SUKUK as a viable option instrument of financing infrastructural development in Nigeria

Abstract

Infrastructure deficit is a major source of concern for stakeholders, as bad infrastructure is one of the country's biggest roadblocks to smooth corporate operations and capital inflows. Given the rise of population growth in Nigeria and the consequence need for infrastructure development to enhance the standard of living, it becomes necessary for government to build infrastructures at minimal cost. The present mode of financing infrastructure is usually marred due to high cost of servicing the debt secured to finance the infrastructure deficit in Nigeria. This has call for the best alternatives to finance the capital projects in Nigeria. Sukuk financing is one of the strategies for enhancing growth and development through capital project financing. Using exploratory research design, the study examines sukuk as a panacea for financing infrastructural deficit in Nigeria. The findings revealed that with the recent over-subscription with 346% (N865bn) of just concluded offered, sukuk can be used to generate needed fund to finance infrastructural deficit in Nigeria. The study therefore concludes that if alternatives source with minimum cost are pursued, Sukuk can be a viable option for funding large-scale infrastructure investments in Nigeria, instead of seeking for external loans, which usually have negative effect on Nigeria economy. The study therefore recommends that government should take immediate steps to increase non-Muslim awareness of sukuk by engaging in more interactions with influential religious organizations, as sukuk might be utilized to fund Nigeria's deficit budget. This will improve capital market intermediation and stimulate the issuance of more sukuk as a reliable source of funding.