Editor’s note: This is general educational information about how Nigeria’s sovereign sukuk are structured and regulated. It is not investment advice. It is based on the debt office, exchange and regulatory documents listed at the end.
Analysis: what the legal form does and does not carry
The lease form is doing genuine work at the front of the transaction and much less at the back. At the front it determines who may buy. Investors barred by conviction from holding interest-bearing paper can hold a certificate that evidences undivided ownership of a leased road asset, and the certification chain from the Commission-registered Shari’ah adviser through the central bank’s advisory council is what makes that holding defensible. The 2022 trading condition shows the certification is capable of binding the issuer’s own timetable, which is not a formality.
At the back the form carries less than the vocabulary suggests. An investor’s recourse is not to a road. The offer document places the credit squarely on the full faith and credit of the Federal Government, the same phrase used in the FGN bond circulars, which means the analysis of what happens in a stress scenario is sovereign credit analysis and nothing else. The asset in a forward ijarah is the mechanism by which a permissible return is generated, not a source of repayment independent of the issuer.
The gap between those two statements is where a careful reader should look. Because the rental rate is fixed at issue in the same way a coupon is, and because the tax and liquidity treatment matches a government bond, a sovereign sukuk prices against FGN bonds of similar tenor rather than against anything asset-specific. The published rental schedule gives the dates and the rates, but the debt office does not publish a running comparison of sukuk rental rates against FGN bond marginal rates at the nearest auction, and that comparison is the one that would show whether the structure costs the government anything. The other unanswered question is delivery. The proceeds are earmarked for named road projects across the six geopolitical zones, the certifying council has already once made trading conditional on construction starting, and physical progress on those roads is reported outside the debt office’s own documents. Anyone assessing the programme on its stated terms has to go and find that reporting separately.
What the documents say
A Federal Government of Nigeria sukuk sits in the same portfolios as an FGN bond, gets the same tax treatment, is listed on the same exchanges and carries the same sovereign credit. What it does not do is lend money. The instrument is built as a lease, the investor’s return is rent, and the paperwork is careful about the distinction at every step. Understanding why the distinction is maintained, and where it stops mattering, explains most of what is unusual about the asset class in Nigeria.
Who issues it and what it is
The offer document for the seven-year issue due May 2032 describes the instrument type as a Forward Ijarah, or lease, sukuk. The issuer is not the Federal Government directly. It is FGN Roads Sukuk Company 1 Plc, acting on behalf of the Federal Government of Nigeria. The offer opened on May 12, 2025 and closed on May 20, 2025, with settlement on May 23, 2025, at a rental rate of 19.75% per annum, payable half yearly, with bullet repayment on the maturity date.
The vocabulary is not decorative. Nigerian Exchange Limited’s rules governing the listing of sukuk and similar debt securities, approved by the Securities and Exchange Commission on 17 March 2016, define sukuk as investment certificates or notes of equal value which evidence undivided interest or ownership of tangible assets, usufructs and services, or investment in the assets of particular projects, using Shari’ah principles approved by the Commission. The same rules define similar debt securities as non-interest bearing Shari’ah compliant debt securities.
The Commission’s own consolidated rules set out the underlying contracts by name. Ijarah is defined there as a contract whereby a lessor leases out an asset to a lessee at an agreed rental for a pre-determined period, with ownership of the leased asset always remaining with the lessor. Sukuk Ijarah are certificates of equal value evidencing undivided ownership of the leased asset, or of the usufruct or services, and the rights to rental receivables from it. The rules also define the alternatives that Nigeria has not used for its sovereign programme: Murabahah, built on a cost-plus sale, Mudharabah, built on profit sharing between a capital provider and an entrepreneur, and Musharakah, a partnership in which losses are shared by capital contribution.
The certification chain
An issuer cannot arrive at a listing with a structure of its own devising. NGX Rule 3.1 requires the issuer of a sukuk to appoint a Shari’ah adviser recognised or registered with the Securities and Exchange Commission, whose responsibilities include advising on documentation and structuring, issuing a Shari’ah certification setting out the basis and rationale of the structure and the applicable Shari’ah principles, and ensuring that endorsed resolutions and rulings are complied with. The Commission’s consolidated rules define such an adviser as a scholar, fund manager, non-interest bank or other licensed institution registered or recognised by the Commission.
For the sovereign programme a second body sits above that. The offer document states that the sukuk is certified by the Financial Regulation Advisory Council of Experts of the Central Bank of Nigeria. When the Federal Government listed its 13% Ijarah Sovereign Sukuk due 2031 on NGX on Tuesday, 5 July 2022, the listing followed the fulfilment of a condition set by that council: trading in the instrument would only be permissible after construction had begun on the road projects the sukuk assets consisted of.
That is a real constraint, and it has no equivalent in a conventional bond. A government bond is tradeable from settlement. A forward ijarah sukuk finances an asset that does not exist yet, and the certifying body treated the existence of the asset as a precondition for trading in the certificate that represents it.
Where the structure stops being a lease
The offer document’s status and security clauses read exactly like an FGN bond’s. The sukuk is backed by the full faith and credit of the Federal Government of Nigeria. It qualifies as a security in which trustees can invest under the Trustee Investment Act. It qualifies as a government security for tax exemption purposes under the Companies Income Tax Act and the Personal Income Tax Act, for pension funds among other investors. It is classified as a liquid asset by the Central Bank of Nigeria. It is listed on Nigerian Exchange Limited and FMDQ Securities Exchange Limited. Proceeds are stated to be used solely for the construction and rehabilitation of key road projects and bridges across the six geopolitical zones.
The rental payment schedule the debt office publishes makes the same point in a different way. The 15.743% FGN SUK 2025 was issued on December 28, 2018 and matured on December 28, 2025, paying on June 28 and December 28. The 11.200% FGN SUK 2027 was issued on June 16, 2020. The 13.00% FGN SUK 2031 was issued on December 29, 2021, the 15.64% FGN SUK 2032 on December 2, 2022, and the 15.75% FGN SUK 2033 on October 13, 2023. Five instruments, named by rate and maturity year, on fixed semi-annual dates. Read the table without the word rental and it is a coupon schedule.
