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SUKUK BOND; (A VIABLE INSTRUMENT FOR INFRASTRUCTURAL DEVELOPMENT) By: ALAWIYE SEMIU

It is the philosophy of every business to minimize risk and maximize profit, this makes it incumbent on it to device a way of achieving this great mission.

Sukuk bond is now a word in the sphere of the country flying around with rigorous debate and misconception of its meaning which is disconcerting its introduction in to financial market of Nigeria.

"The word sukuk bond in the realm of business means nothing, but, a financial instrument certificate, similar to a bond in western finance that complies with Sharia-Islamic law which negates the idea of interest in business transaction."

It also represent aggregate and undivided share of ownership in a tangible assets as it relates to a specific project or specific investment activity. An investor in a sukuk therefore does not own a debt obligation owned by bond issuer, but instead owns a piece of the asset that linked to the investment. This means that the sukuk bond holder, unlike bond holder, receive a portion of the earning generated by the associated asset.

Besides, sukuk have become extremely popular since 2000, when the first sukuk was issued by Malaysia, Bahrain followed suit in 2001, and other Africa country including South Africa and Kenya. In the case of Nigeria, Osun State has been the first to issue sukuk bond from a major economy in sub-sahara Africa.


Since Sukuk bond is about two things, one is raising money and deepening the financial market, there is nothing wrong with current action and pronouncement of government in issuing N100bn sukuk bond just to aid good infrastructure like road development , building of School , health service and provison of social amenities.

Because of lack of debt financing as a phenomena hindering the survival of businesses in western world, sukuk were created in order to link the return and cashflow of debt financing to a specific asset being purchased effectively distributing the benefit of the asset.

The imprecision news spreading about sukuk bond that the present government is trying to islamise Nigeria is unrealistic due to the statement made by Minister of Finance ( Kemi Adeosun) : “ … this particular bond of N100bn is going to be used for road project we identified the road project that is going to be tied to and there is no religious affair there. So, there is no Islam affairs at all”.

It is pertinent to understand that Nigeria plan to issue this bond about six years ago, long before the current administration came into power and even to justify the interest of many Nigerian it was recorded that this bond have gained great subscribers in the financial market because of its worthy characteristics as a bond lacking interest repayment but profit is shared at par between the borrower and the lender.

In conclusion, this is a good initiative by government to foster project development that can bring about growth of businesses, good governance and better life for the populace. Every Nigerian should be expecting more of this development from government as profit is not religious or sentimental based but ability to harness every opportunity available prudently.

Writer;
ALAWIYE SEMIU
LAGOS STATE UNIVERISTY
ACCOUNTING DEPT.


©Excel Minds

Comments

  1. Anonymous1 October 2017 at 16:59

    Sir is Sukuk bond the same as Islamic banking

    ReplyDelete

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