and remote areas to essential social services such as primary and secondary education rural dwellers; and primary and comprehensive health services. The goodness and greatness of Sukuk is that it is tied to projects and enquired about the specific roads towards which the N100 billion Sukuk would be applied. The level of disclosure and transparency for Sukuk financing which requires the issuer to present full details of how funds will be utilised gives investors information that will guide their investment decision whilst also giving them the ability to monitor the utilisation of the Sukuk proceeds after investing, to confirm that funds have been applied as proposed. Other benefits of SUKUK was highlighted by the guest columnist, they include, deepening Nigeria’s financial market by increasing the variety of instruments available for issuers and investors; and benchmark for the pricing of future Sukuks that may be issued by other tiers of governments, corporate institutions and multilaterals. It should be noted that of the N100 billion, Sovereign Sukuk include the rental income, which will be paid to investors in the bond every six months at a rate of 16.47% per annum. It is a safe low-risk investment, as it is a direct obligation of the FGN, which is fully responsible for the payment of the rental income and the repayment of the principal at maturity. It is also backed by the full faith and credit of the federal government. On a final note, the CBN has conferred a liquid asset status, meaning that the low risk of the Sukuk and the liquid asset status make it relatively easy for investors to use the Sukuk holdings as collateral. This is to encourage the investment culture and mobilise savings; the rental income on the Sukuk is tax-exempt and will be listed on the Nigerian Stock Exchange (NSE) and the FMDQ OTC Securities Exchange to provide an avenue for investors that may wish to sell part or all of their investment in the SUKUK before maturity.

 

Sadly enough, Madam D.G. and other writers have failed to acknowledge the pioneering efforts and achievements of Ogbeni in deepening the financial market in Nigeria through Sukkuk. Ogbeni Abdul-rauf Aregbesola led Government of the State of Osun pioneered issuance of SUKUK in the country in 2013, four years long before the Federal Government of Nigeria explored the opportunity as a public financing alternative. The DG DMO and other enlightened commentators made no reference to his pioneering efforts of Aregbesola. Having laid the foundation, teething problems surfaced with issuance of SUKUK and verifiable solutions were proffered by Ogbeni Aregbesola, his government, advisers and transaction parties. It is a notorious fact that several pioneering programmes of the State have been Internationally recognized and emulated by the Federal Government and others States; these programmes include but not limited to School feedings, Tablet of Knowledge (Opon Imo), Free provision of School Uniforms, Agba Osun, OYES, at least one or more is replicated in KEBBI, KADUNA, ONDO States and by the Federal Government of Nigeria.  Various pioneering programmes and models of Aregbesola have no doubt raised the bar and become point of reference of good governance in Nigeria.  Again, garland for Ogbeni for deepening the Nigerian Financial Market through issuance of Sukuk. He was called all sort of unprintable names but his doggedness, visionary leadership and uncommon managerial (to some controversial) style saw the Osun Sukuk through against all odds.

 

It would be recalled that on 10th October 2013, the State of Osun issued N11.4 billion ($70.6 million) seven year SUKUK under the Osun State N60 Billion Debt Issuance Programme to fund the development of 20 High Schools, 2 Middle Schools and 2 Elementary Schools in the State. The SUKUK was issued at a rate of 14.75% per annum at N 1,000 per unit and matures on 08 October, 2020. Although two other African countries (The Gambia and Sudan) are known to have issued small amounts of SUKUK in their domestic markets; the State of Osun SUKUK is widely viewed as the first SUKUK to be issued by the government of a major African economy. The SUKUK is structured as a SUKUKAL-IJARA, a commonly used structure by sovereign issuers, which is based on a lease arrangement supported by rental payments generated from the underlying SUKUK assets. Using this structure, Osun State incorporated a special purpose vehicle, Osun Sukuk Company Plc (the SPV), to which it transferred the land for construction of the schools. Official rating for investors was done for the SUKUK and it was rated ‘A’ by Agusto & Co, a local credit rating Agency, and listed on the Nigerian Stock Exchange. It is understood to have been taken up by local banks, fund managers, insurance companies and high-net-worth individuals will eventually pay SUKUK holders a fixed return of 14.75%. Though the Pension Funds Administrators (PFA’S) were disallowed from investing in the SUKUK as the National Pension Commission (NPC) then maintained that existing regulations on the investment of pension assets did not explicitly provide for pension fund investment in Islamic financial instruments; it would have been massively subscribed by them. For right and appropriate financial and management decision, and as required by the Securities Exchange Commission, the transaction was signed off on by Dr. Mohamed El-Gari, Prof Monzer Kahf and Prof. M.L Bashar as Shariah Adviser. State of Osun SUKUK Bond did not happen without its challenges; sources close to the offering revealed some of the challenges that were encountered in structuring and successfully marketing the SUKUK. Some of the challenges noted were the lack of a solid regulatory framework in Nigeria, institutional investors’ limited understanding of certain structuring aspects of a SUKUK when compared to conventional bonds, and a general lack of awareness of Islamic finance as an alternative source of public funding.

 

The subscription rate was very high and the product was well received. The SUKUK Bond was oversubscribed by N1.4bn ($8.7m), which appears to indicate a measure of appetite for that asset class in Nigeria as well as a measure of confidence by market participants in the structures that are already in place in Nigeria to support Islamic finance. We should be reminded that Osun Sukuk Company Plc; the SPC, carried out the investment transaction. Osun Sukuk Company Plc is a wholly owned Special Purpose Company of the Osun State Government incorporated with an authorised share capital of N1, 000,000.00 (One Million Naira) with Ninety Nine Percent of the shares held by the Osun State Government and One percent held in trust by the Attorney General of Osun State on behalf of the State, owing to the fact that a Nigerian Company must have at least 2 Shareholders. It is worthy to mention that the Osun Sukuk Company Plc. issued SUKUK certificates to the investors and the SUKUK investors’ payment for the certificates represents the cost of construction of the schools. In accordance with Islamic law principles, each certificate represents an undivided beneficial ownership interest in the SUKUK assets that is the School. The SUKUK assets are however, held in trust for the SUKUK investors by the Issuer, the Osun Sukuk Company Plc. Also, the land upon which the schools will be built was transferred by the State of Osun Government to the Special Purpose Company and a Certificate was issued under an Agency Agreement; appointed the State of Osun Government as its agent to inter alia engage a construction company to construct the schools, obtain all government approvals, manage the operational and financial aspects of the construction for a prescribed fee and transferred the agreed cost of construction to the State of Osun Government. The SPC leases the schools to the State Government against rental payments which will be remitted to the Issuer to make distributions to the SUKUK investors; thus earning income for the investors during the construction of the schools. However, a Purchase Undertaking was executed by the State of Osun Government in favour of the Issuer to give assurances that at the end of the lease or maturity of the SUKUK or upon the occurrence of an event of default or early termination of the lease under the Ijara Agreement, the State of Osun Government will purchase the SUKUK assets; with the purchase price being used by the Issuer to redeem the SUKUK certificates at maturity.

It is no doubt that the success of the Government of State of Osun actually attracted the Federal Government of Nigeria as such Ogbeni’s achievement could not but be noticed and commended. That kudos and recognition should be given to Ogbeni Aregbesola cannot be a thought wrongly conceived. True and resourceful leaders need to be celebrated while they yet live.
Having tolled the same line with confronted challenges which were well addressed, there is a lot more that the Federal Government can learn from Ogbeni Aregbesola on the workability of SUKUK; challenges will sure arise from the N100 billions SUKUK Bond but same can be resolved same way Ogbeni and his team handled the N1.4bn ($8.7m) oversubscribed SUKUK in the State of Osun and for once Ogbeni will receive the accolades.

 

Bicci Alli is the Acting Chairman, CEO; Osun Internal Revenue Service

Sukuk: What Nigeria Stands To Gain And Why UK, S’Africa, Others Embrace It

The Federal Government N100billion Sukuk offer was concluded on Friday though the brickbat it generated between the Christian Association of Nigeria (CAN) and the Nigerian Supreme Council on Islamic Affairs (NSCIA) still reverberates. SULAIMON OLANREWAJU looks at what sukuk is, its operation, upsides as well as downsides.

While Nigerians and the rest of the world await the outcome of the nation’s first N100billion offer which ended on Friday after a two-day extension, its issuance has divided the country along religious lines. In a reaction to the sukuk offer, the Christian Association of Nigeria (CAN) described the issuance as a subtle attempt by the Federal Government to Islamise Nigeria. The body, therefore, called on the government to abrogate the laws and framework behind the sukuk issuance, failing which it would seek legal redress.

In a statement signed by its General Secretary, Rev. Musa Asake, CAN noted that it “has been protesting against this aberration since the Osun State Government, under Governor Rauf Aregbesola, embarked on this violation of the constitution.

“Rather than stand in the defence of the constitution, it is disappointing to note that the Federal Government is pursuing what is an outright confirmation of an Islamisation agenda.

“The recent floating of sukuk bond by the government is not only sectional but illegal and a violation of the constitution. Every law that has been promulgated to back the sukuk issuance and promote an Islamic banking system in Nigeria is ultra vires, illegal, null and void.”

But in its reaction, the Nigerian Supreme Council for Islamic Affairs (NSCIA), accused CAN of “Islamophobia.”

In a statement signed by its Deputy Secretary General, Salisu Shehu, the body said, “CAN cannot claim ignorance about the fact that even the World Bank has been involved in issuing sukuk and the floating of sukuk bonds. Interestingly also, several non-Muslim countries across Africa, Europe and Asia have also instituted Islamic Financial System generally and Sukuk in particular. Worthy of mention here are Kenya, Tanzania, South Africa, United Kingdom, Luxembourg, Russia, China, Singapore and a number of firms in the United States.

“Less than two years ago, Britain hosted a World Conference on Islamic Banking and Finance and David Cameron, the then British prime minister, openly declared that their intention was to make UK the hub of Islamic Finance in the World.”

It added that, “It would certainly be embarrassing for CAN to be told that the first and foremost state in Nigeria to submit application for loan to the Islamic Development Bank is a Christian-dominated state in the South-East.”

NSCIA then appealed to CAN to “in the spirit of Biblical injunctions, uphold the truth for its sake and tread the path of honour and refrain from statements capable of causing disaffection and promoting disharmony that may lead to conflict in the country.”

What is Sukuk?

The essence of sukuk is to raise funds without having to bother about interest, which in Islamic parlance is known as riba. Islamic laws forbid interests on loans, hence sukuk, which encourages profit sharing rather than interest earning, is embraced by financial operators in Arab world. However, the appeal of sukuk currently transcends the Islamic world as many non-Islamic countries have now embraced it.

According to the Rules and Regulations of the Securities and Exchange Commission (SEC Rules 2013), sukuk refers to investment certificates or notes of equal value which evidences undivided interest/ownership of tangible assets, usufructs and services or investment in the assets of particular projects or special investment activity using Shariah principles and concepts and approved by the SEC.

Writing along this line, Majeed Oladunjoye, in an article published in Journal of Islamic Banking and Finance, says sukuk can be defined as “certificates of equal value representing undivided shares in the ownership of tangible assets, usufructs and services or (in the ownership of) the assets of particular projects or special investments,” adding that sukuk is more than a mere bond.

Sukuk is contrasted with conventional bond in the sense that while in the case of conventional bonds the issuer has a contractual obligation to pay to bond holders, on certain specified dates, interest and principal, under a sukuk structure the sukuk holders each hold an undivided beneficial ownership in the underlying assets.

Under a sukuk structure, returns to sukuk holders (investors) represent rights to receive payments from a trade transaction or ownership of a particular asset or business venture. However, the returns to conventional bondholders represent the right to receive interest for borrowed monies.

In other words, a sukuk holder is not just a mere investor but a part owner of the project. A sukuk investor has a common share in the ownership of the assets linked to the investment although this does not represent a debt owed to the issuer of the bond. So, sukuk is a trust certificate.

Why opt for Sukuk?

Mr Mounir Gwarzo, Director General of the Securities and Exchange Commission, while explaining the rationale behind his organization and the Debt Management Office (DMO) working together to ensure a buy-in into sukuk by the Federal Government, said, “Within the context of continued decline in the prices of crude oil in the international markets, attendant drop in both foreign exchange and government revenues as well as fragility of growth from major emerging markets like China, the need for alternative sources of capital to finance infrastructure becomes increasingly more compelling. Both government agencies (SEC and DMO) therefore agreed on the urgent need to begin mobilising capital in order to address the nation’s investment needs. Particularly, issuing a sovereign sukuk will attract significant amounts of affordable capital from the Gulf countries and other established Islamic markets around the world into Nigeria.”

Former Director General of the DMO, Dr Abraham Nwakwo, said that sukuk is part of the DMO’s 2013-2017 Strategic Plan which mentions the goal of using “non-interest debt financing instruments (such as sukuk) for investment in critical national development priorities and sectors.”

He added that the issue was “part of the plan to fast track the development of infrastructure and engage in … project-tied capital raising,” adding that Nigeria has challenges with road, railway and power infrastructure.

Gwarzo predicted that Nigeria’s maiden sovereign sukuk would be oversubscribed with enhanced participation of domestic and foreign investors.

Apart from the huge funding made available through the instrumentality of sukuk, for a country that spends a fortune on debt servicing, sukuk provides a refreshingly different alternative. According to Vitor Gaspar, International Monetary Fund’s Director of Fiscal Affairs Department, in April this year, Nigeria spends 66 per cent of its tax revenue on debt servicing. Similarly, the Emir of Kano, Muhammadu Sanusi, said the Federal Government expends 66 per cent of the country’s revenue on servicing debt interest, while 34 per cent of the revenue was used for capital and recurrent expenditures.

In his own view Dr Benedict Nwafor of the University of Lagos, said the attraction for Nigeria is its present challenge. “For Nigeria, anything that will reduce the debt burden will be welcome. If a country expends 66 per cent of her earnings on debt repayment, that country cannot experience development. The government has to develop critical infrastructure to engender development. The sukuk is an opportunity for raising funds without raising the nation’s debt profile,” he said.

According to him, although sukuk is founded in Islamic belief, it is nothing other than a financial instrument for mobilizing funds. He added that each country has its own reason for embracing sukuk.

He explained that while South Africa welcomed sukuk because of its desire to broaden its investor base and to set a benchmark for state-owned companies seeking diversified sources of funding for infrastructure development, Hong Kong adopted sukuk because “As China’s global financial centre, it is an important conduit for Mainland companies to access the international markets and the preferred offshore capital raising centre for Mainland issuers.”

Benefits of sukuk

Sukuk provides access to a vast and growing Islamic liquidity pool in addition to the conventional debt. According to Naveed Mohammed, an Islamic finance scholar, sukuk provides an ideal way of financing large projects for the public good that would otherwise not be possible.

He says, “There are many economic activities or projects that are out of reach of various developing Islamic economies and governments. In these cases, sukuk is perfect for financing these projects without falling into interest-based debt. This makes sukuk an important avenue for redistribution of wealth and achievement of social justice. The use of sukuk to fund large projects means that investors in sukuk are incentivized to help economies develop by creating and producing rather than by consuming or manipulating others. Islamic finance is based on principles of fairness and justice which are achieved by avoiding riba.”

Mohammed adds that investors on the secondary market who are looking for investments that can be liquidated easily will find thatsukuk is ideal. “Thanks to the secondary market for Islamic securities, investors can sell their securities and obtain the cost of their certificates. If the projects that back their sukukcertificates have generated profits, this results in a quick return in investment.  This means that Islamic financial instruments are well suited for fund management. Banks or institutes can use part of their funds to purchase Islamic securities and then sell them on the secondary market when liquid assets are needed.”

Sukuk’s major appeal is the removal of interest burden as well as the vast resources available to its promoters. This explains why a country like the United Kingdom has fully embraced it. The immediate past British Prime Minister, David Cameron, once said he would want London to stand alongside Dubai and Kuala Lumpur as one of the greatest capitals of Islamic Finance in the world. With that, in June 2014, the United Kingdom became the first country outside of the Islamic world to issue a sovereignsukuk. The UK government raised £200 million to fund the construction of residential buildings. Other non-Islamic countries have since keyed into sukuk as a means of raising funds. These include Hong Kong, Senegal, South Africa and Luxemburg.

Drawbacks

Sukuk is not without its drawback. The major drawback is what happens to a sukuk holder should asukuk fail. What is the status of a sukuk holder when a sukuk fails? A sukuk holder is said to be a part-owner of a project. What happens in the eventuality of the failure of the project? Can he and other owners move in and take possession of the project or does he bear the consequences of that failure by forfeiting his investment?

According to Ibrahim Warde, Professor of International Finance at The Fletcher School of Law and Diplomacy, Tufts University, it is not clear what will happen when a sukuk fails. He says, “This is an issue that has not been tested in court. In Malaysia, somesukuk issues have junk status, and two other sukuk are already in default: the Easter Cameron Gas company in the United States and Investment Dar of Kuwait. One of the unresolved questions is whethersukuk holders should stand in the line of creditors or in the line of the owners of underlying assets.”

Also expressing confusion over the status of a sukuk holder, Muddassir Siddiqui, who is both a licensed Shariah jurist and a-U.S. trained attorney, said, “Through reading many cases that have so far been litigated in courts around the world, I have found that in almost all cases, the courts have struggled to reconcile the substance and form of the contract. Was it a sale, lease, construction or partnership contract or a financing arrangement between the parties?”

Lending his voice to the complexity involving sukuk, Rodney Wilson, Emeritus Professor of Economics at Durham University in the UK, who is also Visiting Professor, Qatar Faculty of Islamic Studies and Adjunct Professor, International Centre of Education in Islamic Finance (INCEIF), Kuala Lumpur, opined that “when sukukpayments are delayed or fail, the means of redress are potentially more complex than for conventional notes and bonds because under Shari’ah, leniency towards debtors is favoured.” This will unfailingly raise moral hazard problems.

But beyond these concerns, Nwafor is of view that sukuk certificates can transfer state-owned projects to sukuk holders in case of default. According to him, “A sukuk holder is a part owner of a project until he is fully repaid. So, if a project funded by sukuk fails or is so badly managed that the investors cannot recoup their investment, the project will owned by the investors until the investors are able to get back their capital. This is one of the complications withsukuk. This grey area has to be sorted out to avoid the country and the people being short-changed. The government must come out clean on what happens to a project and the investor in case of project failure. We cannot pretend that it cannot happen. Projects fail regularly here in this country. Should that happen, what becomes of the project and those who invested in it?”

He added that the Federal Government has a lot to do in educating the public on the benefits of sukuk to ensure a buy-in. “The government must also do all it can to assure Nigerians that this scheme is not intended to favour a section of the society. I am of the view that if other non-Muslim countries can accept it, so can Nigeria but the government has to work extra hard to convince Nigerians that it means well for all Nigerians with the sukuk.”

Source: Nigerian Tribune

FG Sells N100bn Sovereign Sukuk At 16.7%

The Federal Government has begun the sale of its N100 billion debut sovereign sukuk, the Debt Management Office (DMO), has said.

The offer circular, which was obtained from its website, said the seven year Islamic sukuk, referred to as Ijarah is at a rental rate of 16.74 per cent and would be due in 2024.

The bond, which is aimed at funding road infrastructure across the six geo-political zones, is payable semi-annually.

Subscription for the bond, which is guaranteed by the government, will close on Sept. 20.

The debut sukuk was originally planned to go on sale in June for three days via book building.

The circular said the planned sukuk issue would target retail investors, institutional investors and high net worth individuals.

It said subscribers could purchase N1,000 per unit subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter with First Bank and Islamic wealth manager, Lotus Capital managing the sale.

The DMO said the bond would be tradable on the Nigerian Stock Exchange (NSE) and on FMDQ Over-The-Counter (OTC) platform and be classified as liquid asset by the Central Bank of Nigeria (CBN).

It may also re-open the offer in case of an undersubcription.

The DMO said the benefits to be derived from investment in Sukuk included using the product as collateral to access loans from banks.

Other benefits are safety and regular income which are tax free and will be listed and traded on the Nigerian Stock Exchange (NSE) and the FMDQ OTC Securities Exchange Plc.

VON

Osun’s Innovative Steel High Schools

By Inwalomhe Donald

 

Governor Aregbesola’s bold and brilliant initiative has changed the face of schools in Osun State. I want to use this medium to appeal to National Universities Commission (NUC) to grant university provisional licences to Osun steel structure high schools in Ilesa, Iwo and Osogbo, that can last for more than 100 years so as to expand access to, and improve the quality of facilities available for higher education in Nigeria. These steel school structures are capable of meeting the requirements for full university operational licenses.

Ilesa, Osogbo and Iwo High Schools have the required standards to operate as universities in Nigeria. There is nowhere in Africa that you can see steel structure high schools like the types in Ilesa, Iwo and Osogbo. I challenge anybody to prove me wrong as Aregbesola has taken a bold step to change the face of high schools in Africa. None of the 12 Federal Universities established in February 2011 by the Federal Government of Nigeria can boast of such structure.

Ondo and Edo States have three state-owned universities each and, based on what Aregbesola has done, NUC should please grant licence to Osun State to operate more state universities.

Osun structural steel schools are the first in Africa with 216 classrooms, 3 ICT halls, 18 laboratories and others that have the capacity to bear great loads in tension and compression, high resiliency and performance under harsh and difficult conditions. Osun steel high schools can be shaped by many processes, ranging from standard rolled sections to custom castings and digitally generated components. Osun steel high schools are wide, the  buildings’ cladding highlight their durability, technical capabilities and aesthetic versatility. Osun State is the first to build steel structure schools in Africa that can accommodate more than 9,000 students.

Osun steel structure new high schools are part of the series of the state-of-the-art schools currently being constructed across the state. With Ilesa, Osogbo and Iwo steel structure sukuk high schools, Aregbesola’s government is committed to Osun schools a model in Nigeria, Africa and the entire world.

Another good thing is that Osun Steel High schools can be easily modified during the lifecycle of a building to accommodate changing occupant requirements. As the most recycled material in the world, steel is an environmentally sound building material choice. Today, structural steel is 97% recycled with the primary source being automobiles. Architects praise the natural beauty of Osun steel schools and are excited about exposing them in the design of their structures to emphasise grace, slenderness and strength.

President Muhammadu Buhari last year described the newly completed steel structure Osogbo Government High school as an educational legacy that should be emulated by other states of the federation.

The steel buildings have many advantages, such as large span/low demand of base structure, seismic and wind resistance, fast construction and easy maintenance. The walls of the steel structure building are also flexible, You can choose colored steel plate or EPS/PU/XPS sandwich panel as your wall system. The products can be packed in one  package, are easy to upload, download and stack on the site.

They can be built on many special places such as mountains, beaches and land with bad condition.

Built from steel, the schools took some months to build instead of the two years required for a more conventional structure. Many tonnes of steel were used to build the site. Unemployed workers from the township were employed on the projects, with between 60-80 on site each day. The steel structure can be produced in kit form, allowing quick and easy assembly. All three schools were built using light weight steel and Arval panels with a view to promoting the use of steel in domestic buildings.

The prototype buildings at Ilesa, Osogbo and Iwo prove that steel can be used cost effectively and aesthetically.  The lesson is that Aregbesola has demonstrated that the three steel structure schools are excellent examples of what can be achieved with steel in the construction environment and my wish is that it will ensure an iron-clad future for the students of the State.

The other sukuk High Schools are: Wole Soyinka High School, Ejigbo, Ataoja High School, Osogbo, Fakunle Unity High School, Osogbo, Oduduwa High School, Ile Ife, Ila High School, Ila-Orangun, Adventist High School, Ede, Iwo, Akinorun High School, Ikirun and  Ayedaade High School, Ikire. What is unique about Osun State High Schools is that each of them has the capacity to take off as a state university.

I want to plead with NUC to visit Osun State Steel Structure High Schools in Iwo, Ilesa and Osogbo.

Donald writes from Benin City