Challenges of Sukuk Issuance in Nigeria: A Case Study of Osun State Sukuk

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1. 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 Department of Islamic Studies, Faculty of Arts, Management and Social Sciences, Federal University Gashua. Yobe State, Nigeria Dr. Aliyu Dahiru Muhammad International Institute of Islamic Banking and Finance (IIIBF) Bayero University Kano. Kano, Nigeria. Abstract:- Infrastructure challenge has been at the top of the priority of any nation. Problem of funding is the major constraint of education sector in Osun state which causes detrimental effect on the sector. The study examines the challenges faced in issuing Sukuk Ijarah in Osun State, Nigeria. The study uses qualitative method of data collection and the study use thematic analysis techniques to analyze the data collected through the use of interview. The study concludes that there is high level of challenges faced during the process of issuing and structuring of Sukuk in Osun state, the main challenges faced during the process of issuing Sukuk in Osun state are the implementation of central Shari’ah governance system, the preparation of suitable regulatory framework and the licensing processes. Therefore, the study recommends that there is highly need to have Shari’ah scholars who will satisfy the compliance of Sukuk issuance and provide legal rulings concerning a certain matter that may arise and the existing legal framework should always be complied with and improve to remain consistent with time and space. remains inadequate, which as a result the schools environment is not conducive for learning to take place and the state of arts infrastructural resources, also, remains a factor. In this regard, Osun state is one among south-western states in Nigeria created by the military administrator Gen. Sani Abatcha in 1996 and is a rural state educationally and economically disadvantaged and is a state with infrastructure deficit almost in all sectors. Thus, underfunding of infrastructure in education makes it difficult for the sectors to meet its expectation as the required infrastructural facilities for effective and efficient learning cannot be adequately provided with current trend of funding. Equally, investors in Nigeria have limited investment channels and most of their life savings they invest in the high-risk equity market or illiquid real estate markets. Institutional investors such as banks and insurance companies and government agencies greatly need to invest long-term and liquid instruments in order to meet their longterm liabilities. Hence, developing liquid and low-risk debt market will help individual and institutional investors in assets allocation and provide portfolio diversification. However the need to provide an alternative way for providing infrastructure deficit in education sector for sustainable development in the state arise. Keywords:- Challenges, Sukuk, Issuance, Osun, Nigeria. I. INTRODUCTION For almost two decades Sukuk market is gaining popularity globally and the market is growing rapidly. Among the Islamic capital market products Sukuk serve as an alternative and viable tool for financing infrastructure development. Therefore, Sukuk emerged as an alternative financing instrument for companies and an investment assetclass, for investors as a source of funding and investment portfolio diversification purposes. Sukuk are back by tangible or intangible collateral and give undivided ownership of the underlying assets for an agreed period for investors. Sukuk is an important financing instrument unlike bank loans. Managers or companies can raise funds with favorable tenure via issuing Sukuk for longer term. For investors, Sukuk are favored as liquid and low-risk investment instrument which are flexible because they can be securitized and become tradable. In Africa, Sukuk market capacity is low, the year 2014 paved way for some African countries to tap in to the Sukuk market. Senegal issued its 4 year Sukuk Ijarah valued at US $208 million to finance energy projects and South Africa followed by issuing US $500 million Sukuk Ijarah with 5.75 years tenure in international market. Therefore, Osun state is the first sub-Sahara state to issue Sukuk. The Osun Sukuk which is up to 14.75% secure return Sukuk Ijarah due in 2020 funding the construction of 11 mega high schools across various local governments in the state. The issuance includes state of arts infrastructural facilities such as instructional materials, science and computer laboratories, and resourceful libraries, among others. The overall objective of the paper is to examine or find out the challenges faced during Sukuk issuance in Osun 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 IJISRT21MAR027 www.ijisrt.com 957
2. Volume 6 , Issue 3, March – 2021 International Journal of Innovative Science and Research Technology ISSN No:-2456-2165 II. emerging market is another key market driver in the first quarter of 2015 (MWIFM, 2015). LITERATURE REVIEW The Concept of Sukuk Though, Sukuk structures have been in existence and utilized in Muslim societies as early as the middle-ages where paper representing financial commitments originating from trade and other marketable activities are issued. The word “Sukuk” can also be traced back to traditional profitable Islamic literature used in place of certificate for goods or foodstuffs (“Sakk al-bada’I”) as the system of paying the wages of government officers who would later exchange such certificates in line with their day-to-day consumption of such goods or foodstuffs (Amundi, 2012). The word Sukuk is defined by different bodies, according the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) defines Sukuk as; ‘Certificate of equal value representing undivided shares in ownership of tangible assets, usufructs and services or (in the ownership of) the asset of a particular projects or special investment activity’ (AAOIFI, 2004).While the Securities Commission of Malaysia (SC) briefly defines Sukuk as; ‘A document or certificate which represents the value of an assets’ (Security Commission, 2004). An Overview of Global Sukuk Market Sukuk market is a new development in Islamic financial system (Isra, 2012). According to Islamic finance information services (IFIS), cited in Islamic financial system: principles and operations, in 1990 Malaysia issued its first Sukuk, but since then there was no issuance by other market players or countries until 2001, where some institutions participated. The institutions including, Majlis Ugama Islam Singapur (MUIS) and the government of Bahrain issued Sukuk. Gutherie Malaysia was the first to issue global corporate Sukuk. In 2006 Sukuk issuance grew up to 145%, compared to 2005, to reach US$27 billion, the market rose to US$47 billion in 2007 and dropped by 55% to US21 billion in 2008. In 2009 the market started recovering with total issuance of US$31 billion, higher than the issuance in 2006. In April, 2010 the issuance stood about US$9.4 billion. The global Sukuk market witnesses tangible growth, the annual Sukuk issuance almost tripled from US$ 45 billion in 2011 to US$ 118.8 billion in 2014. The growth of the markets was driven by the Malaysia, Saudi Arabian, and the United Arab Emirates (UAE) as well as emerging front line such as Turkey and Indonesia. Recently a landmark issuances were recorded from the UK, Hong Kong, Senegal, South Africa, Luxembourg states which shows that the Sukuk market is a viable and competitive source of funding (MWIFM, 2015). Global Sukuk issuances in the first quarter of 2015 turn down to US$18.7 billion from US$24.2 billion in fourth quarter of 2014. Where the Sukuk market is intimately attached to reaction due to the down fall in the oil price and global economic and financial recession, as most Sukuk issuing countries are among the world’s leading oil producers, and also the issue of exchange rate volatility in IJISRT21MAR027 The total global Sukuk issuance amounted to USD$116.7 billion in 2017. The global issuance increased from USD$87.9 billion in 2016 to USD$116.7 billion in 2017 an impressive increase of around 32% in volume. The increase was mainly due to sovereign Sukuk issuance by Saudi Arabia coupled with steady issuance from Asia, GCC, Africa, and other jurisdictions, while still Malaysia has dominated the Sukuk market (IIFM, 2018). Connectedly, the total global issuance reaches USD$123.15 billion in 2018, the issuance of Sukuk in 2018 shows a modest increase 0f +5% from USD$116.7 billion in 2017 to USD$123.15 billion in 2018. The huge volume of Sukuk issuance was mainly due to sovereign Sukuk issuance from Africa, Asia, GCC and other jurisdictions, while still Malaysia has dominated the Sukuk market with other countries such as Indonesia, UAE, and to some extent from Turkey (IIFM, 2019). The boost of the Sukuk market is as a result of its capability to offer long-term financing. Majority of Sukuk have the maturity of three to five years. In April, 2013, Saudi Electricity Company (SEC) issued the first international 30 years Sukuk and in April, 2014, Dubai government issued its first ever 15 years Sukuk (Lathem and Watkins, 2016). The Role of Nigerian Securities and Exchange Commission (SEC) on Sukuk Issuance SEC plays a vital role in providing the basic requirements for Sukuk issuance in Nigeria, the following are the requirements (SEC, 2015): 1. Any public company (including SPV), state government, local government, government agency, multilateral agency is qualified to issue, offer or make an invitation for Sukuk with the consent of the SEC. 2. Any issuer of Sukuk must fulfill with the same registration requirements in the SEC rules and regulation that are pertinent to other conventional securities issued or offered for sale in Nigeria. 3. If the issuer is a public company and the Sukuk is competent of being renewed or exchanged in to equity with the intention of being listed, the issuer must also comply with the listing requirement of the relevant securities exchange in Nigeria. 4. The issuer must appoint Shari’ah adviser that is registered and recognized by the SEC. the Shari’ah adviser will be responsible for (i) advising on all aspects of the Sukuk issuance (including documentation and structuring), (ii) issuing Shari’ah certificate that outlines the basis and rationale of the structure and the Shari’ah principles used and (iii) ensuring that all aspect relating to Sukuk issuance comply with Shari’ah principles. 5. The SEC will recognize as a Shari’ah adviser any Islamic bank, a bank licensed by the CBN to operate as a non-interest bank or fund manager licensed by SEC to managed a Shari’ah compliant fund. Shari’ah principle must be observed for all Sukuk. www.ijisrt.com 958
3. Volume 6 , Issue 3, March – 2021 International Journal of Innovative Science and Research Technology ISSN No:-2456-2165 6. The principles in the Sukuk rules are the same general principles that support all other Islamic finance structure. 7. Accordingly in relation to the assets that will support a Sukuk, such assets must comply the requirement of Shari’ah (for example prohibits dealings or business involving alcohol, pork or pornography) and must be established and certain. 8. In terms of consideration to be paid by an issuer to acquire the underlying assets from the originator, the Sukuk rules go on in specify that the purchase price must not exceed 1.51 times the market value of the assets. 9. All Sukuk must be rated and the rating made available throughout the tenure of the issue. 10. Sukuk program must meet specified additional criteria, including with the respect to the disclosure materials and the tenure for the program (not to exceed two years). 11. If approval is granted by SEC for a Sukuk, the approval must be implemented within three months of the date of approval, except if it is a Sukuk program or Sukuk under a shelf registration, in which case the initial issuance must be made within two years of the date of approval. 12. All issuers must appoint a Sukuk trustee that is registered with SEC and the disclosure and other documents to be submitted with any application. The Role of Nigerian Stock Exchange (NSE) on Sukuk Issuance NSE plays a vital role in providing rules governing the listing of Sukuk. The following are some of the requirements that must be complied with by an issuer seeking a listing of its Sukuk on the official list of the Nigerian Stock Exchange (NSE); 1. An issuer of Sukuk must have a Shari’ah adviser registered with SEC who will carry the responsibilities of (a) advising on all aspect of Sukuk documentation and structuring, (b) issuing Shari’ah certification of the arrangement and method of the Sukuk issue, the appropriate Shari’ah principles used for the Sukuk issue and relevant Shari’ah matters relating to the documentation of the Sukuk issue, (c) ensuring that the appropriate Shari’ah principles and any relevant decisions and ruling certified are complied, (d) applying Ijitihad in all parts relating to ensure that Sukuk issuance are in conformity with Shari’ah principles, (e) must carry all function set out by SEC rules and regulations. 2. An issuer shall submit its listing application through a stockbroker. 3. The NSE shall exercise discretion over the admission and continued listing and quotation of Sukuk on its official list and may approve or reject the application for listing. 4. The NSE may approve applications for listing and quotation of Sukuk unconditionally or subject to such conditions, as it deems fit. 5. Where Sukuk are issued under a program, an issuer may list on NSE either all or a certain class or tranche of the Sukuk issued under the program. 6. No short-term Sukuk with maturity date of less than 1 year shall be listed. IJISRT21MAR027 7. Any issue, offer or invitation of Sukuk by public company intended to be listed on the exchange shall be subject to the listing requirements of the NSE. 8. Any issuer which is a foreign government, a national of any foreign country, or a company or other organization incorporated under the law of any foreign country shall appoint an agent or representative in Nigeria to be responsible for communication with NSE, on behalf of the issuer. 9. A foreign issuer shall prepare financial statements in accordance with International Financial Reporting Standards (IFRS), but shall also provide certified English translations of such financial statements for holders of its securities that are listed on NSE. 10. If the issuer is the SPV, the obligor shall comply with the requirements imposed on the issuer under the rules of the commission and of the NSE as if it were the issuer. A number of researches on Sukuk financing have been conducted to bridge the gap and support the system. Zein (2018), assesses the issues and challenges for developing corporate Sukuk: lesson from an Indonesian case study. The paper aims at mapping the issues and challenges of the development of corporate Sukuk in Indonesia and formulating a corporate Sukuk development strategy. Through the use of questionnaire and in-depth interview. Ahmet and Mehmet (2018), the study clarify secondary market of Sukuk and its problems and proposes some solutions to clear the hurdle of weak secondary market. Descriptive method of research was employed for the study. The study depict out that secondary market of Sukuk is weak because of the scarcity of Sukuk supply, hold-to-maturity culture, Shari’ah restriction, lack of standardization, inadequate trading platforms, low level of Sukuk rated and listed, lack of primary sales of Sukuk to retails investors and lack of large global Islamic banking institutions. Hosen (2016), provides insights in to the growth, contemporary issues in practice and challenges of Sukuk in Malaysia. Therefore, the study fin-point out some challenges such as Shari’ah compliance issues, prudential issues, regulatory plurality, Shari’ah opinions, Islamic security quality rating, liquidity of Sukuk instrument and public awareness of application. Talahma (2015), proposes financing system, which combines merits of the capital system (the Anglo-American market-Based financial system) and Islamic financing system, while at the same time avoiding the flows of each. The study introduces new system based on Islamic jurisprudence of financial transactions as well as establishes principles of capital system. Therefore, the study suggested that a new financing system combining the pros of each of the capitalism system and Islamic financing system be created in order to eliminate all the potential flows and defect of each. Oladunjoye (2014), examines the potential of using Sukuk as a tool of capital raising and infrastructural development in Nigeria and discusses the recent Sukuk issuance in Nigeria by Osun state under their #60 billion 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 www.ijisrt.com 959
4. Volume 6 , Issue 3, March – 2021 International Journal of Innovative Science and Research Technology ISSN No:-2456-2165 structures that can be used to suit various way of financing depending on the situation such as Ijarah, Murabahah, Takaful, Wakalah and so on. stories together to form a comprehensive picture of their collective experience. IV. Hanefah., Noguchi., & Muda (2013), the study discusses the importance of Sukuk as a financial instrument in a global financial markets and the study describe the difference between Sukuk and conventional bond and discusses the issue concerning accounting, recognition, measurement and disclosures in the financial statement. A comparative analysis between IFRSs and AAOIFI standards indicate that Sukuk or other Islamic financial instruments do not require separate accounting standards for recognition, measurement and disclosures. The study recommended that all IFRSs must at all-time consider the unique features of Islamic financial instruments in the development of new accounting standards. Zakaria., Isa., & Abidiu (2013), examines the effect of Sukuk rating as an additional risk in explaining the earning response coefficient based on a sample of 225 firms listed on the Bursa Malaysia from 2008-2011. The study tests whether Sukuk rating effect ERC after controlling the ERC determinant-beta, growth, earning persistence and size. The study finds that Sukuk rating is strongly correlated to default risk measure. Using reverse regression and the study also confirm that Sukuk rating is significant and negative to ERC. III. METHODOLOGY The study used primary source of data collection to gathered information from seven (7) respondents through interview. Based on the selected population of the study, the respondents were selected through their respected working places and they were selected based on their knowledge and experience about the issuance, also at the same time their active participation in Sukuk issuance in Osun state. This interview lasted for the period of three weeks that is from 28th March, - April 21st, 2016. The administration of the interview is as follows; the interview conducted with respondents from Osun State Debt Management Office and Lotus Capital Limited was face-toface interview individually. But for the Securities and Exchange Commission, the interview was conducted faceto-face except that the respondents were gathered in one place each respondent responding to the questions. Also assurance was made to ensure that all the information received from the respondents will be detained as confidential and for the purpose of research only and the interview was recorded and transcribed with the permission of the respondents. The study use thematic analysis techniques to analyze the data collected through interviewed. Data Presentation and Analysis 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 IJISRT21MAR027 THEME PRESENTATION AND ANALYSIS Challenges faced by Osun State Sukuk Sukuk offers a vast scope of innovation and a large potential for the growth of capital market, but at the same time development of the instrument faces some challenges. However, the issuance of Sukuk is regulated by the SEC through the framework provided under the guidelines on the offering of Islamic securities (guidelines). The main challenges facing Sukuk issuing process are the implementation of central Shari’ah governance system, the preparation of suitable regulatory framework and the licensing processes. It is known that for every new development there must be disadvantage likewise in process of issuing Sukuk in Osun state challenges has to expect. In this regard the interviewees agreed that they were faced with different challenges of (i) rules and regulations that give way for the issuance (ii) challenges of limited knowledge about the product and (iii) challenges of misconception of the people for relating Sukuk to religion practices. Interviewee SEC1 detailed: “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 In relation to the challenges in the process of structuring the Sukuk in Osun state. One of the challenges of Sukuk is attributed to the nature of the Sukuk structure (Ali & Humayon, 2007). The challenges of Sukuk issues exist in the structure of the Sukuk must comply with Shari’ah or has to be Shari’ah compliant (Abdullahi, et al., 2014). Accordingly, the nature of Islamic financial products is derived from an interpretation of Islamic law through consensus, and analogical reasoning, creates the possibility for varying interpretations among scholars (Hidayah, 2014). One of the main challenges facing Islamic finance industry in Nigeria as depicted by LOTUS is that, there is scarcity of qualified Shari’ah scholars who will give approval on Islamic financial product (see appendix). Also another challenge noted by interviewees DMO1 & DMO2 that Ijarah as an asset-based there are requirement needed before the issuance. While SEC1 added that, they were faced with challenges of coming-up with amount to be charged as tax and challenges of amending their rules to make Sukuk to be part of investible instrument for Pension Funds Administrators (see appendix). www.ijisrt.com 960
5. Volume 6 , Issue 3, March – 2021 International Journal of Innovative Science and Research Technology ISSN No:-2456-2165 V. RESULT FROM THE FINDINGS The result of the study shows that there is high level of challenges faced during the process of issuing Sukuk and structuring the Sukuk in Osun state, the main challenges facing Sukuk issuing process are the implementation of central Shari’ah governance system, the preparation of suitable regulatory framework and the licensing processes. VI. CONCLUSION AND RECOMMENDATION To conclude the findings of the study shows that there is high level of challenges faced during the process of issuing Sukuk and structuring the Sukuk in Osun state, the main challenges facing Sukuk issuing process are the implementation of central Shari’ah governance system, the preparation of suitable regulatory framework and the licensing processes. The study also recommends that there is highly need to have Shari’ah scholars who will satisfy the compliance of a product and provide legal rulings concerning a certain matter that may arise and the existing legal framework should always be complied with and improve to remain consistent with time and space. REFERENCES [1]. AAOIFI (2004), Accounting, Auditing and Governance Standards for Islamic Financial Institution, Shariah Standards for Financial Institutions Bahrain, Accounting and Auditing organization of Islamic Financial Institutions. [2]. Abdullahi, A., Yazid, S. A., Abullahi, A., and Kamarudin, S. M., (2014). Risk in Funding Infrastructure Projects Through Sukuk or Islamic Bond. International Review of Management and Business Research. Vol. 3. Issue 2 www.irmbrjournal.com [3]. Ahmet, U., and Mehmet, E. (2018). Secondary Market Sukuk : An Overview. International Journal of Islamic Economics and Finance Studies. Vol, 4, Issue 2. EISSN: 2149-8407, P-ISSN: 2149-8407. [4]. Ali, A. K. (2016). Infrastructure Deficit and Challenges for Growing Nigerian Economy. Punchng.com/infrastructure-deficit-… [5]. Ali, A. T. and Humayon, D., (2007). Risk of Sukuk Structure: Implication for Resource Mobilization. Thunder Bird International Business Review Vol. 49 (2). Pp. 203-223. IJISRT21MAR027 [6]. Amundi, A. M. (2012). Cross Assets Investment Strategy: Special focus. [7]. Dubai International Financial Centre, (2009). Sukuk Guide Book. [8]. Hanefah, M. M., Noguchi, A., & Muda, M., (2013). Sukuk: Global Issues and Challenges. Journal of Legal, Ethical and Regulatory Issues. Vol. 16, No. 1, 2013. [9]. Hidayah, N. N., (2014). Religious Compliance in islamic Financial Institutions. Thesis Submitted to Aston University for the Award of Doctor of Philosophy. [10]. Hosen, M. (2016). The Fitfalls of the Malaysian Sukuk Industry: Issues and Challenges in Practice. Working Paper June, 2016. Doi: 10.13140/RG.2.215203.35368. [11]. IIFM Report (2018). A Comprehensive Study of the Global Sukuk Market. 7th Edition. [12]. IIFM Report (2019). A Comprehensive Study of the Global Sukuk Market. 8th Edition. [13]. Isra (2012). Islamic Financial System: Principles and Operations. Published in 2012 by International Shari’ah Research Academy for Islamic Finance (ISRA). 2nd Floor, Annex Block, Menara Tun Razak, Jalan Raja Laur, 50350 Kuala Lumpur, Malaysia. [14]. Lathem and Watkins (2016). The Sukuk Hand Book: A Summary [15]. MWIFM (2016). Global Sukuk Report1Q 2015. [16]. Oladunjoye, O. M. (2014). Sukuk as a Tool for Infrastructural Development in Nigeria. Journal of Islamic Banking and Finance, March 2014, Vol.2, No.1, pp.335-344 ISSN: 2374-2666 Published by American Research Institute for Policy Development. [17]. Sc. (2004). Guidelines no the offering of Islamic securities. Kuala Lumpur; securities commission of Malaysia. [18]. Talahma, I. K. (2015). Islamic Bond (Sukuk): Opportunities and Challenges. Asper Journal of International Business and Trade Law. Vol. XV, pp. 391-431. [19]. Zakaria, B. N., Isah, M. A. M., & Abidiu, Z. A. R., (2013). Sukuk Rating, Default Risk, and Earnings Response Coefficient. Advances in Natural and Applied Sciences. Vol. 7(2), pp. 131-137, ISSN 19950772. [20]. Zein, L. N. (2018). Issues and Challenges for Developing Corporate Sukuk: Lesson from an Indonesian case study. RJOAS. 2(74), February, 2018. Doi https://doi.org www.ijisrt.com 961
6. Volume 6 , Issue 3, March – 2021 International Journal of Innovative Science and Research Technology ISSN No:-2456-2165 APPENDIX Questions What challenges do you encounter in the process of issuing the Sukuk? People perception on Sukuk as an instrument attached to religious practice What are the challenges the agencies face in the process of Sukuk structuring in Osun state? Challenge come across in the process of structuring the Sukuk instrument IJISRT21MAR027 TRANSCRIPTION FOR THE INTERVIEW Discuss Unit Subthemes The only challenges I can speak to may be at the time we started there were no specific rules on Sukuk issuance in the SEC as we all know if you going to issue any instrument or undertaken transaction there must be rules on that. LOTUS Well the challenges are enormous been the first Sukuk in Nigeria and sub – Sahara Africa nobody for you to hear word Sukuk, you will ask what is the meaning of that.DMO1 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 The one major challenge is the affiliation of the word Sukuk to Islam, people are thinking you want to Islamize the state, you want to make the state in to Islamic country, so is very difficult for the state to convince not even the citizens, even the potential investors about the advantages of Sukuk.DMO1 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 -no specific rules on Sukuk issuance in the SEC - first Sukuk in Nigeria and sub – Sahara Africa nobody for you to hear word Sukuk - limited knowledge about the Sukuk product - challenges of coming-up with the rules on Sukuk We don’t have a scholar that will interpreted the law that is applicable to the issuance of Ijarah that was the confidential challenge, so we chose Ijarah because we want the structure that will be tradable .LOTUS -Scholar that will interpreted the law. -challenge on Ijarah been an assets based - arranging the structure. www.ijisrt.com Themes Challenges faced by Osun state Sukuk -want to Islamize the state challenges of misconception - challenges of not having shari’ah advisors - foreign investors to buying in Sukuk 962
7. Volume 6 , Issue 3, March – 2021 International Journal of Innovative Science and Research Technology ISSN No:-2456-2165 Exactly we have a challenge on Ijarah been an assets based, take for instance all the schools that we built with Sukuk we need to go round 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 IJISRT21MAR027 www.ijisrt.com -Fees charge, and looking at even the market and the agreement 963