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Exploring the barriers to corporate sukuk issuance in Nigeria

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Date
2023
SDG:
Abstract
The global phenomenon of sukuk as an alternative means of financing infrastructure development has gained significant momentum in recent years, with impressive growth in both sovereign and multilateral issuances, as reported by Fitch Ratings in 2023. African nations, including Nigeria, are not lagging in exploring sukuk to address their extensive infrastructure funding needs. While Nigeria currently hosts the largest sukuk market in Africa, it represents only a fraction of the global sukuk value. Interestingly, corporate sukuk issuances in Nigeria have seen limited growth, with only two companies venturing into this market. The objective of this study is to uncover the corporate sukuk issuance process in Nigeria and also identify the challenges causing the low penetration of the sukuk market by companies in the country. This study adopts both the primary and secondary sources of data collection process by interviewing primary stakeholders in the Nigerian sukuk market and also reviewing existing literatures on the subject. Findings reveal key challenges to be lack of investors confidence, intense documentation and Shariah requirements among others. Furthermore, the author observes that high issuance cost and restriction on the use of proceeds are major barriers to sukuk issuances by companies in Nigeria. It is recommended that the government should introduce more incentives such as tax incentives to reduce issuance costs thereby attracting more corporate involvement in sukuk issuances. Further, the core regulatory agencies should consider creating a special regulatory window suitable for small and medium-sized enterprises to access financing through the use of sukuk.
Keywords
Sukuk , Nigeria , Project paper (eMIF)
Citation
Ibraheem-Dakeje, A. D. (2023). Exploring the barriers to corporate sukuk issuance in Nigeria (Master dissertation). INCEIF, Kuala Lumpur. Retrieved from https://ikr.inceif.org/handle/INCEIF/4018
Publisher
INCEIF

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