(Ecofin Agency) - The Debt Management Office (DMO) has said that Nigeria will sell its initial $328 million sovereign sukuk in the local market this June. This will be used to finance road projects in the country.

“The issue is part of plans to fast track the development of infrastructure and engage in project-tied capital raising,” the debt office said adding that the country has road, railway and power infrastructure challenges.

According to DMO, the Islamic bond which has a 7-year maturity will be put on sale starting from June 28 and will be sold for three days through book building. The bond will be traded on the Nigerian Stock Exchange and also on the FMDQ over –the –counter platform.

The sale will be managed by First Bank and Islamic wealth manager, Lotus Capital, and will aim for retail and institutional investors.

Osun State on 2013, issued N10 billion ($31million) worth of sukuk and ever since then no other sukuk transaction followed. This issuance is, however, part of plans to establish alternative funding sources for the government, DMO added.

Nigeria has the largest Islamic population in sub-Saharan Africa, with about half its population being Muslims. It is also home to one of Africa's fastest-growing consumer and corporate banking sectors.

Africa’s second largest economy intends to borrow about $10 billion from debt markets, to fund a budget deficit aggravated by lower oil prices which have reduced government revenues and weakened the naira . It also targets concessionary sources to clear its funding needs and expects to issue N20 billion ($62million) green bond after raising a $1.5 billion Eurobond in the first quarter.

Anita Fatunji