A TALE OF TWO MARKETS: DETERMINANTS OF PERFORMANCE DIVERGENCE BETWEEN SOVEREIGN AND CORPORATE SUKUK IN NIGERIA'S ISLAMIC CAPITAL MARKET (Evidence from the Arthur Islamic finance market index (January–April 2026))

Abstract

This paper investigated the structural, regulatory, and pricing determinants of the persistent performance gap between Nigeria's sovereign and corporate sukuk segments. Using January–April 2026 data from the Arthur Islamic Finance Market (AIFM) Index, the study documented a 19.8-point divergence (sovereign 88.8 vs. corporate 69.0) and evaluated this disparity against maqasid al-shariah criteria, particularly the principle of wealth circulation (tadawul al-amwal). A comparative case analysis was employed, drawing on four monthly AIFM reports triangulated with Debt Management Office (DMO), Securities and Exchange Commission (SEC), and Nigerian Exchange Group (NGX) sources. Simple descriptive statistics — percentages, ratios, ranges, and month-over-month growth rates — characterized market dynamics. Three factors were identified as most consistent with the divergence: (i) a persistent 200-basis-point profit-rate differential (sovereign 14.2% vs. corporate 16.2% average); (ii) regulatory asymmetry between the DMO's proactive sovereign framework and the SEC's historically reactive corporate approach; and (iii) severe market breadth constraints, with a 44.7:1 outstanding volume ratio and only eight live corporate instruments against twenty-five-plus sovereign papers. The sovereign segment's 42% foreign participation contrasted sharply with negligible foreign interest in corporate paper. The NGX Lotus Islamic Index's strong historical outperformance (+22.53% in 2009 versus the conventional index's −33.78%) confirmed that investor demand for Shariahcompliant products was not the constraint; the failure was structural and supply-side. Policy recommendations included SEC fee waivers for maqasid-aligned corporate sukuk, institutional allocation mandates for non-interest banks and takaful funds, and a sovereigncorporate co-issuance model with partial DMO credit enhancement to lower corporate pricing.