An Analysis of the Osun State Quasi-Sovereign Sukuk in Nigeria

This study quantitatively examined the Osun State quasi sovereign sukuk as a subnational public infrastructure financing tool within the Nigerian subnational public finance system. The research was informed by the fact that it was necessary to leave behind descriptive accounts of sukuk adoption and progress to the quantification of performance. The analysis employed ratio analysis, comparison of trends, and other descriptive statistics using secondary fiscal and project level data in order to determine the structural allocation efficiency, the behavior of the financing costs, the outcomes of the infrastructure delivery and the fiscal exposure of the sukuk issuance. This was done using mathematical indicators such as the financing cost ratios, project completion rate indices, time variance measures, and debt service to revenue ratios. The findings revealed that sukuk proceeds had a high level of asset allocation accuracy with more than two thirds of the assets allocated to core infrastructural assets. The cost ratios of financing observed were also lower than similar conventional subnational borrowing levels, which is also cost efficient. The indicators of infrastructure delivery revealed statistically significant enhancement in completion rates and less implementation variance after the issuance of the sukuk. Fiscal exposure ratios also indicated that sukuk services liabilities were at comfortable and sustainable levels with respect to state revenues. The results suggested that, given the correct structure and incorporated into the fiscal planning scheme, quasi sovereign sukuk can be an efficient and fiscally disciplined infrastructure financing tool.