Integration of Islamic Finance in Nigeria’s Financial Reporting Framework
Nigeria is taking significant steps to integrate Islamic finance services within its financial reporting framework, aligning with global standards and promoting inclusive economic growth. This move was highlighted during the 7th African International Conference on Islamic Finance (AICIF), where key stakeholders discussed the role of Islamic finance in transforming Africa’s economy.
The Role of Islamic Finance in Economic Transformation
Vice President Kashim Shettima, along with other economic stakeholders, emphasized the importance of deepening the adoption of Islamic finance as a tool for sustainable and inclusive economic transformation across the continent. He pointed out that Islamic finance offers a credible framework rooted in ethics, fairness, and social responsibility.
Shettima highlighted Nigeria’s experience with Islamic finance instruments such as sukuk, takaful, murabaha, and waqf, which have funded critical infrastructure and expanded access to inclusive financial services. “Our sukuk issuances, now in their seventh cycle, have funded more than 120 major road projects covering nearly 6,000 kilometers,” he noted. “Each bond represents a covenant between government and citizens, proof that finance can build rather than burden.”
Vision for an Islamic Banking Institution in Nigeria
The 14th Emir of Kano, His Royal Highness Muhammadu Sanusi, expressed his desire to see an Islamic banking institution in Nigeria that could rival established banks like Access Bank or First Bank of Nigeria. He stressed the need for these institutions to reach the bottom of the pyramid, ensuring that small-scale enterprises and rural communities benefit from financial inclusion.
Sanusi noted that by 2050, 85% of poor people will be in Africa, with half of them in Nigeria and the Democratic Republic of Congo. He urged Islamic financial institutions (IFIs) to focus on creating economies for those in need, emphasizing that inclusivity cannot be achieved without reaching the majority of Nigerians who live in rural areas.
Regulatory Developments and Standards
The Executive Secretary of the Financial Reporting Council of Nigeria (FRC), Dr. Rabiu Olowo, announced that the FRC intends to formally include Islamic finance services within Nigeria’s financial reporting framework by adopting the standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). These standards would complement the existing International Financial Reporting Standards (IFRS) framework, ensuring that Nigeria remains aligned with global practices while providing a dedicated reporting framework tailored to Islamic finance principles.
Olowo explained that AAOIFI standards address specific areas such as Murabaha, Ijarah, Mudarabah, Musharakah, and Sukuk. Many jurisdictions with vibrant Islamic finance sectors already adopt or align with AAOIFI standards, and their adoption will enhance investor confidence, ensure transparency, and improve comparability for both domestic and international stakeholders.
The Future of Islamic Finance in Africa
Samaila Zubairu, President/CEO of the African Finance Corporation (AFC), emphasized that Islamic financing is well-suited to champion inclusive growth due to its focus on real assets like roads, power plants, water, and digital networks. He noted that Islamic finance builds roads, finances power plants, and expands broadband, playing a critical role in Africa’s development.
Mairiga Katuka, Chairman of the Securities and Exchange Commission (SEC), highlighted the rapid growth of Nigeria’s non-interest capital market under the Capital Market Masterplan (2015-2025). He mentioned that sovereign sukuk had raised over N1.4 trillion and funded 124 critical road projects nationwide. Additionally, Nigeria now has 19 registered halal mutual funds managing over ₦112 billion in assets, up from one fund in 2008.
Conclusion
The integration of Islamic finance into Nigeria’s financial reporting framework marks a significant step toward achieving inclusive and sustainable economic growth. With the adoption of AAOIFI standards, Nigeria aims to enhance transparency, build trust, and ensure that Islamic finance continues to contribute meaningfully to the economy. As the continent moves forward, the role of Islamic finance in addressing socio-economic needs and fostering development becomes increasingly vital.