FG resorts to Islamic Bond to fund budget

LAGOS—As the pressure on federal revenue mounts following steady decline in oil revenue, the Federal Government would be resorting 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.

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.

ERAKAMUS:
USELESS ISLAMIC GOVERNMENT

APCLyingBastard:
Travelling up and down not to attract direct foriegn investments but to borrow and beg for money.


Typical almajiri govt.

omenka:
Want to spam the entire thread with your rants so no other voice would have a footing on the fp.

Na wa oo!! . Take it easy before you burst some blood vessels dude.

Jorussia:
If this govt is a useless Islamic government, what will call the govt of GEJ who took loan from the same Islamic bank and who even approved the commencement of the bank's operations in Nigeria?

omenka:
Want to spam the entire thread with your rants so no other voice would have a footing on the fp.

Na wa oo!! . Take it easy before you burst some blood vessels dude.

FG to Borrow $600m From Islamic Development Bank

ww2.radionigeria.gov.ng/frnews-detail.php?ID=3951

www.finance-news.lu/fg-to-borrow-600m-from-islamic-development-bank

Errrm, please, can someone remind me who was the president in 2012??

These religious and tribal bigots on this forum are just too damn clueless. Even those adults you think should know better have become infected with the virus.

APCLyingBastard:


The loan application was pending from 2005 and was never taken by Jonathan.

Keep spewing trash.

A memo to the Senate and the House of Representatives indicates that between 2012 and 2014, government plans to obtain up to about $7.91 billion in low interest credit
facilities from some international finance institutions, including the World Bank, African Development Bank (ADB), Islamic Development Bank (IDB), Exim Bank of China as well as Indian credit lines.

www.premiumtimesng.com/news/3784-jonathan-seeks-senate_s-nod-to-borrow-fresh-n1_3trillion.html

omenka:
Whoever did this to you must be very cruel!!


Rid yourself of religious bigotry- you are fast losing your senses.

TippyTop:
How do they plan to fund the budget with Islamic bond? How does this Islamic bond work?

APCLyingBastard:


You sign a patchment of papyrus with blood and promise to kill all Kafurs in your country as interests.

Shikena

APCLyingBastard:


The question to ask is did they finalize the loan application that was pending from 2005?

The answer is No!

The fact that Yaradua began the process doesn't mean Jonathan finally accepted it.

The application was already pending in the Senate and in order not to look as if he was against Islamic banking the process was not interrupted by Jonathan but the final application was never sought.

omenka:
Oh Lawd, this one can't be helped. Your siggy says it all.

Keep hating boy, aint gonna change nada, not now, not in the long run.

Bye..

TippyTop:



Part of their conditions could be full blown sharia law across the land.

TippyTop:


Dude is making sure you work your a.zz off for that special Aisha jollof rice.

APCLyingBastard:


Ignore that zombie.

The fact remains that Buhari has been junketing around not to secure direct investments and sign bilateral trade agreements but to borrow money.

This is at total variance with what we had under the past administration were investors we're trooping in to invest in all sectors.

TippyTop:


How did we end up with Buhari as president, this nightmare is gonna be a long one.

APCLyingBastard:


Zombies voted him in out of pure ethno religious sentiments and nothing more

TippyTop:


Its a shame because the same zombies are at the bottom of the pecking order, no education, very few prospects etc.

I demand that ediots not be allowed to vote in future elections

APCLyingBastard:


An IQ test will be required before you get a voters card

Jorussia:
If this govt is a useless Islamic government, what will call the govt of GEJ who took loan from the same Islamic bank and who even approved the commencement of the bank's operations in Nigeria?

APCLyingBastard:

An IQ test will be required before you get a voters card

Jorussia:
If this govt is a useless Islamic government, what will call the govt of GEJ who took loan from the same Islamic bank and who even approved the commencement of the bank's operations in Nigeria?