- Title: NIGERIA: Nigeria's debut sukuk islamic bonds to be issued by Osun state
- Date: 3rd July 2013
- Summary: ABUJA, NIGERIA (JULY 1, 2013) (REUTERS) VARIOUS OF BANKING HALL/BANK STAFF ATTENDING TO A CUSTOMER VARIOUS OF CUSTOMER FILLING BANK SLIP VARIOUS OF HASSAN USMAN, ACTING MANAGING DIRECTOR, JAIZ BANK, WORKING AT HIS DESK (SOUNDBITE) (English) HASSAN USMAN, ACTING MANAGING DIRECTOR, JAIZ BANK, SAYING: "In terms of benefits, Sukuk is a more disciplined instrument than a bond. What I mean is that a bond can be issued by the government to even finance its deficit, it can be done for revenue expenditure any kind of expenditure and there is not an underlined transaction for a bond but a Sukuk has to have an underlying physical transaction it may be a power project, it may be a hospital it may be a school a building to house the secretariat or but there has to be a physical project for which a Sukuk will be financing." ABUJA, NIGERIA (RECENT) (REUTERS) STREE SCENES/JAIZ BANK FLAGS FLYING ATM SIGN VARIOUS OF PEOPLE SEATED AT A CONFERENCE VARIOUS OF PROFESSOR SHEHU USMAN ALIYU, DIRECTOR, INTERNATIONAL INSTITUTE OF ISLAMIC BANKING AND FINANCE BAYERO UNIVERSITY, ADDRESSING PARTICIPANTS VARIOUS OF PARTICIPANTS AT CONFERENCE (SOUNDBITE) (English) PROFESSOR SHEHU USMAN ALIYU DIRECTOR INTERNATIONAL INSTITUTE OF ISLAMIC BANKING AND FINANCE BAYERO UNIVERSITY, SAYING: "The need for financing at zero interest is unimaginable. It's not obtainable in any of the conventional banking but a form of an arrangement where profit and loss sharing is accepted between the bank and the customer could be ideal for resource mobilisation, for resource utilisation and for generation of more employment opportunities so it's a win win for both the bank and the investor to come together under the principle of profit and loss sharing which is unattainable in the conventional banking system." VISTIOR ENTRING CONFERENCE HALL VARIOUS OF BROCHURES POSTER ON ISLAMIC BANKING (SOUNDBITE) (English) UMMAHANI AMIN, CHIEF EXECUTIVE OFFICER, METROPOLITAN SKILLS LIMITED ABUJA, SAYING: "We would want government to look at a situation where the private sector will come in every individual will come in, because in Islamic Sukuk it means everybody is involved like the ordinary person can buy a Sukuk certificate so everybody will be involved in the development of our country Nigeria." VARIOUS OF UBA AND STANBIC BANK SIGNS
- Embargoed: 18th July 2013 13:00
- Keywords:
- Location: Nigeria
- Country: Nigeria
- Topics: Economy
- Reuters ID: LVA3UEFFZUGBD9XVH85T7T0NSCHY
- Story Text: Nigeria eyes opportunities provided by Islamic banking to fund infrastructure in the country. According to Nigeria's central bank governor, Islamic bonds called Sukuk, if well developed can serve as a financing option for governments as is already evidenced in countries like Saudi Arabia and United Arab Emirates.
Nigeria is planning to launch its first sukuk bond in the country's Cocoa-producing Osun State, starting with 10 billion naira (62 million US dollars), before the end of July.
The planned 7-year paper would be the first sukuk bond to be issued in Africa's second-biggest economy and is part of a 60 billion naira debt raising programme by Osun State, which started last year, a banking source close to the deal told Reuters.
The funds will be used to finance construction of education projects.
Jaiz Bank, an Islamic bank that started operating officially in Nigeria in January 2012, has grown its customer base to over 30,000 people spreading out to ten branches all over the country.
Its balance sheet has doubled from the bank's initial investment of 10 billion naira.
Hassan Usman, the acting managing director at Jaiz Bank says that a Sukuk bond has more benefits compared to conventional bonds.
"In terms of benefits, Sukuk is a more disciplined instrument than a bond. What I mean is that a bond can be issued by the government to even finance its deficit, it can be done for revenue expenditure any kind of expenditure and there is not an underlined transaction for a bond but a Sukuk has to have an underlying physical transaction it may be a power project, it may be a hospital it may be a school a building to house the secretariat or but there has to be a physical project for which a Sukuk will be financing," he said.
At an Islamic banking conference held recently in the country's capital, Abuja the director at the International Institute of Islamic Banking and finance at Bayero University, Shehu Usman Aliyu, talked to participants on the importance of Islamic banking in the country.
"The need for financing at zero interest is unimaginable. It's not obtainable in any of the conventional banking but a form of an arrangement where profit and loss sharing is accepted between the bank and the customer could be ideal for resource mobilisation, for resource utilization and for generation of more employment opportunities so it's a win win for both the bank and the investor to come together under the principle of profit and loss sharing which is unattainable in the conventional banking system," Aliyu said.
Nigeria is home to the largest Muslim population in sub-Saharan Africa, with around half of its 160 million people members of the Islamic faith.
It is also home to one of Africa's fastest growing consumer and corporate banking sectors.
"I feel that Nigeria can be able to leverage on Sukuk you know in building infrastructure since we have deficits in our . government purses, so we would want government to look at a situation where the private sector will come in, every individual will come in, because in Islamic Sukuk it means everybody is involved like the ordinary person can buy a Sukuk certificate so everybody will be involved in the development of our country Nigeria," said Ummahani Amin, the Chief Executive Officer, at Metropolitan Skills Limited, a company that trains professionals on Islamic banking.
The Osun bond will be issued through a book-building process which will earn a return for sukuk holders via a semi-annually paid rent structure called the Ijara, targeting local pension funds and international investors on the bond.
Local credit rating agency Agusto & Co has assigned an A rating to the note which will be listed on the Nigerian Stock Exchange, said a banking source, adding that Osun was waiting for Securities and Exchange Commission (SEC) approval to start marketing the bond.
In March, Nigeria's SEC approved new rules allowing firms to issue Islamic bonds, a move aimed at attracting Middle Eastern investors.
The south western state of Osun, which is home to around 2.3 million people, issued a 30 billion naira bond last December priced at 14.75 percent, maturing in 2019. - Copyright Holder: REUTERS
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