Nigeria’s N250 billion Sukuk Bond Oversubscribed by 346%

Nigeria’s Sovereign Sukuk Offer attracted over N865 billion subscriptions representing over 346% oversubscription (more than 3 folds). This is according to information from the Debt Management Office. According to the DMO, N250 Billion Sovereign Sukuk whose offer opened on December 16, 2021, closed yesterday December 23, 2021, with an unprecedented subscription level of over N865 Billion. This outcome represents a subscription level of 346%.

The DMO also reported that demand for the bond was from banks, fund managers, pension funds, as well as non-interest financial institutions, ethical funds, cooperative societies, and retail investors. Last year, in June, the Debt Management Office (DMO) also said the result of the third Sovereign Sukuk for which it offered N150 billion to investors was attracted 446% or N669.124 billion.

What the DMO is saying

“The increasing level of participation by a more diverse and larger number of investors is a confirmation that the DMO’s objectives of issuing Sovereign Sukuk to grow the domestic investor base and promote financial inclusion is being achieved. In addition, the high subscription level is proof of investors’ acknowledgment of the impact the USD362.57 Billion Sovereign Sukuk issued between 2017 and 2020 has had on the development of road infrastructure in Nigeria.” Proceeds of the bonds are to be utilized for financing the rehabilitation and reconstruction of road projects across the six (6) geopolitical zones and the Federal Capital Territory.

Why this matters

An oversubscription of any sale of security especially government security indicates demand for government bonds remains high despite concerns about Nigeria’s high debt to service rations. Nigeria’s Sukuk Bond has a history of being oversubscribed.

Nigeria’s N250 billion Sukuk Bond is a 10-Year Ijarah Sukuk due December 2031 and attracts a “Rental Rate” of 12.80% Per Annum. The issuing houses for the Sukuk are Greenwich Merchants Bank Ltd, Vetiva Capital Management Ltd, and Stanbic IBTC Capital Ltd.