The Securities and Exchange Commission (SEC) has announced that the Federal Government of Nigeria has issued six Sovereign Sukuk, totaling ₦1.1 trillion ($657.6M), to finance 124 federal road projects spanning over 5,820 kilometers across the country’s six geopolitical zones.
During the ongoing 2nd International Islamic Capital Market Conference in Karachi, Pakistan, Dr. Emomotimi Agama, the SEC’s Director General, highlighted that the success of these Sukuk issuances underscores the resilience and innovation of the Islamic Capital Market (ICM) as a tool for resource mobilization.
Agama explained that the issuance of sovereign Sukuk since 2017 has been a critical factor in the growth of Nigeria’s ICM, with these issuances consistently oversubscribed, reaching subscription rates as high as 441%. He also noted that the issuance of Sukuk by sub-national governments and corporations is growing in Nigeria. Examples include Osun and Lagos states, Family Homes Ltd, and TAJ Bank Plc, along with several private Sukuk issuances by other sub-nationals. These instruments have been key in financing infrastructure projects, including schools, housing, and the country’s first tier 1 capital Sukuk for a bank, demonstrating Sukuk’s versatility as a financing tool.
Beyond Sukuk, Nigeria’s ICM segment offers a variety of investment opportunities. Since the registration of its first fund in 2008, the market now has 14 registered Halal mutual funds, with a net asset value exceeding ₦105 billion as of November 2024. The NGX Lotus Islamic Index tracks 11 Shariah-compliant equities, and Nigeria’s first Islamic Real Estate Investment Trust (REIT), ChapelHill N-REIT, exemplifies the potential for real estate investment within the sector.
The growth prospects for Nigeria’s Islamic finance industry are supported by both global and local drivers. On a global scale, factors such as demographic shifts, economic diversification in oil-dependent countries, and regulatory support have increased demand for Shariah-compliant products. Locally, Nigeria’s large Muslim population, government-backed Sukuk initiatives, and rising investor awareness are spurring market expansion. Innovations in fintech are also creating further opportunities for growth. In this regard, the SEC registered Nigeria’s first Robo-advisory firm focused on Shariah-compliant investments in 2022.
Agama attributed the success of the ICM in Nigeria to its strategic focus on infrastructure financing, financial inclusion, and sustainability. He noted that the SEC’s engagement with ICM began in 2004 when it joined the Islamic Finance Task Force of the International Organization of Securities Commissions (IOSCO). This commitment led to the development of Islamic fund and Sukuk rules in 2010 and 2013, respectively, and was further reinforced by the Non-Interest Capital Market Master Plan (2015–2025), which provides a 10-year roadmap for expanding the market.
Agama further shared that the Non-Interest Capital Market Master Plan (NICMMP), adopted in 2015, envisions the ICM contributing 25% of total market capitalization by 2025, with Sukuk representing 15%. In 2021, the masterplan was reviewed to target 50 listings of Shariah-compliant products, with a market capitalization of at least ₦5 trillion ($11 billion) by 2025. The plan has seen significant progress, with nine out of 15 initiatives fully implemented by 2022, marking a 70% success rate. Notable achievements include increased public awareness, greater retail participation in Sukuk, the introduction of the Non-Interest Pension Fund (Fund VI) in collaboration with the National Pension Commission (PenCom), and the release of tax guidelines for non-interest transactions in cooperation with the Federal Inland Revenue Service (FIRS), resolving the issue of double taxation on such transactions.
However, Agama acknowledged that the rapid growth of the ICM over the past decade and a half has come with challenges, including limited public awareness of Islamic finance principles, a lack of tradable instruments, and the need for regulatory alignment across institutions. He emphasized that capacity-building efforts, particularly in Shariah governance and compliance, are crucial for sustaining growth. The SEC is addressing these challenges by engaging with stakeholders in both the public and private sectors to provide targeted and effective solutions. One key area of focus is the development of Shariah-compliant housing finance solutions in the mortgage sector, which will help create the momentum needed for developing Shariah-compliant asset-backed instruments to further deepen Nigeria’s capital market.