Nigeria: How CBN Supports Inclusion and Economic Growth With Non Interest Finance

Since the Issuing of guidelines on Non-interest banking by the Central Bank of Nigeria, non interest banking has been deepening its root in Nigeria's financial cycle.

Its acceptance has melted the initial skepticism, suspicion and religious phobia associated with the concept.

Pioneered nine years ago (2012) by Jaiz Bank Plc, the genre of financial service has gained wider acceptance, with more finance institutions opening windows for non-interest banking products to cater for segments of their clients.

Non-interest banking transactions are based on tangible assets and real services. It's an alternative form of banking based on a principle of non-interest, sharing of risk and rewards; equity, fairness and justice.

Functioning on the same space with conventional banking institutions, non-interest banking has achieved some mileage within the space of nine years.

Addressing conference participants recently in Abuja with the theme: "Sustainable Islamic Finance in Nigeria," the immediate past Managing Director/ Chief Executive Officer, Nigeria Deposit Insurance Corporation (NDIC) Alhaji Umaru Ibrahim, outlined modest achievements recorded in non-interest banking since its foray into Nigeria's financial service sector.

He said in terms of assets, total assets of non-interest banks and windows grew modestly from N66.96 billion in 2015 to N186.46 billion as at June 30, 2019.

However, he added that its share of total assets against the total assets of the banking industry stood at a paltry 0.49 percent as at June 30, 2019.

Similarly, he said total deposits stood at ₦121.68 billion, or 0.53 percent of the industry total during the same period while total financing stood at ₦59.81 billion, 0.38 percent of the industry total as at the end of second quarter, June 30, 2019.

"The impact of such performance is clearly insignificant. According to the EFINA access to financial services in Nigeria survey 2018 data, 36.6 million adults representing 36.8 percent of 99.6 million adult-population in Nigeria are financially excluded. Of particular concern, 62 percent of the 23 million adults in the North West and 55 percent of 12 million adults in the North East are financially excluded," he said.

Beyond growth in asset base, the genre has recorded more players outside of Jaiz Bank. Some banks and other financial service providers including insurance firms open non-interest finance service windows to cater for their clients.

Some corporate institutions adopted sharia compliant products as a tool for meeting their financial needs. The federal Government, the Debt Management Office (DMO) raised two tranches of sukuk bonds for financing of road infrastructure across the country. The Osun state government, some years ago, had also raised sukuk bonds to address some infrastructure gaps in the state.

More institutions have embraced sharia compliant products. These include Sterling Bank, Taj Bank, Lotus Capital, Noor Takaful, Cornerstone and Leadway insurance companies, Tijjara Microfinance Bank and Stanbic IBTC, which recently closed its Islamic banking window.

So, it was with great excitement that stakeholders welcomed the latest approval by the CBN granting a non Lotus Bank limited.

Founded & Chaired by Mrs. Hajara Adeola, who is also the Founder and Managing Director of Lotus Capital (the pioneers of non-interest finance in Nigeria), the Bank is starting its operations on a solid foundation of experienced leadership and a strong Advisory Council of Experts (ACE).

LOTUS Bank is managed by a team of seasoned professionals and financial experts led by the Managing Director/CEO, Mrs. Kafilat Araoye who has over 25 years commercial banking experience.

According to the Managing Director, LOTUS Bank's focus and guiding principle is 'to deliver an alternative option to interest-based banking and to cater to the needs of not just the banked but also the under-banked and unbanked population. Non-Interest Banking is geared towards supporting the real sector and LOTUS Bank aims to improve financial inclusion in the country. In addition, the bank will operate transparent pricing models as is the norm in non-interest banking.'

"Our values are deeply rooted in partnership. A critical component of our mission is the provision of innovative solutions that drive ethical prosperity for all stakeholders. We pride ourselves on digital solutions that provide our customers with the convenience of unlimited access to our services and products," she added.

Mrs Araoye further stated, "Our products and service offerings will include non-interest Business Financing, Deposit Products (current, savings and investment accounts) and personal financing. The bank aims to be a socially responsible organization that will satisfy its customers across all touch points."

With its flagship branch located at Adetokunbo Ademola Street, Victoria Island, Lagos, the bank will open its doors to customers from July 2021.

Globally, non-interest banking is worth 2.23 trillion USD and is expected to grow to about 4 trillion USD by 2024. This type of banking is recommended to all Nigerians who desire to be involved in ethical and non-speculative business.

LOTUS Bank is the first non-interest bank to commence operations from South-West, Nigeria with a focus to serve people of all faiths.

Speaking recently on the opportunities to impact the economy, the Group Head, Non-Interest Banking of Sterling Bank, Dr Basheer Oshodi said the Non-Interest market has the instruments that can be deployed to bridge the gap of under-development in the country.

He said based on the Economic Sustainability Plan (ESP) the current administration identified seven key areas the Non-Interest Finance Market can support the government plan to stimulate socio-economic activities in the country.


With Agriculture touted as a major anchor of the revenue diversification plan of the Buhari administration, he said instruments like the Ijara and Musharakah can be deployed to support leasing and mechanized equipment in the agro sector.

Speaking further, he said that Non Interest Financial Institutions can create value and provide a financing vehicle for smallholder farmers for a period of one year or six months.

This will enable the creation of markets for them to sell their products, serving as the intermediaries which will improve the quality of their lives and incentivize them to produce massively.

He believes there is a need for non-interest financial institutions to get more involved in Agri-Business and support the sector post pandemic, exploring partnership transactions for smallholder farmers through the off-takers/ out-growers schemes.

With Nigeria's current unemployment rate as 23.1% according to the NBS, there's a need to address the burden of more than 50% of Nigerian adults who do not have a source of income. There should also be investments in farm estates to boost agro-based industrialization and processing.

Affordable Housing

Considering the housing deficit of over 17m and the fact that Nigeria is ranked among the countries with a large population living in Slums by the UN Habitat, Dr. Oshodi emphasized the need for the Non-Interest Banking stakeholders to collaborate and cooperate more to explore "Retail Sukuks", that can create specific projects targeted at mass housing projects across the country that are affordable for Nigerians.

He also suggested Non-Interest finance initiatives like the "Real Estate Sukuk" in the nation.

Transportation Infrastructure

With the third successful Ijara N150bn Sukuk bond issuance by the Federal Government, the Islamic Finance expert was of the view that the over 400% subscription showed the wide level acceptability of the instrument for financing infrastructure in the country.

With several major highways already earmarked for financing by the Ijara Sukuk, the Group Head of Non-Interest Banking in Sterling Bank maintained that it remained a veritable source of alternative financing for the federal government.

Effective infrastructure, especially link expressways across the nation are enablers for socio-economic activities.

MSME Support & Development

Statistics quoted from the Small Medium Enterprises Development Agency of Nigeria, SMEDAN shows that there are about 41million MSMEs in the country, who contribute over 70% of economic activities in the country.

Dr. Basheer Oshodi notes that 90% of the MSMEs in Nigeria are operating at the micro-business level seeking robust financing measures to scale their operations.

He made a strong case for Non-Interest Finance Institutions to explore how they can create a vehicle for providing funding to key growth MSMEs that can transform the economy and create more jobs, with a view to supporting them.

Islamic Finance Institutions can support the Federal Government's plan to provide more industrial clusters for MSMEs in the country.

Digital Technology

In the age of the fourth Industrial revolution driven by digital technology, nations must reposition themselves to invest in the infrastructure and processes that can unlock the opportunities in the digital economy.

With the focus of the Economic Sustainability Plan on deepening the digital technology space, Islamic Finance institutions can provide capital for digital tech SMEs, supporting their innovations and products.

He also advocated for Non-Interest institutions to have equity investments in technology companies, forging a formidable partnership with them.

Oshodi urged stakeholders in the industry to partner and fund strategic tech hubs in the country.

Gas Expansion

In this area he believed initiatives like "Private Sukuks" can help to finance projects like Gas expansion across the nation, thereby driving a Gas-led industrialization that will also help to boost the power and energy situation in the country.

This according to him will lead to an effective utilization of the natural gas resources in Nigeria, that can support other industries including manufacturing petrochemical, agro amongst others.


The COVID 19 Pandemic revealed the fragile healthcare infrastructure in Nigeria and the need for more large scale investments in research, innovation and capacity building.

"Strategic and well designed multi-billion naira "Healthcare Sukuks" focused on the health sector, can help to provide financing for improving the landscape of the sector in the country, and the upgrading of medical equipment and the building of world-class hospitals in the country," he said.


Giving his perspective, the Islamic Finance scholar said that currently Africa in total accounts for one percent of the Global Islamic Finance Market, which leaves a lot of room for scaling, innovation and the need to deepen the market.

Speaking further he said Africa is doing very well in regulation but needs more players in the market. He acknowledged the fact that there was liquidity in the Non-Interest finance market that was not asset backed and called for innovative products and instruments like "FX Assets".

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