Nigeria: MUSWEN Moves to Strengthen Zakat Collection

Plans are underway by the Muslims Umah of South West Nigeria (MUSWEN) to strengthen Zakat collection to assist more indigent Muslims and solve some social problems confronting them.

However, the group has bemoaned the spate of insurgency in the country, urging the Federal Government to put in place proper mechanism to guarantee security of lives and properties.

The group, in a communiqué made available to The Guardian after its second general assembly meeting in Ibadan condemned the bloody and destructive activities of Boko Haram insurgents who are masquerading under the garb of Islam to perpetrate unprecedented atrocities in some parts of the country.

MUSWEN, in a statement signed by its Chairman, Sakariyau Olayiwola Babalola insisted that Islam stands for peace in all ramifications adding that such atrocities was grossly antithetical to the tenets of Islam.

Besides, it called on the Federal Government to quickly devise a means to address the fundamental causes of insecurity in the land and make frantic efforts to rescue the Chibok girls.

It therefore enjoined Muslims to organize special prayers for the nation. "That the political situation in the country today, when combined with the well known insecurity has become so dangerous that only constant prayer can rescue it. MUSWEN therefore calls for such prayers from all and sundry,"

MUSWEN at the meeting however established a Muslim Elders' Forum for the southwest to address some socio-economic and political issues affecting Muslims, which were often overlooked by an existing Yoruba Elders' Council and similar bodies in the region.

Worried about the present economic situation of the country, particularly as being affected by the crash in crude oil prices, It insisted that, existing agricultural policies should be quickly implemented by the federal and state governments to engage millions of Nigerian youth as a way of curbing unnecessary restiveness in the society.

The group also noted that the overwhelming poverty within the Ummah betrays the preponderance of the meaningful Muslim population in Nigeria, which forms a great workforce that should help to stabilize the economic and political harmony of the country.

"Nigerian Muslims are incessantly confronted by two major problems: One is poverty. The other is ignorance. Whereas a solution to one of these two problems can automatically pave way for the solution to the other. However, no serious attention seems to have been paid to such solution for a long time," it stated.

It further called all Nigerians, irrespective of their ethnic and religious backgrounds, should come together to rally round the present government especially President Muhammad Buhari in solving the multifarious problems staring the Nigerian people on the face.

(All Africa / 29 April 2016)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

SEC positions Nigeria for $2trn global Sukuk market

LAGOS— The Securities and Exchange Commission (SEC) has initiated moves to position Nigeria for a big role in the emerging global market for Islamic or non- interest finance valued at over $2 trillion. 

Director General of SEC, Mounir Gwarzo, said this in Sokoto at a regional roundtable on Non-Interest Capital Market. He said: “In Nigeria, the SEC has implemented a number of reforms aimed at deepening the non-interest capital market.

 The global Sukuk market continues to witness remarkable growth since after the 2008 global financial crisis. Annual issuances have grown from $15 billion in 2008 to almost $120 billion in 2014.” SEC has issued regulatory framework, reviewing the rules and introducing new ones on Islamic Fund Management and on Sukuk issuance. 

The legal frameworks have encouraged Islamic product innovation with the registration of five ethical/shariah compliant funds and the issuance of Nigeria’s first ever sub-national Ijara Sukuk by the Osun State government in 2013 which was oversubscribed. 

“We are also considering modalities for setting up a Sharia Advisory Council as a body of experts to advise SEC and the market on non-interest product and their applications,” Gwarzo said. Investors worldwide are increasingly allocating their resources into Islamic finance products. 

Hong Kong, with only about 270,000 Muslims, raised $2 billion from Sukuk sales in 2014 and 2015, which attracted $6.7 billion in total orders, while Indonesia plans to tap investors for the sixth year running and Malaysia is returning for its seventh offering this year. 

Last year was widely considered a landmark year for Islamic finance, especially with landmark debut Sukuk issuances by countries such as the UK, Hong Kong, Senegal, South Africa, and Luxemburg. 

A Sukuk is part of Nigeria’s strategic framework through 2017, the Debt Management Office (DMO) said recently.

(Vanguard / 15 March 2016)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Nigeria to issue maiden Sukuk

The Securities and Exchange Commission (SEC) has reached an agreement with the Debt Management Office (DMO) to issue Nigeria’s maiden sovereign Sukuk.

Sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia, Islamic religious law.

Under a Sukuk, the issuer sells an investor group the certificate, which then rents it back to the issuer for a predetermined rental fee, while the issuer also makes a contractual promise to buy back the bonds at a future date at par value.

The decision by the two government agencies to collaborate to issue the Sukuk was a major outcome of the visit of the Director General of SEC, Mounir Gwarzo to the DMO on Wednesday.

The visit was a return gesture to a similar exercise by the Director General of DMO, Abraham Nwankwo, in November last year.

During the visit
​, Mr. Gwarzo said the agreement by the two chief executives to partner to deepen the domestic bond market was a clear sign of a closer working relationship they were now enjoy.

Welcoming the SEC delegation to his office, Mr. Nwankwo highlighted the importance DMO attached to the non-interest products in the Nigerian financial market.

He revealed that issuing a sovereign Sukuk has been part of the institution’s strategic plan drawn three years ago, urging Nigerians to support SEC to building capacity in order to realize the goal of issuing Nigeria’s first sovereign Sukuk in 2016.

Responding, Mr. Gwarzo assured the DMO of continued support of SEC, pledging to adopt measures that would enhance the capacity of relevant staff of the debt management agency.

The measures include establishing regular interface between the DMO and key staff of SEC who are very knowledgeable in non-interest finance products.

Mr. Gwarzo said the Commission would equally allow DMO staff to participate in the Capital Market Committee sub-committee on non-interest products to further deepen their knowledge and expertise.

“Within the context of continued decline in the prices of crude oil in the international markets, attendant drop in both foreign exchange and government revenues as well as fragility of growth from major emerging markets like China, the need for alternative sources of capital to finance infrastructure becomes increasingly more compelling,” Mr. Gwarzo stated.

Issuing a sovereign Sukuk, he explained, would attract into Nigeria significant and affordable capital from the Gulf countries and other established Islamic markets around the world.

The SEC Director General said issuing a sovereign Sukuk would send a positive message to the market amidst the negative investor sentiment that persists currently.

He was optimistic that Nigeria’s maiden sovereign Sukuk would be oversubscribed as both domestic and foreign investors have a rich appetite for exposure to Nigeria.

Urging DMO to take advantage of this unique opportunity to make a mark on the Sukuk market, in spite of the challenging times, the SEC boss recalled that after the release of rules on Sukuk issuance in 2013, Osun State was the first to issue Sukuk to raise N11.4 billion.

(Premium Times / 21 January 2016)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic banking, solution to Nigeria’s economic woes

Muhammadu Sanusi II, the Emir of Kano, has urged the federal government to introduce Islamic banking across the country.

He said it would be another way to the economy amid the effect of the decline in oil prices.

Speaking in Kano during a workshop on non-interest capital organised on Monday, Sanusi said huge potentials abound in Islamic banking.

Pointing out that Britain, South Africa, Cote D’voire had adopted Islamic banking, he wondered why Nigeria had not taken advantage of the benefits in the system.

He commended the Osun state government for adopting non-interest free capital market, urging Kano to take the same step.

Sanusi thanked the Securities and Exchange Commission (SEC) for organising a sensitisation programme on Islamic banking, saying the timing was accurate.

Kano State Governor, Abdullahi Ganduje, emphasised the importance of an interest-free capital market in a place like Kano, an economic hub.

(Daily Post / 21 October 2015)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Nigeria Urged To Tap Islamic Financial Resources

The Lord Mayor of the City of London, Alderman Alan Yarrow has urged the country to consider all sources of finance as a means for attracting investment.

In particular the Mayor during a trip to Nigeria was keen to highlight the City of London as a leading centre for Islamic finance and stated Islamic finance can provide substantial investment for Nigeria. He added Islamic financing was currently marginally more expensive when compared to conventional finance but this difference was expected to reduce as volumes increase within the Islamic financial market. The Lord Mayor suggested the North of Nigeria would in particular benefit from Islamic financial products.

Yarrow who met with financial sector regulators and operators including the Securities and Exchange Commission, CBN, Jaiz Bank Lotus Capital among other, in Abuja last week, said London with six Islamic banks and another 20 lenders currently offering Islamic financial products and services had the capacity to help Nigeria to deepen its Islamic financial system.

He said, “We want our Nigerian friends and partners to see London as Nigeria’s international companion whatever type of expertise is required. From looking at Nigeria’s legal framework, to helping to up skill your young, dynamic and ambitious population, London has the expertise, the variety and the capacity to help. And most of all, we offer the willingness.

“Only a few months ago, UK’s Chancellor of the Exchequer – which is really the name of our Finance Minister – stood beside me and the Governor of the Bank of England and he spoke about the importance of Islamic finance.

(Leadership / 12 October 2015)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Legislation gaps slow Sukuk issuance in Nigeria, others – S&P

Legislation gaps are really challenging African countries’ intent to effectively issue the sukuk, an Islamic bond, which could help fund the continent’s huge infrastructure needs, Standard & Poor’s credit rating agency said on Thursday, in a new report.

To date, African sovereigns have issued just about $1 billion of sukuk instruments, compared with global sukuk issuance of an average $100 billion per year over the past five years, says S&P.

In Nigeria, Osun State has issued a N10 billion ($51m) sukuk yielding 14.75 percent, the first and currently the only Islamic bond from the Africa’s largest economy.

The global rating agency, citing experience in South Africa and Senegal, notes that a significant amount of time can elapse between a government’s announcement of intent to issue sukuk and their effective issuance, as governments gauge market interests and try to address the legal hurdles and cost of issuance.

But S&P believes that regulations and fiscal incentives could speed Islamic Finance Development on the continent and that the development of an Islamic finance industry could help Africa fund its huge infrastructure needs.

Meanwhile, widening fiscal deficits and large infrastructure gaps will likely require multibillion-dollar additional financing needs over the next decade.

Infrastructure deficit is huge in Nigeria, and funding is currently a challenge on account of fallen government revenues.

The government has presented $166 billion investment outlay for the first five years implementation of the 30-year National Integrated Infrastructure Master Plan (NIIMP) but is now looking to prioritising projects to package and market to the private sector for investment.

“Legislation gaps are the main causes of delay between a country’s intent to issue and its effective issuance of sukuk,” says S&P’s credit analyst Samira Mensah.

”We believe that a growing interest in Islamic finance could encourage some North African countries, as well as sub-Saharan countries Cote d’Ivoire, Nigeria, and Kenya, which have fairly well developed capital markets by regional standard, to issue sukuk in the future,” says Mensah.

The report suggests that a framework of regulation and fiscal adjustments will be necessary to foster African sukuk markets, provide wider investment options for potential Islamic investors, and attract a pool of Islamic liquidity.

Acceptability of Islamic banking principles is equally an issue particularly in Nigeria, where, for instance, it took almost ten years for Jaiz Bank, the only Sharia-Compliant financial institution in the country to commence operations after obtaining operating licence.

S&P thinks governments will take time to introduce new regulation and fiscal adjustments to foster African sukuk markets, increase investment options for potential investors, and attract a pool of Islamic liquidity.

It cites the success of Malaysia in South-East Asia as a hub for Islamic finance, which among other things, lies in the strong regulatory framework to support the sector’s growth.

Malaysia also moved quickly in 2009 to address the standardization of instruments and interpretation of Sharia law.

“The involvement of major multilateral institutions could accelerate the development of African sukuk issuance, in our view,” it states.

Tax regimes are equally important to consider when encouraging sukuk issuance. Sharia-compliant instruments require equal treatment with conventional instruments for investors to consider them. Malaysia introduced various tax incentives that made Islamic finance a cheaper economic alternative for institutions to raise funding.

S&P notes however that increasing technical assistance by the Islamic Development Bank (IDB) and Islamic Corporation for the Development of the Private Sector (ICD), are gradually facilitating also sovereign sukuk issues.

(Business Day / 07 August 2015)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Nigeria’s Central Bank Centralises Regulation Of Islamic Banking

VENTURES AFRICA – Nigeria’s Central Bank has become the latest regulator to opt for a centralised approach to Islamic Banking after it issued guidelines for an advisory body that will oversee the industry in the country. Nigeria has the largest Muslim population in sub-Saharan Africa, virtually half of the country’s 170 million people.

The advisory body, known as the Financial Regulation Advisory Council of Experts, will be tasked with ensuring all banking products that are designated as Islamic conform to sharia principles. The Central Bank guidelines, published on Friday, set out minimum requirements for the advisory body, which will comprise a minimum of five members including one of its official. Members will serve renewable two-year terms, must be qualified in Islamic jurisprudence, and are restricted from working for any other financial institution supervised by the central bank.  The guideline also stipulates that the advisory body will be guided by the principles of sharia governance issued by the Malaysia-based Islamic Financial Services Board.

Although Islamic banks have long practiced self-regulation, a centralised model of supervision is increasingly being favoured across much of the world. Morocco is one of the several countries that have adopted such format in a bid to limit differences between products, speed the design of new products and boost investor confidence

Financial institutions that offer Islamic banking products in Nigeria are already required to have their own boards of sharia finance experts, who are limited to serving in one institution at a time. However, the centralization is part of the effort to establish the country as the African hub for Islamic finance.

(Ventures / 23 February 2015)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Central Bank of Nigeria (CBN) Sets Guidelines For Islamic Finance Advisory Body

The Central Bank of Nigeria (CBN) has issued guidelines for an advisory body that will oversee Islamic banking in Nigeria, becoming the latest regulator to opt for a centralised approach to the industry.

Nigeria’s advisory body, known as the Financial Regulation Advisory Council of Experts, will be tasked with ensuring all banking products that are designated as Islamic conform to sharia principles.

The guidelines, published on Friday, set out minimum requirements for the advisory body, which will comprise a minimum of five members including a CBN official.

Members will serve renewable two-year terms, must be qualified in Islamic jurisprudence, and are restricted from working for any other financial institution supervised by the CBN.

Financial institutions that offer Islamic banking products in Nigeria are already required to have their own boards of sharia finance experts, who are limited to serving in one institution at a time.

The CBN’s advisory body will be guided by the principles of sharia governance issued by the Malaysia-based Islamic Financial Services Board.

Countries including Bahrain and Morocco have opted for such a format, which can help to limit differences between products, speed the design of new products and boost investor confidence.

(Channel Television / 23 February 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Sukuk As A Tool For Infrastructural Development In Nigeria, Osun Blazing The Trail

Considering the huge infrastructural deficit facing Nigeria, and the challenges being faced by the Federal Government of Nigeria due to a decline in oil revenue amongst other related issues, it has become imperative for State Governments and corporates to access alternative financing techniques to meet their capital development needs.

Activities in the equities market in Nigeria have slowed down considerably from the levels seen during the equities boom of 2004 – 2008 which has compelled corporates and governments to embrace the debt market by floating bonds. From 1960 to November 2013, there have been 80 corporate bond issuances in Nigeria and 34 state and local bond issuances; with state bond issuances dominating the market in recent times.

This article examines the potentials for using sukuk as a tool for capital raising and infrastructural development in Nigeria and discusses the recent sukuk issuance by the Osun State of Nigeria under the State’s N60 Billion Debt Issuance Programme. The sukuk issuance attracted international acclaim by winning the IFN Africa Deal of the Year Award 2013.

Sukuk as a tool of Islamic Finance

Sukuk provides access to a vast and growing Islamic liquidity pool in addition to the conventional debt and are commonly referred to as Islamic Bonds. However, this representation is not entirely correct.

Sukuk is defined in the Rules and Regulations of the Securities and Exchange Commission (SEC Rules 2013) as investment certificates or notes of equal value representing undivided shares in the ownership of tangible assets, usufructs and services or investments in the assets of particular projects or special investment activity using shariah principles and concepts approved by the Securities and Exchange Commission (“the Commission”). In simple terms, sukuk can best be called trust certificates.

In addition, under a sukuk structure, returns to sukuk holders (Investors) represent rights to receive payments from a trade transaction or ownership of a particular asset or business venture, while the returns to conventional bondholders represent the right to receive interest for borrowed monies.

Traditional bonds are not allowed in Shariah-compliant transactions due to their interest based nature as interest is prohibited in Islamic law as aforesaid. It is important to note that the underlying asset for a sukuk issuance must itself be Shariah-compliant. For example, a building does not qualify as an underlying asset for sukuk issuance if the major tenant will be a producer of alcohol.

The Commission explicitly recognizes the following sukuk structures under Rule 571 of the SEC Rules:

• Sukuk Ijarah – (lease contract)

• Sukuk Musharakah– (sharing contract)

• Sukuk Istisnah– (exchange contract)

• Sukuk Murabahah– (financing contract)

Legal Framework for the Issuance of Sukuk in Nigeria

Several Laws regulate the issuance of sukuk in Nigeria including the Investments and Securities Act 2007, the SEC Rules and the state law authorizing the sukuk issuance. The Commission in recognition of the development of Islamic finance introduced new rules on February 8, 2013 to regulate the issuance of sukuk in Nigeria. Rule 572 of the SEC Rules provides that all public companies (including SPV’s), state governments, local governments, and Government agencies as well as multilateral agencies are eligible to issue, offer or make an invitation of sukuk upon seeking the Commission’s approval.

The Rules apply to:

i. sukuk which are offered by local or foreign entities that are within the regulatory purview of the Commission;

ii. sukuk which are denominated in Naira or in foreign currencies; and

iii. sukuk which are listed, convertible, exchangeable, redeemable or otherwise.

From the wording of Rule 572, sukuk issued by private companies appear not to fall within the regulatory purview of the SEC. In a similar vein, a strict interpretation of Rule 567 will suggest that bonds issued by private companies will not be regulated by the SEC as this Rule specifically mentions only bonds issued by public companies, foreign public companies and supranational bodies. However, the SEC will exercise its supervisory powers over any instrument issued to the public by private or public companies.

In addition to the advisers who advise on bond issuances, an issuer of sukuk must appoint a Shariah adviser who shall inter alia advise on all aspects of the sukuk including documentation and structuring and who shall also issue shariah certification which outlines the basis and rationale of the structure and mechanism of the sukuk.

Osun Sukuk Company Plc.’s Sukuk Al –Ijarah – Blazing the Trail

The Government of Osun State (“OSG”) through a wholly owned Special Purpose Company, Osun Sukuk Company Plc issued on the 8th of October, 2013 the first sukuk in Sub-Saharan Africa worth N11.4 billion ($70.6 million) under the Osun State N60 Billion Debt Issuance Programme to fund the development of 20 High Schools, 2 Middle Schools and 2 Elementary Schools in Osun State.

The sukuk was issued at a rate of 14.75% per annum at N 1,000 per unit and matures on 8th of October, 2020. The issue which was rated A by Agusto & Co was successfully subscribed to by domestic investors with the price set through a book building process that lasted for 10 days.

Structure of the Osun Sukuk

The SPC, Osun Sukuk Company Plc is a wholly owned Special Purpose Company of the Osun State Government incorporated with an authorised share capital of N1, 000,000.00 (One Million Naira) with Ninety Nine Percent of the shares held by the Osun State Government and One percent held in trust by the Attorney General of Osun State on behalf of the State.

The sukuk was structured as an Al-Ijarah; with the Osun Sukuk Company Plc. issuing sukuk certificates to the investors.

In accordance with Islamic law principles, each certificate represents an undivided beneficial ownership interest in the sukuk assets (i.e. the Schools). The sukuk assets are however held in trust for the sukuk investors by the Issuer. The sukuk investors’ payment for the certificates represents the cost of construction of the schools. Holders of the Certificates have no recourse to any assets of the Issuer other than the sukuk assets. Since the sukuk holders are the owners of the assets (schools), they are free to trade the certificates in the secondary market. The land upon which the schools will be built was transferred by the OSG to the SPC and a Certificate of Title (Certificate of Occupancy) was issued to the SPC.

The Issuer under an Agency Agreement, appointed the OSG as its agent to inter alia engage a construction company to construct the schools, obtain all government approvals, manage the operational and financial aspects of the construction for a prescribed fee and transferred the agreed cost of construction to the OSG.

The SPC forward leased the schools to the State Government against rental payments which will be remitted to the Issuer to make distributions to the sukuk investors; thus earning income for the investors during the construction of the schools.

A Purchase Undertaking was executed by the OSG in favour of the Issuer to give assurances that at the end of the lease/maturity of the sukuk or upon the occurrence of an event of default or early termination of the lease under the Ijara Agreement, the OSG will purchase the sukuk assets; with the purchase price being used by the Issuer to redeem the sukuk certificates at maturity.

The Purchase Undertaking is essential in Islamic Finance as it creates a debt obligation on the part of the OSG which eliminates market risk on the part of the investors. A Sale Undertaking was also executed by the Issuer in favour of the OSG in like manner.

Sukuk – What Lies Ahead

The issuance of the first state sukuk by Osun Sukuk Company Plc attests to the huge potentials for Islamic Finance in Nigeria, while its subsequent international acclaim creates integrity within the market which has the propensity to promote foreign direct investment.

The Central Bank of Nigeria (CBN) has so far registered Jaiz Bank Plc. to provide full Islamic Banking Services and has licensed Stanbic IBTC Plc to operate an Islamic Banking Window. In addition, Sterling Bank Plc has also been given an approval in principle to operate an Islamic Banking Window.

With the right team of professional advisers, it is clear that focusing on substance over form can contribute significantly to the rapid development of the Nigerian economy through the issuance of Islamic Finance products. Nigeria should not miss out on this opportunity.

About the Author

Oladele is called to the Nigerian Bar and is a qualified solicitor in England and Wales. He currently heads the Banking and Finance law Practice of Kola Awodein & Co. Lagos, Nigeria. He obtained his Masters Degree (with Distinction) from the University of Warwick, UK. He has advised on several capital market transactions.

(Osun Defender / 18 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Nigeria: Zakat Can Eradicate Poverty - Sultan

Sokoto — The Sultan of Sokoto, Alhaji Sa'ad Abubakar, has said that the practice of Zakat is capable of eradicating poverty. The statement comes as the Sokoto State Zakat and Endowment Committee disclosed that it collected and distributed N105.3 million between January and now.

Speaking during flag off of an enlightenment campaign on the payment of Zakat, organised by the Muslim Ummah in Sokoto, the Sultan said: "Giving out Zakkat and endowment, according to the teachings of Islam will surely purify our wealth and also eradicate poverty in our society."

The Sultan, who was represented by the Galadiman Garin-Sokoto, urged Muslims and the leaders to be faithful and always fear Allah in the conduct of their activities.

In his remarks, Commissioner for Religious Affairs, Alhaji Tukur Alkali, said the affluent in the state need to ensure they play their roles as stated in the Quran.

The commissioner, who was represented by Sokoto State Director for Shari'a and Religious Affairs, Alhaji Aminu Aliyu, added that government needs to be supported in ensuring the welfare of the masses.

(All Africa / 21 August 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Senegal Sukuk Shows Way for South Africa, Nigeria to Debut

Senegal beat South Africa and Nigeria to market with sub-Saharan Africa’s biggest sovereign sukuk, clearing the path for the continent’s biggest economies to follow with debut Islamic bonds.

Senegal opened a sale this week for 100 billion CFA francs ($208 million) of the debt that will close July 18, tapping a global market that may surpass record issuance of $46.5 billion in 2012, according to arrangers. Worldwide offerings rose 27 percent to $24.4 billion in 2014 from a year earlier, data compiled by Bloomberg show. Gambia, which shares a border with Senegal, sells sukuk maturing in less than a year weekly, with yields on 91-day notes falling 117 basis points this year to 14.89 percent.

“Other governments on the continent will be watching the issuance with interest,” Sarah Tzinieris, principal Africa analyst at Bath, U.K.-based risk advisory company Maplecroft, said in an e-mailed response to questions on June 25. “With the market still relatively undeveloped in sub-Saharan Africa, the first countries issuing sukuk bonds -– such as Senegal -– are in a strong position to position themselves as African hubs for Islamic finance.”

South Africa, which has the continent’s largest stock and bond exchanges, plans to issue a sukuk this year, the National Treasury said in April. A sukuk is part of Nigeria’s strategic framework through 2017, Patience Oniha, the Abuja-based Debt Management Office market development director, said by e-mail yesterday. Kenya may offer sukuk to broaden its investor base, Treasury Secretary Henry Rotich said two days ago. Nigeria’s Osun state sold 10 billion naira ($61 million) of Islamic debt in September, the first state in the country to sell sukuk.

Capital Needs

Since coming to power in the West African nation in 2012, Senegalese President Macky Sall has shut or combined 59 state agencies and allocated more money to curb water and power cuts in the capital, Dakar. He audited the administration of his predecessor, Abdoulaye Wade, and set up a court to try economic crimes, while reducing Senegal’s inflation rate. Senegal’s economy is set to expand 4.6 percent this year, the fastest pace since 2007, and 4.8 percent in 2015, according to the International Monetary Fund.

“Senegal is issuing sukuk bonds before more developed markets in North Africa, such as Morocco and Tunisia, reflecting the investment-minded approach of the Macky Sall government, as well as its crucial need to raise capital,” Tzinieris said.

The sukuk issuance comes as Senegal plans to sell its second Eurobond, with the nation seeking to raise $500 million by July. Standard Chartered Plc, Societe Generale SA’s local unit and Citigroup Inc. have been appointed to manage the offering, Ange Constantin Mancabou, an adviser to Finance Minister Amadou Ba, said by phone from Dakar yesterday.

Yields Drop

Yields on its notes due May 2021 have dropped 88 basis points this year to 5.97 percent by 10:52 a.m. in Dakar. The average yield on African dollar bonds dipped to a one-year low of 4.97 percent on May 29, JPMorgan Chase & Co. indexes show.

In July 2012, Sudan raised 955 million Sudanese pounds ($165 million) selling Islamic debt, with no issuance since, Osama Saeed, head of the research and statistics section at Sudan Financial Services Co., said by phone from Khartoum, the capital, yesterday. South Africa’s Treasury didn’t immediately respond to e-mailed requests for comment yesterday.

Senegal has the second-largest economy in the eight-nation West African Economic and Monetary Union and is the only country in the region apart from Cape Verde that’s never had a military overthrow of the government.

Half of the debt earmarked for the sukuk has already been sold, Budget Minister Mouhamadou Mactar Cisse told reporters in Dakar, the capital, on June 25.

“The launch of this sukuk bond marks an important milestone for the development of Islamic finance” in West African markets, he said. “It allows Islamic banks and financial institutions to improve their liquidity.

(Bloomberg / 27 June 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

New rules and products lay groundwork for Nigerian Islamic finance

Lagos/Sydney: Nigeria is gradually opening up to Islamic finance, a move that could bring non-interest banking to over 80 million Muslims and develop one of Africa’s fastest-growing consumer and corporate banking sectors.

Home to the largest Muslim population in sub-Saharan Africa, Nigeria is trying to establish itself as the African hub for Islamic finance, which follows religious principles such as bans on interest and gambling.

In recent months, a string of regulatory initiatives have set the groundwork for products such as Islamic bonds (sukuk), insurance (takaful) and interbank lending products, although there is still only a small number of local market participants.

“The potential is there but the market is negligible in Nigeria because we have only one Islamic bank and one window — but it has potential to grow,” said Bashir Aliyu Umar, special adviser on non-interest banking to the central bank governor.

Islamic banking is currently offered by the Islamic window of Stanbic IBTC, a unit of South Africa’s Standard Bank, and Jaiz Bank, a full-fledged Islamic lender which has operated since 2012.

Abuja-based Jaiz now plans to obtain a national licence to expand operations beyond Nigeria’s north, which has been hit by an Islamist insurgency.

“That was where the security challenges started last year, that really affected the roll-out of the products,” Umar said.

Despite the challenges, Jaiz has grown its branch network to 10 from an initial three, with ambitious expansion plans calling for 100 branches by 2017.

It completed a capital raising in August, attracting investors such as the Jeddah-based Islamic Development Bank. As of June, it had total assets of 20.6 billion naira ($129 million) and capital of 10 billion naira.

Sterling Bank has been granted approval in principle for an Islamic window, while two more lenders have expressed interest in obtaining licences to operate Islamic windows, according to a central bank official.

The market needs the competition. A November report by Efina, a Lagos-based development organisation, estimated that 34.8 per cent of Nigerian adults who did not use non-interest banking products were likely to take them up if they were available.

But Nigeria’s banking sector remains underdeveloped. The same report found that over 61.6 per cent of adults borrowed from family and friends, while only 5.6 per cent used deposit-taking banks and 9.9 per cent used co-operatives.

To service the demand, Sterling Bank plans to roll out several products including a profit-sharing account and other investment products, Basheer Oshodi, group head of non-interest banking at Sterling, told Reuters.

“We are ready to go live immediately when we get the final licence. We will pilot with 10 branches and will end up using all 165 branches across the country thereafter.

“In reality, we will be having almost all basic Islamic banking products. We have also started to structure a couple of sukuk,” he added.

Rules for sukuk

Sukuk could come to the market soon, after rules for their issuance were approved in March by the Securities Commission; cocoa-producing Osun State plans the country’s first such issuance.

Nigeria’s regulators have taken steps to retain the final say on what Islamic products come to market, a centralised approach which mirrors regulation of the industry in countries such as Malaysia and Oman.

The central bank has set up an advisory committee to regulate sharia compliance, while the insurance regulator issued guidelines for takaful operators in April.

There are currently three takaful windows operating in Nigeria and up to five firms may be considering entry into the market, said Auwalu Ado, internal sharia auditor at Jaiz Bank.

“With a meagre 100 million naira as the minimum capital requirement for either family or general takaful, it is expected that many players will join the train as full-fledged takaful companies,” said Ado.

Takaful would not just give Islamic lenders an opportunity to protect their assets, but also offer an avenue for Islamic banks to invest their funds actively, he added.

Nigeria’s central bank has begun developing lending products to help Islamic banks manage their short-term funding needs; a lack of such products has slowed industry growth in other countries.

“The financial market department is developing instruments that will be used between the central bank and the Islamic banks as well as on an interbank platform,” said Umar.

The central bank is a shareholder in the Malaysia-based International Islamic Liquidity Management Corp (IILM), which aims to provide cross-border options for short-term funding through a planned sukuk programme.

In December, the Nigerian central bank issued guidelines for asset-backed securities that would use IILM certificates as collateral — potentially putting Nigeria ahead of many other Islamic finance centres in developing such complex products.

(Gulfnews.Com / 18 Aug 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Cleric advises Muslims to shun interest loan business

Those who engage in loans business with interest would be punished both on earth and hereafter by God.

Making this assetion was the guest lecturer at the fifth Year Anniversary of the Oyo East Local Government Hasbunnalah, a non-intrest Cooperative and Credit Society in  Kosobo, Oyo.

In a lecture entitled: ‘The practise of non-interest cooperatives societies in Nigeria, the guest lecturer who is the Chief Imam of Al-zunah Mosque, Owode, Oyo and the Amir “the Muslim congress TMC,” Alhaji Lukman that God abhors riba (interest) as the practice encourages exploitation, class distintion, fraud, callousness and poverty, among others.

To ensure eqal distribution of wealth in the society, non-interest loans should be encouraged by all.

Alhaji Lukman also commended the chairman of the society for acquiring 10 acres of land on Osogbo Road.

In his annual report, the Chairman of the Hasbunallah Adebayo Quadri highlighted the management achievements which included increase in membership population from 301 to 325, car loan to seven members, monthly provision of electrical gadgets on credits basis, purchase of photocopy and computer machines and purchased of 102 plots of land for members.

(Nigerian Tribune / 09 Aug 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Sanusi: Islamic Finance, Key to Nigeria's Infrastructural Development

The Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, has stated that the Islamic Banking System, which was introduced to Nigeria, is vital to the country's infrastructural development.

Sanusi, who was represented by his Personal Assistant on Islamic Banking, Dr. Bashir Aliyu Umar, stated this in Abuja during the international conference on Islamic Finance organised by The Metropolitan Skills Limited, Abuja, with endorsement by CBN and related agencies.

He said the Islamic Finance asset-backed and asset-based financing instruments to fund infrastructural needs would go a long way in promoting financial inclusion, enhancing the productive capacity of the nation and by extension, contribute to its economic development.

The CBN Governor also noted that the theme of the conference ‘Infrastructure Development through Alternative Funding(Islamic Finance) in Africa’, was appropriate and timely because of the current low level of infrastructural development experienced in most African countries as well as dwindling sources of finance especially in the aftermath of the global financial crises.

He also revealed that a good approach to funding of infrastructure in Africa is through the Public-Private Partnership (PPP) explaining that the current administration in Nigeria has already embraced the method.

Sanusi said: “There is no gainsaying that the financial resource required to fund infrastructural development is huge, and government and the banking system might not be able to provide the needed funding alone; considering the gestation of the projects as well as the risk of crowding out the private sector.

“A very good approach to funding of infrastructure in Africa is through the PPP, which the current administration in Nigeria has already embraced. This provides a window under Islamic finance asset-backed and asset-based financing instruments to fund infrastructural needs, which will go a long way in promoting financial inclusion”, he added.

Also, MSC Coordinator Islamic Finance, Faculty of Islamic Studies, Qatar, Prof. Monzer Kahf, who was one of the guest speakers, described Islamic Finance as a depository institution of financial intermediary specialised in providing finance on sale, lease or sharing bases which is committed to the Islamic Shari'ah criteria of financial transactions especially realism, morality as well as prohibition of interest.

Kahf condemned the way the Islamic Banking is being misinterpreted in some quarters, adding that the bank does not put any restrictions on one’s faith or belief, but rather grants an equal opportunity that operates under the principles of fairness, realism and morality.

Earlier, the Chief Executive Officer, Metropolitan Skills Ltd, Ms Ummahani Ahmad Amin, said the subject of Islamic Finance has gained further prominence following the global financial crises and sovereign debt crises, which highlighted a range of fallacies. In the conventional financial systems and underscored the usefulness of Islamic principles for stability and sustainability.

“Islamic economics us becoming more relevant for socio-economic development of countries, regions and the world, which is facing high unemployment, unsustainable growth and above all ethical crises”, Amin added.

(This Day Live / 24 July 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com