Islamic Finance in Nigeria Continues To Flourish

Islamic Finance in Nigeria has emerged as a thriving sector, offering Sharia-compliant banking solutions and investment opportunities to cater to the country’s growing Muslim population. Fitch Ratings has predicted a sustained growth trajectory for Nigeria’s Islamic finance industry in 2023 and 2024. The report states that growth will be driven by government Sukuk issuance and policy stimulus, but is likely to remain nascent in the medium term.

According to the ratings, Nigeria, although small by global standards, is home to the largest Sukuk market in Africa with outstanding issuance of N755.5bn.

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The report said the size of Nigeria’s Islamic finance industry is estimated at $2.9bn by 2022, with Sukuk outstanding being the largest segment at 57 percent, followed by Islamic banks at 42 percent and the remaining one percent between Islamic funds and takaful.”The long-term potential is significant as Nigeria has the largest Muslim population in Africa with a large pool of unbanked citizens.

“In 2022, the Federal Government of Nigeria issued a seven-year sukuk to raise N130 billion, the fifth issuance since 2017 at over 1.6 times subscription.

“The Securities and Exchange Commission aims to make Nigeria a hub in Africa for Islamic capital market products, as part of the government’s ‘Revised Plan 2021-2025’.”

He noted that the SEC is targeting 50 listings of Sharia-compliant products with a market capitalization of at least N5tn by 2025.

“Last year, Taj Bank Limited also launched an N100bn mudaraba sukuk program in 2022 to raise Tier 2 capital,” Fitch said. As Nigeria continues to embrace Islamic finance principles, its robust industry paves the way for economic growth, financial inclusion, and the integration of Islamic values into the country’s financial landscape.