Nigeria Makes Up Only 0.9% of Global Islamic Finance Market-SEC

The Director General of the Securities and Exchange Commission (SEC) in Nigeria, Lamido Yuguda, has said that Nigeria makes up only about 0.9 per cent of the global non-interest market.

He said this while giving the welcome address at the First Annual SEC Nigeria-IFSB International Forum on Non-Interest Capital Market in Abuja on Wednesday.

Yuguda noted that the global Islamic finance market is estimated at $3.25 trillion, and the market size in Nigeria is about $2.9 billion.

He pointed out that there is still a huge potential for Islamic financing in the country.

Quoting the International Islamic Financial Market (IIFM), he stated that in 2022 the Islamic Finance Industry had an estimated size of $ 3.25 trillion, with global sukuk issuances valued at $182.72 billion.

“In Nigeria, the Islamic finance segment of the financial industry reached an estimated size of US$2.9 billion as at the end of 2022, with outstanding sukuk forming the largest part at 57 per cent, followed by Islamic banks at 42 per cent (total assets), and the remaining one per cent split between Islamic funds (total assets) and takaful (total contributions).

“This shows that the Nigerian market makes up just 0.9 per cent of the global non-interest market, indicating the dire need for more growth. With the country boasting a large population and a significant proportion unbanked, the long-term potential for Islamic finance in Nigeria is immense.”

Speaking further on Islamic financing potential, Yuguda said that the Non-Interest (Islamic) Capital Market in Nigeria offers a distinctive platform for ethical and Shari’ah-compliant investments.

He noted that since Nigeria’s first Sukuk issue in 2017, the Debt Management Office (DMO) has raised almost N1 trillion to finance over 5,000 kilometres of important roads and bridges. All of these issues were oversubscribed.

He said: “We are all aware that sukuks backed by assets promote risk sharing in high-risk projects, offer flexibility in project stages and foster public-private partnerships.

“Therefore, Sukuks are a good structure for infrastructure financing, as they clear the issuer’s balance sheet of debt, given that the investors own the assets to be financed and share in the gains from such asset. This is really an attractive capital market instrument to be explored by both corporates and governments at all levels.

“The non-interest capital markets have a huge role to play in the current economic program being pursued by the administration of His Excellency, President of the Federal Republic of Nigeria, Chief Bola Ahmed Tinubu, GCFR. We believe that the country’s economy cannot reach its target size without a lot of investments in critical infrastructure. Indeed, with the high debt-service to revenue ratio, sukuks present a viable alternative to other modes of financing.”

Yuguda added that Nigeria could become one of the world’s leading Islamic finance jurisdictions if we could fix problems like low awareness, unified regulations, and the lack of laws that boost legal certainty and clarity, like what happens in the traditional financial system.

He also said that with the country’s current problems with foreign exchange funding, the non-interest finance market should be looked at to bring in more foreign currency.

In his keynote address, the Secretary-General of the Islamic Financial Services Board (IFSB), Dr Bello Lawal Danbatta, stressed that the non-interest finance industry can capitalise on a multitude of available opportunities.

“Non-interest and Shariah-compliant financial institutions possess significant potential in effectively addressing emergent challenges and maintaining their relevance amidst dynamic landscapes”, he added.