Infrastructure Financing through Islamic
Finance in the Islamic Countries
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distributions to the Sukuk investors. A Purchase Undertaking was executed by the OSG in
favour of the Issuer to give assurances that, at the end of the lease/maturity of the Sukuk, or
upon the occurrence of an event of default or early termination of the lease under the Ijara
Agreement, the OSG would purchase the Sukuk assets. The Purchase Undertaking was meant
to eliminate market risk on the part of the investors. Similarly, a Sale Undertaking was also
executed by the Issuer in favour of the OSG. The Sukuk structure was certified as Shari’ah-
compliant by the Shari’ah Advisers62 (Oladunjoye (2014)). The basic features of Osun sukuk
are shown in Table 4.3.4.
Table 4.3. 4: Summary of Sukuk Features Issuance in Nigeria
Features Osun Sukuk FGN Roads Sukuk
Issuer and
Trustee
Osun Sukuk Company Plc FGN Roads Sukuk Company 1 Plc
Obligor Osun State Government (OSG) Federal Government of Nigeria
Nature of
Instrument
Subnational Sukuk – Medium Term
Sukuk (the Osun Sukuk)
Sovereign Sukuk – Medium Term
(the FGN Roads Sukuk)
Structure Type Ijarah Ijarah
Purpose To raise funds for the development of
20 High
Schools, 2 Middle Schools and 2
Elementary Schools in Osun State
To raise funds for the execution of
25 road projects in the six
geopolitical zones of the country
Issue Size N11.4 billion ($31.67 million) N100 billion ($278 million)
Issue Date 8th October 2013 22nd September 2017
Maturity 8th October 2020 22nd September 2024
Rental Rate 14.75% 16.47%
Redemption Sukuk will be redeemed in a lump sum
at Maturity
Sukuk will be redeemed in a lump
sum at Maturity
Listing NSE and FMDQ NSE and FMDQ
Ijarah Assets Schools Roads
Governing Laws Laws of the Federal Republic of Nigeria Laws of the Federal Republic of
Nigeria
Rating Bbb+ (Augusto & Co) B (Fitch)
Sources: Oladunjoye 2014, COMCEC 2018, Prospectus 2017
The Osun Sukuk was fully subscribed and was mainly taken up by local banks, fund managers,
insurance companies and high-net-worth individuals. The tax incentives which were approved
by the federal government in March 2010 entitled the Sukuk holders to payments that were
free from withholding, state and federal income and capital gains taxes, with no deductions at
source. Additionally, proceeds from the disposal of the Sukuk and stamp duty on its sale or
transfer are exempted from taxation. The tax incentive was seen as a motivator to the
subscription of the Sukuk (COMCEC, 2018).
Case Study: Sovereign FGN Roads Sukuk
The N100 billion (about $327.01) Sovereign Sukuk was issued by the FGN in 2017 to raise
funds for the construction/rehabilitation of 25 roads across the six geopolitical zones of the
country. The offer was subscribed by investors across a broad spectrum. Pension funds, banks,
62 Shari’ah Advisers were Dr. Mohamed El-Gari, Prof Monzer Kahf and Prof. M.L Bashar