Nigeria’s third Sukuk bond has fetched $2.1 billion, an oversubscription of the targeted $533 million offered to investors, despite the paper eliciting religious controversy.

The oversubscription of 446 per cent may reflect the high prospects the Islamic bonds present to Africa’s most populous country.

The sovereign Sukuk is meant to finance 44 critical road projects in the six geopolitical zones of Nigeria. Its launching earlier this year attracted various investors, including ethical funds, insurance companies, fund managers and retail investors.

But it came with religious intonations. Sukuks are different types of bonds that don’t earn interest, which is not permissible under Islamic law. Instead, they present financial certificates to investors who give out the money to be a part of some asset ownership. The government, in this case the issuer, then promises to buy back the assets at a later date based on an agreed value.

In Nigeria, the arrangement incensed Christian groups who argue that it is an Islamic financial instrument to raise fund to “Islamise”.

The Christian Association of Nigeria (CAN), an umbrella body of all denominations, has alleged Nigeria wants to turn into an Islamic state.

The General Secretary of CAN, Rev Musa Asake, demanded the abrogation of the framework behind the bond and threatened to seek legal redress if that was not done.

"It is disappointing to note that the government is pursuing what is an outright confirmation of an Islamisation agenda.’’

The floating of Sukuk is not only sectional but illegal and a violation of the constitution, he argued.

Nigeria’s 200 million people are split between the world’s two biggest religions, however.

The federal government says it resorted to Sukuk to fund construction and development of key economic infrastructure projects and to diversify the sources of funding. Sukuk it says offers ethical investors an opportunity to invest in government’s issued securities and to achieve a higher level of financial inclusion.

It sees Sukuk as the more convenient way to bridge financial deficits and address infrastructure challenges in the nation that will turn 60 by October 1.

The first Sukuk bonds in Nigeria was issued by Osun State in South West Nigeria in 2013. It realised $45.9 million through 42 investors in the Nigeria Stock Exchange to finance projects.

The success of the maiden issue attracted the cash-strapped federal government to float its first Sukuk bond that fetched $325 million in 2017.

The bond, which is due in 2025, was used to fund 25 road projects in South East, South South, South West, North West, North Central and North East.

The federal government’s second issuance of another $327 million was in December 2018.

Rev Samson Ayokunle, President of CAN, said: “Our worry as a body is that Nigeria started getting active in international Islamic alliances and organisations in total violation of the constitution.”

But the Muslim Rights Concern and Nigeria Supreme Council for Islamic Affairs, have accused CAN, of playing up sentiments.

They explained that "Sukuk’’ is purely for business purposes’’.

Islamic agenda

Nigeria’s Vice President Yemi Osinbajo, one of the pastors in the Redeem Christian Church, denied the Islamisation agenda, saying: "We focus our minds on something we call the Islamic agenda. We look for it everywhere as if we are looking for demons.’’

The Sukuk, he said, was essentially like a bond. The US, UK, China, South Africa have all used the Sukuk.

Dr Mamoud Kamara, regional head of Islamic Development Bank in Nigeria, said on September 16, at a strategic meeting with the chairman of Nidcom, Abike Dabiri-Erewa.

Dr Kamara said Sukuk that would involving the World Bank and African Development Bank, would help assuage the sufferings of Nigerians, particularly those who have lost their means of livelihood and were struggling for any means of survival.

The President, Chartered Institute of Stockbrokers, Olatunde Amolegbe, has urged Nigerians to support the government by subscribing to Sukuk, describing the instrument as a profitable.

He urged the public to partner to take advantage of Sukuk to boost their cash flow and assist government’s efforts to invest in infrastructure.

“Sukuk Ijarah is a fixed income security backed by the Federal Government and as an investment without risk as repayment of investors is guaranteed by the full faith and credit of the Federal Government of Nigeria, he explained.