New Telegraph

Fitch: Nigeria’s Islamic finance industry sustains growth despite headwinds

Nigeria’s Islamic finance industry will hold its growth trajectory in 2023-2024, driven by the government’s sukuk issuances and policy push, Fitch Ratings said in a report released yesterday The Central Bank of Nigeria has set the regulatory liquidity ratio for Islamic banks at 10%, much lower than for conventional banks at 30%. The apex bank also grants Islamic banks a 50% “alpha-factor” discount in calculating riskweighted assets, but none for conventional banks. This provides a sizable uplift to Islamic banks’ capital ratios and allows Islamic banks to capture market share with less capital constraint on growth.

“Islamic banking is growing swiftly from a low base on the back of a strong financing push, a growing capital base, and the government’s more lax prudential requirements compared with conventional banks,” the report said. However, Fitch noted that the industry is likely to remain nascent in the medium term despite the government impetus.

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