•Says inflation risk high
The Central Bank of Nigeria (CBN) plans to issue its first sovereign sukuk within the next 18 months in a move aimed at boosting Islamic banking in Nigeria’s economy, its governor, Sanuis Lamido Sanusi said on Monday.
Sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia, Islamic religious law. Because the traditional Western interest paying bond structure is not permissible, the issuer of a sukuk sells an investor group the certificate, which 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.
The debt management office (DMO) is working on policies to be able to enact the sale of Islamic bonds, Sanusi told Reuters on the sidelines of a conference on Islamic finance in Dakar, Senegal.
“We are working with the debt management office. The central bank is collaborating with them on capacity building. We do have a target of issuing a first sovereign sukuk in Nigeria within 18 months,” Sanusi said. However, he declined to say how much will be issued.
“The process has just started, the decision [on amount to be issued] will be taken by the finance minister and the debt management office,” Sanusi said.
Sanusi said the country was on track to approve its first Islamic bank and was working towards becoming a regional hub for Islamic banking.
He said the CBN had given an implicit approval to Jaiz Bank as the country’s first Islamic bank. Jaiz Bank has six months to comply with the central bank’s terms to get a final licence.
“Hopefully, by the end of the year, we will have one Islamic bank in operation, about five banks operating Islamic banking windows, and then start looking at developing an Islamic money market,” Sanusi said. Meanwhile, Sanusi said on Monday that inflation risks in Nigeria remained high and that there was no choice but to focus on tightening monetary policy.
“I think that the indications are that we have to look at the money supply situation very closely,” he said during a visit to the Senegalese capital.