The Debt Management Office (DMO) has officially opened subscriptions for a N300 billion Series VII Ijarah Sukuk aimed at funding critical road infrastructure projects across the country. This new issuance will bring the total subscription for Sukuk to approximately N1.09 trillion since its inception.
The issuance of the Series VII Sukuk, which is the seventh in the series and the largest since the instrument was introduced in Nigeria in September 2017, forms part of the federal government’s broader strategy to finance infrastructure through Islamic investment instruments. The Sukuk will have a seven-year tenor and offer an annual rental rate (interest) of 19.75%, serving as a significant source of domestic funding for the 2025 federal budget.
Progress and Economic Developments
In a statement, the Director-General of the DMO, Patience Oniha, highlighted recent improvements in Nigeria’s macroeconomic environment, such as the upgrade of the country’s credit outlook by global ratings agency Fitch. She attributed these positive developments to effective fiscal and monetary management, with a particular emphasis on recent reforms by the Central Bank of Nigeria (CBN), especially measures aimed at stabilizing the foreign exchange market.
“There’s more transparency now, FX supply has improved, and the rates have become more stable. Although some of the measures were initially challenging, the benefits are now beginning to show,” Oniha remarked.
Sukuk Details and Investment Terms
The subscriptions for the N300 billion Series VII Sukuk, which opened on Monday, will close on next Tuesday. The minimum subscription has been set at N10,000, with increments of N1,000 per unit, ensuring broad access for a wide range of investors. Oniha emphasized that this issuance was part of the government’s approved borrowings to cover budgetary shortfalls, and it will be officially recorded in Nigeria’s debt records.
Diversified Debt Portfolio
Oniha reassured investors about the sustainability of Nigeria’s debt, noting that the country’s external borrowings are sourced from a diverse pool, including multilateral institutions such as the World Bank and African Development Bank, bilateral partners such as China, India, and Germany, as well as the commercial Eurobond market.
“Over 60% of our external debt is from multilaterals and bilaterals, which offer more favorable terms compared to commercial debt. This diversification helps mitigate market risks and ensures stability,” she stated.
Oniha also expressed optimism about initiatives aimed at boosting oil and gas revenue, a critical component of Nigeria’s national income.
Public Debt and Domestic Borrowing
As of December 2023, Nigeria’s total debt stock stood at N144.67 trillion, with an almost equal split between external and domestic debt. A significant contributor to the rise in debt was the devaluation of the Naira, which increased the value of dollar-denominated debts when converted into the local currency. However, the external debt remains stable at around $42.5 billion, with a slight increase due to a $2.2 billion Eurobond issued in December.
Another key factor in the total debt was the inclusion of Ways and Means Advances, amounting to about N30 trillion, in the overall debt figure.
The DMO boss noted that Nigeria’s bond market remains active, with regular issuances of Treasury Bills, Federal Government Bonds, Savings Bonds, and Sukuk, offering a variety of investment opportunities for different types of investors.
Debt Sustainability and Economic Growth
Regarding Nigeria’s debt profile, Oniha acknowledged that while the debt-to-GDP ratio had surpassed 50%, it remains within internationally accepted limits, as prescribed by organizations such as the IMF, World Bank, and ECOWAS.
“Public debt sustainability is not just about the size of the debt; it’s about growing revenues and expanding GDP,” she said, emphasizing that the country’s debt management strategy is focused on long-term growth and stability.
