*Photo caption : Lamido Yuguda
… Queries Non Maximisation Of NICMs Despite Its Huge Potential
The Director General of Securities and Exchange Commission (SEC) Lamido Yuguda has stated that the Non-Interest Capital Markets (NICMs) have a huge role to play in the current economic programme of the Federal Government .
He said this while speaking at the 1st Securities and Exchange Commission (SEC) Nigeria-IFSB International Forum on Non-Interest Capital Markets held in Abuja, the Nigerian political capital..
Yuguda submitted that SEC is of the belief that Nigeria’s economy cannot reach its target size without a lot of investments in critical infrastructure. , adding that with the high debt-service to revenue ratio, Sukuks present a viable alternative to other modes of financing.
He said that according to the International Islamic Financial Market (IIFM), in 2022, the Islamic Finance Industry had an estimated size of US$ 3.25 trillion, with global Sukuk issuances valued at $182.72 billion. And that in Nigeria, the Islamic finance segment of the financial industry reached an estimated size of $2.9 billion as at the end of 2022, with outstanding Sukuk forming the largest part at 57 per cent, followed by Islamic banks at 42 per cent total assets, and the remaining 1 per cent split between Islamic funds (total assets) and takaful (total contributions).
This Danbatta said shows that the Nigerian market makes up just 0.9 per cent of the global non-interest market, indicating the dire need for more growth, adding that with the country’s large population and a significant proportion unbanked, the long-term potential for Islamic finance in Nigeria is immense.
The Non-Interest (Islamic) Capital Market in Nigeria, he contended, has undergone transformative growth, becoming an integral part of our financial framework, offering a distinctive platform for ethical and Shari’ah-compliant investments. , stressing that the NICM contributes to the diversity of our financial markets in line with our revised capital market Master plan 2021 -2025.
“Since the debut of Sukuk in Nigeria in 2017, the Debt Management Office has raised almost N1.0 trillion to finance over 5,000 kilometers of critical roads & bridges with all such issues oversubscribed.
“The oversubscription of the most recent 6th Federal Government of Nigeria Sukuk by 435% underscores investor confidence, showcasing the strategic role of Sukuk in infrastructure development and financial inclusion.
“We are all aware that Sukuks backed by assets promote risk sharing in high-risk projects, offer flexibility in project stages and foster public-private partnerships,” Danbatta said.
“Nigeria has the potential to join the league of global Islamic finance jurisdictions if we could address issues, such as inadequate awareness, regulatory harmonization, and enactment of legislations that enhance legal certainty and clarity similar to what prevails within the conventional financial architecture.,” he added.
Speaking further, the SEC DG asserted that Nigeria also has a lot to gain from growing the non-interest segment of its financial sector.
He cited potential foreign exchange inflows from international investors to be attracted by Sukuks as one very important area Nigeria stands to benefit from , adding that with the current foreign exchange liquidity challenges facing the country, an opportunity to attract greater foreign exchange inflows must be explored using the non-interest finance market.
Danbatta said that International investors are also attracted to environmental and climate related initiatives and that as such, there is desirability for our subsequent Sukuk issuances to look at this as an important area.
The SEC boss wondered why Nigeria has not maximised the potential non-interest finance market despite its many benefits .
“Then the question is why have we not been maximizing their potential? This brings us to the challenge of low awareness. This is one of the reasons for this forum and other efforts the SEC and other regulatory bodies attending this forum must continue to work towards exploring the full potential of this segment of the market,” he said.
He informed that SEC Nigeria has a 10-year (2015-2025) Capital Market Master plan which according to him was revised in November 2022.and that it has special provision for developing the Non-Interest Capital Market with the aim of making Nigeria to be a regional hub for NICM in Africa amongst other targets.
About The Author
