Nigeria to Play Major Role in Global Islamic Banking Growth, Market to hit $4.94 trillion by 2025- Report

Despite social-economic challenges during Covid-19 pandemic, the Islamic Finance industry continues to attract new players and evolve its products and services to bring in more active participants worldwide.

A new Islamic Finance Development report 2021 has said, “The global Islamic finance industry will continue to grow, with a total global asset value of $4.94 trillion expected by 2025, with Nigeria expected to play a major part in its growth.”

While the main drivers of development in the industry are; quantitative development, knowledge, governance, corporate, social responsibility, and awareness, according to the Islamic finance development report 2021.

Themed “Advancing Economies” the Islamic Finance Development report 2021 indicate that $1.28 billion was spent on Corporate Social Responsibility (CSR).

Meanwhile, the CSR Activities sub-indicator, the global average for CSR disclosure remained low but some countries stood out, including Nigeria and the Maldives that are ranked among the top five.

Oversubscription rates for sovereign Sukuk indicate continued strong demand, which sovereigns are meeting with several jumbo issuances in 2020 and more recently in
the first half of 2021, the report said.

It added that, fifteen (15) countries issued Sukuk in 2020, with Nigeria and Egypt being notable returnees to the market after their absence in 2019.

With an estimated total global asset of $4.95trn by 2025 and average growth of 8% in the next five years, the global Islamic finance industry will continue its growth trajectory, the report noted.

Key activities in the Nigerian Islamic banking space in 2021

  • The Securities and Exchange Commission Nigeria SEC approved a N30bn Corporate Sukuk Programme targeted at affording housing development
  • NASFAT partners Halal invest to enhance ethical financing in Nigeria
  • August 2021 Ahmadu Bello University, Zaria begins undergraduate, postgraduate courses in Islamic banking
  • Lotus Bank in June got a licence from the Central Bank of Nigeria (CBN) to operate non-interest banking in Nigeria
  • August 2021, Noor Takaful Insurance Plc pays a total of N63.8m Surplus to policyholders
    December 2021, Sterling Bank Plc received the CBN approval to operate Islamic Banking Subsidiary
  • The Islamic Development Bank IsDB approved $150.52m support for Nigeria Special Agro-Industrial Processing Zone and $29.75m Front-End Engineering Design Phase II
  • In December 2021, Nigeria issued the fourth Sukuk. The N250bn Sovereign Sukuk was over-subscribed by N865bn.
  • This outcome represents a subscription of 346%
  • The National Pension Commission (PENCOM) introduced the non-interest fund VI that complies with Shariah Principles.
  • Islamic Finance Weekly organized two Islamic finance webinars on the capital market and Takaful. The webinars brought together regulators, operators, experts and individuals from the SEC and NAICOM.
  • In November 2021, the African Islamic finance conference hosted its 5th AICIF in Abuja. The 2-day conference brought together stakeholders across the globe.
  • Similarly, in Nigeria, the Non-Interest Financial Institution Association of Nigeria (NIFIAN) started its series of webinars. The NIFIAN members offer savings, Credit, investment, Takaful and microfinance services to the ethical-minded investors demography.
  • The Institute of Islamic Finance Professionals (IIFP) hosted its annual stakeholder’s conference and induction ceremony in Lagos, reaffirming commitment to Islamic finance education in Nigeria.
  • The University of Lagos announced that it would commence a Post Graduate Diploma and Master programmes in non-interest Banking and Finance

Expectations from the Nigerian Islamic banking Space in 2022

  • In Nigeria, there will likely be more Sukuk issuance that will focus on critical sectors like education, health care system, energy projects.
  • There is a need for government and regulatory incentives to drive participation in the Islamic finance sector
  • More market issuances are likely, Islamic friendly products, and Islamic Commercial Papers (ICPs)
    Stakeholders in the non-interest finance market will have to collaborate to improve awareness and market education
  • There is a need for knowledge building in the capital market to educate investors that non-interest finance is for Muslims and all investors.
  • There will be a need to enhance liquidity in the market through non-interest finance.
  • It is expected that players in the non-interest finance market will work assiduously to improve the quality of their services. Islamic Finance can gain the needed trust it deserves to scale.
  • There is a need for increased adoption of Islamic Fintech and Digital Banking
  • There is a need for more non-interest banks in the country to cater to the unbanked population and bridge the financial exclusion gap in the country
  • It is expected that there will be more Sharia Compliant Products in the market that are simplified.
    There is a need for more support from the Islamic Development Bank is needed to fund Nigeria ailing economy
  • Regulators like CBN, SEC, PENCOM, NDIC, NAICOM need to fully support the non-interest banks, Takaful industry and other non-interest finance sectors in Nigeria
    States need to explore issuing Sukuk to finance infrastructure and other critical socio-economic projects.
  • Increase activities in (Takaful) Islamic insurance
  • There is need to see more non-interest finance instrument funding infrastructure such as Waqf, Zakat and Sadaqah
  • There will be a need to establish more Islamic Microfinance institutions
  • On AfCFTA and Islamic finance, there is a need for more awareness of how Islamic financial instruments can support the African Continental Free Trade Area.
  • The Islamic finance weekly will continue its webinars series in Nigeria
  • Finally, a collaboration between the regulators, operators, academics, professional bodies, and non-interest financial institutions is critical for the growth of the non-interest finance market.

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