The Debt Management Office (DMO) has launched a new N300 billion Sovereign Sukuk bond, promising to sustain its effort to provide funding for road infrastructure in the country.

The agency, while launching the new sukuk on Monday, said it is determined to narrow the country’s estimated N18 trillion Road infrastructure deficit. It said the Sukuk issuance is part of efforts to diversify the government’s funding sources and accelerate the pace of infrastructural development.

This is even as the Director-General of DMO, Ms Patience Oniha said that though the debt-to-GDP ratio has crossed 50 per cent, it still remains within acceptable limits prescribed by international benchmarks, including those of the IMF, World Bank, and ECOWAS.

She said public debt sustainability is not just about the size of the debt but also about growing revenues and expanding the GDP.

Between 2017 and December 2023, the government has raised over N1.09 trillion from six series of Sukuk and this was invested in the construction or rehabilitation of roads across the country.

So far, over 4,100 kilometers of roads and nine bridges across the six geopolitical zones and the Federal Capital Territory have been either constructed or rehabilitated.

The new N300 billion Sovereign Sukuk is a seven-year Sukuk due 2032; a non-interest, alternative instrument designed in a form of annual rental income. The annual rental income is 19.75 per cent.

DMO, which oversees Nigeria’s government debt issuances and management, indicated that the offer which opened on Monday with a minimum subscription of N10,000, will close on May 20, 2025.

It is also being offered at N1,000 per unit, subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter.

The rental payment will be made half-yearly while the bullet repayment will be done on the date of maturity.

Speaking at the launch, the Director-General of the DMO, Patience Oniha, made reference to recent macroeconomic improvements, including the upgrade of Nigeria’s credit outlook by global ratings agency, Fitch, adding that such developments were indicative of the progress made in both fiscal and monetary management.

According to her, sustainable development is a journey and not something that happens in one day.

“Current policies are steering the country in the right direction,” she said.

She attributed the progress partly to recent reforms by the Central Bank of Nigeria (CBN), particularly those targeting the forex market.

“There’s more transparency now. FX supply has improved, and the rates have become more stable. Some of the measures were difficult at first, but the benefits are beginning to show,” she said.

Oniha, said the government recognised the need to issue more Sukuk bonds given the increasing success and strong investor’s appetite for the alternative non-interest bonds.

According to her, the Sukuk initiative by DMO, has been increasingly successful given the strong level of awareness that has been created.

She attributed the success of the Sukuk issuances to the increased confidence from market participants given that the Sukuk bonds are tied to specific projects that can be tracked.

“Looking ahead, we recognise the need to upscale issuances to include other standalone projects beyond road infrastructure, but more importantly, we are looking to support projects that are revenue generating to service the Sukuk,” Oniha said.

On the N300 billion Series VII Sukuk, Oniha said it was part of approved borrowings by the government to cover budgetary shortfalls and was officially encapsulated in the debt records.

She reassured investors about the structure and sustainability of Nigeria’s debt, noting that the country’s external borrowing was sourced from a diversified pool including multilateral institutions like the World Bank and African Development Bank, bilateral partners such as China, India, and Germany, and commercial markets such as the Eurobond space.

“Over 60 per cent of our external debt is from multilaterals and bilaterals, which offer more favourable terms than commercial debt,” she said, adding that this diversification reduces the country’s exposure to market shocks and provides stability.

Oniha also expressed optimism that recent presidential initiatives would further strengthen revenue from oil and gas, which remain a significant component of national income.