(Adds details, quote)
LAGOS Oct 7 Nigeria's central bank has set
commercial banks' investment in Islamic bonds issued by state
governments to 10 percent of the total amount on offer and fixed
a maximum tenor of 10 years for the bonds, it said in a
The central bank said it considered the need to issue the
guidelines to enhance the quality of sukuk instruments and to
grant liquidity status at its discount window as well as for
banks' liquidity ratio.
In 2013, Nigeria's cocoa producing state of Osun the country
first sukuk to raise 10 billion naira, but no other transactions
Nigeria is working out details for issuing a debut sovereign
sukuk but is yet to determine the size of a potential deal and
was working with the Securities and Exchange Commission (SEC),
the central bank and the stock exchange to build capacity.
Africa's top economy, which is in the middle of a recession
and needs to raise funds to plug a budget deficit, has set up a
government committee to advise on the amount to be raised from
the Islamic bond sale, the timing and jurisdiction of issue,
either domestic or foreign.
Nigeria is also planning to sell Eurobond to raise $1
billion this year.
"The adoption of Sukuk by state governments, as an
alternative means of financing public expenditure, will
contribute to the deepening of the financial system," the
central bank said in the circular seen by Reuters on Friday.
It said it expects other levels of government may get
involved in sukuk in the future.
The regulator assigned a weight of 20 percent for capital
adequacy for banks' investment in sukuk and a weight of 50
percent for Islamic bonds that do not qualify as liquid assets.
Issuance of a sovereign sukuk is part of a strategic plan
developed by Nigeria's debt office to develop alternative
sources of funding and to establish a benchmark curve.
Nigeria is home to the largest Islamic population in
sub-Saharan Africa, with about half of its 160 million people
Muslims. It is also home to one of Africa's fastest growing
consumer and corporate banking sectors.
(Reporting by Oludare Mayowa; Writing by Chijioke Ohuocha;
Editing by Toby Chopra)