The Central Bank of Nigeria (CBN), Security and Exchange Commission (SEC) and Debt Management Office (DMO) on Monday, in Abuja, met on how to develop alternative finance modes for infrastructure development in the country.
Speaking at the inaugural meeting, CBN governor, Malam Sanusi Lamido Sanusi, said the forum would set up a committee that would explore alternative financing modes to boost infrastructure development.
He said: “The objective of the meeting is to inaugurate a joint committee that will explore the prospects and set out procedures for using alternative financing modes for development of the infrastructure sector of our national economy.
“It is expected to contribute to the effort of the Federal Ministry of Finance to raise funds from international markets and diversify sources of funding for projects critical to our national development.”
According to him, infrastructure development projects are usually capital intensive while funding of such projects from historical perspective is 100 per cent government financed.
This, he said, had proved insufficient resulting in inefficient allocation of resources that give rise to white elephant and abandoned projects. He noted that private sector funding through Private Public Partnership and other mechanisms were potential sources of alternative finance.
Sanusi said Islamic finance in some parts of the world had served as an alternative financing mode.
“The CBN thus realises, as many regulatory authorities all over the world do, the potential of this alternative form of finance.
“We view it as not only having the potential of providing much needed funds for infrastructure development through foreign direct investment, but also of developing the critical mass needed for a capital market that will offer products and instruments for the investment and liquidity management needs of institutions that are coming on stream to offer alternative form of financial intermediation,’’ he said.
He said the committee would set out the legal framework that would foster the issuance of sukuk (Islamic bond) in Nigeria, especially trusts and securities laws that would facilitate the operation of Special Purpose Vehicles (SPVs).
The committee, he added, would come up with a frame work on how to create a level playing field for Islamic instruments in the capital market while identifying underlying assets for possible issuance.
The committee, he said, would also undertake the following: “Examine all other relevant issues related to the sukuk issue, including listing, governing law, parties, type size, tenor, pricing, rating and currency and provide necessary suggestions.
“Make any other recommendation that will be presented to the ministry of finance which will assist in tapping into the international sukuk market for the purpose of infrastructure development in Nigeria.’’
Sanusi gave an assurance that the apex bank would continue to engage in active capacity building involving staff of relevant agencies in the project to help develop the required expertise needed for the development of the sector.