14th Emir of Kano, Muhammadu Sanusi II, has said an essential condition for the development of the Islamic finance market in Nigeria is the presence of an effective legal and regulatory framework to provide an enabling environment that will create a level-playing field, and enforce the legality of Islamic finance contracts and ensure Sharia compliance.
Sanusi said Islamic finance provides a potent alternative for resource mobilisation, fair and equitable allocation of resources that could help address the sustainable development goals in Nigeria and help to bridge the infrastructure gap.
“Islamic finance offers tremendous potential for both public and private financing in such a way that reinforces the links between finance and the real economy, thereby contributing to both economic growth and financial stability,” Sanusi said yesterday at the fifth international conference on Islamic finance in Abuja.
The theme of the Conference is Infrastructure Financing, Sustainability and the Future of African Markets.
He said the fast-expanding global pool of Sharī’ah-compliant capital has become an attractive source for various sovereigns, government-related entities and corporates to tap into, to meet their financing needs.
According to him, Islamic financing modalities offer strong potential for public-private partnerships in the financing of physical and social infrastructure. “
Instruments such as Ṣukūk for example can be structured as a partnership instrument to channel capital into productive activities or the real economy.
He explained that when appropriately structured, Ṣukūk is well suited for infrastructure financing to fill the funding gap for infrastructure and support the development goal of development of quality, reliable, sustainable and resilient domestic, regional, and trans-border infrastructure.
The former governor of the Central Bank of Nigeria said there is a need for more collaborations between regulatory authorities to grow the industry as well as more awareness generation and more professional development for effective and efficient operation of the institutions in order to instil and maintain stakeholder confidence and achieve optimum performance.
He said despite the potential for growth of the Islamic financial services industry in Africa, promoters need to be encouraged to establish more Islamic financial institutions so as to create the needed critical mass that is essential for the growth of the industry in the Continent, and these institutions need to come together and support each other for advocacy and growth of the industry.
In his address, vice president country operations, Islamic Development Bank, Mansur Muhther, said Africa must address three broad challenges ranging from project, currency and ethics risks in order to attract foreign direct investment for infrastructural funding.
He said Africa require about $360 billion to close the huge infrastructure deficit and enable the continent to achieve the agenda of Sustainable Development Goals.
To bridge this gap, Sanusi said Africa must embrace an Islamic finance system which according to him offers tremendous potential for both public and private financing for economic growth and financial stability and provides a potent alternative for resource mobilization, fair and equitable allocation of resources that could help address the sustainable development goals.
He said the issuance of sovereign Sukuk in Nigeria, South Africa, the Gambia, Senegal, Togo and Cote d’Ivoire are significant milestones for Islamic finance in Africa.
“However, there is an over-arching need to make Sukuk issuance as constant as possible in order to have a yield curve for each jurisdiction, which will encourage sub-sovereign and corporate Sukuk issuances, and thus deepen the Sukuk market that is necessary for the growth of the trio sectors of Islamic banking, Takaful and Islamic Capital Market,” he added.