The Stanbic IBTC Shariah Fixed Income Fund has grown 400% since its launch in Q4, 2019. The growth in the Fund translates to a rise from N1bn in Q4 2019 to N4bn as at February, 2020.
Executive Director, Stanbic IBTC Mr. Shuaib Audu revealed this in an interview with WebTV's Islamic Finance Weekly programme.
According to Mr. Shuaib the general decline in investor's appetite for equities led to increased activities in the fixed income market, which was to the benefit of Stanbic IBTC's Shariah-Compliant FIF.
Speaking further he said the SFIF registered by the Securities and Exchange Commission (SEC) is an open-end unit trust scheme that aims to provide investors with liquidity and competitive returns over the short, medium and long term. The Fund, he said, was ideal for ethically-minded investors with low-risk appetite as well as a bias for Shariah-compliant investment opportunities.
He outlined the benefits of the SFIF to include;
The Executive Director noted that the fund was not Muslim-specific but open to people of all faiths and religious inclination.
Apart from the SFIF Mr. Shuaib said Stanbic IBTC had the Imaan fund registered in 2013 by SEC Nigeria, which is equity-based and set out to achieve long-term capital appreciation by investing in Shariah-compliant equity securities approved by the Shariah Advisory Committee of the Fund.
On the current state of the Non-Interest Finance market in Nigeria, he described it as a huge space looking at the Nigerian population, which has about 100m Muslims which suggests that they constitute roughly 51% of the population.
He cited The National Pension Commission (PENCOM) that regulates Pension Fund Administrators (PFA), that is planning a new Shariah-compliant fund which is non-interest based as an example of new opportunities. When launched it would allow the PFAs to invest up to 20% of their asset under management (AUM) in the non-interest market space.
Giving further details of critical developments in the Non-Interest Market Shuaib also noted that the Central Bank of Nigeria (CBN) has licenced about 23 banks to be able to participate in the non-interest banking window which is a notable feat.
"The opportunities are huge and Stanbic IBTC Asset Management is creating ways to tap into it. As an end-to-end financial solution provider we want to cater for investors, clients and customers within the Stanbic IBTC group to meet any risk profile and investment appetite they have, whether it is conventional investment or non-conventional investment like the non-interest window" Shuaib said.
Speaking on the Challenges facing the non-interest market in Nigeria, the major challenge according to him was the lack of understanding of the market. He made reference to the first Sukuk issued in 2017, where the federal government was accused of planning to Islamize Nigeria.
Other challenges facing Islamic finance in Nigeria according to Mr. Shuaib include the need to develop investable products, as Islamic finance is a relatively new segment of the financial market in Nigeria, several products have not been developed to deepen and broaden the market.
He made a case for deepening the capital market in the country, through Islamic Finance.
At the macro-economic level he said Nigeria's economy is going through interesting and challenging times. The Q4, 2019 GDP report that was released recently showed the economy grew at 2.55%, while population growth level is around 2.6%.
He stressed the fact that Nigerian should grow consistently at over 2% and aspire to hit continuously 6-7% growth, if it is to uplift 100m people from poverty.
For this to achieved the investment expert called on the fiscal policy authorities to drive inclusive growth for the economy.
Reviewing the financial market in Q4, 2019 he pointed out that the Central Bank of Nigeria came with a policy in the fixed income market where corporate and institutional investors were restricted from participating in the Open Market Operations (OMO).
According to him, a lot of liquidity has resided in institutional investors such as Pension Fund Administrators (PFAs) with total asset under management of about N10trillion which is close to $30billion.
Shuaib identified the fact that some of the funds were invested in the OMO market and the CBN has prevented PFAs as well as Asset Managers, Insurance companies and other institutional investors from participating in the market.
"There has been a decline in yields across board because a lot of the money that was available to institutional investors is pursuing a limited number of securities. The price of the securities have gone up as yields come down. In addition, interest rates across banks are falling to 0.5% or 1%. This constituted part of the reasons why interest rate in the fixed income space has dropped drastically" He said.
In terms of inflation, Stanbic IBTC's Shuaib highlighted the fact that it has grown close to 12% which is high. He emphasized the need for inflation to trend closer to single digits.
He identified the following as some of the issues that speak to investor concerns in Nigeria;
Â· Fear of low GDP growth
Â· High inflation
Â· Possibility or the risk of potential exchange rate devaluation
Since the 2008 global financial crisis, Shuaib acknowledged that many investors lost money in the market, and learnt bitter lessons preferring fixed income securities generally such as treasury bills, bonds, money market placement, fixed deposit and the likes.
According to him, traditionally and historically investors have had low risk appetite which means investors are not prepared to take on significant amounts of risk.
He said investors still have appetite for fixed income securities because they would rather see the protection of their principal which is of major concern.
Speaking on the inflationary environment, he said the non-interest finance instrument are competitive. Shuaib noted that they are competitive because they are priced into the market accordingly . On the Inflation rate inching close to 12% he noted that non-interest products are usually asset-backed.
"Most of the asset-backed investments must be priced in such a way that they take into cognisance the reality of the economic environment" he said.