Nigeria is large enough to accommodate opportunities, and among the growing opportunities is the Islamic capital market which the government should prioritize effectively as a saving grace to the economic downturn.

In a recent interview, Tunde Ajani, a PhD researcher in Islamic Finance and Climate Financing speaks on the “opportunities that will shape Nigeria’s Islamic capital market”.

Commencing the interview, Ajani appraised the current economic challenges of the Nigerian, stating that macroeconomic factors pose significant hurdles to the health of the economy. He stated these factors to be 28.2% inflation rate, 18.75% MPR, 2% GDP growth, and an 878.02/USD exchange rate.

However, Ajani stated that the Fitch Ratings in November affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook, potentially attracting foreign investments, despite conflicting policy outcomes, innovative solutions in tech start-ups, agriculture, human capital, and industrialization buoy the nation.

As an Islamic Finance expert, he asserted that Islamic finance has a rising influence in Nigeria, especially through the FGN Sukuk, four established Islamic banks, and other Islamic financial institutions. With these, there are myriads of transactions that have a positive economic impact. He stated that active players in the sector work towards collaborations with the Islamic Development Bank (IsDB), Islamic Financial Services Board (IFSB), and Multilateral Development Banks (MDBs) for grants, capital mobilization, and external funding, which are remarkable opportunities for Nigeria.

Tunde Ajani gave an in-depth insight that the Islamic capital market needs enhancements in standardization, more liquid instruments, short-term and tradable options, larger collaborations, increased players and functions, and improved market infrastructure. According to him, the vast opportunities in Nigeria’s diverse sectors and resources present significant potential for expansion and exploration.

“As the nation transitions to developmental economy, the Islamic capital market holds great promise in mobilizing funds for crucial developmental projects.” He spoke.

Ajani further explained that, in other to fully realize Islamic capital market potential, the market requires innovative and accessible investment avenues that align with the country’s leadership mandate.

By increasing market players, the Islamic Capital market remains in a nascent stage, offering much more to contribute to improving economic well-being.

He was of the view that several untapped areas need attention and development, such as:

• Standardization and Regulatory Framework:

The Islamic capital market should strive to standardize its operations to meet global best practices. This move would facilitate exploration and collaboration with international organizations dedicated to promoting Islamic finance.

• More Liquid Instruments:

Currently, the market relies heavily on the FGN sukuk as the sole liquid instrument for Islamic financial institutions. Introducing more liquid instruments is crucial to sustain and expand the market.

• Short-term and Tradable Instruments:

There is a notable absence of short-term Sharia-compliant instruments in the market. Addressing this liquidity issue is vital as the market progresses to the developmental stage.

• Larger Collaboration:

The industry cannot thrive in isolation. While focusing on the real estate and construction sector, the market should explore creating tradeable assets in diverse sectors such as education, technology, innovation, maritime, and agriculture to generate high-quality liquid assets (HQLA).

• More Players and Functions:

Establishing other functions of the Islamic capital market, such as rating agencies, issuing houses, auditors, and reporting accountants, is crucial to reducing reliance on conventional institutions.

• Enhanced Market Infrastructure:

Developing a well-functioning secondary market for Islamic financial instruments is crucial. Measures like creating short-term liquid facilities, encouraging market makers, and promoting electronic trading platforms can enhance tradability and accessibility. While four banks have taken the initial step, the journey has just begun, and more participants are needed to break new ground.

Ajani believes efforts should be directed toward promoting economic well-being, enhancing financial stability, and supporting businesses and individuals.

More importantly, incorporating the Maqasid Shariah mindset in profit maximization objectives will contribute to a sustainable and socially responsible Islamic capital market.