Experts make case for Islamic finance

Private and public sectors experts have affirmed the importance of the development of Islamic finance to the economy.

Experts agreed that Islamic finance holds immense opportunities for financing of critical infrastructure and unlocking dormant capital in Nigeria.

Experts spoke at the inaugural edition of the IFN Nigeria Forum organised by the Nigerian Stock Exchange (NSE) in partnership with REDmoney Group.

The forum themed, “Harnessing the Islamic finance sector for infrastructure development and economic growth”,  brought together decision-makers, regulators and investors to discuss and share experiences on opportunities in the Nigerian Islamic finance market.

The IFN Nigeria Forum 2019 featured a mix of panel sessions, onstage interviews and interactive sessions on a number of themes in Islamic finance including corporate financing and capital raising in Nigeria; funding infrastructure and social welfare requirements in West Africa and Islamic finance, investment, banking and takaful in Nigeria.

Divisional Head, Trading Business, Nigerian Stock Exchange (NSE), Mr Jude Chiemeka, noted that Islamic finance sector has grown noticeably over the years, from about $1.5 trillion in 2016 to about $2 trillion in 2018, driven by growth in Islamic banking assets as well as growth in Sukuk issuances.

He pointed out that while this growth has largely been concentrated within GCC region and in Asia; recent data suggest that Islamic financing is beginning to take root in Africa, with issuers across Gambia, Sudan, Senegal, Ivory Coast, Togo, as well as Nigeria in more recent times.

Chiemeka, who represented the Chief Executive Officer of NSE, Mr Oscar Onyema, said Islamic finance marked a turning point and new paradigm for the financing of infrastructure in Nigeria with issuances such as the 2013 raising of N11.4 billion in a seven-year Sukuk by the Osun State Government to finance construction and rehabilitation of 27 schools in the state.

According to him, the subsequent issuance of two N100 billion tranches of Federal Government of Nigeria Sukuk instruments by the Debt Management Office (DMO) were huge success and the proceeds were also used to finance the maintenance and construction of critical road infrastructure across the six geopolitical zones of the country.

“The Islamic finance sector presents numerous opportunities for enhancing the economic fortunes of this country. From a domestic perspective, Islamic finance presents opportunities to unlock the dormant pools of capital present within our nation,” Chiemeka said.

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He added that the development of a viable Islamic economy in Nigeria has far reaching implications within global markets, for investment managers seeking to achieve portfolio diversification.

According to him, the ability for fund managers seeking Shari’ah-compliant investment products to diversify into the Nigerian markets will facilitate more foreign inflows which has implications for the economy through the attraction of low-cost funds for development.

He assured that the NSE will continue to work with market stakeholders to ensure the development of a robust Islamic finance sector in Nigeria noting that the Exchange had in 2016 developed and publicized its rules governing the listing of Sukuk and similar debt securities to provide regulatory guidance for issuers seeking to list their instruments on its platform.

He added that in line with the Securities and Exchange Commission’s (SEC’s) Non-Interest Capital Markets Product Master Plan, the Exchange identified five strategic pillars critical for the growth of the sector including a strong regulatory framework, capacity building, product development, robust primary and secondary markets, and market awareness programmes.

“We have already started executing on these pillars and recently hosted a training exercise for the market. We will also continue to provide an efficient and liquid market for investors and businesses in Africa, to save and access capital. We promise to continue our collaboration with all market stakeholders, to collectively contribute towards the enhancement of this new asset class, and ultimately towards the growth Islamic finance in Nigeria and Africa at large,” Chiemeka said.

Other speakers spoke on the opportunities in the Islamic finance sector. Director-General, Debt Management Office (DMO), Ms Patience Oniha, reiterated the commitment of the government to diversify the Nigerian capital market.

She noted that the government’s issuance of sovereign Sukuk was aimed simultaneously at raising funds to finance critical infrastructure and to develop the domestic capital market.

Other speakers at the event included Ms Mary Uduk, acting director-general, Securities and Exchange Commission (SEC),represented by Abdulkadir Abbas; Hajia Aisha Dahir-Umar, acting director-general, National Pension Commission (Pencom), represented by Dr Umaru Farouk Aminu, Head, Research & Strategy Management Department, Pencom; Hajara Adeola, managing director, Lotus Capital; Adeola Sunmola, Partner, Udo Udoma & Belo Osagie and Oluseun Olatidoye, Head, Debt Capital Markets, FBNQuest Merchant Bank.