Connect with us

BUSINESS

CBN approves guidelines for granting liquid assets to States on Sukuk issuance

Published

on

CBN disburses N174.48 bn under Anchor Borrowers Programme — Official

As the Federal and State governments seek alternative funding sources for infrastructure in the face of present contracting revenues, the Central Bank of Nigeria (CBN) has provided more available option by approving new guidelines on issuance of Sukuk instruments by state governments.

The Securities and Exchange Commission (SEC) notified issuers and investors of this development in a statement by its Management.

According to the statement, “The release of these guidelines follow diligent advocacy efforts from the Capital Market Committee (CMC) on the need to grant liquidity status to Sukuk in order to bolster its appeal as a product for both issuers and investors alike”.

SEC also described the development as a major milestone for Nigeria as it is expected to catalyse the development of non-interest capital market products.

Sukuk, the non-interest equivalent of bonds, is becoming increasingly attractive as a capital market instrument across the globe. Annual Sukuk issuances around the world have grown from $15 billion in 2008 to over $150 billion in 2015.

NEWSVERGE recall that in 2013, the SEC had issued Rules on Sukuk Issuance in Nigeria following which the State Government of Osun raised N11 billion in Nigeria’s first Sukuk issuance which was oversubscribed. Since then, several State Governments have been exploring issuing Sukuk to raise funds for infrastructure financing and other much needed public interventions.

However, the absence of a liquid secondary market had been a key concern for investors like pension funds and other institutional investors. To address this constraint, the Capital Market Master Plan had highlighted the need to push for liquidity status for Sukuk. In implementing the Master Plan, the SEC and the capital market community closely engaged the CBN to develop and release guidelines for this purpose.

According to SEC, “with these new guidelines, Sukuk instruments issued by State governments can be discounted at CBN discount windows and can be applied by banks in their liquidity ratio computation, similar to conventional State bonds. This will facilitate the emergence of a vibrant secondary market that will encourage more issuances from State governments”.

The Commission further noted that the guidelines will play a key role in broadening and deepening Nigeria’s financial system by catalyzing the development of non-interest products and enhancing financial inclusion.

The Management commended the CBN for what it described as laudable step while appreciating the CMC sub-Committee on non-interest products for their dedicated work leading to the release of these guidelines.

Sunday Ojelabi

NEWSVERGE, published by The Verge Communications is an online community of international news portal and social advocates dedicated to bringing you commentaries, features, news reports from a Nigerian-African perspective. The Verge Communications (NEWSVERGE) is fully registered with the Corporate Affairs Commission of the Federal Republic of Nigeria as a corporate organization.

Comments
NIGERIA DECIDES

NIGERIA DECIDES

Shell Digital Plan RESPONSIVE600x750
Shell Digital Plan RESPONSIVE600x750
GTB
JoinOurWhatsAppChannel