NASRDA and its need for SUKUK as an alternative source of funding

Nigeria’s sovereign sukuk which debuted in 2017 has so far demonstrated how borrowing can be better utilized to strategically fund National infrastructure, promote financial inclusion and create depth in the domestic securities markets. The proceeds which are meant to help the Federal government fund infrastructure are today very important to the National Space Research and Development Agency’s (NASRDA) quest to fund its infrastructural deficits through an alternative source of funding called SUKUK and most importantly develop its intended satellite communication.

Infrastructural deficits in Nigeria which is ranked as Africa’s largest economy is huge and expanding everyday and would require as much as $1 trillion dollars in ten years to plug and we need to acknowledge this limitations to jobs, poverty alleviation, and economic reduction, increasing low revenue now put at 7.5 percent of National GDP is impeding government ability to meet this needs for a country of more than 200 million people in population size, with at most three percent annual growth over the years succeeding governments in Nigeria have progressively implemented incremental budgets as it constantly look for ways to turn the economy around for growth amid tight incomes. But in all of this year revenues have failed to match projections, creating even deficits and more borrowing which has also affected NASRDA as an agency of government and so therefore there was every need for the agency to think out of the bag for an alternative means of solving its funding needs for infrastructures.

Since his appointment as the director general of NASRDA, Dr. Halilu Ahmed Shaba concerned about the need to quickly improve the infrastructural base of the agency especially as the space world is today a race that is very competitive that the country could not afford to be left behind, he is thinking of looking towards the SUKUK as one of his hallmarks of initiatives to turn to in other for the agency to be able to develop a new satellite communication for the country.

SUKUK which is commonly referred to as an Islamic bond, in non interest bearing bond will help the government diversify its source of funding while offering ethical investors an opportunity to invest in the government’s – issued securities. This instrument has not only helped the government in time past achieve a higher level of financial inclusion but has served as a reference for pricing SUKUK issued by other bodies, especially the private sector. Today in Nigeria, SUKUK is classified as liquid asset by the Central Bank of Nigeria, (CBN) and listed and traded in the Nigeria stock exchange (NSE) and the financial markets dealers quotation, (OTC), the SUKUK provide opportunities for holders to buy or sell on any business day.

The SUKUK is today also ranked as the smartest borrowing strategy of any government in the sense that it attracts ethical investors, it is project-tied, and has demonstrated visible outcomes. So, it is natural for any manager of governmental agencies who wish to help his agency meet up with the demand of thinking out of the box in helping solve the financial requirements of funding its infrastructural needs not to rely on only budgetary provisions but to turn to SUKUK as one of its best alternative in solving the agency’s needs for this critical infrastructures and that is what Dr. Halilu Shaba is doing with NASRDA going forward.

Having recognized that the SUKUK has been more effective than most other government’s borrowing platforms in the past in the sense that it is project-specific and targeted at a particular type of infrastructure that is developmental-oriented which communication satellite is one of Nigeria’s critical needed infrastructure the call by the director general of NASRDA, Dr. Halilu Shaba for the government of President Ahmed Bola Tinubu to support NASRDA’s reapplication for the SUKUK funding is therefore apt and a welcome development because of SUKUK’s effectiveness which has led to projects been executed with the funds since it’s introduction has been successful and continues to attract investors who have issues with other bonds. NASRDA therefore needs to be assisted by the government to take advantage because SUKUK has been commended as a visible instrument for financing infrastructures. Therefore, the DG of NASRDA must be commended for his call for SUKUK which is not a debt instrument but represents ownership in a tangible assets service, project, business or joint ventures.