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Islamic Finance Sector Records $2 Trillion Growth in 2018

June 18, 2019/NSE

The Director-General of the Debt Management Office, the Acting Director-General of the Securities and Exchange Commission, the Acting Director-General of the National Pension Commission, Members of the Capital Market Community, Distinguished Guests here present, on behalf of the National Council, Management and Staff of The Nigerian Stock Exchange, I heartily welcome you all to the maiden edition of the IFN Nigeria Forum.

The Islamic Finance sector has grown noticeably over the years, from about $1.5trillion in 2016, to about $2trillion in 2018, driven by growth in Islamic Banking assets as well as growth in Sukuk issuances. This growth has largely been concentrated within GCC region and in Asia; however, recent data suggest that Islamic financing is beginning to take root in Africa, with issuers across Gambia, Sudan, Senegal, Ivory Coast, Togo, as well as Nigeria in more recent times.

Clearly, Islamic Finance represents a turning point and a new paradigm for the financing of infrastructure in this country.

In 2013, for example the Osun State Government issued an N11.4bn, 7-year Sukuk instrument used to finance the construction and rehabilitation of 27 schools in the state.  As you are aware however, the Nigerian economy in 2016 suffered a number of economic headwinds occasioned by the fall in crude oil prices, the mainstay of the economy which resulted in high and rising inflation, and consequently higher capital costs. In a bid to restart the economy, the Debt Management Office embarked on a diversification strategy which amongst other things involved the issuance of two N100bn tranches of Federal Government of Nigeria Sukuk instruments. These Sukuk were also used to finance the maintenance and construction of critical road infrastructure across the six geopolitical zones of the country. These instruments were a huge success and widely accepted by the capital market community in Nigeria.

The Islamic Finance sector presents numerous opportunities for enhancing the economic fortunes of this country. From a domestic perspective, Islamic Finance presents opportunities to unlock the dormant pools of capital present within our nation. In particular, adherents to the Islamic faith are prohibited from investing in non-Shar’iah-compliant investments which within the domestic economy, eliminates this demography from participating in capital market activities, and further serves to undermine the level of savings needed for capital formation. Also, the development of a viable Islamic Economy in Nigeria has far reaching implications within global markets, for investment managers seeking to achieve portfolio diversification. The ability for fund managers seeking Shari’ah-compliant investment products to diversify into our markets facilitates more foreign inflows which has implications for the economy via the attraction of low-cost funds for development.

On this note, we applaud the Federal Government of Nigeria, the Debt Management Office, the Securities and Exchange Commission, the National Pension Commission for showing unwavering commitment to the deepening and growth of Islamic Finance in Nigeria. We also thank our domestic and international partners with whom we have worked assiduously to ensure the success of this Inaugural IFN Nigeria Forum. Finally, we would like to thank the audience and the various market stakeholders here present for their tirelessness and dedication towards the birthing of this novel initiative in our markets.

The Nigerian Stock Exchange for its part will continue to work with market stakeholders to ensure the development of a robust Islamic Finance sector. In 2016, for example we developed and publicized our rules governing the listing of Sukuk and similar debt securities to provide regulatory guidance for issuers seeking to list their instruments on our platform. Furthermore and in line with the SEC’s Non-Interest Capital Markets Product Master Plan, we have identified five strategic pillars critical for the growth of the sector. These include a strong regulatory framework, capacity building, product development, robust primary and secondary markets, and market awareness programs such as these. We have already started executing on these pillars and recently hosted a training exercise for the market. We will also continue to provide an efficient and liquid market for investors and businesses in Africa, to save and access capital. We promise to continue our collaboration with all market stakeholders, to collectively contribute towards the enhancement of this new asset class, and ultimately towards the growth Islamic Finance in Nigeria and Africa at large.

Thank you

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