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SEC positions Nigeria for $2 tr global sukuk market


Nigerian-Stock-Exchange-(1)Nigeria may soon emerge a big player in the global $2 trillion Islamic or non interest finance market (sukuk), courtesy of initiatives of the Securities and Exchange Commission (SEC) .

“Indeed, the SEC has implemented a number of reforms aimed at deepening the non-interest capital market.
“The global sukuk market continues to witness remarkable growth since after the 2008 global financial crisis. Annual issuances have grown from $15 billion in 2008 to almost $120 billion in 2014,” the Director General of Nigeria’s SEC, Mounir Gwarzo, said on Tuesday in Sokoto at a regional roundtable on non – interest capital market.

The SEC has issued regulatory framework, reviewing the rules and introducing new ones on Islamic fund management and on Sukuk issuance.

The legal framework has encouraged Islamic product innovation with the registration of five ethical/shariah compliant funds and the issuance of Nigeria’s first ever sub-national Ijara Sukuk by the Osun State government in 2013, which was oversubscribed.

“We are also considering modalities for setting up a Sharia advisory council as a body of experts to advise SEC and the market on non-interest product and their applications,” Gwarzo said.

Investors worldwide are increasingly allocating their resources into Islamic finance products.
Hong Kong with only about 270,000 Muslims raised $2 billion from Sukuk sales in 2014 and 2015, which attracted $6.7 billion in total orders, while Indonesia plans to tap investors for the sixth year running and Malaysia is returning for its seventh offering this year.

Last year is widely considered a landmark year for Islamic finance, especially with landmark debut sukuk issuances by countries such as the UK, Hong Kong, Senegal, South Africa, and Luxemburg.

A sukuk is part of Nigeria’s strategic framework through 2017, the Abuja-based Debt Management Office (DMO) said recently.
Nigeria is Africa’s largest economy and home to some 80 million people practising the Muslim faith, which is about half the total population.

To transform Nigeria’s non interest finance potential into reality the Securities and Exchange Commission in 2013 set up an industry-wide committee of experts to develop a strategic blueprint for the growth and development of Nigeria’s non-interest capital market.

Their recommendations have been incorporated in the 10-year Capital Market Master Plan which is currently being implemented by the SEC.

The Master plan sets a strategic direction for the non-interest capital market in Nigeria to attain at least 25 percent of total market capitalisation.

The roundtable is being organized as part of implementing one of the recommendations on enlightenment and capacity building contained in the Master Plan.

Some progress have been made in the non –interest finance sector in Nigeria in recent times on the back of the SEC interventions.

Nigeria’s Osun State sold N10 billion ($61 million) of Islamic debt in September 2013, the first state in the country to sell sukuk.

Lotus Halal ETF, a non-interest capital market product which tracks the NSE Lotus Islamic Index (NSE-LII) was launched in August 2014.

The NSE-LII index tracks the performance of 15 Sharia-screened equities listed on the stock exchange. Some of companies comprised in the index include Cadbury Nigeria, Dangote Cement and Unilever.

“We have very few professionals, such as lawyers and accountants who are conversant with Islamic Finance,” said Kazim Yusuf, CEO of Kord Capital, a Shariáh compliant investment company, said.
“Liquidity management in our industry is also a big problem, due to a lack of products,” Yusuf added.

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