The nation’s infrastructure deficit due to funding gaps can be addressed considerably with the support of sukuk bonds, Faheem Ahmad has said.
He gave this suggestion recently during the virtual conference organised by DataPro Limited, a compliance solutions and technology-driven rating agency in Nigeria.
Sukuk are Sharia-compliant financial certificates through which investors gain partial ownership on an issuer’s assets until the Sukuk maturity date. Bonds are financial certificates through which investors lend money to the issuer, indicating an obligation for repayment at maturity date.
Like bonds, sukuk are issued to investors and may be used to raise capital for a firm. Both are considered to be safer investments than equities. Sukuk investors receive profit generated by the underlying asset on a periodic basis while bond investors receive periodic interest payments.
Ahmad stated that with sukuk infrastructure finance can be made easy especially using the public private partnership.
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“Sukuk can help to provide energy efficiency and installation of smart meters, renewable energy, transmission and distribution systems improvements with grids for connecting with renewable energy sources. It can also help with affordable housing, education and skill training, and sustainable food supply.”
According to him, the rise of Islamic finance, sukuk have become extremely popular since 2000, when the first such products were issued in Malaysia while Bahrain followed suit in 2001.
While noting that sukuk has high yield investments, Ahmad said the “Global ESG market is above $2trilion while EUR could reach 5.5-7.6tr by 2025.
“Islamic Development Bank issued a $1.5bn sustainable Sukuk 2020 for healthcare and supporting SMEs as well as issued EUR 1bn in 2019 Green Sukuk for renewable energy, green transportation and pollution control in member countries. UAE’s Etihad Airways issued world’s first transition $ 600mn Sukuk while Indonesia issued two Green Sukuk in 2020 $200million and $333million.”