Nigeria needs to take advantage of huge non-interest funding – Finance minister
The Minister of Finance and Coordinating Minister for the Economy, Wale Edun, have insisted that Nigeria needs to take advantage of the huge funds available in the non-interest segment of the capital market.
In his address at the opening ceremony of the 1st SEC Nigeria-IFSB International Forum Wednesday in Abuja, the minister noted that Nigeria needs to latch onto the viable options that non-interest financing offers.
He said, “We also need to take more advantage of the huge funds that are available in the non-interest segment of the capital market so as to have a viable way of financing the green sustainable growth of Nigeria which is the agenda of Mr. President to attract investments that will increase the productivity of this economy, that will create the jobs that will drive poverty and help the President in fulfilling his promise to Nigerians which is better life for all.”
He noted that with the world undergoing financial exhaustion, it was time that the country took advantage of non-interest finance and put a halt to constant resort to borrowing.
“There is fiscal exhaustion in many parts of the world, and there is also a need to finance green projects, so that the way to grow the economy is not just relying on foreign direct investments, domestic investment that is green,” the minister said.
In his welcome address Director General of the Securities and Exchange Commission (SEC), Lamido Yuguda, disclosed that the federal government has so far spent a total of N1 trillion to finance over 5,000 kilometers of critical roads & bridges with all such issuances oversubscribed since 2017 when Sukuk debut in the country.
Yuguda said that in Nigeria, the Islamic finance segment of the financial industry is estimated at $2.9 billion as at the end of 2022.
According to him, Sukuk formed the largest part at 57%, followed by Islamic banks at 42% (total assets), and the remaining 1% split between Islamic funds (total assets) and takaful (total contributions).
“Therefore, Sukuks are a good structure for infrastructure financing, as they clear the issuer’s balance sheet of debt, given that the investors own the assets to be financed and share in the gains from such assets. This is really an attractive capital market instrument to be explored by both corporates and governments at all levels.
“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,” Yuguda said.
He said the SEC will continue to commit to developing a robust Non-Interest Capital Market (NICM) as well as ensure it collaborates with the Islamic Financial Services Board (IFSB) on standards.
“The SEC is fully committed to fostering market development and innovation, maintaining a regulatory framework that ensures stability and fairness. Today’s collaboration with the IFSB is a testament to our belief in open discussions and the exchange of ideas on vital matters for the benefit of our economy and the nation at large.
“The non-interest capital markets have a huge role to play in the current economic program being pursued by the administration of His Excellency, President of the Federal Republic of Nigeria, Chief Bola Ahmed Tinubu. We are of the belief that the country’s economy cannot reach its target size without a lot of investments in critical infrastructure. Indeed, with the high debt-service to revenue ratio, sukuk presents a viable alternative to other modes of financing,” he added.
In his goodwill message, Secretary-General of IFSB Dr. Bello Lawal Danbatta, stressed the need for the federal government to employ non-interest financing as it holds the key to reviving its economy.
According to him, non-interest is a very effective strategy that would help us revive our textile industry through the capital market that will help us support our automobile industry, education centres through the non-interest capital market.
“Looking ahead, there are various opportunities for the non-interest finance industry to harness in order to continue its growth trajectory. As we move into a transformed and more uncertain global environment, it becomes even more crucial for the industry to keep pace with global trends and be well-positioned to respond to changing demands. Non-interest and Shariah-compliant financial institutions have tremendous potential to navigate emerging challenges and remain relevant in this fast-changing domestic and international environment,” he said.
