Osun State has begun offering the Nigeria’s first Islamic bond,
taking a major step towards developing an Islamic finance industry in
Africa’s most populous nation, bankers said on Thursday.
According to Reuters, the issue makes Nigeria the first big economy
in sub-Saharan Africa to market a sukuk, although Gambia has been
selling small amounts of Islamic bonds for several years.
Other African countries including South Africa, Kenya and Senegal
have been laying plans to issue sukuk seeking to tap into growing global
demand for Islamic debt, particularly among cash-rich Islamic funds in
the Gulf and southeast Asia.
Osun’s issue of up to 10 billion naira ($62 million) of seven-year
sukuk, denominated in local currency, will pay investors a fixed return
of between 14.25 and 14.75 percent, according to a prospectus seen by
Reuters.
The offer will close at the end of this month, the bankers said,
declining to be named under briefing rules. The sukuk is based on an
ijara structure, a common leasing arrangement in Islamic finance, which
bans the payment of interest.
Local credit rating agency Agusto & Co gave an A rating to the
sukuk, suggesting it will attract ample investor demand. Bankers said
earlier that Osun hoped the issue, which is expected to be listed on the
Nigerian Stock Exchange, would be bought by local pension funds and
international investors.
In March this year, Nigeria’s Securities and Exchange Commission
approved new rules facilitating issues of sukuk. About half of Nigeria’s
160 million people are Muslims, giving it sub-Saharan Africa’s largest
Muslim population.
The cocoa-producing, western Nigerian state of Osun has a population
of about 3.5 million people. The proceeds of the sukuk will be used to
build schools, the prospectus said.
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