According to recent research by the international rating agency Fitch Ratings, the Nigerian Islamic finance industry is expected to continue to grow over 2023-2024, supported by the issuance of sukuk, the growth of Islamic financing, and flexible regulations.

Nigeria, home to Africa's largest Muslim population, is also the largest sukuk (Islamic financial securities equivalent to bonds in conventional finance) market in Africa, with NGN755.5 billion (US$1.6 billion) in outstanding securities, according to Fitch Ratings.

In research published Wednesday, Jan. 25, the rating agency reports that the Nigerian government raised NGN130 billion (about US$282 million) by issuing sukuks. The operation was the fifth sukuk issuance organized by the country since 2017.

In addition to the Nigerian federal government, other financial institutions also launched sukuk issuance programs in 2022. for instance, the Islamic bank TajBank Limited launched an NGN100 billion (about US$222 million) sukuk mudaraba program last year. 

In such conditions, Fitch expects Islamic finance in Nigeria to grow further in 2023-2024, supported by government sukuk, increased financing by newly established Islamic banks in the country, and regulations that are less restrictive for Islamic Finance than they are for conventional finance.

Let's note that only three full-fledged Islamic banks are operational in Nigeria. Deposit collection remains limited for those banks due to their limited presence throughout the country. In addition, local populations are not sufficiently aware of the existence of Islamic financial products.

Despite those challenges, in the first half of 2022, Islamic banking assets grew by 71% year-on-year, with the size of the Nigerian Islamic finance industry reaching about US$2.9 billion by the end of 2022.

Chamberline MOKO