From Uche Usim, Abuja
The Director General, Securities and Exchange Commission (SEC), Lamido Yuguda, has called for a stronger stakeholder engagement to enable Nigeria tap deeper into the Islamic finance industry currently valued at $3.5 trillion and global sukuk issuances pegged at $182.72 billion.
To realise this, Yuguda said the Commission was strongly focused on strengthening the development of the Non-Interest Finance segment in Nigeria by
collaborating with the Islamic Financial Services Board (IFSB), an international standard-setting body.
The SEC boss stated these in Abuja on Wednesday at the first annual SEC-IFSB international forum on non-interest capital market.
Yuguda, while acknowledging IFSB’s pivotal roles in ensuring stability and resilience in the Islamic finance segment globally, said the body has also been of immense help to SEC Nigeria and indeed all other IFSB members in Nigeria in capacity building, technical support, and global visibility.
He revealed that the Islamic finance segment of the financial industry in Nigeria reached an estimated size of $2.9 billion as at the end of 2022, with outstanding sukuk forming the largest part at 57%, followed by Islamic banks at 42% (total assets), and the remaining 1% split between Islamic funds (total assets) and takaful (total contributions).
“This shows that the Nigerian market makes up just 0.9% 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.
The Non-Interest (Islamic) Capital Market in Nigeria has undergone transformational growth, becoming an integral part of our financial framework, offering a distinctive platform for ethical and Shari’ah-compliant investments.
“Since the debut of Sukuk in Nigeria in 2017, the Debt Management Office has raised almost N1 trillion to finance over 5,000 kilometres of critical roads & bridges with all such issuances oversubscribed.
The oversubscription of the most recent 6th Federal Government of Nigeria Sukuk by 435% underscores investor confidence, showcasing the strategic role of Sukuk in infrastructure development and financial inclusion.
“The Pension Industry’s Fund VI is presently not able to find enough instruments to fill its demand. This means that there is ready demand for sukuk issuances.
“Why are we not maximizing the potential. This brings us to the challenge of low awareness. This is one of the reasons for this forum and other efforts the SEC and other regulatory bodies attending this forum must continue to work towards exploring the full potential of this segment of the market.
“SEC Nigeria has a 10-year (2015-2025) Capital Market Masterplan which was revised in November 2022. The attainment of the Masterplan targets by 2025 remains a challenging distance. These targets encompass the introduction of 100 retail Shari’ah-compliant products, the attracting at least 1 million retail investors in Shari’ah-compliant products, the securing of at least N5 trillion in investments from institutional investors in Shari’ah-compliant products, and the facilitation of 50 listings of Shari’ah-compliant products with a market capitalization of no less than N5 trillion by 2025”, he explained.
In his keynote address, Dr. Bello Lawal Danbatta, Secretary-General of IFSB noted that 2023 has been marked by a tumultuous series of events but expressed joy Nigeria and other economies showed strong resilience in the face of daunting adversities.
He added that the challenges present significant potential for the non-interest and Shariah-compliant financial services industry to drive the sustainable development agenda.
Danbatta said the optimism was hinged on the limited exposure of many non-interest financial services industry to global conflicts, gradual recovery and reopening of economies, an accelerated digital transformation process, the improved financial soundness and resilience in advancing inclusive and sustainable socio-economic growth.
“The non-interest financial system, with its emphasis on risk-sharing, asset-backed arrangements, and project-specific execution, naturally aligns with public-private partnerships in the infrastructure sector. Moreover, non-interest finance offers flexibility, demonstrated by the diverse structures available for those seeking financial backing. For example, it can be transformed into marketable credit instruments, such as Sukuk, linked to specific assets,” he explained.