Diversification of Islamic Financial Insturments
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3.1.2 INTRODUCTION
The Islamic finance sector, which comprises of Islamic Banks, Takaful institutions and Islamic
capital markets is relatively new in Nigeria when compared to the conventional finance sector.
Habib Bank was the first conventional bank in Nigeria to be granted license to operate an
Islamic Banking Window in 1992 following the amendment of Banks and Other Financial
Institutions Act (BOFIA) in 1991 to recognize profit and loss sharing banking model. The
Window commenced operations in 1999; however, it did not survive as Habib Bank, which
metamorphosed into Bank PHB after merger with Platinum Bank in 2005, was liquidated in
2011.
Islamic finance was again boosted in 2011 when the Central Bank of Nigeria (CBN) released
the guidelines for the regulations and supervision of institutions offering non-interest financial
services in Nigeria. Following the release of the guidelines, a full-fledge Islamic Bank (Jaiz
Bank), Stanbic IBTC and Sterling bank Islamic Banking Windows as well as Tijara microfinance
Islamic bank were licensed and commenced operations between 2011 and 2014. A new
Microfinance Islamic Bank, I-Care Microfinance was recently licensed (in the last quarter of
2016) and commenced operations in April 2017. These five (5) institutions constitute the
Islamic banking sub-sector.
A significant milestone in Takaful was also recorded in 2013 when the National Insurance
Commission (NAICOM) issued the Guidelines for Takaful-Insurance. Following the release of
the guidelines, two full-fledged Takaful companies, namely Jaiz Takaful and Noor Takaful as
well two (2) Takaful windows (African Alliance Insurance and Niger Insurance) and a division
of Takaful (Cornerstone Insurance) of conventional insurance companies were incorporated
and thus by December 2016, there were two full-fledged Takaful companies and three
conventional insurance companies offering Takaful as a product.
Similarly, the Nigerian Islamic Capital market comprises of two (2) Islamic funds, namely:
Lotus Capital Halal Fund and Stanbic IBTC- Iman Fund as well as Osun State Government
Sukuk.
In Nigeria there are no dedicated laws for Islamic Finance. The legal framework for Islamic
finance was derived from the existing conventional finance laws by leveraging on some
provisions in the laws to establish Islamic financial institutions. These laws include: Banks and
Other Financial Institutions Act (BOFIA) 1991, Central Bank of Nigeria (CBN) Act 200717,
Nigerian Deposit Insurance Corporation (NDIC) Act 200618, National Insurance Commission
(NAICOM) Act 199719 as well as Company and Allied Matters Act (CAMA) 199020 and
Investment and Securities Act (ISA) 200721. This lack of separate laws for Islamic finance has
contributed in retarding the growth and development of Islamic finance in Nigeria.
17For details see sections 23(1) 52; 55(2); 59(1)(a); 61 of Banks and Other Financial Institutions Act (BOFIA) 1991 (as
amended). Available at
18 For details see part 1 section 2. Available at
19 For details see section 7 of the NAICOM Act 1997. Available at:
20 For details see Part II Chapter 1: Available at
21 For details see parts 8, 13 and 17: Available: