Nigeria is 40 years behind in Islamic Banking

I understand that you are among those who submitted the proposals for the Draft Guideline on the establishment of non-interest financial institutions in the country during the Olusegun Obasanjo administration, what were your major interests in formulating the guidelines? Yes, it is true, we are stakeholders in non-interest banking and, probably, I may say that […]

I understand that you are among those who submitted the proposals for the Draft Guideline on the establishment of non-interest financial institutions in the country during the Olusegun Obasanjo administration, what were your major interests in formulating the guidelines?

Yes, it is true, we are stakeholders in non-interest banking and, probably, I may say that I pioneered the scheme with Habib Bank around 1999 when it started; I was the head of department until I joined the government as coordinator, Katsina State Poverty Eradication Programme.

It is true that we submitted recommendations during the Obasanjo regime when Chukwuma Soludo, who was Governor of Central Bank of Nigeria (CBN), advertised for contributions from stakeholders on non-interest banking in the country.

Now, technically speaking, non-interest banking is a universal concept of banking which has been introduced for more than six to seven decades ago. Nigeria has been over 40 years behind other nations of the world with this system. And there were some few obstacles within the Banking and Other Financial Institutions (BOFI) Act then which restricted naming a bank Islamic, Christian, biblical or Qur’anic. These are some of the restrictions which were taken care of. But generally the idea was to build a bank that is in conformity with what is being practiced in USA, UK, Saudi Arabia and South Africa and over 75 countries around the world today. So that is the basic principle that influenced the guidelines taking into account the peculiarity of Nigeria.

The House of Representatives on recently cleared the CBN on non-interest banking. How do you see it?

I think Nigeria is a country where we live in phobia of so many things; we don’t complement one another rather we are antithetical. I was impressed with the submissions of Lamido Sanusi, and I am highly elated that the House was very rational in looking at this from a very economic and nationalistic point of view. Personally, the whole issue about Islamising Nigeria does not even arise. The three related religions of Judaism, Christianity and Islam have much in common in economic principles.

Are you saying the Christian Association of Nigeria (CAN) and other groups erred in their opposition of non-interest banking?

If you look at the Old and New Testaments of the Bible, you see so many sections that clearly forbid interest. Look at the book of Leviticus 25, Jeremiah Chapter 15:10; In Nehemiah 5, you find out that one percent interest, because it says restore the100th part, is not allowed. If you look at Ezekiel, there is clear provision for death penalty for whoever takes interest.

If you look at Jesus Christ (Alehi Salaam) when he moved on a donkey to Jerusalem, he went to the temple and he found people who were changing money on usury, he turned the tables and chased them out. He said they have turned the temple into the dungeon of thieves.

So for any Christian cleric to come and say they want interest banking rather than non-interest banking, with due respect, I think he is not correct.

I think CAN was insincere and political with the alarm. UBA PLC says the minimum deposit by customer is N25,000 as their guideline, must you bank with them alone? I expected we should be talking about the feasibility and viability of Islamic banking; of course Nigeria remains a circular state. Islamic banking is flourishing in UK than Saudi Arabia but just we retard ourselves because of our myopic mentality of fighting because of religion, we think we won’t allow other countries to move forward.

What is the principle and application of non-interest banking?

In Islam it is said if there is no risk, there is no reward. You don’t keep money to make money because money is not a commodity; it is supposed to be an object for exchange. So when you place your money with a bank, that money remains money unless it’s being used. Therefore you are only entitled to a return based on the proportion of the use in whatever is returned into the coffers of that bank. It is saying that look ‘if you bring N1000 I am going to invest it or give somebody to invest and whatever you will get out of this N1000 will depend on the profit we make with that money’. What they are saying simply is that while the conventional banking is trading in money, they are selling money to the highest bidder. Non-interest banking invests money in a particular project.

So it will be very difficult in the Islamic banking concept for a politician to come and say ‘give me money I am going to campaign when I come back I am going to pay you money plus money’.  You cannot justify what profit he is going to make from that. Whoever is a depositor with a current account or savings account in Islamic banking, you are not going to be paid any interest and you will not pay any. You keep your money under the principle of Amana, which is on trust. Islamic banking will consider the type of business you are investing the money before you participate under the partnership concept of Musherika. Monies are tied to assets. That is why Islamic banking is not affected by economic meltdown because there is no artificial creation of money. In conventional banking, a company like Peugeot may find it difficult to borrow money for investment for fear of losing the money. But it is easier for House of Representatives to go and borrow N10 billion with interest, because they know the money will always come into their account.

Studying non-interest banking one comes across terms like Sukuk and Takaful, what are they?

Sukuk means bond like the FG and CBN bonds. Take for instance we want to return the Nigerian Airways, and we need six to ten aeroplanes. Then we create a Sukuk bond for N7 billion. Then when these airplanes make profit the investors on the Sukuk will gain. There are so many countries such as Pakistan that have built them power stations like that.

Takaful is an Islamic insurance where people invest in a cooperative society to help in exigencies, you don’t just lose your premium with or without catastrophe.

If we adopt the Sukuk, will that stems the tide of ailing privatised firms in the country which has resulted in job losses?

I have never been a sympathiser of privatisation. I don’t believe in selling public assets to private individuals because it entails the evil of capitalism which aims to maximise profits. So when you buy and find you are not able to make profit you sell it off to recover your money without concern to the employees. They have sold NEPA, NITEL etc; Today in Nigeria there is no single government venture that is working, whether education, agriculture, health, roads, security.

Sukuk will encourage invest investment in only viable ventures and benefits to all stakeholders.

Recently we were made to understand that the country expends over 70 per cent on recurrent expenditure. As a former presidential aspirant is this right?

I think the problem is we tend to service our individual interests rather than the Nigerian collective. It has to do with the societal values where you are only respected if you are given big government appointments with big house and chauffeur; the cleaner is different from the file carrier and all what not. When you add up the first lady expenditure and security vote, you see we are spending too much on nothing. The whole public service is so large, people end up doing nothing.

How do you see the CBN cashless policy of a maximum of N100, 000 withdrawal beyond which you pay charges for it?

It is good we are starting the policy but it I think a hundred thousand is small because cashless economy is the norm in rural areas. I think we can increase the limit to N1 million. I think it will help monitor cash flow within the system and track money laundering and fraud. I don’t think the rural cow dealer can collect cheque.