Diversification of Islamic Financial Insturments
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in making investment in Sukuk because of the constraint imposed by the legal and
regulatory environments.
 Inconsistency in regulatory framework: As an example, while the Guidelines for the
licensing and regulation of Islamic banks in Nigeria issued by the Central Bank in 2011
allows a conventional bank to own an Islamic bank subsidiary, the Regulation 3 issued
in 2010 permitted a conventional bank to own a subsidiary only in a foreign Country.
This inconsistency is currently affecting the ability of one of Islamic banking windows
to convert to a subsidiary.
 General lack of adequate knowledge of Islamic finance on the part of both the
Practitioners and the Regulators: The case of knowledge gap in the area of Islamic
finance is glaring on both the Operators and Regulators side. The issue of liquidity
management instruments is an indicator of this challenge. The Central Bank is unable
to come up with a viable instrument and the Operators on the other hand are unable
to propose a structure to the Central Bank for consideration.
 Apathy and Skepticism by the general public: Islamic finance products are
sometimes regarded by the general public as a‘Muslim affair, although there are some
segments from the Muslem population as well who are skeptical about Islamic finance
and believe that it may not succeed.
 Shariah Scholars knowledgeable in conventional finance: The Shariah scholars
have limited knowledge of conventional finance and this has led to frequent reversal
of decisions by the Shari’ah board of the financial institutions.
Best Practices in IFIs
According to the IMF, Islamic finance has some strength in at least three key areas: it fosters
greater financial inclusion, especially of large underserved Muslim populations, its emphasis
on asset-backed financing and risk-sharing feature means that it could provide support for
small and medium–sized enterprises (SME), as well as investment in public infrastructure.
These areas of strength highlighted by the IMF are also relevant to the Nigerian case and are
briefly discussed as follows:
 Greater Financial Inclusion: In a country like Nigeria with an approximate
population of 184 million out of which at least 50% are Muslims, Islamic finance
presents great potential for financial inclusion. According to EFInA (Enhanced
Financial Innovation and Access) Access to Financial Services 2016 Survey 32, the
financially excluded dropped from 68% in 2014 to 62% in 2016 in the North East of
Nigeria signifying an increase in financial inclusion by 6%. This development is partly
explained by the introduction of Islamic banking system in Nigeria which started with
a regional Islamic bank in 2012 that covered North East and North West geopolitical
zones of Nigeria. The North West has however witnessed an increased in financial
32 The EFInA 2016 Survey is available at: EFInA