Nigeria eyes increased Islamic finance instrument issuances

The Nigerian Exchange is taking significant steps to enhance its capital market engagements by focusing on increasing the issuance of Islamic finance instruments, particularly by corporates. Jude Chiemeka, the Executive Director of Capital Markets at the Nigerian Exchange, recently spoke with CNBC Africa to discuss the institution's collaboration with the Islamic Development Bank Institute and provide insights into the near-term outlook for the market. Chiemeka highlighted the recent capacity building workshop conducted in partnership with the Islamic Development Bank Institute to educate issuers and investors on the nuances of Islamic finance instruments. The workshop aimed to deepen the Nigerian capital market by promoting Sharia-compliant financial products. Chiemeka emphasized the Securities and Exchange Commission's (SEC) goal of ensuring that 25% of all listed entities adhere to Sharia principles, as outlined in the Capital Market Masterplan. During the workshop, participants had the opportunity to engage with industry experts and learn from case studies of successful Islamic finance implementations in countries like Malaysia, Indonesia, and Saudi Arabia. The event also attracted state governments keen on leveraging Islamic products to bridge infrastructural funding gaps in their respective regions. One of the key Islamic finance instruments discussed at the workshop was Sukuk, a type of Islamic bond. Chiemeka noted that Sukuk plays a predominant role in global Islamic finance, with an estimated market size of $4 trillion, projected to reach $5.6 trillion by 2026. In Nigeria, Sukuk issuances have been instrumental in securing funding for various projects, with the federal government leading the way through multiple Sukuk offerings for infrastructure development. Apart from Sukuk, Chiemeka underscored the importance of Islamic banks and insurance products in the Islamic finance ecosystem. He emphasized the supportive regulatory framework in Nigeria that enables corporates to tap into Islamic finance instruments for capital raising purposes. Collaborative efforts between the SEC and the Nigerian Exchange have laid down clear guidelines for utilizing these instruments, fueling market growth and investor interest. When questioned about investor and issuer sentiments, Chiemeka expressed optimism regarding future issuances of Islamic finance instruments by corporates in Nigeria. He highlighted ongoing initiatives by market operators to explore diverse financial instruments beyond Sukuk, signaling a positive trajectory for market expansion. The SEC's target of achieving a market capitalization of 5 trillion, contrasted with the current 849 billion valuation, indicates significant growth potential in the Nigerian capital market. In conclusion, the emphasis on Islamic finance instruments signifies a broader commitment to diversify and deepen Nigeria's capital market offerings. The collaboration between the Nigerian Exchange, the SEC, and international partners like the Islamic Development Bank Institute reflects a concerted effort to enhance market accessibility, attract ethical investors, and drive sustainable economic development through innovative financial solutions.