|Bisola Olusoga||Chinelo Agom-Eze|
With 15% growth in the last decade, Islamic financing has found increased prominence across the globe and more recently in Africa. Nigeria, ranked among the top ten fastest growing economies with the largest Muslim population in Sub-Saharan Africa has the potential to become a leading Islamic finance market. Islamic finance may also provide an appropriate solution to the country's dearth of infrastructure finance.
The objective of promoting shariah-compliant investments as a viable means to deepen the financial system and promote financial inclusion has been at the heart of strategic repositioning efforts led by both the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC). Pioneer advancements include the launch of the Nigerian Stock Exchange (NSE) Lotus Islamic Index in 2012; issuance of the Guidelines on the Regulation and Supervision of Non-Interest Financial Institutions (NIFIs) in June 2011 by the Central Bank of Nigeria and the Guidelines on the Operations of NIFIs in December 2012. These two guidelines are credited with further expanding Nigeria's present banking structure by ushering in the emergence of Nigeria's first full-fledged Islamic bank and licensing for several commercial banks seeking to operate Islamic banking windows.
Also, the actions taken by SEC and NSE in approving and listing Nigeria's first issuance of Islamic bonds, a seven-year sukuk issued by the Osun State Government, despite its challenges illustrates a steady commitment to strengthening the nation's Islamic finance offerings. To buttress the point, CBN recently issued guidelines for the establishment of a specialist advisory body, the Financial Regulation Advisory Council of Experts, tasked with ensuring that all banking products designated as Islamic conform to shariah principles.
At its core, Islamic finance involves using traditional investment techniques and structures that comply with the principles of shariah to create arrangements that work in ways analogous to modern conventional finance. The attractive quality of this mode of financing is the foundation of fair and just trading practices. It is projected that the sector will continue to expand attracting individuals and entities seeking new shariah-compliant investments and for conventional investors, financiers and issuers keen to participate in a growing market.
However in order to achieve this envisioned success, there will be a need to develop a comprehensive legal framework including efficient dispute resolution mechanisms that will both regulate Islamic financial products and support the growth of this nascent sector.
Bisola Olusoga and Chinelo Agom-Eze