Ethical Investments Rise as Market Cap of Shariah-Compliant Stocks in Nigeria Stand at N11.3trn

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Friday, September 24, 2021 / 11:00 AM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: WebTV


The Total market capitalization of Shariah-compliant stocks in the Nigerian Capital market stands at over N11.3trn. Mr. Ndako Mijindadi, Head, Investment and Research, Lotus Capital Limited, disclosed this in a conversation on "Investing Through Islamic Finance Products and Index".


He observed that the Lotus Islamic Index was created in 2009, and the index was launched in collaboration with the Nigeria Exchange Limited (NGX) in 2012. The Index tracks the performance of a basket of selected Shari'ah-compliant equities listed on the NGX.


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He further noted that ethical investors have access to a wide variety of investable assets. Some of the areas highlighted was the Real Estate and Commodities markets which had explorable opportunities.


The Islamic finance expert stressed that all investments are usually permissible except expressly forbidden, and there was a growing diversity of investible instruments. He was of the view that Shariah-conscious investors, now have more investment options than in the past.


He added that asset managers have recognized the growing opportunities in Islamic finance and launched mutual funds with increasing specialization to cater to the unique needs of investors.


Speaking on principal considerations for investing in ethical assets, he explained that Shariah compliance was the cornerstone of investing, this was non-negotiable. Also, it was essential to understand the nature of the market-based instrument as it would involve ethical governance oversight.


The critical issues, according to him, include the following ;

  • Regulation; when investing in market instruments subject to law.
  • Return; It is essential to understand the returns in non-interest finance as investment channels.
  • Risk
  • Liquidity
  • Time 


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Speaking on ways to engage in equity investment as a Muslim investor, he stressed the need for investors to follow the required methodology and ensure the company was not involved in businesses that were not permissible in the non-interest finance market or that were not Halal.


He also emphasized the need for ethical investors to look at the company by ensuring that their financial performance is managed in a way that is convenient for a non-interest investor.


Speaking on Sukuk investment fixed income, he said many broad investors are attracted to Sukuk Market due to its social impact, ethical preference, low-risk returns, liquidity, and Shariah compliance returns.


According to him, non-interest products are designed in the market to meet multiple needs. Sukuk provide benefit to various of classes of investors such as:

  • Funds Managers
  • Retail investors
  • Pension Funds
  • Other Institutional Investors
  • Banks and Non-Interest Institutions 


He cited the FGN N362bn Sukuk for constructing and rehabilitating highways across the country as a significant socio-economic step taken to galvanize the economy.


Mijindadi illustrated Nakheel issuing Sukuk for Palm Jumeirah, Dubai, one of Dubai's largest real estate developers, and has published a series of Sukuk for real estate projects based on Ijara. He noted that Sukuk had catered for social endeavours such as the US$500million International Finance facility for immunization.


Assessing the Mutual Funds, he acknowledged that the pooled investment in Nigeria was growing. He observed that Shariah-compliant mutual funds are currently nine in number, including three launched within the last twelve months. In 2020, there was a massive increase in the value of assets that were accumulated in pooled or collective investment schemes and are registered by the SEC as non-interest funds.


He said investors need to understand that non-interest product are quite a lot, they are available in the market, and there is room for investing different products like; Sukuk, Money Market, Private equity funds, Mutual Funds and there is a need for more market players to participate in the market.


Giving his projection, he said the increased demand for non-interest assets would allow for other asset creation along the following lines; Sukuk, Shariah-compliant Private Equity Funds, Shariah-compliant Open/Closed Funds, Alternatives (Commodities, etc.), Shariah-compliant Money Market Instruments and Shariah-compliant ordinary shares and Shariah-compliant infrastructure funds.


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