Nigeria inches closer to establishing Islamic banking model


The Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi’s initiative to establish an Islamic banking model in the country is getting closer to reality. To foreclose any doubt and capitulation to varied criticisms against the proposal, the apex bank‘s helmsman led a delegation from the CBN to the 16th Meeting of the Council of Islamic Financial Services Board in Khartoum, Sudan recently.

The meeting, the second attended by Nigeria since the CBN became a full member of the council in 2009, serves as a tonic for the regulator to reaffirm its commitment towards establishing the model of banking operated according to the dictates of Sharia law.

Sanusi, who has never hidden his passion for the non-interest banking paradigm, is of the opinion that the prevailing economic meltdown has increased the demand for Islamic financial products and services across the world.

His belief stems from the perception that while the recent economic meltdown lasted, Islamic institutions displayed strong resilience reflecting their conservative approach to business, balanced and ordered appetite for growth and focus on the basis of financial intermediation as opposed to innovation.

At the Khartoum gathering, Sanusi intimated the leadership of the Central Bank of Sudan of the ongoing efforts by the CBN to develop a regulatory and supervisory framework for non-interest banking and solicited the support and cooperation of the mainly Islamic country‘s banking regulator in that regard.

As expected, he got a positive response from the Advisor to the Governor of the CBS, Dr. Ahmad Ali Abdullah, who represented the Governor.

He was assured of the readiness of the banking regulatory authorities in Sudan to support the CBN in its implementation efforts through experience sharing and capacity building.

During the meeting, the council deliberated on several issues including strengthening of Islamic financial system and approved in principle to establish an inter-governmental special purpose entity to help in building liquidity management infrastructure at both domestic and international levels.

The CBN, in an e-mailed statement to our correspondent on Friday, said, ”Establishing the special purpose entity would be achieved by facilitating cross-border liquidity management among non-interest financial institutions through the acquisition and maintenance of global pool of sovereign assets.”

According to the council, such sovereign assets must be suitable for use as underlying asset on which it would benchmark the issuance of highly rated Islamic bonds to be traded globally.

Other areas which the council deliberated and agreed upon include the issue of capacity building among the operators and regulatory authorities with a view to strengthening their operations and ensuring efficient service delivery in the industry.

Sanusi believes that the global financial crisis exposed the deficiencies in the conventional banking system and damaged the confidence in the global governance system.

The CBN boss had said in an earlier gathering that he initiated actions to develop a regulatory and supervisory framework for Islamic banking in Nigeria in recognition of its benefits in a growing economy like Nigeria.

To realise the non-interest banking model, the CBN intends to deploy a number of strategies to address some of the identified challenges,

These include extensive capacity building through collaboration among the various stakeholders to develop cognate expertise in non-interest banking, development of an adequate regulatory and supervisory framework for the effective operation of non-interest banking in Nigeria, promotion of greater cooperation and coordination among relevant regulators and other stakeholders such as the Securities and Exchange Commission and the Nigerian Stock Exchange, the National Insurance Commission, the Nigeria Accounting Standards Board, among others.

source : the punch