Nigeria’s First Sukuk

This month, the Nigerian government will issue a $328 million (100 billion naira) sukuk, a kind of sharia-compliant bond that avoids Islamic prohibitions on interests. The government will use the bond “to help fund road projects.” As the Financial Times explains,

Sukuk represents undivided shares in the ownership of tangible assets relating to particular projects or special investment activity. A sukuk investor has a common share in the ownership of the assets linked to the investment although this does not represent a debt owed to the issuer of the bond.

In the case of conventional bonds the issuer has a contractual obligation to pay to bond holders, on certain specified dates, interest and principal. In contrast, under a sukuk structure the sukuk holders each hold an undivided beneficial ownership in the underlying assets.

Consequently, sukuk holders are entitled to a share in the revenues generated by the Sukuk assets. The sale of sukuk relates to the sale of a proportionate share in the assets.

Reuters reports on how the bond will work in Nigeria:

The Islamic bond with a 7-year tenor will go on sale on June 28 for three days via book building, the [Debt Management Office, DMO] said. The bond will be tradable on the Nigerian Stock Exchange and on FMDQ over-the-counter platform.

[…]

The DMO said the issue was “part of the plan to fast track the development of infrastructure and engage in … project-tied capital raising.” It said Nigeria has challenges with road, railway and power infrastructures.

In 2013, Nigeria’s Osun State issued 10 billion naira worth of sukuk, but no other sukuk transaction followed.

The latest issuance is part of plans to develop alternative funding sources for government and to establish a benchmark curve for corporates to follow, the debt office said.

If you’re financially illiterate like me, you can learn about “book building” here.

Worth noting is that the DMO is experimenting with other types of new bonds, such as the recently issued diaspora bond. The sukuk is part of the DMO’s 2013-2017 Strategic Plan (p. 21), which mentions the goal of using “non-interest debt financing instruments (e.g. Sukuk) for investment in critical national development priorities and sectors.”

The Nigerian press is predicting that the sukuk will do well, given the past experience in Nigeria’s Osun State and given global trends. Here is This Day:

The likely success of the N100 billion Sukuk may not be an issue considering the huge booming international market for the product. Besides, Osun State, which issued N10 billion Sukuk in 2013 had a successful outing as it was 120 per cent subscribed…Currently, Sukuk issuances across the globe stand at about $120 billion, up from just $15 billion in 2008…By the end of 2015, total assets under management in the global Islamic finance industry surpassed $2.5 trillion as more and more investors continue allocating their funds to Shariah compliant instruments across the globe. There is therefore a huge, unmet demand for Sukuk issuances from high-potential economies like Nigeria, especially in view of the fact that similar issues by peer countries were oversubscribed.

Islamic finance has a relatively short history in Nigeria. The country’s first Islamic/non-interest bank, Jaiz, opened in 2012. So Nigeria is an experimental phase with regard to instruments like the sukuk. It will be interesting to see how the sukuk does, and what reactions it elicits from different religious communities in Nigeria.

 

Nigeria: The Anatomy of How Osinbajo Projects Competence

Nigeria’s President Muhammadu Buhari remains ill in London amid his second prolonged medical leave of 2017. In his absence, Acting President/Vice President Yemi Osinbajo has continued to win domestic acclaim for his management of the government and his engagement with different crises in Nigeria.

Reading the transcript of Osinbajo’s June 8 speech in Maiduguri, northeastern Nigeria, I was struck by how the speech showcases the elements of his approach to being acting president. All of these elements are extremely basic, but that is part of the point – I think Osinbajo has received so much praise partly because he is doing these basics and doing them in combination. Here are a few of the things he does:

  1. Showing up: Osinbajo physically goes to troubled areas such as Maiduguri, the birthplace of the Boko Haram sect. (He has also visited the Niger Delta and southern Kaduna, two other conflict hotspots, in recent months.) He proceeded with the visit to Maiduguri even after an attack by Boko Haram there the previous night. By physically showing up, Osinbajo communicates a sense that the Federal Government cares about troubled communities.
  2. Mediatizing his activities: Osinbajo uses media, particularly Twitter and Medium, to communicate directly with the public, or at least with those segments of it that are regularly online. He makes heavy use of photographs and some use of videos, meaning that Nigerians literally see him working or, if you want to be more cynical, they see images that may or may not correspond to the actual work.
  3. Acknowledging ordinary people’s difficulties: Osinbajo sometimes speaks with considerable candor about the problems ordinary Nigerians face. For example, in a recent speech on the economy, he said, “Often our economic development plans and budgets assume a trickle down approach, namely; that if we put resources in promoting industry and commerce, jobs would eventually be created and the poorest will be reached. The other premise is that GDP growth should translate to jobs. But both premises are flawed. First the trickle down model has proved far too slow to stem the tide of poverty in one of the fastest growing populations in the world. Secondly, most of the growth was on account of the oil sector which is capital intensive but not labour intensive. So, while we were recording growth levels of 7% because of the high oil prices, unemployment figures grew.”
  4. Explaining government programs: Osinbajo regularly provides updates and explanations concerning new Federal Government programs, of which there are currently many. In his Maiduguri speech, for example, he launched and explained the government’s new grain distribution program for internally displaced persons. He did so, moreover, in a way that conveys a sense that the government is using individual programs to advance multiple, interlinked objectives – in this case, meeting needs, giving people more dignity, reducing corruption, and boosting local agriculture.

These habits are, or should be, unremarkable. But I would say it’s been at least a decade since Nigerians have regularly seen their head of state deploy all these elements routinely and in combination. Of the most recent three heads of state, two – Umaru Yar’Adua (2007-2010) and Buhari (2015-present) – had/have serious health problems that prevented them from steadily projecting an image of activity and energy. The other, Goodluck Jonathan (2010-2015), came to seem increasingly disconnected from key problems the country was facing, especially the Boko Haram crisis, widespread poverty, and endemic corruption. I am also not aware of any of those three figures undertaking the kind of diverse in-country travel schedule that Osinbajo has pursued this year – it is rare, at least from what I can remember, for a Nigerian president to conduct multiple widely praised, high-profile visits to multiple hotspots within just a few months. Jonathan appeared reluctant to visit the northeast, and Buhari appears reluctant to visit the Delta. So Osinbajo, with this combination of travel, media, candor, and clarity, is giving Nigerians a different view of what the presidency can be.

Now, with all that said, crediting Osinbajo with successfully managing the optics and theater of the presidency does not mean that the Buhari/Osinbajo government is successfully addressing Nigeria’s challenges. Optics count for a lot, however: the line between optics and policy is quite blurry, especially in the case of a presidential visit that calms tensions, intimidates malefactors, or inspires new efforts at accountability and good performance by local officials.

In terms of the country’s main problems, the economy remains in recession but may be poised to turn a corner, and the Buhari/Osinbajo administration could benefit politically from that – although the problem of jobless growth, as Osinbajo himself has pointed out, is real, and unemployment actually seems to be getting worse. On the security front, the trend is concerning – Boko Haram remains a degraded but still significant threat in the northeast, conflicts involving pastoralists are causing widespread tension, and things in the Niger Delta seem to still be tense. In this context, if Osinbajo is doing the basics well, that sets him up to succeed, but does not constitute success in and of itself.

Finally, the issue of Buhari’s health hangs over Nigeria. I have written before that if Buhari dies suddenly, that might dry up the goodwill that many Nigerian elites, particularly northerners, currently show toward Osinbajo. And to voice a note of pessimism, perhaps Osinbajo has the space to project this kind of image of a hard-working, honest, competent administration precisely because the uncertainties around Buhari’s future free Osinbajo, temporarily, to concentrate on the work of the presidency rather than on the politics of the office.

Recent Writings on Nigeria

I’ve written two pieces on Nigeria recently, addressing very different topics. One, at The Maydan, looks at Shi’ism and anti-Shi’ism in Nigeria. The other, at World Politics Review, looks at the politics surrounding the question of President Muhammadu Buhari’s health. If you read either or both, I welcome your comments below.

A Few Posts Related to My Book “Salafism in Nigeria”

In September, Cambridge University Press published my first book, which is called Salafism in Nigeria: Islam, Preaching and Politics. I haven’t written much about the book here on the blog, but I have written a few posts elsewhere that deal with issues covered in the book. The most recent post is a conceptual “introduction” to the book, which went up at the Social Science Research Council’s The Immanent Frame blog yesterday. That post deals with the idea of “canon” – the main argument of the book is that Salafism, in Nigeria and around the world, is animated by a canon of texts that includes not just the Qur’an and the hadith literature, but also a great deal of relatively recent material.

Other posts related to the book include:

  • A post outlining part of the history of (non-jihadi) Salafism in Nigeria, published at the Council on Foreign Relations’ Africa in Transition blog
  • A post on Saudi Arabia’s influence in Nigeria, published in the Washington Post’s Monkey Cage blog
  • A post discussing the Salafi-jihadi thinker Abu Muhammad al-Maqdisi’s influence on Boko Haram founder Muhammad Yusuf, published at Jihadica

I’m hoping to write a bit more here on the blog about the book soon, but these posts treat some of the key themes in the book.

Nigeria and the Islamic University of Medina’s Dawra: An Interesting Anecdote

Last week, while doing a quick Google search to confirm the life dates of Umar Fallata (see below, I came across this obituary for the Nigerian Muslim religious leader Isa Waziri (1925-2013). The obituary contains an interesting anecdote about the dawra (tour), a kind of educational and recruitment initiative by Saudi Arabia’s Islamic University of Medina. The dawra, as I discuss in my book, was a key mechanism for recruiting Nigerian students to Medina; worldwide, Nigeria was one of the countries where the University conducted the most tours. The dawra was a key early step in the careers of several prominent Nigerian Salafis.

But as the anecdote makes clear, the Saudi and African scholars who ran the dawra took pains to make sure that it was not just a Salafi affair:

I saw one great quality with Shaikh Isa Waziri around 1994 during the annual Dawra, which is a course for Arabic teachers organized by the Islamic University of Madina under the leadership of Shaikh Abdalla Zarban Al-Ghamidi.  A dinner was organized at Da’awah Group of Nigeria in which almost all the Islamic Scholars in Kano were present. Equally present at the dinner was late Shaikh Umar Fallata, a highly respected Islamic scholar who teaches in the Mosque of Prophet Muhammad (peace be upon him).

It was an interesting event, because despite all the differences between Izala and Tariqa, many prominent Islamic scholars from Tijjaniyya, Qadiriyya, and Izala were present. But one thing you cannot miss during the dinner was that Shaikh Isa Waziri was the rallying point among these scholars, some of whom do not get along publically. On that day, I saw some wonders, because some of the scholars that members of the public thought would look away when they meet each other were so respectful of one another. You wouldn’t be completely wrong if you suggest that sometimes our scholars dribble the followership.

Not only was Waziri a prominent shaykh from the Tijaniyya Sufi order, but the dinner included figures from both the Tijaniyya and the Qadiriyya, the two most prominent Sufi orders in northern Nigeria. This is not to say that there are no tensions between Salafis, who are often vehemently anti-Sufi, and Sufis – it would have been quite fascinating to attend that dinner! – but it is to say that sometimes stereotypes don’t hold true. Moreover, as the author of the obituary points out, sometimes public hostility can give way to private cordiality.

The anecdote raises two other points:

  1. African scholars who took up residence in Saudi Arabia and became part of the Saudi Arabian religious establishment also, often, became key links between Saudi Arabia and Africa. One can see that in the case of this anecdote and Umar Fallata. The best English-language source on Fallata is Chanfi Ahmed’s 2015 book on West African scholars in the Hijaz. See also here (Arabic) for an official Saudi Arabian biography.
  2. I think a lot about the idea of a “fragmentation of sacred authority” in the Muslim world (see here and here). That’s on display in this anecdote too, as the author of the obituary argues that no scholar in northern Nigeria today can play the unifying role of someone such as Waziri. No one wants to fall prey to a distorting nostalgia about the past – it’s not like there were no intra-Muslim conflicts during the twentieth century! – but it does seem like the Muslim world, and various Muslim communities, are much more internally fragmented than they were even a generation ago.

State(s) of Emergency in Niger

On March 3, Niger’s government declared a state of emergency (French) in two of its seven regions while maintaining a state of emergency in a third.

The new state of emergency affects Tillabéri and Tahoua, two western regions on the border with Mali. Specifically, the state of emergency includes the departments of Ouallam, Ayorou, Bankilaré, Abala et Banibongou in Tillabéri and the departments of Tassara et Tillia in Tahoua. The declaration responds to recent attacks, including one in October that I covered here on the blog, as well as the recent killing of sixteen soldiers in an attack on a military patrol in Ouallam (French) and the recent killing of five gendarmes in Bankilaré. That last incident occurred after the state of emergency was declared.

The Nigerien government also maintained the state of emergency in Diffa, in the far southeastern part of the country near the borders with Nigeria and Chad. The government explained that “despite the relative respite observed in the Diffa region,” it wanted to keep exceptional security measures in place. Diffa has been the site of numerous attacks by the Boko Haram sect since 2015. The state of emergency in Diffa dates to February 2015.

As the cliché goes, Niger is in a “bad neighborhood” and its border zones are vulnerable to multiple sources of violence, whether emanating from Nigeria, Mali, or Libya. The northern Agadez region is not under a state of emergency, but the region (and the city of Agadez) face their own problems amid a new anti-smuggling crackdown. Going forward, then, there will be questions about what the states of emergency allow the Nigerien government to achieve in terms of security, or whether further security challenges are coming.

On Buhari’s Absence from Nigeria

Nigerian President Muhammadu Buhari has been on extended medical leave in London since January 19, which has occasioned considerable anxiety and commentary in Nigeria and abroad. I wrote about the situation last week for Global Observatory, comparing Buhari’s absence to the absence of President Umaru Yar’Adua in 2009-2010.

I recommend two other takes:

  • Chika Oduah, “Nigeria Proves a Missing President Isn’t Necessarily a Bad Thing” (I don’t necessarily agree, but the piece is well argued)
  • Brandon Kendhammer, “The President Has Left the Country”

I also recommend following a few Twitter accounts if you are tracking the situation: Channels Television, Presidency Nigeria, and Vice President Yemi Osinbajo.