Nigeria’s Islamic finance industry hits N5trn – Daily Trust

Nigeria’s Islamic finance industry has grown to about N5 trillion, with the Federal Government’s Sukuk issuances attracting subscriptions of N2.2 trillion against an initial offer of N300bn, the Managing Director of One17 Capital Limited, Abdullahi Idris Umar, has said.

Umar disclosed this during an interview on Trust TV’s Business Daily, where he said the industry had expanded beyond banking into pensions, insurance and capital market investments.

He said the Federal Government had conducted seven Sukuk issuances, raising more than N1 trillion for infrastructure development, but noted that the instrument had the potential to finance projects in other sectors.

“Federal government went into the market for N300 billion, it came out with 2.2 trillion Naira. That speaks to a demand that the market has for a product that is not in enough supply,” he said.

Umar called on the Federal Government and state governments to increase the use of Sukuk to finance education, healthcare, potable water supply and other essential public services.

“Islamic finance is like a toolbox. The question is what do you want to achieve and we will structure it for you. So whether it’s the creative industry, whether it’s water and environment, whether it’s oil and gas, name it,” he said.

He said Sukuk provided investors with an additional layer of oversight through annual audits to establish whether funds had been used for their intended purposes.

“If I give you money and I have a third party that goes every year to check whether or not the money you have received has been used for the thing that you said it to be used for and then physically you see evidence of that thing,” he said.

He added that the Federal Government had delivered 124 road infrastructure projects through Sukuk issuances, with signposts at project locations showing where the funds had been deployed.

On government borrowing, Umar said non interest financing should complement conventional sources of funding rather than replace them, stressing that borrowed funds must be channelled into productive sectors.

“I would not say government should stop borrowing. It’s a case of whatever we’re borrowing, is it going into effective use for the development of certain sectors that would have an impact on growth?” he said.

Umar attributed the industry’s expansion to regulatory developments, including the Central Bank of Nigeria’s approval for Islamic financial institutions in 2011 and the Securities and Exchange Commission’s guidelines for non-interest fund and asset management companies in 2015.

He said the industry had also recorded growth in pension administration, disclosing that Fund VI, a non interest pension fund, increased from about N7bn in 2021 to N54bn in 2024.

He also put the number of non interest mutual funds in Nigeria’s capital market at close to 25, saying the funds provided opportunities for investors to participate in the equity and fixed income markets through non interest products.

On financing for small and medium scale enterprises, Umar said non interest finance allowed financial institutions to provide capital while sharing risks with business owners.

“What non interest finance does is that it’s able to put in capital and share the risk with the business owners,” he said.

He cited partnerships between Jaiz Bank, the Small and Medium Enterprises Development Agency of Nigeria and the Bank of Industry as efforts to extend financing to businesses.

Umar also said the Bank of Industry had received approval from the Central Bank of Nigeria to establish a non-interest financing window, while the Federal Mortgage Bank of Nigeria had introduced non interest mortgage financing, which was recently launched in Kano.

He said the expansion of non interest financial products would provide more opportunities for individuals and businesses that avoid interest based transactions to participate in the financial system.