The Islamic Development Bank (IsDB) says it will release the sum of $150 million for the development of Special Agro-Processing Zones in Nigeria within the next few days.
The Vice-President, Country Operations, IsDB, Dr. Mansur Mukhtar, disclosed this during a panel session at the 5th African International Conference on Islamic Finance held in Abuja.
Mukhtar who spoke on the theme, “Infrastructure Financing, Sustainability and the Future of African Markets”, said that Islamic Finance offers several features and practices that support infrastructural growth.
“Islamic banking is asset-backed and based on participation and risk sharing. We also have to look at other elements, which are the social and environmental sustainability that are consistent with Islamic principles of supporting infrastructure.
“At IsDB we focus on projects in social and fiscal infrastructure. To implement these projects we place a lot of emphasis on regional connectivity.
“For example, in Nigeria in the next couple of days, the IsDB will be making a contribution to a project that is aimed at supporting the development of special agricultural processing zones and we will be committing $150 million.
“We have also been involved in several other projects in Nigeria,” he said.
In September, the African Development Bank disclosed that it was collaborating with other multilateral organizations to finance with the sum of $520 million the first phase of Special Agro-industrial Processing Zones in some selected states across Nigeria.
A former Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, who spoke at the event stated that one of the most significant impact of Islamic finance is that it provides a potent alternative for resource mobilization as well as fair and equitable allocation of resources.
He, however, noted that for the benefits of the model to be achieved, an effective legal and regulatory framework that will enforce the legality of finance contracts and ensure Sharia compliance must be put in place.
“Regulators, especially in the banking, capital markets and insurance, have been quite responsive to this development, through creating the enabling environment, facilitating its integration into the mainstream financial sector and generating awareness to achieve higher level of its acceptance, and thus higher level of financial inclusion.
“Going forward, there is a need for more collaboration between regulatory authorities to grow the industry, as well as more awareness generation and more professional development for effective and efficient operation of the institutions in order to instill and maintain stakeholder confidence and achieve optimum performance,” he added.
Sanusi who is a former Emir of Kano, urged the apex bank to continue with its initiative of developing non-interest liquidity management instruments, especially short-term papers for non-interest banks.
“Without these instruments in the market, the possibility of creating a non-interest inter-bank market is very slim, and this will impact negatively on the profitability of the financial institutions involved.
“Islamic finance provides a potent alternative for resource mobilization and fair and equitable allocation of resources that could help address the sustainable development goals.
“However, an essential condition for the development of Islamic finance markets is the presence of an effective legal and regulatory framework to provide an enabling environment that will create a level playing field, and enforce the legality of Islamic finance contracts and ensure Sharī’ah compliance.
“Regulators, especially in the banking, capital markets and insurance have been quite responsive to this development, through creating the enabling environment, facilitating its integration into the mainstream financial sector and generating awareness to achieve higher level of its acceptance, and thus higher level of financial inclusion.
“Going forward, there is a need for more collaboration between regulatory authorities to grow the industry, as well as more awareness generation and more professional development for effective and efficient operation of the institutions in order to instill and maintain stakeholder confidence and achieve optimum performance. This forum is one such initiative for achieving the needed collaboration and awareness generation. We hope that the conveners will continue with this,” said Sanusi.
Sanusi noted that the issuance of sovereign Sukuk in Nigeria, South Africa, the Gambia, Senegal, Togo and Cote d’Ivoire are significant milestones for Islamic finance in Africa, adding that there is an over-arching need to make Sukuk issuance as constant as possible in order to have a yield curve for each jurisdiction.
This, he said, will encourage sub-sovereign and corporate Sukuk issuances, and thus deepen the Sukuk market that is necessary for the growth of the trio sectors of Islamic banking, Takaful and Islamic Capital Market.
“The CBN, as a pacesetter, needs to continue with its initiative of developing non-interest liquidity management instruments especially short-term papers for non-interest banks. Without these in the market, the possibility of creating a non-interest inter-bank market is very slim, which will impact negatively on the profitability of the institutions.
“Despite the potentials for growth of the Islamic financial services industry in Africa, promoters need to be encouraged to establish more Islamic financial institutions, so as to create the needed critical mass that is essential for the growth of the industry in the Continent, and these institutions need to come together and support each other for advocacy and growth of the industry,” he added.
Speaking on the model in Nigeria, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said,
“One of the impediments to the development of Islamic finance is the notion that Islamic finance is just for Muslims.”
To address this, she advocated the establishment of comprehensive operational frameworks for Islamic financial products and services and increased awareness of these financing options to the real sector.
Ahmed also called for stakeholder engagement to enhance the soundness and efficiency in Nigeria’s financial system on Islamic finance. This, she said, will enable the country build a globally competitive economy.
“We, at the Federal Ministry of Finance, Budget and National Planning, will continually embrace and advocate for innovative financing that addresses beyond the Nation’s fiscal needs, but promotes inclusivity, financial deepening, social development and wealth redistribution.
“To this end, I wish to reiterate our commitment to develop enabling fiscal policies and collaborate with the domestic and international stakeholders on the development of frameworks that promote financial deepening in Nigeria through platforms such as the African International Conference on Islamic Finance,” she added.
