VINEETA TAN and MARC ROUSSOT bring you an exclusive on Nigeria’s Sukuk plan after failing to come to market as planned.
The Nigerian national government is still working on tapping the sovereign Sukuk market, assuring that an auction is imminent, IFN has learned. This comes after the Debt Management Office (DMO) missed its 28th June 2017 debut date, confirming what IFN previously reported (See IFN Sovereign Sukuk Report Vol 14 Issue 27). Its reaffirmation marks a continuity in its fund diversification policy to narrow the nation’s widening budget deficit and meet its deep infrastructure financing needs despite a recent change in leadership at the DMO.
A week before the initial auction date, the Securities and Exchange Commission (SEC) confirmed that the DMO had concluded the arrangements needed to offer the local currency NGN100 billion (US$308.31 million) seven-year Islamic paper, suggesting that the auction was on track. But the sale never took place.
“The DMO needed to finalize some issues first,” Patience Oniha, the newly appointed director-general of the DMO, told IFN when asked about the auction, without elaborating what the issues were.
Oniha, who took over from Dr Abraham Nwanko early this month, did however confirm that the DMO is still planning to issue, and that the auction will take place “soon”, indicating that she intends to continue the work of Dr Nwanko who, over the last decade in his capacity as the head of the DMO, had overhauled the Nigerian debt-raising ecosystem and diversified the country’s funding sources by introducing new debt instruments such as federal government savings bonds, sovereign retail bonds and Sukuk — although Dr Nwanko retired before the federal government could make its mark as a Sukuk issuer.
Launching the Sukuk has proven challenging: this is not the first time the West African nation has walked back on its word as the country over the last half a dozen years have on multiple occasions assured the market that it would tap the sovereign Sukuk space, only to have the sale postponed one time after another.
In 2013, the Osun State government pipped the federal government to the post when the state raised NGN11.4 billion (US$35.15 million) through Sukuk.
However, things took a different turn at the end of 2016 because for the first time, the DMO initiated visible concrete steps toward an issuance: Dr Nwanko engaged the SEC multiple times last year over the government’s Sukuk plans; it sent out a request for an expression of interest for advisors and a trustee for a federal government domestic Sukuk in December 2016 after the central bank released new guidelines to facilitate such an issuance two months earlier; it engaged parties to manage the deal including First Bank and Lotus Capital later in 2017; and doing something it has never done previously — it committed to a specific date for the sale.
IFN has learned from a source close to the deal that a meeting is expected to convene over the next two weeks to determine a new date for the auction, which is likely to be in August.
Notwithstanding the delays faced, all features of the proposed Sukuk facility, according to Oniha, would remain the same.