‘Sukuk’ to enjoy same tax concessions as corporate bond

The Securities and Exchange Commission (SEC) has stated that the sovereign Sukuk bond to be launched in the first quarter of 2017 would enjoy all tax concessions granted to the corporate bonds.

The Director-General of SEC, Mounir Gwarzo said that the Federal Inland Revenue Services (FIRS) had agreed to grant the necessary tax concession granted to corporate bond to the proposed sukuk bond.

He added that the move would encourage the issuance of sovereign sukuk bond and increase participation on the bond.According to him, the sukuk bond was initially scheduled for third quarter of 2016 but due to unforeseen circumstances, the bond issuance may not be visible this year.

“The sovereign Sukuk bond was initially scheduled for this year, but they are working towards the savings bonds and other infrastructural instrument. But they have a time line and from our discussion with them, it is very unlikely that a sovereign sukuk is issued this year.

They are working towards it but if they are not able to issue it this year, they are certainly looking at the first quarter of 2017. For the corporate sukuk, a lot of concessions have been given to the corporate bond. FIRS agreed that any concession that the corporate bond will enjoy, sukuk bond will also enjoy it and at the meeting we got that confirmation from FIRS.”

The SEC boss had in January; this year disclosed that the commission and DMO had formed a committee to set up modalities for the first sovereign bond.Gwarzo said that the commission was working with DMO to ensure issuance of the bond in the third quarter of 2016, adding that the commission would support DMO in capacity building to ensure successful issuance of the bond.

He pointed out that persistent fall in crude oil price and drop in revenue generation made it imperative for government to source for alternative source of capital to finance infrastructure development.

“The need for alternative sources of capital to finance infrastructure becomes increasingly more compelling with fragility of growth from major emerging markets,” Gwarzo stated.

He said that the country would attract significant amounts of affordable capital from the Gulf countries and other established world issuing a sovereign sukuk.According to him, SEC and DMO will collaborate on ways to address the country’s investment needs. He added that SEC would allow nominated staff of DMO to participate at the Capital Market Committee sub-committee on non-interest products to deepen their capacity.

He assured that the sovereign sukuk when issued would send the much needed positive message to the market amidst the negative investor sentiment that persists currently, while predicting that the maiden sovereign sukuk would be oversubscribed with enhanced participation of domestic and foreign investors.