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Nigeria has successfully issued 2 sovereign sukuk since 2013. The introduction of the Rules on
Sukuk by the SEC had paved the way for its first sukuk―the State Government of Osun ₦11.4
billion ijarah sukuk (Osun State Sukuk). The Osun State Sukuk is part of 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 tax incentives under this sukuk are key to
its oversubscription. The sukuk was taken up by local banks, fund managers, insurance
companies and high-net-worth individuals. The tax incentives entitle the sukuk holders to
payments that are free from withholding, state and federal income and capital gains taxes, with
no deductions at source. In addition, proceeds from the disposal of the Sukuk and stamp duty
on its sale or transfer are exempted from taxation. This tax benefit is due to the 10-year tax
waiver approved by the federal government in March 2010, which exempts all categories of
bonds (including sukuk) issued by all tiers of the government (sub-national and supra-
national) and corporate bonds from company income tax, personal income tax, value-added
tax, capital gains tax and stamp duties.
The successful issuance of the Osun State Sukuk had paved the way for the issuance of
Nigeria’s second sukuk. The Federal Government of Nigeria (FGN) ₦100.0 billion ijarah sukuk
(FGN Sukuk) was issued in 2017. The proceeds will be used to construct and rehabilitate 25
roads in Nigeria’s 6 geopolitical zones selected by the Ministry of Power, Works and Housing
due to their strategic economic importance. Similar tax incentives have been accorded to the
FGN Sukuk, which had led to its over sub subscription by investors across a broad
spectrum―pension funds, banks, fund managers, institutional and retail players. Further
details on the Osun State Sukuk and the FGN Sukuk are described in Table 4.33. There is
reportedly another sovereign sukuk in the pipeline; the Nigerian Mortgage Refinance Company
(NMRC) plans to issue its first sukuk. The purpose is to source cheaper funding for mortgage
refinancing and lighten the interest-rate burden of the ultimate mortgage beneficiaries.
Table 4.33: Overview of Nigeria’s Government Sukuk Issuances
SPV issuer Osun Sukuk Company Plc FGN Roads Sukuk Company 1 Plc
Obligor State Government of Osun Federal Government of Nigeria
Currency/format Nigerian Naira Nigerian Naira
Structure Ijarah Ijarah
Sukuk/obligor ratings Bbb+ (Agusto & Co)
A (Agusto & Co)
B- (Fitch)
Use of proceeds The net proceeds of Naira10.97
billion after deduction of the cost
of the offer of Naira 0.43 billion
(i.e. 3.77% of the amount) will be
utilised for the following:
(i) Construction of 23 high
schools (total cost of Naira
10.35 billion – 94.35% of
sukuk value)
(ii) Construction of 2 middle
schools (total cost of Naira
0.30 billion – 2.73% of
sukuk value)
(iii) Construction of 2
elementary schools (total
cost of Naira 0.32 billion –
2.92% of sukuk value)
To fund the construction and rehabilitation of
roads across the country:
(i) North Central: 5 projects costing
Naira16.67 billion: construction of Loko
Oweta bridge, dualization of the Abuja-
Lokoja road (sections 1 and 4),
dualization of the Suleja-Minna road
(Phase 2), dualization of the Lokoja-
Benin road (Section 1)
(ii) North East: 5 projects costing Naira
16.67 billion: dualization of the Kano-
Maiduguri road (Sections 2-5)
(iii) North West: 4 projects costing Naira
16.67 billion: dualization of the Kano-
Maiduguri road (Section 1), dualization
of the Kano-Katsina road (Phase 1),
construction of Kano western bypass
and the Kaduna eastern bypass