Nigeria-based bank issues first Islamic bond

AFRICA Finance Corp (AFC) has issued a three-year $150-million (R2-billion) sukuk, becoming the first African government-backed entity to sell an Islamic bond.

The announcement confirmed a Reuters report this month that the bank would raise a dollar sukuk through a private sale.

AFC, a pan-African institution based in Nigeria, said it had received subscriptions of $230-million (R3.06-billion) for a debut sukuk initially planned to raise $100-million (R1.33-billion). It did not disclose the yield. “This sukuk represents a milestone in our financing activities . . . to build new relationships,” chief executive Andrew Alli said.

AFC was set up by African governments and the private sector in 2007 to mobilise investment for infrastructure across the continent. It has since invested more than $4-billion (R53.28-billion) in 26 countries.

Other African-based issuers are likely to follow with sukuk of their own, analysts say, as Islamic bonds can be cheaper than conventional bonds, especially when interest from the market is high.

Nigeria, which has the largest Islamic population in sub-Saharan Africa, is already looking for advisers to organise its first Islamic bond in the domestic market.

Moody’s Investors Service assigned AFC’s sukuk an A3 credit rating.