Nigeria’s Sovereign Sukuk Surpasses N1 Trillion, Powering Infrastructure Growth

Ever wondered how a country can fund massive infrastructure projects without traditional loans? Nigeria found a fascinating way: Sovereign Sukuk! Since 2017, they’ve raised a staggering N1.09 trillion (that’s a cool USD 657.6 million!) through this Sharia-compliant method. It’s a smart move to fix those roads and bridges, boosting the economy across Nigeria. Let’s investigate how this Sovereign Sukuk system works and what it means for Nigeria’s future.

The announcement of this cumulative achievement came on Wednesday, March 26, 2025, during a crucial “all-parties meeting” convened in Lagos by the Debt Management Office (DMO). This gathering served as a prelude to the planned issuance of the seventh series of the Sovereign Sukuk, a testament to the government’s continued confidence in this innovative financing mechanism. According to Patience Oniha, the Director-General of the DMO, the upcoming series aims to raise an additional N300 billion, further solidifying the Sovereign Sukuk’s role as a cornerstone of Nigeria’s infrastructure funding strategy.

Related: Nigeria Issues N1 Trillion Sukuk Bond to Boost 124 Road Projects Across Six Zones

Ethical Finance for National Progress

For those unfamiliar with Islamic finance, Sovereign Sukuk represent a compelling alternative to conventional bonds. Rooted in Sharia principles, which prohibit interest (riba), Sukuk are structured to represent ownership in an underlying asset or a specific project. Investors in Sovereign Sukuk do not receive fixed interest payments but rather a share of the returns generated by the asset or project being financed.

This structure aligns with ethical investment principles and has garnered increasing global attention as a sustainable and responsible means of funding development initiatives. Nigeria’s journey into the realm of Sovereign Sukuk commenced in September 2017 with an initial offering of N100 billion. This maiden issuance was met with enthusiastic investor response, evidenced by a total subscription of N105.878 billion, signaling a strong market appetite for Sharia-compliant investment instruments within Nigeria.

Building upon this initial success, the Federal Government, through the DMO, has consistently tapped into the Sukuk market with subsequent issuances in 2018 (N100 billion), 2020 (N162.557 billion), 2021 (N250 billion), 2022 (N130 billion), and 2023 (N350 billion). These successive offerings have collectively propelled the total funds raised through Sovereign Sukuk to the impressive N1.09 trillion mark by late March 2025, according to the DMO’s latest figures.

The Tangible Impact of Sukuk-Funded Projects

The substantial capital generated through Nigeria’s Sovereign Sukuk program has been strategically directed towards the development and rehabilitation of vital road infrastructure projects that span the length and breadth of the nation. Covering all six of Nigeria’s geopolitical zones and the Federal Capital Territory, this dedicated funding has demonstrably transformed the country’s infrastructure landscape. As of March 2025, the DMO reports that over 4,100 kilometers of roads and nine significant bridges have been either constructed or brought back to optimal condition through the proceeds of these Sukuk issuances.

The impact of these infrastructure improvements is far-reaching, generating tangible benefits for the Nigerian populace and the national economy:

• Reduced Travel Time and Costs: Upgraded and newly constructed road networks are significantly reducing travel times and transportation costs for both individuals and businesses, fostering greater efficiency and connectivity.
• Enhanced Road Safety: Infrastructure projects undertaken through Sovereign Sukuk adhere to contemporary safety standards, contributing to a reduction in road accidents and improving the overall safety of Nigeria’s transportation network.
• Significant Job Creation: The lifecycle of infrastructure projects, from initial planning and construction to ongoing maintenance, generates substantial employment opportunities across various skill levels, contributing to job creation and economic empowerment.
• Improved Market Access for Farmers: Enhanced road infrastructure is particularly beneficial for farmers in remote agricultural regions, providing them with better access to markets, reducing post-harvest losses, and boosting their income and livelihoods.
• Increased Access to Essential Public Services: Improved transportation networks facilitate greater access to critical public services such as education and healthcare facilities, particularly for communities in underserved areas, promoting social inclusion and development.
• Stimulating Broader Economic Growth: Efficient and reliable infrastructure is a fundamental prerequisite for sustained economic growth. The projects funded by Sovereign Sukuk are playing a crucial role in facilitating trade, attracting investment, and enhancing productivity across diverse sectors of the Nigerian economy.

The Multifaceted Advantages of Nigeria’s Sukuk Strategy

The Nigerian government’s sustained commitment to issuing Sovereign Sukuk reflects a deep understanding of the multifaceted benefits that this Islamic financial instrument offers beyond the immediate funding of infrastructure projects. These advantages contribute to the overall strengthening and diversification of Nigeria’s financial ecosystem:

1. Direct Project Linkage and Investor Confidence: Sovereign Sukuk are inherently tied to specific infrastructure projects, providing investors with a clear understanding of how their funds are being utilized and the tangible impact they are contributing to. This project-specific nature enhances transparency and bolsters investor confidence, aligning with the growing global interest in impact investing.
2. Promoting Financial Inclusion Across Demographics: Nigeria has actively pursued a strategy of broadening investor participation in its Sovereign Sukuk offerings. This includes allocating a portion of subscriptions specifically for retail investors, making Sharia-compliant investment opportunities accessible to a wider segment of the population, and promoting financial inclusion.
3. Deepening and Diversifying the Domestic Financial Market: The consistent issuance of Sovereign Sukuk is playing a vital role in the development and diversification of Nigeria’s domestic financial market. It introduces a new asset class, attracts a broader range of investors (including both conventional and Islamic financial institutions), and fosters innovation within the financial sector, creating a more resilient and robust financial ecosystem.
4. Tapping into the Global Islamic Finance Market: Sovereign Sukuk provides Nigeria with access to the rapidly expanding global Islamic finance market, attracting ethically conscious investors and Islamic financial institutions seeking Sharia-compliant investment opportunities. This diversifies Nigeria’s funding sources and positions it as a player in the international Islamic finance landscape.
5. Mobilizing Domestic Islamic Capital: By offering a secure and Sharia-compliant investment avenue, Sovereign Sukuk effectively mobilizes domestic capital that adheres to Islamic financial principles, keeping these funds within the Nigerian economy and channeling them towards national development priorities.
6. Building a Foundation for Future International Issuances: Nigeria’s successful track record with Naira-denominated Sovereign Sukuk lays a strong foundation for potential future forays into the international Sukuk market. This could unlock significant opportunities for attracting foreign direct investment and further diversifying Nigeria’s funding sources for large-scale development projects.

High Subscription Rates and Investor Trust

The remarkable success of Nigeria’s Sovereign Sukuk program is further underscored by the consistently high subscription rates witnessed in previous issuances. For instance, the N250 billion Sukuk offered in 2021 attracted an unprecedented subscription level of over N865 billion, representing an oversubscription of 346%. This overwhelming investor demand reflects a strong vote of confidence in the Nigerian government’s commitment to utilizing these funds effectively for infrastructure development and delivering returns to investors in a Sharia-compliant manner.

The average subscription rate across the six Sovereign Sukuk issuances between 2017 and 2023 stands at an impressive N431.64 billion for an average offering of N182.09 billion, with an average tenor of 8.3 years, according to data from the Securities and Exchange Commission (SEC) Nigeria. As the DMO prepares for the seventh series of Sovereign Sukuk with a target of N300 billion, the future of Islamic finance in Nigeria’s development agenda looks promising.

Nigeria’s strategic use of Sovereign Sukuk has demonstrably fueled infrastructure growth. This Islamic finance tool has generated over N1 trillion since 2017. Funds target critical projects like roads and bridges nationwide. This approach bypasses traditional interest-based loans. Sovereign Sukuk promotes ethical investment and financial inclusion. Nigeria’s success inspires other nations seeking sustainable development funding. This highlights the power of Sharia-compliant finance for national progress.