Globally, there has been unprecedented growth in non-interest banking and finance, which is generally known as Islamic Banking. The existence of Islamic finance has become imperative in many jurisdictions of the world and it is expected to continue to spread in view of the economic growth in countries with a huge Muslim population. Nigeria is home to the largest population of Muslims in sub-Saharan Africa, accounting for over 80 Million Muslims. In recent years, Nigeria has opened the door for the adoption of Islamic finance with the hope of establishing a hub for non-interest banking.
From a broad perspective, Islamic finance is based on principles and foundations laid down by the Sharia (Islamic law). This comprises of the Quran and the Sunnah, which is the sayings and practices of Prophet Mohammed, peace be upon him. Also central to this are the moral guidance or set of principles practiced by Muslims and, ultimately, the Shariah Supervisory Board (SSB). The SSB could be made up of three to five Islamic scholars who would decide on what is compliant or not and interpret based on Islamic jurisprudence, known as Fiqh.
The African Development Bank highlighted several infrastructure projects that have been funded through Islamic finance, some of which are in Nigeria. Essentially, however, Islamic finance does not only help with financing large infrastructure projects across Africa but also helps to strengthen the SME and microfinance sector, as well as the capital markets. This was emphasised by a market investment advisor, Tesleem Akosile, who believed that “Islamic Finance is embedded with the potentials of engendering floodgate of economic advancement and prosperity for humanity.”
Nonetheless, despite the huge potential of introducing and strengthening Islamic finance products in Nigeria on the capital market and the larger Nigerian economy, there are still numerous hurdles to cross as highlighted by the Nigerian expert on Islamic finance, Jubril Salaudeen. He pointed out that the challenges include regulatory and tax issues, lack of Sharia scholars and Sharia-compliant products, in addition to the dearth of knowledge on Islamic finance products. It is, therefore, important to create an enabling environment for Islamic finance products to develop while being mindful of risks.
This lack of knowledge and awareness may lead to social issues in the country where Christians comprise an estimated 40 per cent of the population. In September 2017, shortly after the Nigerian government introduced its debut Sukuk offer, the Christian Association of Nigeria (CAN) said the move was part of the “strategies to ‘Islamise’ Nigeria.” In this regard, Mr Saludeen noted that challenges like that could be addressed with adequate sensitisation of the public on the basic principles and provisions of Islamic finance, training and adequate skill acquisition by Islamic bankers and investment professionals, as well as detailed information that will aid mutual understanding by prospective clients
There is apparently low awareness of the Islamic banking concept in Nigeria. Hence, for interest-free banking system to work efficiently in Nigeria, there is a great need for sensitisation of all the stakeholders (government/public, government and individuals) by Islamic professional scholars and Muslim economists. This is borne out of the fact that Nigeria is a secular state. Hence, government should not be seen as trying to Islamise the country’s financial/banking system. This means that the tendency of the non-Muslims to misconstrue the ideology because of its religious colouration calls for nation-wide awareness
It is worthy to note that for Nigeria to institutionalize Islamic banking system, there is need to incorporate this concept into Nigerian university curriculum to prepare a good foundation and human resources for the operationalization of Islamic banking system. In other words, Scholarship can be awarded to students to travel abroad for practical training from those countries that have succeeded in the implementation of Islamic banking such as Malaysia, Bahrain, Saudi-Arabia. Etc.
3) Requisite legal framework
The central bank of Nigeria being the supervisor and regulator of the banking industry is expected to come up with details of regulations governing the operation of Islamic banking in Nigeria (legal frame work) that conforms to the principles of Quran and Hadith of Prophet Mohammed, peace be upon him. However, the policy framework should be such that the Islamic banks will be competitive with conventional banks. More importantly, the justification for the existence of an alternative is to quench the thirst of Muslim faithful for banking facilities that will be in total adherence to the law of Islam