{"id":290396,"date":"2020-06-28T08:38:21","date_gmt":"2020-06-28T07:38:21","guid":{"rendered":"https:\/\/nigerianfinder.com\/?p=290396"},"modified":"2020-06-28T08:39:37","modified_gmt":"2020-06-28T07:39:37","slug":"sukuk-investment-in-nigeria","status":"publish","type":"post","link":"https:\/\/nigerianfinder.com\/sukuk-investment-in-nigeria\/","title":{"rendered":"Sukuk Investment in Nigeria: All You Need to Know"},"content":{"rendered":"

Have you often heard of the term \u2018Sukuk\u2019 and do not know what it is about? <\/strong><\/p>\n

This article provides you with information on Sukuk investments in Nigeria, how to invest and all you need to know about it.<\/strong><\/p>\n

Read on below: <\/strong><\/p>\n

What is sukuk?<\/strong><\/h3>\n

Sukuk is a tool of investment or certificate that represents the ownership interest of the holder in an asset or pool of assets. The holder of the certificate (sukuk) is entitled to receive income from the use of the assets. The implication of this is that when the issuer of the Sukuk bond (in this case, the Federal Government) sells an individual investor or group a certificate, the Federal government then uses the proceeds of the bond to purchase an asset (which could be road construction). The individual investor or group has partial ownership of this asset and is paid an income according to contract. The issuer of the bond (Federal Government) must also make a contractual promise to buy back the bond at a future date.<\/p>\n

Sukuk is part of the Islamic financial system which comprises institutions, products (such as Sukuk), and services. This financial system operates in accordance to Islamic law known as Shariah under the principle of Islamic commercial laws. The Islamic financial system involves the means by which corporations or governments raise capital and make other forms of investments according to Shariah. Islamic law does not permit interest rates, hence all products and services under the Islamic financial system do not have interests paid on them.<\/p>\n

\"Sukuk<\/p>\n

Just like conventional financial systems, Islamic financial system comprises of the following:<\/p>\n

Deposit-taking banks<\/p>\n

Fund managers<\/p>\n

Investment firms<\/p>\n

Insurance companies known as takaful<\/p>\n

All of these institutions are governed both by Islamic law and the conventional finance industry\u2019s rules and regulations.<\/p>\n

The basic principle you need to know behind Sukuk, popularly referred to as an Islamic or Shariah-compliant \u201cBond\u201d, is that the holder has undivided ownership right in a particular asset. Therefore, he or she is entitled to the return generated by that asset.<\/p>\n

About\u00a0Sukuk\u00a0bonds\u00a0\u00a0<\/strong><\/h3>\n

Sukuk is derived from the Islamic word, Sakk, which can be translated to mean legal instrument, deed, and cheque. Sakk also means to strike a deal on a paper or document. As a component of the Islamic financial system, Sukuk is a non-interest-based investment and financing instrument. However, its application is not restricted to Muslims as it conforms to ethical standards and justice. Sukuk simply finds a way for investments to take place in an alternative manner to conventional bonds. Islamic Finance is aimed at justice and equity for all parties involved in a transaction.<\/p>\n

The difference between Sukuk bonds and Conventional bonds<\/strong><\/h3>\n

Sukuk bonds represent ownership in assets while conventional bonds represent an obligation of debts from the issuer<\/p>\n

The purposes of funds raised from a Sukuk bond are strictly for ethical purposes while proceeds from bonds issued conventionally can be used to finance any legal purpose<\/p>\n

With Sukuk bonds, rental income is paid on assets while with conventional bonds, interest is paid.<\/p>\n

Benefits of investing in Federal government Sukuk bonds<\/strong><\/h3>\n

\u2022 When you invest in Federal government Sukuk bonds, you are guaranteed of regular cash flow. This is because rental income will be paid half-yearly to Sukuk Holders.
\n\u2022 The rental paid to the owner is tax-free
\n\u2022 Investing in Sukuk bonds is safe and risk-free because they are issued by the Federal Government of Nigeria and backed by the full faith of the FGN
\n\u2022 Investing in Sukuk bonds is a secure way of diversifying one\u2019s asset portfolio
\n\u2022 Sukuk bonds are acceptable as collateral when borrowing from banks and other conventional financial institutions
\n\u2022 Sukuk bonds are classified as Liquid Asset by the Central Bank of Nigeria<\/p>\n