The Central Bank of Nigeria has begun efforts to improve governance standards and regulatory oversight of Nigeria’s non-interest financial sector with concerns over compliance risks; operational vulnerabilities and the rapid growth of Islamic fintech services.
At the 2nd Annual Interactive Session between the CBN Financial Regulation Advisory Council of Experts (FRACE) and Advisory Committees of Experts (ACE) of Non-Interest Financial Institutions, held in Abuja, the apex bank said stronger governance frameworks had become critical to sustaining investor confidence, financial stability and the credibility of the country’s expanding non-interest finance ecosystem.
Speaking on behalf of the Deputy Governor, Financial System Stability, Mr. Philip Ikeazor, at the session, the Director, Financial Policy and Regulation Department, Dr. Rita Ijeoma Sike, described the engagement as a strategic platform for strengthening the resilience and soundness of the industry.
The session, Ikeazor said, was an offshoot of the foundation laid during the inaugural engagement and a reflection of the CBN’s commitment to promote a “sound, credible and resilient non-interest financial system anchored on robust governance, effective compliance and prudent risk management.”
He observed that Non-Interest Financial Institutions (NIFIs) have continued to be more strategic players in Nigeria’s financial system by providing ethical and Shariah-compliant alternatives to conventional banking and also spearheading financial inclusion, real sector financing, MSME development and shared prosperity.
But he warned that the growth and sophistication of the sector has also made operators more vulnerable to new threats that can undermine public trust if not properly checked.
“The industry has its own set of risks, notably the risk of non-compliance, governance challenges, operational vulnerabilities and emerging technological risks,” he said.
Such challenges, if not properly managed, could undermine financial stability and erode confidence in the non-interest finance industry, he warned.
The Deputy Governor said the setting up of FRACE and the compulsory constitution of Advisory Committees of Experts in all NIFIs were aimed at institutionalising a harmonised governance framework across the industry and ensuring uniformity in the interpretation of Shariah principles.
He added: “The objectives of today’s session are to promote the institutionalisation and effective functioning of a robust Shariah governance system within Non-Interest Financial Institutions, and to provide a structured platform for dialogue, knowledge-sharing and collaboration.”
Speaking during the engagement, the Deputy Chairman of FRACE, Prof. Bashir Aliyu Umar, said the engagement was towards deepening governance standards in the sub-sector while creating room for constructive engagement between regulators and operators. “The CBN management deserves commendation for bringing back the interactive forum which was first introduced in 2014, saying that the industry is evolving and continued engagement is becoming more and more necessary.
Earlier, Dr Sike had re-emphasized the apex bank’s commitment to sustaining a strong and efficient non-interest finance industry to support economic growth and innovation.
She pointed to the increasing diversity of products and delivery channels in the sector, particularly the emergence of Islamic fintech platforms, as examples that call for robust regulatory oversight and sustained collaboration among regulators, scholars and practitioners.
“With the rise of Islamic fintech, the wider variety of products, institutions and delivery channels, requires ongoing dialogue, sound regulatory oversight and strong advisory input from scholars and practitioners,” she said.
The session also featured technical presentations on emerging risks and opportunities in the industry.
Prof. Bashir Aliyu Umar presented a paper entitled “Shariah Non-Compliance Risk in Non-Interest Banks and its Impact on the Non-Interest Financial Services Industry” while Muhammad Kabir Muhammad and Mustapha Ishaq presented a paper on “Islamic Fintech and Financial Inclusion.”
Participants at the event deliberated on the operational challenges of the sub-sector in depth, including governance independence, risk mitigation strategies, capacity building, and innovation management.
In his closing statement, a member of FRACE, Prof. Abdul-Razzaq Alaro, called on the stakeholders to move from discussions to the implementation of the resolutions reached during the engagement.
He said the true measure of the session would be in the practical improvements in governance it delivers across the industry.
FRACE is the highest advisory body that bridges conventional financial regulation and faith-based financial practices in Nigeria. It supports the CBN in handling complex regulatory and Shariah governance issues and promotes consistency, credibility and investor confidence in the non interest finance sector.
Members of FRACE, chairmen and members of ACEs, managing directors of non-interest banks, senior CBN officials, and representatives from institutions like the Bank of Industry and the Securities and Exchange Commission were present at the event.
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