The plan by the Central Bank of Nigeria (CBN) for Islamic banking in the country notwithstanding the opposition in some quarters has taken a new dimension with the pronouncement of N10 billion capital base requirement for any Islamic bank applying for licence to operate nationwide even as it further announced N5 billion capital requirement for an Islamic banking licence for regional operations. The CBN explained that it has the power to license Islamic banks in the country as stated in the CBN Act and Bank and Other Financial Institutions (BOFIA), duly passed into law by the National Assembly.

Accordingly, the Banks and Other Financial Institutions Act (BOFIA) 1991 as amended in Sections 9, 23 and 52, provide for the establishment of Islamic banking in the country. In that capacity, the former Habib Bank was granted an approval in 1992 to operate a window of Islamic banking which is still operational with Bank PHB. Thus, the approval by the CBN under former CBN Governor Charles Soludo saw the emergence of the proposed JA’IZ Bank, which has been working to raise 25 billion naira capital base as required (under BOFIA), showing that Islamic banking system was already in Nigeria years before the emergence of Sanusi as governor of the CBN.

The apex bank had, on December 31, 2010 and January 12 2011, published the guidelines on Shariah governance for non-interest financial institutions.

The policy framework as stated by the monetary authority aims at providing minimum standards for the operation of institutions offering non-interest banking and financial services in the industry to stimulate massive investments in the country. While some stakeholders are of the opinion that non-interest banking would bring long terms economic benefits to Nigeria, others said that such business practice must be condemned to prevent religious sentiments and division in the country, especially as Nigeria is highly sensitive to sectarian politics and religious conflict. Stakeholders who spoke with Sunday Vanguard expressed their views:

Non-interest banking would benefit Nigeria’s economy in many ways – Santigie Charles Conteh: Ministry of Finance Sierra Leone.

What people should realise is the fact that Islamic banking has a lot of incentives for countries practising it. This type of banking technique is not totally new to the system, but it is just a banking model that is interest rate free and people are also free to make use of what product they want in the financial sector.  Non-interest banking is a unique form of banking under the specialised banking model designed to promote development of Small and Medium Enterprises (SMEs).

This is because the entrepreneurs who are into SMEs operate on a smaller scale, sometimes with low capital for investment especially in the areas of start-up. This type of banking model would help them because they do not have to pay high interest rate charged by the commercial banks doing business in the country. What Nigerians should do is to carefully evaluate the new product to see what it entails and what the economy stands to benefit in the long-run.

CBN should not implement Islamic banking in a hurry – Rechard Tinubu, management and financial consultant to Osun State Government.

Because it is called Islamic banking, there is tendency for people to bring religion into it. For me, the CBN should not be in a hurry to introduce the model. The apex bank should allow time for people to examine the new banking system to see how it would benefit investors and government in the long-run expectation.

The apex bank is an agency of government charged with the responsibility of regulating the financial sector, which is a continuous process and an institution of the state.  So, for effective policy implementation and for the leadership to continue to create wealth among the citizenry, government must continue to look inward with a view to satisfying the yearnings of the people in the area of welfarism geared towards infrastructure renewal. Hence, the apex bank should carry the people along in introducing new banking model.

In a developing economy like Nigeria, the government needs to invest in infrastructure, public goods and capital projects to stimulate economic growth and development. This requires efficient banking industry capable of financing capital projects in different locations across the country. The government should continue to develop the nation’s domestic bond market in such a way that the private sector players could borrow to invest and finance projects with long term benefits. This could pave way for sustainable growth in the economy.

There should be level -playing field – Silas Onuoha Igwe: Non-interest banking model should not be introduced for the muslims only. The monetary authority should ensure a level playing field for all investors to benefit from the new banking model.  The non-interest banking system should be adequately structured to promote development of small and medium enterprises in the country.

This is because Nigeria has a population of over 140million people and majority are youths, so CBN should give priority to SMEs to enhance jobs creation.  If adequately implemented, the new model would be a way of encouraging entrepreneurial development in the economy. The moment this is done, most people would become employers of labour and this would further tackle the problem of unemployment in the country. Government should as a matter of urgency map out a structural framework to diversify the economy into non-oil export sector in order to develop the agricultural sector, which has the capacity to create thousands of jobs for the citizens.

The CBN should also look at the statistics in the area of small and medium scale operators – Boniface Amobi of National Bureau of Statistics, Presidency, Abuja: The initiative by the CBN to introduce a new model, which would bring additional product to the banking industry should not be condemned because the economy needs holistic growth.

I commend the effort of CBN in financing data production in the country. Economic growth and development requires credible data to help government in making decision on what basic infrastructures are needed and appropriate locations to put public goods for the benefit of the citizens. Government should make data production a national issue with sufficient revenue allocated for it and not just a project financed by the Central Bank of Nigeria (CBN) alone. The apex bank should ensure adequate use of data in the on-going banking reforms.


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.