Senegal’s sukuk paves the way for SA and Nigeria


Sadibou Marone and Jaco Visser

Senegal has beat South Africa and Nigeria to market with sub-Saharan Africa’s biggest sovereign sukuk, clearing the path for the continent’s biggest economies to follow with debut Islamic bonds.

Senegal opened a sale last week for 100 billion CFA francs (R2.1bn) of the debt that would close on July 18, tapping a global market that may surpass record issuance of $46.5bn (R483bn) in 2012, according to arrangers. Worldwide offerings have risen 27 percent to $24.4bn in the first half of this year from a year earlier.

Gambia, which shares a border with Senegal, sells sukuk maturing in less than a year weekly, with yields on 91-day notes falling 117 basis points this year to 14.89 percent.

“Other governments on the continent will be watching the issuance with interest,” Sarah Tzinieris, the principal Africa analyst at risk advisory firm Maplecroft, said on Wednesday. “With the market still relatively undeveloped in sub-Saharan Africa, the first countries issuing sukuk bonds – such as Senegal – are in a strong position to position themselves as African hubs for Islamic finance.”

South Africa, which has the continent’s largest stock and bond exchanges, planned to issue a sukuk this year, the National Treasury said in April.

A sukuk was part of Nigeria’s strategic framework through 2017, Patience Oniha, the Debt Management Office market development director, said on Thursday. Osun state became Nigeria’s first state to sell sukuk when it issued 10 billion naira (R619 million) of Islamic debt in September last year.

Kenya might offer sukuk to broaden its investor base, Treasury Secretary Henry Rotich said last week.

Since coming to power in 2012, Senegal’s President Macky Sall has shut or combined 59 state agencies and allocated more money to curb water and power cuts in Dakar. He has audited the administration of his predecessor, Abdoulaye Wade, and set up a court to try economic crimes, while reducing the inflation rate.

Its economy is set to expand 4.6 percent this year, the fastest pace since 2007, and 4.8 percent next year, the International Monetary Fund has forecast.

“Senegal is issuing sukuk bonds before more developed markets in north Africa, such as Morocco and Tunisia, reflecting the investment-minded approach of the government, as well as its crucial need to raise capital,” Tzinieris said.

The sukuk issuance comes as Senegal plans to sell its second eurobond, with the nation seeking to raise $500m by next month. Standard Chartered, Société Générale’s local unit and Citigroup had been appointed to manage the offering, Ange Constantin Mancabou, an adviser to Finance Minister Amadou Ba, said last week.

Yields on its notes due in May 2021 have dropped 87 basis points this year to 5.98 percent on Thursday. The average yield on African dollar bonds dipped to a one-year low of 4.97 percent on May 29, JPMorgan Chase indices show.

In July 2012, Sudan raised 955 million Sudanese pounds (R1.6bn) selling Islamic debt, with no issuance since, Osama Saeed, the head of the research and statistics section at Sudan Financial Services, said.

South Africa’s Treasury did not immediately respond to e-mailed requests for comment on Thursday.

Senegal has the second-largest economy in the eight-nation West African Economic and Monetary Union. It and Cape Verde are the only countries in the region that have never had a military coup.

Half of the debt earmarked for the sukuk had already been sold, Budget Minister Mouhamadou Mactar Cisse said on Wednesday.

“The launch of this sukuk bond marks an important milestone for the development of Islamic finance” in west African markets, he said. “It allows Islamic banks and financial institutions to improve their liquidity.” – Bloomberg


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