‘Why Nigeria Cannot Shun Islamic Financing Market’

A Chartered Accountant and Tax Administrator, Mr. Bicci Alli has said that the federal government as well as states cannot shun Islamic financial instruments whose market is valued at over $2.6 trillion, because it has the capability to bridge the infrastructure deficit in the country.

Alli, said this in a presentation titled: “Islamic Financial Market: A Catalyst for Bridging Infrastructure Deficit,” obtained by THISDAY yesterday.

The federal government is presently looking for financial and legal advisers and trustee firms to organise its first Islamic bond in the domestic market, the Debt Management Office (DMO) said on Monday. Nigeria is working on a debut sovereign sukuk but has yet to determine the size of a potential deal. Issuance of a sovereign sukuk is part of a plan by Nigeria’s debt office to develop alternative sources of funding and to establish a benchmark curve.

Continuing, Alli highlighted the reasons for the growth of Islamic financial products to include the crash of the financial market and crises that followed it (Subprime Finance in USA); excess liquidity from sale of crude oil (until recently) most especially in the oil producing countries of the Arabian Peninsular; active roles played by some countries in the development of Islamic financial market; especially Malaysia, Iran and Countries of the Gulf; increase perception that Islamic financial instruments can support effort to promote global financial stability; as well as Increase deployment of Islamic financial instrument as monetary policy tool by some countries, Iran especially.

“The Governor, Central Bank of Nigeria (CBN) Mr. Godwin Emefiele was elected as the chairman of the International Islamic Liquidity Management Corporation (IILM) on ,December 15, 2016 in Jakarta Indonesia. Emefiele combines the position with headship of the General Assembly of financial body comprising nine countries and Islamic Development Bank
“In view of the fact that religion has become a volatile issue over the years in Nigeria and IILL has Islamic colouration, naturally the election of Emefiele, is regarded in some quarters as attempt to further Islamise Nigeria. I humbly hold a different opinion.

“Nigeria is at a stage where there is need to broaden the source of funds required to support her huge infrastructure deficit and plug revenue short fall caused by global slump in prices of crude oil and commodities . We cannot shut ourselves out of a market that according to Nadim Najjar, Managing Director at Thomson Reuters, Middle East and North Africa, is projected to reach $3.5 trillion by 2021,” Alli said.

The tax expert pointed out that the Islamic financial market is made up of institutions, managers, and instruments that comply with Islamic Religious (Sharia) law with respect to payment of interest and generation of profits from business activities.

The market seeks to reconcile secular financial system with basic tenet of Islamic Faith. Sharia law bans the sale and purchase of debt contracts, profit taking without real economic activity as well as activities that are not considered halal (sharia-compliant). Only interest-free forms of finance associated with investments that do not involve any association with pork, alcohol, fire arms, adult entertainment or gambling are considered permissible in Islamic finance.

The value of Islamic financial assets worldwide increased from USD 150 billion in the mid-1990s to an estimated $2.6 trillion by end-2015.Malaysia, Qatar, the UAE, Saudi Arabia and Indonesia feature among the countries that have been at the forefront of growth in the sukuk primary market.

“At present, there are four major sukuk-listing domiciles, namely the London Stock Exchange, the Bursa Malaysia (in Kuala Lumpur), NASDAQ Dubai and the Luxembourg Stock Exchange. The London Stock Exchange is the largest exchange for sukuk listings. Osun State Sukuk is listed on Nigerian Stock Exchange,” he added.

by Obinna Chima