The Nigerian government has secured Shariah compliant financing for its Special Agro-Industrial Processing Zone (SAPZ) to boost food security, in a move underscoring the West African nation’s openness to utilizing Islamic financial instruments to support its economic endeavors.
The US$150 million line of financing is provided by the IsDB.
“The project can play a key role in pushing Nigeria’s economic recovery in the post-pandemic period. Given that Nigeria has a high agricultural potential, SAPZ will help in boosting the country’s agricultural supply chain. With this in mind, tapping prospects in a special agro-industrial processing zone and pushing for its advancement is one way to achieve inclusive growth and sustainable development in Nigeria,” IsDB President and Group Chairman Dr Muhammad Al Jasser said.
The SAPZ program is estimated to cost US$575 million and is receiving funding support from other multilateral finance organizations including the African Development Bank Group and the International Fund for Agricultural Development. The IsDB’s financing commitment would be channeled toward developing the infrastructure for three agro-industrial processing hubs (AIHs) and 10 agricultural transformation centers, improving irrigated land and farm to market access roads, supplying certified agricultural inputs and extension services, developing skills for 10,000 farmers and MSMEs and updating agro-industrial zone policy as well as establishing a regulatory institution/special regulatory regime.
The project covers the Federal Capital Territory (FCT) as well as seven other states; the IsDB project will cover FCT, Kano and Kwara.
With the overall goal of increasing investments by private sector companies within the AIHs by US$375 million, creating 185,000 new jobs, including 50% for women and 50% for youth, increasing the yields of key crops by at least 50%, reducing post-harvest losses within the catchment area by at least 10–20% and increasing the income of small producers/farmers by 25%, the SAPZ project meets several UN sustainable development goals and resonated with the IsDB’s climate change policy, women and youth policy as well as environmental and social safeguard.
Shariah compliant financing is increasingly becoming a part of Nigeria’s funding strategy. The government first issued a Sukuk facility in 2017 and has tapped the market another three times since to fund its budget needs. The IsDB has also extended a string of Islamic financing facilities to the government, mainly for agricultural infrastructure (29%), health (18%), transportation (17%) and water (15%) projects, among others. The multilateral bank confirmed that it has more projects with Nigeria between 2022 and 2023.