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Tuesday, May 10, 2011

ISLAMIC BANKING IN NIGERIA: the journey so far

The path to Islamic banking in Nigeria has been very tough right from the inception, unlike in other parts of the world where the program implementation got support from different angles: the government, academia, professional and the general public. In Nigeria the situation provides a difficult case study of it own, in which some sections of the country see the move as a way of given preference to one religion over others, while the other side see it as their legitimate right given their own non compatibility with the main conventional system in use in the country. The same thing is true in the academia, while the southern intellectuals approach the new system with skepticism; those in the north see it as a positive move capable of bridging the economic gap between the two major sections of the country. The government and the central bank in particular did not help matters in this case; if not of recent some among the Central bank plethora of policies are the major stumbling block to the take off of Islamic banking in Nigeria. Surprisingly, the banking and finance professionals in Nigeria constitute an important segment of those Nigerians ignorant of the system; their hatred for the system has so far driven them to oppose its successful implementation.
  Since the start of official mutterings about the introduction of Islamic banking, that began in the 80’s, the whole program has remained as it was, a government’s tool use when ever appropriate to achieve some political goals. At different times the governments of Babangida, Abacha and Obasanjo had promised the actualization of this dream only to turn out at the end as normal policy pronouncements. Since the promulgation of Bank and other financial institutions acts (BOFIA) in the early 90’s, and the attempt by the former HABIB Bank to open a kind of window to cater for the need of Islamic banking public, there was no any other major land mark. The recent effort at setting up of JAIZ, significant as it was, has remained a mirage that remains a mental picture. The entire Soludo hullabaloo about Islamic banking has ended up in producing one piece of policy book, the so called guide, while the nitty-gritty of laying a solid foundation for establishing Islamic Banking like the recruitment and training of the necessary manpower to take care of the basic jobs and the operationalization of the required money and capital market infrastructures were neglected.   
   While in other countries the laws were reviewed to allowed for the establishment of Islamic banks by foreigners, only in recent time did the Nigerian monetary authorities start to look in that direction. Since the wealthy Nigerians are reluctant to put their money in the sector, this should have been a perfect course for kick starting Islamic banking in Nigeria. But as I have mentioned the policy and the existing infrastructures will not allowed for that. Our so called banking professionals have failed to understand the enormous foreign investment potentials provided by Islamic banking which the Western world have been using to their own advantage for sometime now. Or we could have used the Malaysian model where existing conventional banks were encouraged by the central bank to start independent Islamic bank, as a kind of subsidiary. The enormous amount of resources at the disposal of Islamic Development Bank (IDB) based in Jeddah, Saudi Arabia, to provide assistance to countries trying to establish their own Islamic banking system, was never put to a good used by our monetary authorities. Likewise the various opportunities for collaboration, with countries that have already made substantial progress in the area, were not used.
  There were many efforts, particularly coming from Usmanu Dan Fodio University Sokoto and Bayero University Kano, towards research and training of manpower in the area of Islamic Banking and finance during the 80’s and 90’s. Usmanu Dan Fodio University is the first university in Nigeria to introduce courses in Islamic Economic and finance. The initial enthusiasm of the university toward the development of the area was killed by the apparent lack of concerned for the field shown by the government. Through collaboration with other institutions around the world, Usmanu Dan Fodio University was able to organize and hosted international conferences that gathered some of the first pioneers in the field of Islamic economic and finance from around the world. The like of the late Sule Ahmed Gusau and Professor Mohammed lawan Bashar of the university were the brains behind some of the earlier feasibility studies on the practicability of the system in the country. Currently Bayero University is in the process of establishing an Institute for Islamic Banking and Finance for the training of manpower in the area. Courses to be offered will include both undergraduate and postgraduate programs to be done in collaboration with some institutions from around the world.
  Nigeria’s Central bank under Sanusi Lamido has made another pledge to see to the actualization of the system in the country, but despite the zeal with which the current effort is been persuade, many people remain cautious until when they started to see the promise bearing fruits. The categorization of the banking system into groups will go along way in helping the course of Islamic banking in the country. But if the Central bank is indeed very serious and decided to move a bit faster than it does now, the skepticism on the part of the concerned public will subside. In a country like Nigeria where more than half of the population is outside the formal banking system, for reasons that included economic and religious, any set of programs that will help reduce this percentage should have been openly welcome not treated the way Islamic banking have been treated over the years.  No matter the beliefs we held on our minds concerning Islamic banking as a phenomenon, Islamic finance has so far turned out to become an important segment of global finance that cannot be simply ignored. We are all watching to see how Nigeria’s aspiration to become a regional hub for global finance in Sub Saharan Africa will be achieved without revisiting the part that Islamic finance is to play in this.

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