The Securities and Exchange Commission on Sunday said the Central Bank of Nigeria has approved the Guidelines for Granting Liquid Asset Status to Sukuk Instruments issued by State Governments.
A statement by the Head of Corporate Communication, Naif Abdulsalam, in Abuja, said this was a major boost in the issuance of Sukuk in the country.
Sukuk is a non-interest equivalent of bonds.
The statement said, “SEC is pleased to notify issuers and investors that the Central Bank of Nigeria has approved “Guidelines for Granting Liquid Asset Status to Sukuk Instruments Issued by State Governments’’.
The statement said: “This is a major milestone for Nigeria as it will catalyse the development of non-interest capital market products.”
According to the statement, the release of these guidelines followed diligent advocacy efforts from the Capital Market Committee on the need to grant liquidity status to Sukuk.
It said that the aim was to bolster its appeal as a product for both issuers and investors alike.
It explained that Sukuk was becoming increasingly attractive as a capital market instrument across the globe.
It also disclosed: “Annual Sukuk issuances around the world have grown from $15 billion in 2008 to over $150 billion in 2015.
“As the Federal and State governments seek alternative funding sources for infrastructure, these new guidelines will make Sukuk one more available option.’’
The statement recalled that the commission had in 2013, issued Rules on Sukuk Issuance in Nigeria following which the State Government of Osun State raised N11 billion in Nigeria’s first Sukuk issuance which was oversubscribed.
It stated that since then, several State Governments had been exploring issuing Sukuk to raise funds for infrastructure financing and other much-needed public interventions.
The statement further said that the absence of a liquid secondary market had, however, been a key concern for investors like pension funds and other institutional investors.
To address this constraint, it stated that the Capital Market Master Plan had highlighted the need to push for liquidity status for Sukuk.
The statement said: “In implementing the Master Plan, the SEC and the capital market community closely engaged the CBN to develop and release guidelines for this purpose.
“With these guidelines, Sukuk instruments by State governments can be discounted at CBN discount windows and can be applied by banks in their liquidity ratio computation, similar to conventional State bonds.
“This will facilitate the emergence of a vibrant secondary market that will encourage more issuance from State governments.’’
The statement further explained that the guidelines would play a key role in broadening and deepening Nigeria’s financial system by catalysing the development of non-interest products and enhancing financial inclusion.
It also commended the CBN for the laudable step while appreciating the Capital Market Sub-Committee on non-interest products for their dedicated work leading to the release of these guidelines.
Source: Eagle Online
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