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Sunday, June 21, 2020 / 10.00AM /
Bukola Akinyele for WebTV / Header Image Credit: EcoGraphics
With the roll out of the Economic
Sustainability Plan of the Federal Government of Nigeria, the Non-Interest
Finance Market has the capacity to support its implementation in ways that can
reset the economy and achieve inclusive growth for the nation.
The Group Head, Non-Interest Banking
of Sterling Bank, Dr Basheer Oshodi made this assertion as a guest during the special edition of the WebTV "Islamic Finance
Weekly", anchored by Bukola Akinyele.
According to him, recent
data from the National Bureau of Statistics showed that Nigeria had a poverty rate of 40.1% implying that
about 82.9m people are poor. However, the Non-Interest market has the instruments that can be
deployed to bridge the gap of under-development in the country.
Speaking on the Economic
Sustainability Plan
(ESP), Dr. Oshodi
believed the opportunities in the industry are enormous, and it is time for effective collaboration amongst stakeholders to
support the economy.
From the ESP of the current administration
he identified seven (7) key areas the Non-Interest Finance Market can support the government’s plan to stimulate socio-economic
activities in the country.
The areas identified for strategic intervention include:
With Agriculture touted as a major
anchor of the revenue diversification plan of the Buhari administration, he
said instruments like the Ijara and Musharakah can be deployed to support
leasing and mechanized equipments in the agro sector. Speaking further,
he said that Non Interest Financial Institutions can create value and
provide a financing vehicle for smallholder farmers for a period of one year or
6months.
This will enable the creation of markets for them
to sell their products, serving as the intermediaries which will improve the
quality of their lives and incentivize them to produce massively.
He believed, there is need for non interest
financial institutions to get more involved in Agri-Business and support the
sector post pandemic, exploring partnership transactions for smallholder
farmers through the off-takers/ out-growers schemes.
With Nigeria's current unemployment rate as 23.1%
according to the NBS, there's a need to address the burden of more than 50% of
Nigerian adults who do not have a source of income. There should also be
investments in farm estates to boost agro-based industrialization and
processing.
2. Affordable Housing
Considering the housing deficit of over 17m and
the fact that Nigeria is ranked among the countries with a large population
living in Slums by the UN Habitat, Dr. Oshodi emphasized the need for the
Non-Interest Banking stakeholders to collaborate and cooperate more to explore "Retail Sukuks", that can create specific projects targeted at mass housing
projects across the country that are affordable for Nigerians.
He also suggested Non-Interest finance initiatives
like the "Real Estate Sukuk" in the nation.
3. Transportation Infrastructure
With the third successful Ijara N150bn Sukuk bond
issuance by the Federal Government, the Islamic Finance expert was of the view
that the over 400% subscription showed the wide level acceptability of the
instrument for financing infrastructure in the country.
With several major highways already earmarked for
financing by the Ijara Sukuk, the Group Head of Non-Interest Banking in
Sterling Bank maintained that it remained a veritable source of alternative
financing for the Federal Government.
Effective infrastructure especially link expressways across the nation are enablers for socio-economic activities.
4. MSME Support and Development
Statistics quoted from the Small
Medium Enterprises Development Agency of Nigeria, SMEDAN shows that there
are about 41million MSMEs in the country, who contribute over 70% of economic
activities in the country.
Dr. Basheer Oshodi notes
that 90% of the MSMEs in Nigeria are operating at the micro-business level
seeking robust financing measures to scale their operations.
He made a strong case for Non-Interest
Finance Institutions to explore how they can create a vehicle for
providing funding to key growth MSMEs that can transform the economy and create
more jobs, with a view to supporting them.
Islamic Finance Institutions can
support the Federal Government's plan to provide more industrial clusters for
MSMEs in the country.
5. Digital Technology
In the age of the fourth Industrial
revolution driven by digital technology, nations must reposition themselves to
invest in the infrastructure and processes that can unlock the opportunities in
the digital economy.
With the focus of the Economic
Sustainability Plan on deepening the digital technology space, Islamic Finance
institutions can provide capital for digital tech SMEs, supporting their
innovations and products.
He also advocated for Non-Interest
institutions to
have equity investments in technology companies, forging a
formidable partnership with them.
Oshodi urged stakeholders in the industry to
partner and fund strategic tech hubs in the country.
6. Gas Expansion
In this area he believed initiatives
like "Private Sukuks" can help to finance projects like Gas expansion across the
nation, thereby driving a Gas-led industrialization that will also help to
boost the power and energy situation in the country.
This according to him will lead to an effective
utilization of the Natural Gas resources in Nigeria, that can support
other industries including manufacturing petrochemical, Agro amongst others.
7. Healthcare
The COVID 19 Pandemic revealed the fragile
healthcare infrastructure in Nigeria and the need for more large scale
investments in research, innovation and capacity building.
"Strategic and well designed Mutli-billion
naira "Healthcare Sukuks" focused on the healthsector, can help to provide
financing for improving the landscape of the sector in the country, and the
upgrading of medical equipments and the building world-class hospitals in the
country" He said .
N150bn Ijara Sukuk Oversubscription
On the massive subscription of the
Ijara N150bn Sukuk, Dr Oshodi said "the pricing at 11.2% and
the alignment with the current economic realities in Nigeria led to massive
reception of the bond in the market".
Prospects For the Growth of
Non-Interest Finance Market In Nigeria
Giving his perspective,
the Islamic Finance scholar said that currently Africa in total accounted for
1% of the Global Islamic Finance Market, which leaves a lot of room for
scaling, innovation and the need to deepen the market.
Speaking further he said Africa is
doing very well in regulation but needs more players in the market
He acknowledged the fact that there
was liquidity in the Non-Interest finance market that was not asset backed and
called for innovative products and instruments like "FX Assets".
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