‘How Nigeria can explore over $2.7trn global Islamic market’

Islamic finance or non-interest finance experts have said Nigeria can tap significantly into the over $2.7 trillion global Islamic finance market by developing more Islamic financing instruments and deepening awareness. They also agreed that Nigeria is a huge market for Islamic finance and that the government can leverage the cheap funding options available in Islamic […]

Islamic finance or non-interest finance experts have said Nigeria can tap significantly into the over $2.7 trillion global Islamic finance market by developing more Islamic financing instruments and deepening awareness.

They also agreed that Nigeria is a huge market for Islamic finance and that the government can leverage the cheap funding options available in Islamic finance to fund infrastructure.

These form the core of their submissions during the fifth African International Conference on Islamic Finance with the theme ‘Infrastructure Financing: Sustainability and the Future of African Markets 2.0’, held in Abuja Tuesday and would continue today.

It was organised by the Metropolitan Law Firm and the Metropolitan Skills Ltd.

The Financial Services Industry Stability Report released in August 2021 said Islamic Financing had reached an estimated total worth of $2.70 trillion as of 2020, and recorded a growth rate of 10.7% year-on-year based on significant improvement across the three segments of the global Islamic Financial Services Industry, especially in Islamic banking and Islamic Capital Market.

Leading the call for deepening of Islamic financing option in Nigeria and indeed Africa was Muhammad Sanusi II, the 14th Emir of Kano.

He said: “Despite the potentials for growth of the Islamic financial services industry in Africa, promoters need to be encouraged to establish more Islamic financial institutions so as to create the needed critical mass that is essential for the growth of the industry on the continent, and these institutions need to come together and support each other for advocacy and growth of the industry.

“The CBN, as a pacesetter, needs to continue with its initiative of developing non-interest liquidity management instruments especially short-term papers for non-interest banks. Without these in the market, the possibility of creating a non-interest inter-bank market is very slim, which will impact negatively on the profitability of the institutions.”

Sanusi lauded the sovereign Sukuk bonds in Nigeria, saying it was impacting the infrastructure landscape across the country.

He noted: “Islamic finance offers tremendous potential for both public and private financing in such a way that reinforces the links between finance and the real economy, thereby contributing to both economic growth and financial stability.

“The fast expanding global pool of Sharī’ah-compliant capital has become an attractive source for various sovereigns, government-related entities and corporates to tap into, to meet their financing needs.

The Family Homes Sukuk, which is the first publicly offered corporate Sukuk licensed by SEC, testifies to the appeal that the Sukuk market offers to corporates to cover the infrastructure deficit especially in the housing sector in Nigeria.

“Islamic financing modalities offer strong potential for public-private partnerships in financing of physical and social infrastructure. Capital market instruments such as Sukūk for example can be structured as a partnership instrument to channel capital into productive activities or the real economy.

“When appropriately structured, Sukūk is well suited for infrastructure financing to fill the funding gap for infrastructure and support the development goal of development of quality, reliable, sustainable and resilient domestic, regional, and trans-border infrastructure.”

In her comment, the Minister of Finance, Budget and national Planning, Zainab Ahmed, said in order to mitigate the risks of development setbacks, the Federal Government had explored financing options offering long-term viable source of finance for its infrastructure projects, one of which is Islamic finance.

She said: “Islamic finance has distinguished itself in bridging Nigeria’s infrastructure gap by promoting investments in key economic sectors like healthcare, education and transportation.

“The asset-backed nature and risk-sharing components of Islamic finance structures help improve financial sector stability and make them appropriate for infrastructure public private partnerships.

“Islamic finance instruments like Sukuk are being utilised by sovereigns and corporates around the globe for post pandemic recovery.

“The recorded success of our sovereign Sukuk issuances and the market anticipation towards the recently announced FGN Sukuk III demonstrates the huge potential that Islamic finance offers in achieving the private sector participation, financial inclusion and fiscal discipline needed to attain an inclusive, resilient and sustainable Nigerian economy.”

The convener of the conference Unmahani Ahmad Amin, Managing Partner, the Metropolitan Law Firm and Managing Director, the Metropolitan Skills Ltd, said she had set up the Metropolitan Endowment Fund to assist underprivileged children to get education.

She said she was willing to partner with any relevant stakeholder to grow Islamic finance in Nigeria.

The conference also witnessed presentation from Mansur Muhtar, Vice President, Country Operations, Islamic Development Bank, who called on African governments to leverage Islamic financing options to develop the badly needed infrastructure.