Stockbrokers have advocated more issuance of fixed income securities by the government to finance infrastructure deficit.
They described the recent over-subscription of the Sukuk bond issued by the Federal Government as a clear demonstration of the market’s absorptive capacity.
The Federal Government recently issued a N150bn Ijarah Sukuk, a financial instrument for ethical investors that provides regular bi-annual tax-free payment with seven-year maturity, and it was oversubscribed by over 400 percent.
But market watchers described the over-subscription of the offer as a double-edged sword, saying the offer, which snapped up over N600bn from the market, had largely contributed to the current bearish trend amid other perceived variables.
Appraising the subscription of the instrument, securities dealers ascribed the success to factors such as investor confidence as the instrument was project-tied with assurance of ease of redemption being backed by the full weight of the government.
They urged the government to leverage such an instrument to mobilise fund to revive Nigeria’s ailing industrial base.
“The Federal Government should increase the pace of issuance of such an instrument as the market has demonstrated its absorptive capacity given the over 400 per cent over-subscription of the last Sukuk,”, the President, Chartered Institute of Stockbrokers, Mr Olatunde Amolegbe, said.
Corroborating him, the Managing Director and Chief Executive Officer, Global Asset Management, Mr Babatunde Sobamowo, noted that Sukuk was becoming famous as an investment vehicle being used by the Federal Government.
According to him, the instrument can boost the implementation of the government’s Economic Recovery and Growth Plan.
He said, “Sukuk confers on the subscriber’s ownership of the assets being financed which in most cases are for ethical purposes. In recent times, they are used to finance roads, railways and other infrastructure which are lacking in the country.
“They will serve as a catalyst to the much-needed development to boost our industrial and agricultural growth which will impact positively on our GDP as clearly spelt out in the Economic Recovery and Growth Plan.
“In order to ensure probity in the management of these underlying assets. It is advisable that Project Management Offices are opened in all the sites where these funds are being deployed.”
Sobamowo said this would afford all stakeholders the opportunity to have an on-the-spot assessment of the projects and the expected cash flows to be generated in paying the rental incomes due to the subscribers.
“Furthermore, regular facts behind the bonds should be done during its lifespan to avail all stakeholders the opportunity to ask questions and proffer solutions on projects that seem not to be meeting the set targets. This may open avenues and more awareness to the general public to participate in future.”
The Managing Director and Chief Executive Officer, APT Securities and Fund Limited, Mallam Garba Kurfi, explained that the projects being executed with Sukuk proceeds were visible across the country and this enhanced the instrument’s patronage by investors.