Due to the steady decline in oil revenue, the Federal Government is currently under pressure to resort to a Sukuk Bond for funding the widening budget deficit.
Sukuk is a financial certificate, similar to the traditional government bond, but complies with Sharia, Islamic religious law.
The Debt Management Office, DMO, and Securities and Exchange Commission, SEC, are collaborating in an effort to issue the Nigerian sovereign Islamic bonds this year.
Details of the expected revenue from the bond is not yet disclosed but officials said they expect significant bridging of the 2016 budget deficit which has exceeded the initial N2.2 trillion estimate.
According to DMO “issuing a sovereign Sukuk will attract significant amounts of affordable capital from the Gulf countries and other established Islamic markets around the world into Nigeria.”
Third country to issue Sukuk in W-Africa
Though Nigeria would be the third West African country to issue Sukuk after Senegal and Cote d’ Voire, Osun State had rolled out USD62 million Sukuk in 2013.
Because the traditional bond comes with interest paying structure which is not permissible under the Islamic financial system, the issuer of a Sukuk bond would sell the certificate to an investor group, who then rents it back to the issuer for a predetermined rental fee.
PIC. 6. PRESIDENT MUHAMMADU BUHARI, ADDRESSING A JOINT SESSION OF THE NATIONAL ASSEMBLY AT THE PRESENTION OF THE 2016 APPROPRIATION BILL IN ABUJA ON TUESDAY (22/12/15). 7805/22/12/2015/JAU/BJO/NAN
FILE: PRESIDENT MUHAMMADU BUHARI, ADDRESSING A JOINT SESSION OF THE NATIONAL ASSEMBLY AT THE PRESENTION OF THE 2016 APPROPRIATION BILL IN ABUJA ON TUESDAY (22/12/15).
The issuer also makes a contractual promise to buy back the bonds at a future date at par value.
Islamic bonds are structured in such a way as to generate returns to investors without infringing Islamic law that prohibits interest.
Sukuk represents undivided shares in the ownership of tangible assets relating to particular projects or special investment activity.
The Sukuk option in federal government finance will be coming in addition with other unconventional budget funding strategies of the President Muhammadu Buhari’s first budget.
Unconventional funding strategies
Other unconventional funding strategies include plans to raise N350 billion from recoveries of stolen funds in the on-going anti-graft war.
The 2016 budget financing plan, according to a finance ministry source, envisages significant revenue from blocking leakages expected to yield over N1.0 trillion during the 2016 fiscal year.
The breakdown of the revenue side of the budget shows several unconventional sources of funding for the budget.
Key among them includes a revenue optimising measure expected to be complemented by initiatives meant to reduce wastage of public funds such as the recently established Efficiency Unit meant to identify and eliminate wasteful spending, duplication and other inefficiencies across Ministries, Departments and Agencies, MDAs.
Waste reduction initiatives
Other waste reduction initiatives include engagement of costing experts to scrutinize the 2016 budget proposals with a view to further improving efficiency. Also, government intends to extend the Integrated Personnel Payroll Information System, IPPIS, to all MDAs in order to maintain a lean payroll.
With a projected revenue of N3.86 trillion in the face of dwindling crude oil receipts, government estimates that oil revenues contribute N820 billion of the total revenue; non-oil revenues, comprising Company Income Tax, CIT, Value Added Tax, VAT, Customs and Excise duties, and Federation Account levies, are expected to contribute N1.45 trillion; while independent revenues are expected to contribute N1.51 trillion through the enforcement of the Fiscal Responsibility Act, 2007 and public expenditure reforms in all MDAs.
Independente revenues
In addition, the government intends to significantly improve the collection and remittance of independent revenues from government agencies with the full implementation of the Treasury Single Account, TSA.
A finance ministry source who said that the budget breakdown would answer all the posers raised by critics of the budget, explained that the delay in putting the budget together as well as the errors recently corrected were as a result of the difficulties in balancing Nigerian’s expectations with realities on ground. Click to signup for FREE news updates, latest information and hottest gists everyday
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The actual plot to finally Islamise the country is beginning to unfold. God have mercy
ReplyDeleteWAILING WAILERS keep on wailing!!!
DeleteHaahaaahahha laughing in Chinese
ReplyDeleteGod have mercy!
ReplyDeletePMB,abeg no do dat one o. Economic diversification is key
ReplyDeleteBuhari dare not do that otherwise he is an unwise man and will be short of memory to forget that it is this actual step that brought him down from the throne around 30 years ago. That same God who initiated that dethronement has not gone on exile, He is still omnipotent enough to execute a surprise repeat. There is no short cut to revamp our dwindling economy and create a vibrant one other than a shift from oil as our major source of export revenue generation.
ReplyDeleteThis APC govt is the most clueless and naive govt of all times in Nigeria. No be me talk am o....... The budget wen dem present naim talk ammmmmmmmm ooooooooooooooo...........
ReplyDeleteSaid Baba what is happening? Are we safe @all
ReplyDeleteYou don't know the agenda of this government and very soon sharia will be reintroduced and will be enforced throughout the country as a result of this Sukuk Bond. I have seen it coming right from the beginning. Buhari let me warn you: Abacha tried to and he died mysteriously and Yaradua intended to but was taken out immediately and now you want to do the same thing. Wait for your doom if you tries it.
ReplyDeletePsalm 53:5 no fear people, do right and no fear
ReplyDelete