The Central Bank of Nigeria has embarked on efforts to improve governance standards and regulatory oversight of Nigeria’s non-interest financial sector as concerns rise 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, builds on the foundation laid during the inaugural engagement and reflects the CBN’s commitment to promoting 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 remained to be more strategic players in Nigeria’s financial system by providing ethical and Shariah-compliant alternatives to conventional banking and at the same time promoting financial inclusion, real sector financing, MSME development and shared prosperity.
But he cautioned that the growth and sophistication of the sector have also made operators more susceptible to new threats that could 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.
He warned that such challenges, if poorly managed, could undermine financial stability and erode confidence in the non-interest finance industry.
The Deputy Governor said the establishment of FRACE and the mandatory constitution of Advisory Committees of Experts in all NIFIs were aimed at institutionalising a harmonised governance framework across the industry and ensuring a uniform 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.”
The Deputy Chairman of FRACE, Prof. Bashir Aliyu Umar, in his remarks, said the engagement was to deepen governance standards in the sub-sector while creating room for constructive engagement between regulators and operators. He commended the CBN management for reviving the interactive forum, which was first introduced in 2014, noting that sustained engagement was becoming more and more necessary as the industry evolves.
Earlier, Dr. Sike reaffirmed the apex bank’s resolve to maintain a resilient and efficient non-interest finance industry capable of supporting economic growth and innovation.
She cited the increasing diversity of products and delivery channels in the sector, especially the emergence of Islamic fintech platforms, as instances that call for robust regulatory oversight and sustained collaboration between regulators, scholars and practitioners.
“The increased diversity of products, institutions, and delivery channels, particularly with the advent of Islamic fintech, necessitates continuous dialogue, sound regulatory oversight and robust advisory input from scholars and practitioners,” she said.
Technical presentations on emerging industry risks and opportunities were also part of the session.
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.”
At the event, participants extensively discussed the operational challenges facing the sub-sector, including governance independence, risk mitigation strategies, capacity building and innovation management.
In his closing statement, Prof. Abdul-Razzaq Alaro, a member of FRACE, called on the stakeholders to go beyond discussions to the implementation of the resolutions reached during the engagement.
He underlined that the true value of the session would be measured in practical governance improvements across the industry.
FRACE is the apex advisory body that bridges conventional financial regulation and faith-based financial practices in Nigeria. The council supports the CBN in dealing with complex regulatory and Shariah governance issues while promoting consistency, credibility, and investor confidence within the non-interest finance sector.
The event was attended by members of FRACE, chairmen and members of ACEs, managing directors of non-interest banks, senior CBN officials, and representatives from institutions such as the Bank of Industry and the Securities and Exchange Commission.
