Volume 6, Issue 3, March – 2021 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

Challenges of Sukuk Issuance in Nigeria:

A Case Study of Osun State Sukuk
Muhammad Duku Dr. Aliyu Dahiru Muhammad
Department of Islamic Studies, International Institute of Islamic
Faculty of Arts, Management and Social Sciences, Banking and Finance (IIIBF)
Federal University Gashua. Bayero University Kano.
Yobe State, Nigeria Kano, Nigeria.

Abstract:- Infrastructure challenge has been at the top remains inadequate, which as a result the schools
of the priority of any nation. Problem of funding is the environment is not conducive for learning to take place and
major constraint of education sector in Osun state which the state of arts infrastructural resources, also, remains a
causes detrimental effect on the sector. The study factor. In this regard, Osun state is one among south-western
examines the challenges faced in issuing Sukuk Ijarah in states in Nigeria created by the military administrator Gen.
Osun State, Nigeria. The study uses qualitative method Sani Abatcha in 1996 and is a rural state educationally and
of data collection and the study use thematic analysis economically disadvantaged and is a state with
techniques to analyze the data collected through the use infrastructure deficit almost in all sectors. Thus,
of interview. The study concludes that there is high level underfunding of infrastructure in education makes it difficult
of challenges faced during the process of issuing and for the sectors to meet its expectation as the required
structuring of Sukuk in Osun state, the main challenges infrastructural facilities for effective and efficient learning
faced during the process of issuing Sukuk in Osun state cannot be adequately provided with current trend of funding.
are the implementation of central Shari’ah governance Equally, investors in Nigeria have limited investment
system, the preparation of suitable regulatory channels and most of their life savings they invest in the
framework and the licensing processes. Therefore, the high-risk equity market or illiquid real estate markets.
study recommends that there is highly need to have Institutional investors such as banks and insurance
Shari’ah scholars who will satisfy the compliance of companies and government agencies greatly need to invest
Sukuk issuance and provide legal rulings concerning a long-term and liquid instruments in order to meet their long-
certain matter that may arise and the existing legal term liabilities. Hence, developing liquid and low-risk debt
framework should always be complied with and improve market will help individual and institutional investors in
to remain consistent with time and space. assets allocation and provide portfolio diversification.
However the need to provide an alternative way for
Keywords:- Challenges, Sukuk, Issuance, Osun, Nigeria. providing infrastructure deficit in education sector for
sustainable development in the state arise.
I. INTRODUCTION
In Africa, Sukuk market capacity is low, the year 2014
For almost two decades Sukuk market is gaining paved way for some African countries to tap in to the Sukuk
popularity globally and the market is growing rapidly. market. Senegal issued its 4 year Sukuk Ijarah valued at US
Among the Islamic capital market products Sukuk serve as $208 million to finance energy projects and South Africa
an alternative and viable tool for financing infrastructure followed by issuing US $500 million Sukuk Ijarah with 5.75
development. Therefore, Sukuk emerged as an alternative years tenure in international market. Therefore, Osun state is
financing instrument for companies and an investment asset- the first sub-Sahara state to issue Sukuk. The Osun Sukuk
class, for investors as a source of funding and investment which is up to 14.75% secure return Sukuk Ijarah due in
portfolio diversification purposes. Sukuk are back by 2020 funding the construction of 11 mega high schools
tangible or intangible collateral and give undivided across various local governments in the state. The issuance
ownership of the underlying assets for an agreed period for includes state of arts infrastructural facilities such as
investors. Sukuk is an important financing instrument unlike instructional materials, science and computer laboratories,
bank loans. Managers or companies can raise funds with and resourceful libraries, among others.
favorable tenure via issuing Sukuk for longer term. For
investors, Sukuk are favored as liquid and low-risk The overall objective of the paper is to examine or find
investment instrument which are flexible because they can out the challenges faced during Sukuk issuance in Osun
be securitized and become tradable. state.

However, infrastructural problem is drawing back

Africa’s economic growth per capital by 2% each year, and
reducing firm productivity as much as 40% (Ali, 2016). In
Nigeria, for example, infrastructure in education sector

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II. LITERATURE REVIEW emerging market is another key market driver in the first
quarter of 2015 (MWIFM, 2015).
The Concept of Sukuk
Though, Sukuk structures have been in existence and The total global Sukuk issuance amounted to
utilized in Muslim societies as early as the middle-ages - USD$116.7 billion in 2017. The global issuance increased
where paper representing financial commitments originating from USD$87.9 billion in 2016 to USD$116.7 billion in
from trade and other marketable activities are issued. The 2017 an impressive increase of around 32% in volume. The
word “Sukuk” can also be traced back to traditional increase was mainly due to sovereign Sukuk issuance by
profitable Islamic literature used in place of certificate for Saudi Arabia coupled with steady issuance from Asia, GCC,
goods or foodstuffs (“Sakk al-bada’I”) as the system of Africa, and other jurisdictions, while still Malaysia has
paying the wages of government officers who would later dominated the Sukuk market (IIFM, 2018). Connectedly, the
exchange such certificates in line with their day-to-day total global issuance reaches USD$123.15 billion in 2018,
consumption of such goods or foodstuffs (Amundi, 2012). the issuance of Sukuk in 2018 shows a modest increase 0f
The word Sukuk is defined by different bodies, according +5% from USD$116.7 billion in 2017 to USD$123.15
the Accounting and Auditing Organization of Islamic billion in 2018. The huge volume of Sukuk issuance was
Financial Institutions (AAOIFI) defines Sukuk as; mainly due to sovereign Sukuk issuance from Africa, Asia,
‘Certificate of equal value representing undivided shares in GCC and other jurisdictions, while still Malaysia has
ownership of tangible assets, usufructs and services or (in dominated the Sukuk market with other countries such as
the ownership of) the asset of a particular projects or special Indonesia, UAE, and to some extent from Turkey (IIFM,
investment activity’ (AAOIFI, 2004).While the Securities 2019).
Commission of Malaysia (SC) briefly defines Sukuk as; ‘A
document or certificate which represents the value of an The boost of the Sukuk market is as a result of its
assets’ (Security Commission, 2004). capability to offer long-term financing. Majority of Sukuk
have the maturity of three to five years. In April, 2013,
An Overview of Global Sukuk Market Saudi Electricity Company (SEC) issued the first
Sukuk market is a new development in Islamic international 30 years Sukuk and in April, 2014, Dubai
financial system (Isra, 2012). According to Islamic finance government issued its first ever 15 years Sukuk (Lathem and
information services (IFIS), cited in Islamic financial Watkins, 2016).
system: principles and operations, in 1990 Malaysia issued
its first Sukuk, but since then there was no issuance by other The Role of Nigerian Securities and Exchange
market players or countries until 2001, where some Commission (SEC) on Sukuk Issuance
institutions participated. The institutions including, Majlis SEC plays a vital role in providing the basic
Ugama Islam Singapur (MUIS) and the government of requirements for Sukuk issuance in Nigeria, the following
Bahrain issued Sukuk. Gutherie Malaysia was the first to are the requirements (SEC, 2015):
issue global corporate Sukuk. In 2006 Sukuk issuance grew 1. Any public company (including SPV), state government,
up to 145%, compared to 2005, to reach US$27 billion, the local government, government agency, multilateral
market rose to US$47 billion in 2007 and dropped by 55% agency is qualified to issue, offer or make an invitation
to US21 billion in 2008. In 2009 the market started for Sukuk with the consent of the SEC.
recovering with total issuance of US$31 billion, higher than 2. Any issuer of Sukuk must fulfill with the same
the issuance in 2006. In April, 2010 the issuance stood about registration requirements in the SEC rules and regulation
US$9.4 billion. that are pertinent to other conventional securities issued
or offered for sale in Nigeria.
The global Sukuk market witnesses tangible growth, 3. If the issuer is a public company and the Sukuk is
the annual Sukuk issuance almost tripled from US$ 45 competent of being renewed or exchanged in to equity
billion in 2011 to US$ 118.8 billion in 2014. The growth of with the intention of being listed, the issuer must also
the markets was driven by the Malaysia, Saudi Arabian, and comply with the listing requirement of the relevant
the United Arab Emirates (UAE) as well as emerging front securities exchange in Nigeria.
line such as Turkey and Indonesia. Recently a landmark 4. The issuer must appoint Shari’ah adviser that is
issuances were recorded from the UK, Hong Kong, Senegal, registered and recognized by the SEC. the Shari’ah
South Africa, Luxembourg states which shows that the adviser will be responsible for (i) advising on all aspects
Sukuk market is a viable and competitive source of funding of the Sukuk issuance (including documentation and
(MWIFM, 2015). structuring), (ii) issuing Shari’ah certificate that outlines
the basis and rationale of the structure and the Shari’ah
Global Sukuk issuances in the first quarter of 2015 turn principles used and (iii) ensuring that all aspect relating
down to US$18.7 billion from US$24.2 billion in fourth to Sukuk issuance comply with Shari’ah principles.
quarter of 2014. Where the Sukuk market is intimately 5. The SEC will recognize as a Shari’ah adviser any
attached to reaction due to the down fall in the oil price and Islamic bank, a bank licensed by the CBN to operate as a
global economic and financial recession, as most Sukuk non-interest bank or fund manager licensed by SEC to
issuing countries are among the world’s leading oil managed a Shari’ah compliant fund. Shari’ah principle
producers, and also the issue of exchange rate volatility in must be observed for all Sukuk.

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6. The principles in the Sukuk rules are the same general 7. Any issue, offer or invitation of Sukuk by public
principles that support all other Islamic finance structure. company intended to be listed on the exchange shall be
7. Accordingly in relation to the assets that will support a subject to the listing requirements of the NSE.
Sukuk, such assets must comply the requirement of 8. Any issuer which is a foreign government, a national of
Shari’ah (for example prohibits dealings or business any foreign country, or a company or other organization
involving alcohol, pork or pornography) and must be incorporated under the law of any foreign country shall
established and certain. appoint an agent or representative in Nigeria to be
8. In terms of consideration to be paid by an issuer to responsible for communication with NSE, on behalf of
acquire the underlying assets from the originator, the the issuer.
Sukuk rules go on in specify that the purchase price must 9. A foreign issuer shall prepare financial statements in
not exceed 1.51 times the market value of the assets. accordance with International Financial Reporting
9. All Sukuk must be rated and the rating made available Standards (IFRS), but shall also provide certified English
throughout the tenure of the issue. translations of such financial statements for holders of its
10. Sukuk program must meet specified additional criteria, securities that are listed on NSE.
including with the respect to the disclosure materials and 10. If the issuer is the SPV, the obligor shall comply with the
the tenure for the program (not to exceed two years). requirements imposed on the issuer under the rules of the
11. If approval is granted by SEC for a Sukuk, the approval commission and of the NSE as if it were the issuer.
must be implemented within three months of the date of
approval, except if it is a Sukuk program or Sukuk under A number of researches on Sukuk financing have been
a shelf registration, in which case the initial issuance conducted to bridge the gap and support the system. Zein
must be made within two years of the date of approval. (2018), assesses the issues and challenges for developing
12. All issuers must appoint a Sukuk trustee that is registered corporate Sukuk: lesson from an Indonesian case study. The
with SEC and the disclosure and other documents to be paper aims at mapping the issues and challenges of the
submitted with any application. development of corporate Sukuk in Indonesia and
formulating a corporate Sukuk development strategy.
The Role of Nigerian Stock Exchange (NSE) on Sukuk Through the use of questionnaire and in-depth interview.
Issuance Ahmet and Mehmet (2018), the study clarify secondary
NSE plays a vital role in providing rules governing the market of Sukuk and its problems and proposes some
listing of Sukuk. The following are some of the requirements solutions to clear the hurdle of weak secondary market.
that must be complied with by an issuer seeking a listing of Descriptive method of research was employed for the study.
its Sukuk on the official list of the Nigerian Stock Exchange The study depict out that secondary market of Sukuk is weak
(NSE); because of the scarcity of Sukuk supply, hold-to-maturity
1. An issuer of Sukuk must have a Shari’ah adviser culture, Shari’ah restriction, lack of standardization,
registered with SEC who will carry the responsibilities of inadequate trading platforms, low level of Sukuk rated and
(a) advising on all aspect of Sukuk documentation and listed, lack of primary sales of Sukuk to retails investors and
structuring, (b) issuing Shari’ah certification of the lack of large global Islamic banking institutions. Hosen
arrangement and method of the Sukuk issue, the (2016), provides insights in to the growth, contemporary
appropriate Shari’ah principles used for the Sukuk issue issues in practice and challenges of Sukuk in Malaysia.
and relevant Shari’ah matters relating to the Therefore, the study fin-point out some challenges such as
documentation of the Sukuk issue, (c) ensuring that the Shari’ah compliance issues, prudential issues, regulatory
appropriate Shari’ah principles and any relevant plurality, Shari’ah opinions, Islamic security quality rating,
decisions and ruling certified are complied, (d) applying liquidity of Sukuk instrument and public awareness of
Ijitihad in all parts relating to ensure that Sukuk issuance application.
are in conformity with Shari’ah principles, (e) must
carry all function set out by SEC rules and regulations. Talahma (2015), proposes financing system, which
2. An issuer shall submit its listing application through a combines merits of the capital system (the Anglo-American
stockbroker. market-Based financial system) and Islamic financing
3. The NSE shall exercise discretion over the admission system, while at the same time avoiding the flows of each.
and continued listing and quotation of Sukuk on its The study introduces new system based on Islamic
official list and may approve or reject the application for jurisprudence of financial transactions as well as establishes
listing. principles of capital system. Therefore, the study suggested
4. The NSE may approve applications for listing and that a new financing system combining the pros of each of
quotation of Sukuk unconditionally or subject to such the capitalism system and Islamic financing system be
conditions, as it deems fit. created in order to eliminate all the potential flows and
5. Where Sukuk are issued under a program, an issuer may defect of each. Oladunjoye (2014), examines the potential of
list on NSE either all or a certain class or tranche of the using Sukuk as a tool of capital raising and infrastructural
Sukuk issued under the program. development in Nigeria and discusses the recent Sukuk
6. No short-term Sukuk with maturity date of less than 1 issuance in Nigeria by Osun state under their #60 billion
year shall be listed. debt issuance program. The study uses exploratory method
to show Islamic finance as a means of financing based on
the principle of Islamic law (Shari’ah) and has several

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Volume 6, Issue 3, March – 2021 International Journal of Innovative Science and Research Technology
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structures that can be used to suit various way of financing stories together to form a comprehensive picture of their
depending on the situation such as Ijarah, Murabahah, collective experience.
Takaful, Wakalah and so on.
IV. THEME PRESENTATION AND ANALYSIS
Hanefah., Noguchi., & Muda (2013), the study
discusses the importance of Sukuk as a financial instrument Challenges faced by Osun State Sukuk
in a global financial markets and the study describe the Sukuk offers a vast scope of innovation and a large
difference between Sukuk and conventional bond and potential for the growth of capital market, but at the same
discusses the issue concerning accounting, recognition, time development of the instrument faces some challenges.
measurement and disclosures in the financial statement. A However, the issuance of Sukuk is regulated by the SEC
comparative analysis between IFRSs and AAOIFI standards through the framework provided under the guidelines on the
indicate that Sukuk or other Islamic financial instruments do offering of Islamic securities (guidelines). The main
not require separate accounting standards for recognition, challenges facing Sukuk issuing process are the
measurement and disclosures. The study recommended that implementation of central Shari’ah governance system, the
all IFRSs must at all-time consider the unique features of preparation of suitable regulatory framework and the
Islamic financial instruments in the development of new licensing processes. It is known that for every new
accounting standards. Zakaria., Isa., & Abidiu (2013), development there must be disadvantage likewise in process
examines the effect of Sukuk rating as an additional risk in of issuing Sukuk in Osun state challenges has to expect. In
explaining the earning response coefficient based on a this regard the interviewees agreed that they were faced with
sample of 225 firms listed on the Bursa Malaysia from different challenges of (i) rules and regulations that give
2008-2011. The study tests whether Sukuk rating effect ERC way for the issuance (ii) challenges of limited knowledge
after controlling the ERC determinant-beta, growth, earning about the product and (iii) challenges of misconception of
persistence and size. The study finds that Sukuk rating is the people for relating Sukuk to religion practices.
strongly correlated to default risk measure. Using reverse Interviewee SEC1 detailed:
regression and the study also confirm that Sukuk rating is
significant and negative to ERC. “First when the application was file to the commission,
virtually we have no
III. METHODOLOGY rules, so we are face with that challenges of coming-up with
the rules on
The study used primary source of data collection to Sukuk, the challenges earlier I have mention the knowledge
gathered information from seven (7) respondents through gap is a challenge
interview. Based on the selected population of the study, the both on the operators side and regulatory side and
respondents were selected through their respected working awareness also there
places and they were selected based on their knowledge and were no awareness in the entire market.”SEC1
experience about the issuance, also at the same time their
active participation in Sukuk issuance in Osun state. This In relation to the challenges in the process of
interview lasted for the period of three weeks that is from structuring the Sukuk in Osun state. One of the challenges of
28th March, - April 21st, 2016. Sukuk is attributed to the nature of the Sukuk structure (Ali
& Humayon, 2007). The challenges of Sukuk issues exist in
The administration of the interview is as follows; the the structure of the Sukuk must comply with Shari’ah or has
interview conducted with respondents from Osun State Debt to be Shari’ah compliant (Abdullahi, et al., 2014).
Management Office and Lotus Capital Limited was face-to- Accordingly, the nature of Islamic financial products is
face interview individually. But for the Securities and derived from an interpretation of Islamic law through
Exchange Commission, the interview was conducted face- consensus, and analogical reasoning, creates the possibility
to-face except that the respondents were gathered in one for varying interpretations among scholars (Hidayah, 2014).
place each respondent responding to the questions. Also One of the main challenges facing Islamic finance industry
assurance was made to ensure that all the information in Nigeria as depicted by LOTUS is that, there is scarcity of
received from the respondents will be detained as qualified Shari’ah scholars who will give approval on
confidential and for the purpose of research only and the Islamic financial product (see appendix). Also another
interview was recorded and transcribed with the permission challenge noted by interviewees DMO1 & DMO2 that
of the respondents. Ijarah as an asset-based there are requirement needed before
the issuance. While SEC1 added that, they were faced with
The study use thematic analysis techniques to analyze challenges of coming-up with amount to be charged as tax
the data collected through interviewed. and challenges of amending their rules to make Sukuk to be
part of investible instrument for Pension Funds
Data Presentation and Analysis Administrators (see appendix).
In an attempt to answer the research questions,
different themes were identified within the framework and
bringing together component of ideas or experience.
Therefore, themes that are emerged formed the informant

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Volume 6, Issue 3, March – 2021 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
V. RESULT FROM THE FINDINGS [6]. Amundi, A. M. (2012). Cross Assets Investment
Strategy: Special focus.
The result of the study shows that there is high level of [7]. Dubai International Financial Centre, (2009). Sukuk
challenges faced during the process of issuing Sukuk and Guide Book.
structuring the Sukuk in Osun state, the main challenges [8]. Hanefah, M. M., Noguchi, A., & Muda, M., (2013).
facing Sukuk issuing process are the implementation of Sukuk: Global Issues and Challenges. Journal of
central Shari’ah governance system, the preparation of Legal, Ethical and Regulatory Issues. Vol. 16, No. 1,
suitable regulatory framework and the licensing processes. 2013.
[9]. Hidayah, N. N., (2014). Religious Compliance in
VI. CONCLUSION AND RECOMMENDATION islamic Financial Institutions. Thesis Submitted to
Aston University for the Award of Doctor of
To conclude the findings of the study shows that there Philosophy.
is high level of challenges faced during the process of [10]. Hosen, M. (2016). The Fitfalls of the Malaysian Sukuk
issuing Sukuk and structuring the Sukuk in Osun state, the Industry: Issues and Challenges in Practice. Working
main challenges facing Sukuk issuing process are the Paper June, 2016. Doi: 10.13140/RG.2.215203.35368.
implementation of central Shari’ah governance system, the [11]. IIFM Report (2018). A Comprehensive Study of the
preparation of suitable regulatory framework and the Global Sukuk Market. 7th Edition.
licensing processes. [12]. IIFM Report (2019). A Comprehensive Study of the
Global Sukuk Market. 8th Edition.
The study also recommends that there is highly need to [13]. Isra (2012). Islamic Financial System: Principles and
have Shari’ah scholars who will satisfy the compliance of a Operations. Published in 2012 by International
product and provide legal rulings concerning a certain Shari’ah Research Academy for Islamic Finance
matter that may arise and the existing legal framework (ISRA). 2nd Floor, Annex Block, Menara Tun Razak,
should always be complied with and improve to remain Jalan Raja Laur, 50350 Kuala Lumpur, Malaysia.
consistent with time and space. [14]. Lathem and Watkins (2016). The Sukuk Hand Book:
A Summary
REFERENCES [15]. MWIFM (2016). Global Sukuk Report1Q 2015.
[16]. Oladunjoye, O. M. (2014). Sukuk as a Tool for
[1]. AAOIFI (2004), Accounting, Auditing and Infrastructural Development in Nigeria. Journal of
Governance Standards for Islamic Financial Islamic Banking and Finance, March 2014, Vol.2,
Institution, Shariah Standards for Financial Institutions No.1, pp.335-344 ISSN: 2374-2666 Published by
Bahrain, Accounting and Auditing organization of American Research Institute for Policy Development.
Islamic Financial Institutions. [17]. Sc. (2004). Guidelines no the offering of Islamic
[2]. Abdullahi, A., Yazid, S. A., Abullahi, A., and securities. Kuala Lumpur; securities commission of
Kamarudin, S. M., (2014). Risk in Funding Malaysia.
Infrastructure Projects Through Sukuk or Islamic [18]. Talahma, I. K. (2015). Islamic Bond (Sukuk):
Bond. International Review of Management and Opportunities and Challenges. Asper Journal of
Business Research. Vol. 3. Issue 2 International Business and Trade Law. Vol. XV, pp.
www.irmbrjournal.com 391-431.
[3]. Ahmet, U., and Mehmet, E. (2018). Secondary Market [19]. Zakaria, B. N., Isah, M. A. M., & Abidiu, Z. A. R.,
Sukuk : An Overview. International Journal of Islamic (2013). Sukuk Rating, Default Risk, and Earnings
Economics and Finance Studies. Vol, 4, Issue 2. E- Response Coefficient. Advances in Natural and
ISSN: 2149-8407, P-ISSN: 2149-8407. Applied Sciences. Vol. 7(2), pp. 131-137, ISSN 1995-
[4]. Ali, A. K. (2016). Infrastructure Deficit and 0772.
Challenges for Growing Nigerian Economy. [20]. Zein, L. N. (2018). Issues and Challenges for
Punchng.com/infrastructure-deficit-… Developing Corporate Sukuk: Lesson from an
[5]. Ali, A. T. and Humayon, D., (2007). Risk of Sukuk Indonesian case study. RJOAS. 2(74), February, 2018.
Structure: Implication for Resource Mobilization. Doi https://doi.org
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(2). Pp. 203-223.

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APPENDIX

TRANSCRIPTION FOR THE INTERVIEW

Questions Discuss Unit Subthemes Themes
What challenges do you
encounter in the process
of issuing the Sukuk?
The only challenges I can speak to may be at -no specific rules on Sukuk Challenges faced by
the time we started there were no specific rules issuance in the SEC Osun state Sukuk
on Sukuk issuance in the SEC as we all know if - first Sukuk in Nigeria
you going to issue any instrument or and sub – Sahara Africa
undertaken transaction there must be rules on nobody for you to hear
that. LOTUS word Sukuk
Well the challenges are enormous been the first - limited knowledge about
Sukuk in Nigeria and sub – Sahara Africa the Sukuk product
nobody for you to hear word Sukuk, you will - challenges of coming-up
ask what is the meaning of that.DMO1 with the rules on Sukuk
There are so many challenges and the
challenges are associated with the fact that
there is limited knowledge about the Sukuk
product in the country.DMO2
First when the application was file to the
commission , virtually we have no rules, so we
are face with that challenges of coming-up with
the rules on Sukuk, the challenges earlier I
have mention the knowledge gap is a challenge
both on the operators side and regulatory side
and awareness also there were no awareness in
the entire market.SEC1
People perception on The one major challenge is the affiliation of the -want to Islamize the state
Sukuk as an instrument word Sukuk to Islam, people are thinking you - challenges of
attached to religious want to Islamize the state, you want to make misconception
practice the state in to Islamic country, so is very - challenges of not having
difficult for the state to convince not even the shari’ah advisors
citizens, even the potential investors about the - foreign investors to
advantages of Sukuk.DMO1 buying in Sukuk
So when we started we actually witness the
challenges of misconception, once you mention
Sukuk the impression is that Sukuk is a
synonymous with Islamic faith.DMO2
We have the challenges of not having shari’ah
advisors, the entire market I think too you
know the operators at least to have their own
advisory council also total acceptance of the
product you understand people see it as Islamic
product.SEC1
The only general challenges we may face now
as we are looking for foreign you know
investors in to buying in Sukuk, the issue of
tax. So these are the issue that we need to raise
to the government to look in to.SEC4
What are the challenges
the agencies face in the
process of Sukuk
structuring in Osun
state?
Challenge come across in We don’t have a scholar that will interpreted -Scholar that will
the process of structuring the law that is applicable to the issuance of interpreted the law.
the Sukuk instrument Ijarah that was the confidential challenge, so -challenge on Ijarah been
we chose Ijarah because we want the an assets based
structure that will be tradable .LOTUS - arranging the structure.

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Exactly we have a challenge on Ijarah been an -Fees charge, and looking
assets based, take for instance all the schools at even the market and the
that we built with Sukuk we need to go round agreement
all the schools, we need to issue C of O i.e
certificate of occupancy is part of the
requirement from SEC for occupancy of the
schools lands that we built because the
structure of the Sukuk by the is not government
property is for the Sukuk holders. DMO1
In terms of you know arranging the structure,
so it was a big top that time I remember even
that time before we agree how to go about it, it
involves as a state government, it now involve
the use of structuring a special purpose vehicle
company, we have to now register one
company special purpose vehicle OsunSukuk
plc. In terms of time taking actually we waste a
lot of time before we get the structure right.
While in terms of coming-up with structure
getting shari’ah advisory board to even satisfy
what we are going to do is in line with shari’ah.
I can tell you that there is no any qualify
personnel in the country to satisfy the
issuance.DMO2
So we have to look at even how are we coming
with the fees that commission will charge, you
understand and another challenge is looking at
even the market, the agreement even that was
file, the structure it has a multi-function
structure I can say we have an Istisna’a aspect
inside embedded in it. Another serious
challenge that we face during such time was
with Pension Funds Administrators Sukuk is
not part of the investible instrument for Pension
Funds Administrators, so we were face with
that challenge.SEC1

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