Sukuk: FG Releases N100bn for Road Construction

By Tony Obiechina, ABUJA
The federal government on Thursday released N100 billion to contractors engaged for the construction of  twenty eight key economic roads across  six geo- political zones of the country using Sukuk bond proceeds raised  by Debt Management Office ( DMO).

Some of the roads listed to be constructed with Sukuk bond proceeds  include, dualization  of Suleja-Minna road in Niger State Phase II (km 40+000-km101+000) awarded  to Salini Nigeria Limited, dualization of Abuja – Abaji – Lokoja road  Section I (International Airport link road junction-Sheda Village Junction) in FCT Contract awareded to Dantata & Sawoe Construction Company Nigeria Limited; dualization of Lokoja-Benin road: Obajana Junction-Benin Section I Phase I: Obajana – Okene in Kogi State  awarded  to CGC Nigeria Limited .
For South East, contract for rehabilitation and reconstruction of Enugu-Port Harcourt dual carriageway Section I: Lokpanta – Umuahia Tower  in Abia State was awateded to Setraco Nigeria Limited  .

The  Minister of finance Mrs. Zainab Ahmed handed over the N100 billion symbolic cheque to the Minister of Power, Works and Housing Mr. Babatunde Fashola at Finance Ministry’s headquarters in Abuja for onward transmission to various contractors engaged by government for the road projects.

Speaking at the occasion,  Mrs Ahmed described the high level of oversubscription of Sukuk offer as a  mark of investor’s  confidence in the economy.

” The high level of subscription and participation by a diverse range of investors demonstrate the high level of investor confidence in the financing product, particularly, because the road Projects funded with the Proceeds of the first Sukuk that was issued in 2017 were evident for all to see”

” The Twenty-Five  road projects, which benefited from the debut Sukuk have resulted in improved transportation across the six ( geo-political zones.The Sukuk offer opened following Investor Meetings in Lagos and Abuja by a delegation led by the Director-General of the Debt Management Office, Patience Oniha, and included representatives of the Federal Ministry of Power, Works and Housing and the Transaction Parties for the Sukuk Issuance. The Transaction Parties were: FBNQuest Merchant Bank Limited, Lotus Financial Services Limited, Banwo & Ighodalo”, she said.

In his remarks,  Minister of power, works and housing Mr. Babatunde Fashola said Sukuk as instrument for funding infrastructure projects had been effectively utilized by other nations .

” I  want to say again that , there is no nation that i know of that has gone into greatness without building infrastructure.   The massive construction in Asia,  particularly China and the Middle East is a good example.  Nigeria is going through something similar but perhaps in very challenging times.

“We missed this opportunity when we had multi-dollar income in hundred dollar per barrel of oil and we did not invest it on infrastructure.  This administration is committed to follow the part of greatness, build the foundation for tomorrow by investing in infrastructure “, said power ,works and housing Minister.
He said the current administration was  borrowing to build at today’s prices assets that will last the nation  for another 30years.
” As soon as I collect this cheque, I’m  going to give it to the contractors but even they can’t keep it; they have to give it to their suppliers because they need aggregates, they need materials and labourers but they first need suppliers “, Fashola said.

The federal government in  December 28, 2018, issued a 7-year N100 billion Sovereign Sukuk  as part of the new domestic borrowing in the 2018 budget to finance road projects.

The Offer attracted significant interest from a wide range of retail and institutional investors with a total subscription of N132.20 billion, representing subscription rate of 132.2%.
Retail investors accounted for 17.33% of the total allotment compared to 4% recorded in the debut Issuance, indicating that the stated objectives of financial inclusion and deepening of the investor base for federal government securities.
Commenting on the successful Issuance of the second N100 billion Sovereign Sukuk, the Director-General, Debt Management Office, Ms Patience Oniha said:
“Sukuk has become a veritable tool for financing infrastructure which has several multiplier effects including job creation and boosting economic activities.
In addition to being a viable tool for financing infrastructure, the Sovereign Sukuk promotes financial inclusion and the development of the domestic financial markets”

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