Rehabilitation and Reconstruction of the North-East: The Role of Sukuk Financing

The Northeast region of Nigeria has been experiencing the devastating impact of Boko Haram insurgencysince 2009, which triggeredhumanitarian crisis and destruction of infrastructure,such as schools, hospitals, roads, bridges as well as homes and farmlands, leading to many becoming internally displaced persons and refugees. Both governmental and non-governmental organizations have been mostly providing relief services and materials, whilst only few Federal Government agencies and State Governmentsare providing reconstruction and rehabilitation due to insufficient sources of funds(Olaseni, 2012).The emergence of Sukuk to Nigerian Capital Market is a new development that provides alternative funding avenue for both State and Federal Governments to finance projects and infrastructure development for nation building (Alaro, 2020).It is against this backdrop that this study aims to reviewthe approaches of financing rehabilitation and reconstruction programmes in the Northeast and examines how the potentials ofSukuk financing could properly be utilized to complement the infrastructural deficit in the region. Thus, the research is an exploratory qualitative research that sourced cross sectional primary data collected through the use of structured questionnaire. Multistage purposive sampling method was employed in selecting the respondents for the study across the study area. Thematic Analysis was employed as the method of data analysis. Both descriptive and inferential statistics were used to summarize and interpret the results of the thematic analyses of the

and rehabilitation.Since 2009, the Northeast region has been experiencing the devastating impact of Boko Haram insurgency which triggered humanitarian crisis and destruction of infrastructure,such as schools, hospitals, bridges as well as homes and farmlands, leading to many becoming internally displaced persons and refugees. The Federal Government and the Northeast State Governments, alongside the local and international Non-governmental organizations and development partners have been mostly providing relief services and materials, whilst only few Federal Government agencies and State Governmentsare providing reconstruction and rehabilitation. Generally speaking, funding has been a major challenge to infrastructural development in Nigeria for decades, since government resources can hardly meet the increasing demand. Consequently, government has relied on foreign loans to complement infrastructural deficit (Olaseni, 2012). Though the emergence of Sukuk to Nigerian Capital Market is a new development, but it provides alternative funding avenue for both State and Federal Governments to finance projects and infrastructure development for nation building (Alaro, 2020). It is against this backdrop that this study aims to reviewthe approaches of financing rehabilitation and reconstruction programmes in the Northeast and examines how the potentials ofSukuk financing could properly be utilized to complement the infrastructural deficit in the region. As well, the study identifies the areas of priority that need to be rehabilitated and constructed via Sukuk financing as well as the appropriateSukuk model that will suit the peculiarities of rehabilitation and reconstruction programme.
According to Olaseni, (2012)funding has become a major challenge to infrastructural development in Nigeria for decades. As the country's population rises, demand for additional infrastructure in all sectors also increases. Unfortunately, the government resources can hardly meet the increasing demand. Consequently, government has relied on foreign loans to complement budgetary allocations in the provision of infrastructure.
As the Government of Nigeria makes progress in securing significant parts of the North-East, much of the region remains fragile.
Northeast region of Nigeria comprises 6 States: Adamawa, Bauchi, Borno, Gombe, Taraba and Yobe. According to the 2006 national census, the 6 States that comprise the Northeast region have a population of over 18.9 million, that is, 13.5% of Nigeria's over 140 million total population (NPC, 2006). As in many other regions of the savannah area, it is estimated that 70% percent of the population lives in rural areas where the primary occupation is agriculture. It is estimated that about80-90 percent of the population depends on agriculture, fisheries and livestock for their livelihoods and food security (FAO, 2017).
The North-East Nigeria Recovery and Peace Building Assessment (RPBA) was conducted by the Government of Nigeria, with the support of the European Union (EU), the United Nations (UN) and the World Bank (WB) within the framework of the 2008 Joint EU-UN-WB Declaration on Post Crisis Assessments and Recovery Planning.The assessment report provides a shared understanding between the Government of Nigeria and its local and international partners on the peace building and recovery needs of the North-East. The report also sets a framework that could bridge the operational gap that can exist between humanitarian relief and recovery programmes, further encouraging a holistic approach to stabilization efforts in the North-East.
In essence, Ibrahim and Olu (2015), recommended that the Governments should harmonize efforts with foreign partners and prioritize needs for an efficient allocation of scarce resources within the affected area. There is also the need for Federal and state Governments, in collaboration with the international community and partners to start the process of reconstructing the communities and rehabilitating the citizens who have been affected by the insurgency.
Subhani, (2010) observed that the global financial crisis of 2007 has created awareness of the ethical flaws of the conventional financial system. This in turn has the potential to make Islamic finance appeal beyond the Muslim World; because countries have deemed it necessary to search for a financial system that can withstand the taste of time and as a result the debate about the mission, operations and viability of the Islamic financial system has not only grown but has considerably widened.
The introduction of Islamic capital market has been a relatively recent development in Nigeria in comparison with the more established conventional products. The legal framework for the issuance of Sukuk in Nigeria was firstly enshrined in the Investments and Securities Act, 2007. Subsequently in February, 2013, SEC introduced new rules to regulate the issuance of Sukuk in Nigeria.
According to Rule 572 of the SEC, "all public companies (including SPV"s), state governments, local governments, and Government agencies as well as multilateral agencies are eligible to issue, offer or make an invitation of Sukuk upon seeking the Commission"s approval" (SEC Rules 2013).
Rehabilitation and Reconstruction of the North-East:  (Oladele, 2014). This millstone achievement is regarded as a turning point in the history of Sukukissuance in Nigeria, as such; Osun State Government is seen as trailblazer in this regard (Lotus Capital, 2014). However, at Federal Government level, the first Sukuk bond issuance was the Federal Government of Nigeria (FGN) N100.0 Billion IjarahSukuk, which was issued in 2017 with a tenor of seven (7) years and a Rental Income rate of 16.47% per annum, which will be paid every six months. The proceeds were used to construct and rehabilitate 25 roads in Nigeria"s 6 geopolitical zones selected by Ministry of Power, Works and Housing due to their strategic economic importance (DMO 2018).
Similarly, with the aim of promoting financial inclusion and deepening the investor base for FGN securities, the Debt Management Office (DMO) of Nigeria on Tuesday, July 23, 2019, listed on the Nigerian Stock Exchange, the second ₦100bn, 7-Year, FGN Sukuk due to mature in 2025. According to the CBN Half Year Activity Report, 2019: "The total FGN Sukuk Bonds outstanding at end-June 2019 stood at ₦200.00 billion, the two issues of the 7-year Sukuk of ₦100.00 billion each attracted rental rates of 16.47 and 15.74 per cent, respectively, payable semi-annually. The proceeds were targeted at the rehabilitation of roads across the six geopolitical zones (CBN Half Year Activity Report, 2019).
In a nutshell, the issuance of guidelines for the operations of Sukukin Nigeria by the Securities and Exchange Commission (SEC) creates economic value within a Shari"ahcompliant structure that has been successfully practiced in some jurisdictions, particularly, Asian countries and Middle-east in financing project and infrastructure development. Though the emergence of Sukuk to Nigerian Capital Market is a new development, but it provides alternative funding avenue for both State and Federal Governments to finance projects and infrastructure development for nation building.
Hence, Nigeria in general and Northeast in particular, will continue to reap from the benefits of Sukuk issuance taking into cognizance its potentialitiesin terms of economic growth,diversification, financial inclusion and infrastructural financing amongothers as wellas large Muslim population who would like to invest their money in an interest free Shari"ah compliant product.

B. THEORITICAL
Etymologically, Sukuk is an Arabic word that has its root in the word Sakk, which means financial instrument or cheque, it is reported that the modern cheque originated from this Arabic term. In modern financial terminology, Sukuk is commonly refers to as Islamic Bond, meaning a sharia-compliant financial certificate that represents proportionate beneficial ownership in the underlying tangible asset(s) of particular projects or investment activity (IIBI, 2019).

According to Accounting and Auditing Organization of Islamic Finance
Institutions (AAOIFI) Sharia standard no.17 (2), the term Sukuk refers to a certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services or in ownership of the asset of particular project or special investment activity. Similarly, The Islamic Financial Service Board(IFSB) in its Capital Adequacy Standard(IFSB 2) defined Sukuk as "certificate that represents the holders proportionate ownership in an undivided part of underlying asset where the holder assumes all right and obligations to such asset"". In Nigerian context, the Rules and Regulations of the Securities and Exchange Commission of Nigeria (SEC Rules 2013), defined Sukukas investment certificates or notes of equal value which evidences undivided interest/ownership of tangible assets, usufructs and services or investment in the assets of particular projects or special investment activity using Sharia principles and concepts as approved by the SEC. According to Ayub, (2007), there are three (3) major parties involved in any Sukukstructure, namely: originator, investors and issuer. The originator is the government or corporate entity that intends to benefit from the Sukuk issuance, while the investors are certificate holders, the issuer called special purpose vehicle (SPV) is an independent legal entity that manages the pool of assets related to the Sukuk and acts as an intermediary between originator and investors. contract between parties to a transaction) and MusharakahSukuk (a partnership not much different from Mudharabah). It noteworthy that despite the variety of Sukuk, IjarahSukukremains the most popular type of Sukuk issued around the world by governments and corporate entities. This is due to its simplicity and favor with Sharia scholars, in addition to its similarity with "lease" financing in conventional financial system (Afshar, 2013). According to Olaniyi,Echchabi, and Alfarisi (2013): "Sometimes people perceive that Sukuk is similar to bonds, however, there are some elements that differentiate them, such as: nature, claims, security, principal and return, purpose, trading ofsecurity and responsibility of holders. The other distinctive feature of Sukuk is the approval of Shari"ah adviser to ensure that all aspects of Sukuk issuance comply with Shari"ah principles" P140. This statement shows that Sukuk is very much analogous with conventional bond in terms of their purpose, objective and use, but Shari"ah distinguishes Sukuk in terms of mode of application and other features. Sukuk certificates are intended to replicate the functions of conventional bonds and tradable securities in resources mobilization from markets and injecting liquidity into the enterprise or government and in providing stable resource of income for investors. But, there are many differences that distinguish the Sukuk from debt bonds. But amongst them, the most important difference is that Sukuk structure must follow the basic requirements stipulated by Shari"ah principles regarding Islamic Financial transactions, for it to become a Shari"ah compliant product (Chik, 2012). These basic requirements are the avoidance of Riba "interest", the avoidance of Gharar "uncertainty", the avoidance of any form of Maysir "gambling", and the avoidance of Islamically prohibited transactions such as alcohol, tobacco, pork-related products, conventional financial services, and immoral entertainment. On the other hand, debt bonds are based on loan contract to create indebtedness (Cakir and Raei, 2007). However, in spite of the differences explained above, there are some similarities between Sukuk and debt bonds such as marketability, ratability, enhance-ability and versatility. Sukuk are marketable in the sense that they are monetized real assets that are liquid, easily transferred and traded in the financial markets. While ratability of Sukuk referred to its being easily rated, enhance-ability allows different Sukuk structures to be pooled for credit enhancements, and versatility which makes the variety of Sukuk structures for structuring across legal and fiscal domains, fixed and variable income options, (Alvi, 2006

C. METHODOLOGY Population and Sampling Technique
The study adopted multistage sampling method in determining the appropriate respondents in the study. In the first stage, three (3) States (Adamawa, Borno and Yobe)were purposively selected out of the six States of the region. The choice of the States was informed by the fact that the selected States are the worst affected by the insurgency in the zone. In the second stage, three categories of stakeholders/entities(comprising Federal Government Agencies, State Governments and Non-Governmental Organizations) were purposively identifiedin each of the three selected States as the majorplayers/stakeholdersresponsible for the rehabilitation and reconstruction programmein the region, giving a total of nine (9) selected entities. In the third stage, threeAgencies/Ministries/organizations were purposively selected from each of the nine selected entities, giving a total number of twenty seven (27) organizations. In the fourth stage, threerespondents werepurposively selected from managerial cadre of each of the twenty seven organizations, giving a total number of eighty one (81) respondents. The following table 4.1 summarizes the entire population categories and sampling frame: Source and Instrument for Data Collection: The study is an explorative qualitative research. Cross sectional data were collected from primary sourceandused for the main analysis in this study. Questionnaire method was used in collecting relevant information which are in form of opinions/views, from the sampled respondents selected from the population in the study area.In addition to that, documented secondary information was also utilized, which includes record from State Ministries of Finance; Ministry of Budget and Planning; Ministry of Works; Ministries of Humanitarian Affairs; Ministries of Rehabilitation, Resettlement and Reconstruction; Non-governmental development partners, journal papers and conference proceedings. Both descriptive and inferential statistics were used to analyze the data for the study. Thematic Analysis was employed as the methodof data analysis in this study. Thematic analysis is a method for identifying, analysing, and reporting patterns (themes) within data. It organises and describes your data set in detail and interprets various aspects of the research topic (Braun&Clarke, 2006). However, they also argues that, thematic analysis should be considered a method in its own right as it provides a flexible and useful research tool, which can potentially provide a rich and detailed, yet complex account of data.
The qualitative data or the raw responses (opinions) from the primary respondents were logically arranged into discuss units according to each recommendation/selection of the respondents, then systematically converted into sub-themes, and further analyzed using the thematic method of data analysis, and scientifically extracted the themes (or the unanimous commonest/popular opinion of all the subjects), with a view to determine the findings. Descriptive statistics such as frequency distribution tables and percentages were utilized in summarizing, presenting and interpreting the results of the two conducted thematic analyses.
The study examined the correlation between the two variables (  corruption/nepotism, increasing efficiency and cost effectiveness, because the Sukuk project is usually executed or supervised by the third party (SPV) before handing over to the government. 5. It also serves as an avenue for alternative source of government funds/revenue in addition to its statutory allocations and loans 6. It could be used for public private partnership, for financial diversification and for rapid economic development. The above table 5.1 shows the summary of the resultfrom our thematic analysis 1 (see the attached appendix), where we have five recommendations (Statutory Allocations, Loans, Grants Aids & Donations, Sukuk and Others) and their respective themes (numbered 1-n beneath) that emerged from the analysis of the collected qualitative data (opinions) of the 65 respondents on the above question.
The result shows that, 11 respondents (17%) recommended the use of statutory allocation in financing the RR in the NE due to the above two major themes extracted from their reasons. 2 respondents (3%) opted for the collected of loans for the RR in the NE with one theme above. 17 respondents (26.1%) are on the opinion that Grants, Aid, and Donations are the most appropriate means of financing the RR in the NE, the above four major themes were extracted from their collective opinions. 24 (37%) out of the 65 total respondents opined that Sukuk will be the most suitable source of funding the RR in the NE because of the above 6 different themes collated from their various supplied reasons. 1 respondent (1.5%)opted for other means of funding other than the above four, with no valid reason. While the remaining 10 respondents representing (15.4%) of the contacted respondents could not respond to this question due to reasons known to them.
The result of the above thematic analysis and their respective frequencies suggests that the issuance of Sukuk will be the best means of financing the rehabilitation and reconstruction program(s) in the Northeast amongst all other Rehabilitation and Reconstruction of the North-East: The Role of Sukuk Financing   (Housing, Schools, Hospitals, Roads & Bridges and Others) and their respective themes (numbered 1-n beneath) that emerged from the analysis of the collected qualitative data (opinions) of the 65 respondents on the above question. The result shows that, 13 respondents (20%) recommended the Housing as the first critical infrastructure to be rehabilitated and reconstructed in the northeast due to the above four major themes which were extracted from their reasons. 19 respondents (29.2%) opted for schools as the most critical area to be reconstructed and rehabilitated in the NE due to theseven themes mentioned above. 7 respondents (10.8%) are on the opinion that hospitals require theurgent reconstruction and reconstruction in the northeast, the above five major themes were extracted from their divergent views. 10 (15.4%) out of the 65 total respondents opined that roads and bridges are more dilapidated, and thus needed the immediate revival in the NE because of the above three different themes deduced from their variety of perceptions. 5 respondents (7.8%) argued for infrastructures other than the above four (e.g. Government Offices, Markets or Shops), with the above valid reason. While the remaining 11 respondents representing (16.9%) of the total contacted respondents did not respond to this question due to some reasons.
The findings of the above thematic analysis 2, the themes and their respective frequencies suggest that the schools as well as the entire education sector is the most critical area that requires immediate attention in the rehabilitation and reconstruction programme(s) in the Northeast amongst all other listed potential areas to revive. This was justified by the fact that the choice of schools by the respondents has the modest frequency of 19 which constitutes the highest percentage of 29.2%, and has the highest number of seven extracted themes, which justify the significance of starting with schools over other destroyed infrastructures.