Stakeholders Examine the Role of Islamic Banking and Finance in Stabilizing Nigeria's Economy

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Tuesday, October 12, 2021  / 5:50 PM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: IIUM Alumni Association Nigeria Chapter


The International Islamic University Malaysia Alumni Nigeria Chapter held its 3rd annual conference virtually with the theme "The Role of Islamic Banking and Finance in Stabilizing the Nigerian Economy Amidst Insecurity". It was an opportunity for government bodies, royal highness, banking sectors, scholars, Market players, policymakers and individuals to share their views on the opportunities in Islamic Banking and finance sectors in solving Nigerian economic challenges.


In his opening remarks, Dr. Abba Idris President of IIUM Alumni Nigeria Chapter said one of the IIUM mission is to bring together colleagues, to network and create an atmosphere where experts and professional will share their experience and proffer solution, to train the younger generation and contribute to the development of the nation.


According to him, the theme for this year is the role of Islamic finance in stabilizing Nigerian economy. He said, Nigeria was facing several hurdles like kidnapping, religious crises, and secessionist groups that have negatively affected economic activities.


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Mr. Mir Azrul, Director, Alumni Relations Division IIUM in his goodwill messages believed amidst the COVID-19 pandemic, Islamic banking and Finance would play a role in stabilizing the economy.


Also, in a goodwill message, His Royal Highness, Emir of Keffi, Dr. Shehu Usman Chindo, said the association had always been at the forefront of promoting economic development. He noted that the theme was beneficial to policy makers and participants.  He emphasized that networking, conferencing and summits should be sustained by IIUM, but the alumni should equally build a network of economic sustainability.


He commended the association for organizing the event and called on banking and finance experts to create more jobs in the country, as unemployment remained a major challenge.


Giving the keynote address, Mallam Garba Shehu, SSA, Media Publicity to the President of Nigeria, presented an overview of non-interest banking in Nigeria, he said the BOFIA Act 1991 granted approval to the defunct Habib Bank limited to operate an Islamic banking service window but was unsuccessful. In 2010 the Central Bank of Nigeria (CBN) introduced a new banking model which gave birth to Nigeria's maiden non-interest bank, Jaiz Bank in 2011.


Speaking further he said the FGN agenda for non-interest finance was to deploy it to support the real sector of the economy through using CRR, intervention in the textile industry, non-oil export stimulation facility, anchor borrower's program, agri-business small and medium enterprises investment scheme, MSME development fund, commercial agricultural credit scheme, targeted credit facility, credit support for the health sector, and efforts to support the creative industry.


According to Shehu, other regulatory and supervisory Authorities (RSA) in Nigeria equally play a vital role in developing a responsible ecosystem for non-interest finance such as guidelines for Takaful industry in 2013, FIRS issue draft regulation on Islamic non-interest finance Taxation in 2020, SEC rules on Islamic fund Management and Sukuk issuance regulation in 2020.


He added that the NGX and Lotus Capital developed an Islamic capital market index, in order to track the performance of Shariah-compliant equities trading on the floor of NGX in 2012, also PENCOM issued regulation on investment and pension fund assets in 2017 and it has grown to N14trn. While the NDIC introduced a noninterest Deposit Insurance Scheme for NFIs.


Reviewing domestic borrowing, Shehu said Sukuk has so far represented a promising instrument, in October 2013 Osun State issued an 11.4bn sovereign Sukuk, in 2017 the FGN issued a N100bn Sukuk to construct 25 road projects across the country, in 2018 a N100bn Sukuk Issuance took place, and in 2020 an additional 150bn Sukuk was Issued to meet domestic borrowing needs.


Mallam Shehu noted that the Sukuk issuances has brought enormous benefit to the economy and capital market. Most of the subscribers to Sukuk were conventional investors and not just Muslim.

 

Providing further perspective he emphasized the fact that the Nigerian Islamic finance industry is fully back by regulation, it is still nascent but there is potential for growth.


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The Presidential spokesperson noted that Sukuk Issuance was expected to increase between 2021 and 2022 after reaching 0.05% of domestic banking system assets.


Lead paper presenter, Mr. Norfadelizan AbdulRahman, CEO Taj Bank, said the distribution of wealth was important to increase the level of wealth for each different economies.


"The millennials are internet savvy and Tajbank is leveraging technology. In Nigeria 2g phones should be included, while the USSD and wallet will go a lot deeper into the remote area," he said.


The event featured a session of distinguished speakers who aired their views around the theme.  The Head, Research and Publications IFSB, Associate Prof. Dr. Adewale Abideen said poverty poses the most dangerous threat to the country's stability than terrorism. He observed that it had led to a sense of hopelessness, poverty and inequality which has fueled violence. 


Looking at the issue of inequality, he highlighted the various types from political, gender, social, and educational. With the poverty rate in Nigeria, currently at 40.1%  he noted that the IsDB, had come up with an economic agenda for Muslim nations and the CBN was working with Islamic microfinance banks.


In his presentation on "Dispute Management in Islamic Financial Services in Nigeria", Dr. Umar Oseni, CEO of International Islamic Liquidity Management Corporation called for liquidity management for Islamic banks. He advocated for policies that promote access to justice.


Associate Prof. Rashidah Funke Olanrewaju speaking on "exploring humanitarian engineering to stabilize economy" said humanitarian engineering was a new term to take engineering to new levels. It explored the role and application of engineering to disadvantaged, marginalized and vulnerable communities to improve their quality of life and support empowerment. She noted that principles of humanitarian engineering were: focus on people in order to help, relate, listen, ask, cooperate, and empower. According to her, it was important to form good relationships with people in their communities.


Humanitarian activities from an Islamic perspective could be achieved through Makaseen. Olanrewaju explained how practical engineering was connected to social development to move the society out of poverty and hunger and achieve social stability and peace.


The CEO of Lotus Capital, Mrs. Hajara Adeola, represented by Mr. Ndako Mijindadi analyzed the "The Prospect of Islamic Funds in Supporting Economic Recovery and Stability in Nigeria".


Giving a presentation on the Nigerian economy and COVID-19, she said, the country's economy saw a 2.27% GDP expansion in 2019 and 1.87% in Q1 2020. The economy experienced a 2.5% recovery in Q2 2021 with non-interest finance increasingly seen as a tool for supporting economic recovery.


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She observed that Nigeria has always depended on the oil sector but requires new drivers of economic growth, especially in the area of manufacturing which would involve inclusion, job creation and equity. Government should provide a conducive environment for investment in infrastructure and climate control. She said, Islamic funds could support economic recovery and stability by increasing "participation and allocation".


Adeola pointed out that Islamic funds need to focus on market dynamics and not just theory. Islamic funds through investments in the real estate sector by Shariah-compliant instruments could spur economic growth.  


Also, Dr. Adedeji Akeem of the Police Headquarters Abuja in his contribution on the "Nigerian economy and insecurity, a matter of concern and the way forward" said government should structure and centralize security. He pointed out that in any nation where there is insecurity, economic growth would be unattainable. He stated that the situation calls for concern, because no nation can achieve development without security.


After 61 years of independence, Dr. Akeem pointed out that country was still grappling with unemployment, poverty and insecurity. In the area of insecurity, the activities of herdsmen, Boko-Haram, armed bandits, IPOB, kidnappers, human traffickers, child, militants and so on, pose identifiable risks to investments in the country.


He highlighted the following as the causes of insecurity in Nigeria:

  • Bad governance
  • Unemployment
  • Corruption
  • Poverty
  • Power tussle
  • Lack of industrial capacity and
  • Porous Borders  


On strategies for curbing the spate of insecurity, he made the following suggestions:

  • Good governance
  • Zero tolerance for corruption
  • Rule of Law
  • Adequate and Proper Funding of Security Agencies
  • Creation of Jobs
  • Funding Educational System
  • Funding Technological Research
  • Virile and Inclusive Democracy 


The webinar was moderated by the Secretary of IIUM Alumni Nigeria Chapter, Dr. Aliyu Dahiru Mohammad.     


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