AICIF: Experts call for awareness, legal framework to aid Islamic financial inclusion in Nigeria
Experts in financial sector have called on relevant regulatory bodies to increase awareness and create strong legal framework that will help increase Islamic financial inclusion in Nigeria.
Speaking during the 4th Edition of African International Conference on Islamic Finance (AICIF) in Lagos, Ashraf Amma, director PWC, Luxembourg said Sudan has continued to be a leader of Sukuk issuance volume in Africa.
Sukuk is an Islamic financial certificate, similar to a bond in Western finance that complies with Islamic religious law commonly known as Sharia.
He however noted that sadly, globally, Africa contributed less than one percent in Sukuk issuance in 2018, showing that there are lot of untapped opportunities in Africa.
“Africa has continued to face considerable challenges in developing strong sukuk market as a result of regulatory tax and legal framework, lack of transparency, cost of issuance, number of debit indexes benchmark and hedging currency risk.
He spoke on the need for Africa to have level playing field in taxation of Islamic contracts and the need for more awareness among multilateral development banks and agencies.
Speaking during a panel session themed: ‘Regulatory and Cross Border Issues Affecting the Utilisation of Sukuk,’ Adeola Sunmola, a partner in Udo Udoma and Belo-osagie’s banking and Finance, power, projects and infrastructure said there is lack of clarity in Nigerian laws in relation to how Sukuk is structured.
“When there are issues in relation to Sukuk, people often do not know who to run to. There should be clarity on the transaction structure and taxation exemptions. Our laws and regulations are reactionary. We need to be more forward looking in terms of making laws that can adapt to transactions of this nature, so we can understand them when these issues arise,” Sunmola said.
Muhammed Dabai Suleyman, director Central Bank of
Nigeria and Head of National Programme for the Financial System Strategy (FSS2020) who also spoke during the panel session said Sukuk is needed to fund infrastructure development.
“Domestic market must be very robust. We need to develop
new products for long term. There should be a level playing ground for all operators to operate across all regions. We need to address knowledge gap, so that operators understand that the products they bring to the table must complement with Sharia laws,” Suleyman said.
Ummanhani Amin, managing partner, the Metropolitan law firm and chairperson 4th AICIF 2019 planning committee said AICIF started because they felt there is a gap in Islamic financial inclusion.
“This is the main reason for the conference and that is why we have been working towards financial inclusion. We are working towards letting everyone know what products to take because people do not understand.
“There is a belief that Islamic finance is meant for Muslims and it is not. It is meant for everyone. There are Muslims and non-muslims in the conference and they are all speaking Islamic finance. We want to sensitise people and make them know that it is just another product which is ethical,” Amin said.
She said the awareness process has been gradual in Nigeria because Nigeria is new to Islamic finance.
She disclosed that the first AICIF conference was quite successful because a lot of people were curious and out of curiosity to understand Islamic finance, people came.
She further disclosed that during the second conference, people were understanding it gradually. “The fourth one, we have seen the amazing turn out and all our speakers and panellists are top-notch and are all in the financial industry. We are making a lot of progress and I believe the next one will be bigger and better,” Amin said.
On the level of responsiveness to sukuk in Nigeria, she said, “I was involved in federal government sukuk as a legal adviser and I know sukuk has been oversubscribed twice; the first in 2017 and second in 2018.
“Before then, in 2013 there was sukuk which was basically for education and has been very successful because for the first time, government took money and put it in education. It has been successful. The federal government’s sukuk is mostly for social infrastructure financing and the need for it has been utilised and that is what Islamic finance is all about.”
Abdulkader Thomas, chairman Shariah Board of Sterling Bank PLC and also a speaker at the conference noted that some questions raised in financing projects using Sukuk are if the contractor will complete the project as at when due and according to the specifications and integrity of funds.
He mentioned some of the liquidity risks in Sukuk to include necessity of secondary market, eligible instrument for trading, source of money, what sukuk represents and what the bench mark is.
He listed some of the default to include risk of non-completion, non-payment, failure to honour payments and supply chain being able to support delivery.
He said Sukuk are usually non-dynamic and compliance should be a front end issue.
Another spear, Chinua Azubike, who is also the managing director Infra Credit said people should be looking at where the market lies and ensure the structure works in compliance with Sharia laws.
“When Sukuk is demystified, people will begin to understand its benefits. The opportunities in sukuk are enormous. The principles of sukuk can be applied to leasing of equipment, agro business, amongst others. There should be more market awareness,” Azubike said.