Challenges of Islamic Banking in Nigeria; Legal and Regulatory Perspectives
June 28th, 2018
By Idris Muhammad Idris & N.M. Gatawa
This research paper discussed the challenges of Islamic banking in Nigeria, looking at the legal and regulatory perspective of the industry. The background of both the Islamic and Conventional banking system was analyzed, the legal background supporting the major actors in the industry i.e. (CBN and NDIC) functions was also analyzed. The research concluded that Islamic banking is an essential sub-sector with prospect and has a lot to contribute to the diversification of the Nigerian financial system. However, legal and regulatory challenges would hinder the success of this financial system. It is recommended that the policies guiding the operations of Islamic banking in Nigeria should be restructured to consider the AAOIFI standard. Islamic Financial market should be developed so that Islamic banks could invest their excess liquidity. FRACE should be a unit within the CBN that will oversee the activities of the ACE on day to day basis. The ACE tenure should be a non-renewable one term of four (4) years to enhance their independence. Advanced trainings on Islamic banking should be conducted for the regulators of the industry in order to meet their regulatory challenges and the global best practice of Islamic banking. Capacity building for the regulators and operators in the sub-sector should be intensified. To have a robust Islamic banking and finance system, these challenges need to be addressed in order to achieve the objectives and goals of Islamic banking.