How Islamic Finance Supports Nigeria’s Sustainable Development Goals-HRH Muhammadu Sanusi II
Islamic Finance has the potentials to support Nigeria’s quest to achieve its sustainable development goals as a nation. The Emir of Kano His Royal Highness Mohammed Sanusi II disclosed this as a keynote speaker at the recent 4th Africa International Conference on Islamic Finance in Lagos.
Speaking on the theme “infrastructure financing, sustainability and the future of African markets,” HRH Sanusi II said Islamic Finance within a period of four and half decades has grown from a niche to mainstream financial intermediation.
Sanusi noted that Islamic Finance has grown with respect to the number of financial institutions offering ethical products and services and the size of assets managed. He also observed that the geographical distribution of Non-interest finance has widened.
The former Governor of Central Bank of Nigeria said that, according to the 2019 Islamic Financial Services Industry Stability Report (IFSB), the current global size of the market was over $2.19trn. Sanusi observed that the introduction of Islamic finance in Nigeria has been responsible for faster growth in various economic sectors. He said the legislation that created profit and loss sharing banks was enacted as early as 1991.
In a historical overview of the evolution of Islamic Finance, Sanusi pointed out that the framework started by Sudan and was fine-tuned by Malaysia and is now widely adopted by several jurisdictions, including Bahrain, the UAE, Indonesia, Pakistan, Oman, amongst other countries around the world.
Sanusi informed stakeholders that it was under his tenure as Central Bank Governor, that the framework for Islamic Finance emerged.
“It took Nigeria’s almost two decades to witness the licensing of its first Islamic bank which was in the last quarter of 2011, and it happened when I was the Governor of the Central Bank of Nigeria,” Sanusi said.
He added that the central bank was able to develop a regulatory framework for the regulations and supervision of Islamic banking. The Emir acknowledged that the response of the regulatory institutions in Nigeria to the introduction of Islamic finance has been satisfactory.
Led by the CBN, all the financial regulatory authorities, which include the Securities and Exchange Commission (SEC), National Insurance Commission (NAICOM), the Nigeria Deposit Insurance Corporation (NDIC) and the National Pension Commission, PENCOM have all supported Islamic finance as an alternative form of financing.
He stated that the regulatory authorities are also facilitating the integration of the Islamic financial services system into the mainstream financial sector of the economy.
Speaking on the role of the Central Bank of Nigeria, Sanusi said it had introduced a non-interest structure for accessing developmental funds and schemes through non-interest financial institutions.
In 2017 and 2018, Sanusi mentioned two Sukuks that were issued by the Federal Government at N100bn, each which has been used to fund critical projects like 26 federal roads across the country.
The former CBN Governor stressed the fact that Islamic Finance could help in addressing Nigeria’s sustainable development goals (SDGs) in areas like immunization programmes, student educational loans, and financing green energy project among others.
“Islamic finance has the potential to broaden the investor base to include the growing category of investors seeking socially responsible and ethical investment,” He added.
He made a case for more collaboration between regulatory authorities and stakeholders to grow the industry, as well as create more awareness and capacity building for the effective and efficient operation of institutions to maintain stakeholder confidence and performance.
Islamic finance, according to him, provides an alternative for resource mobilization and fair and equitable allocation of resources that could help address sustainable development goals in the country.