Fitch Ratings has forecasted a sustained growth trajectory for the Nigerian Islamic finance industry in 2023 and 2024. This growth is expected to be driven by government sukuk issuance and supportive policies, although the industry is likely to remain nascent in the medium term. Despite being relatively small on a global scale, Nigeria boasts the largest sukuk market in Africa, with an outstanding issuance totaling N755.5 billion. As of 2022, the Nigerian Islamic finance industry was estimated to be worth $2.9 billion, with sukuk representing the largest segment at 57 percent. Islamic banks accounted for 42 percent, while the remaining one percent was divided between Islamic funds and takaful.
The long-term potential for growth in this sector is significant, particularly given that Nigeria has the largest Muslim population in Africa and a substantial unbanked demographic. In 2022, the Federal Government of Nigeria issued a seven-year sukuk, raising N130 billion. This marked the fifth issuance since 2017 and attracted more than 1.6 times the subscription. The Securities and Exchange Commission (SEC) is actively working to position Nigeria as a hub for Islamic capital-market products in Africa, as part of the government’s ‘Revised Plan 2021-2025.’ The SEC has set a target of 50 listings of Sharia-compliant products, aiming for a market capitalization of at least N5 trillion by 2025.
Additionally, last year witnessed the launch of a N100 billion Mudaraba sukuk program by Taj Bank Limited, aimed at raising tier 2 capital. This initiative further underscores the growing interest and potential within Nigeria’s Islamic finance sector.
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