Stockbrokers on the Nigerian Stock Exchange have called for more issuance of fixed income securities by the government to finance infrastructure deficit.
They described the recent over-subscription of Sukuk Ijarah, issued by the Federal Government, as a clear demonstration of the market’s absorptive capacity.
The Federal Government recently floated a N150 billion Sukuk Ijarah, a financial instrument for ethical Investors that provides regular bi-annual tax-free payment with seven-year maturity and it was oversubscribed in excess of 400 per cent.
Mr Olatunde Amolegbe, President, Chartered Institute of Stockbrokers, in a statement on Tuesday, urged the Federal Government to leverage such an instrument to mobilise fund to revive Nigeria’s ailing industrial base.
“Federal Government should increase the pace of issuance of such an instrument as the market has demonstrated its absorptive capacity given the over 400% over subscription letter of the last Sukuk”, Amolegbe said.
Mr Babatunde Sobamowo, Managing Director, Global Asset Management, in a statement, also said that Sukuk was becoming famous for its structure as an investment vehicle being used by the Federal Government.
Sobamowo stated that the instrument can boost implementation of the government’s Economic Recovery and Growth Plan (ERGP).
“ Sukuk confers on the subscribers ownership of the assets being financed, which in most cases are for ethical purposes.
“In recent times, they are used to finance roads, railways and other infrastructure which are lacking in the country.
“They will serve as catalyst to the much needed development to boost our industrial and agricultural growth which will impact positively on our GDP as clearly spelt out in the ERGP.
“ In order to ensure probity in the management of these underlying assets, it is advisable that Project Management Offices (PMOS) are opened in all the sites where these funds are being deployed,” he said.
Sobamowo noted that it would afford all stakeholders to have an on-the-spot assessment of the projects and the expected cash flows to be generated in paying the rental incomes due to the subscribers.
On his part, Malam Garba Kurfi, the Managing Director, APT Securities and Fund, explained that the projects being executed with Sukuk proceeds were visible across the country and this enhanced the instrument’s patronage by investors.
“The FGN Sukuk 111 was over subscribed by over 400 per cent which has not appeared in any public offer in Nigeria both in equity and bonds.
“This confirmed the confidence people have in Sukuk. It can be attributed to the underlying structure of Sukuk which is based on the existing projects and people can see across the country as shown on the road network.
“Therefore, the investors are living testimonies of the projects, unlike a bond which cannot be directly attached to a project,” Kurfi said.
By Chris Ndibe