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Friday, April 18, 2014

ISLAMIC BANKING IN NIGERIA: THE FUTURE OF THE SYSTEM AFTER SANUSI LAMIDO SANUSI


   


      The suspension of Sanusi Lamido Sanusi from his position as the governor of the Central Bank of Nigeria by Nigerian President Goodluck Jonathan and the appointment of a new governor Mr Godwin Emefiele who was former Managing Director of Zenith Bank Plc has left many people wondering about the future of Islamic Banking and finance in Nigeria. The movement for the establishment of a fully pledge Islamic Bank (Ja'iz Bank) in the country has been on for almost a decade before the coming of Sanusi Lamido as CBN governor. But, it was only after he became CBN governor that that dream was realised with the starting of operation of Ja'iz Bank plc in January 2012. Before him other Central bank governors (especially Soludo) have made noises about how they wanted to see the realisation of the bank, including drafting policy documents, but up to the time they left the apex bank Islamic banking had remain on papers locked inside CBN headquarters. Now that the person who has put into practice what had been locked in archives of the apex bank has left the bank, what is next for Islamic Banking? Which direction will it possibly take? Would its growth and dynamism be sustained looking at the controversies that trailed the establishment of the system in the last two years and the antecedent of the new governor? These are some of the questions we will be looking at here, because no body can tell you the agenda of the new CBN governor and whose interest he is there to protect.

   Mr Emefiele spent most of his 26 years in commercial banking business with Zenith Bank Nigeria Plc. He is not very well known outside the banking industry or known to harbor any animosity against Islamic finance. But, that is where it stops as stakeholders in the industry have to watch his move closely (now) to see whether he will continue from where Sanusi stopped. Already Ja'iz bank plc has seen multiplications in its capital base and deposits, and has continued to open new branches almost on monthly basis hoping to became a national bank in the nearest future, from it current position of a regional bank. On April 17-19 this year, precisely at the time of the writing of this article, the international institute of Islamic Banking and finance (IIIBF) Bayero University Kano is holding an international conference on Islamic Banking and Finance. This effort no matter how small it is, is commendable as it will go along way in keeping the fire of Islamic finance in Nigeria burning. If the past pronouncement of the current finance minister Dr. Ngozi Okonjo-Iweala is anything to go by it shows that the minister appreciated the contributions of Islamic finance to the global economy. Thus, the Islamic banking and finance industry in Nigeria has not much to fear from her. As a matter of fact her former employer, the World Bank has recognized the contributions of Islamic Economics and finance to the global economy for over two decades now; and has commission a lot of research works on the area.



   Nigerian Wealthy, academics and professional bankers has not done enough for the development of Islamic banking in Nigeria. Imagine the fact that the richest man on the continent is a Muslim from northern Nigeria, but despite that he has done little for Islamic finance because of fear of being seen as Islamic enthusiast by non Muslims. Other wealthy Nigerian Muslims are in abundance but only handful of them has shown any desire to contribute to the field, if not for the sake of God then for the sake of profit or both. This will go a long way to tell you that most of the Nigerian Muslim communities are ignorant of the workings of the system and the profitability hidden their. Many recent studies have shown that on average Islamic banking is more profitable than conventional banks and more risk averse (Hassan and Dridi, 2010). Despite efforts to establish Islamic banks in Nigeria dating back to over two decades ago, there is only one Islamic Bank in Nigeria today. But take for example in the D8 group where Nigeria is a member, all the rest of the seven members countries (including secular Turkey) has more than one Islamic Bank and their numbers is fast increasing. The reasons for the rapid growth in the Islamic financial sector in these countries are not difficult to fathom. First, the authorities has provided the enable environment for the sector to grow; second, elites have recognised the advantages inherent in getting involve in the system; third, the general populace are being educated about the workings of the system.

   Nigerian academics are slow in catching up with their counterparts around the world in the area of making scholarly contributions towards the development of the field. When compared with any other member of D8, the number of scholarly papers on Islamic economics and finance produced in Nigeria in a year is insignificant; it is not up to the volume produced by a single university in Malaysia or Pakistan. This is very worrying looking at the fact that more than half of the population of Nigeria is Muslim and the fact that there are more than 30 universities in Muslim dominated states, half of them offered some economics, finance or management courses. The number of Muslim economists who are actually interested in Islamic economics and finance and are ready to contribute their quarter to the field is insignificant. Most are afraid of the field for fear of discrimination in Nigeria's charged labour market, where being associated with a particular religious thing is seen as being sensitive matter. Though, the coming on stream of Ja'iz bank has changed that perception a little bit by bringing Islamic finance into the main stream and demonstrating to the non Muslims in Nigeria that they have nothing to fear, a lot need to be done. Among the current employees, shareholders, and customers of Ja'iz Bank Plc there are many non Muslims who are happy to be associated with the bank and who feel at home when dealing with it. 



   With only one Islamic bank, two conventional banks operating a window of Islamic bank, and a shariah base Mutual Fund Company, it is just the beginning of Islamic banking in Nigeria as there is more room for growth. Without the will on the part of the authorities in the apex bank the continuous rapid growth the sector has witnessed in the last three years will be jeopardized. Hence, the need on the part of Muslim leaders in the country to make it clear to the authorities the fact that they need Islamic banking or their (Muslim) economic and religious interest will be jeopardized. Sanusi's tenure as CBN governor has done a lot in laying the foundations for the take off of a robust Islamic Banking industry; what remains is for stakeholders in the industry to insure that nobody comes and take them backward. First, the rich Nigerian Muslims should join hand together with Muslim banking professionals to establish another Islamic bank. This will ensure that unnecessary pressure is not mounted on Ja'iz and that a partner bank is provided to Ja'iz which will help to ensure that authorities provide the necessary infrastructures needed for the development of Islamic banks such as Islamic liquidity facilities. Second, more capital should be invested in Ja'iz and more Muslims should patronized the bank in order to make it more profitable and ensure that additional investors both within and outside the country bring their money to the industry. 

NOTE:
Hassan, M. and Dridi, J. (2010), “The effects of the global crisis on Islamic and conventional Banks: A                                                              Comparative study", IMF working papers, WP/10/201

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