ISLAMIC/ NON-INTEREST FINANCIAL MARKET ANALYSIS

Overview 

Islamic Finance in Nigeria has seen a marked increase in scope and scale, reflecting the country’s substantial Muslim population. Nigeria boasts a population of 218.5m (2022 est.), and about 53% of the population is Muslim. This significant growth had led to a broader push towards inclusive financial systems. The Islamic financial market in Nigeria includes various segments, such as Islamic banking, popularly known as “Non-Interest Financial Institutions.”

Market Size 

According to S&P Global, the global Islamic Finance market size was valued at 250 million dollars in 2024 and is expected to grow exponentially over the next decade. The global growth of the Non-interest market has influenced the Nigerian Islamic Finance industry; According to Fitch Ratings Nigeria has the largest sukuk market in Africa with an outstanding issuance of NGN755.5 billion (USD1.6 billion), and in terms of total assets said to be estimated at N1.69trn ($2.9bn). The market is primarily dominated by The Federal Government of Nigeria (through Sukuk issuances), which accounts for 57% of the total market. Islamic banks represent about 42% of the market, and the remaining 1% is shared between Islamic funds and takaful (Insurance).  

A perfect representation is the exponential growth witnessed by Taj bank reported 11.bn Naira profit before tax in 2023 and according to renowned news outlets Taj Bank record in profit before tax for 2023 is the “Highest in Non-interest Banking”

Major Players and Market Share 

The Islamic banking sector features several key players, each contributing differently to the market dynamics:

1. The Federal Government of Nigeria: The government is a major player in the Nigerian Islamic finance market, predominantly through the issuance of Sukuk bonds. Nigeria has seen multiple sukuk issuances to fund infrastructure projects and provide ethical investment opportunities. These issuances have been well-received, indicating a robust appetite for Islamic financial instruments. 

2. Islamic Banks:

1. Jaiz Bank Plc: As Nigeria's premier non-interest bank, Jaiz Bank is a pioneer in the Islamic banking sector and holds a significant market share. Their focus has been on providing Sharia-compliant banking products and services.

2. Lotus Bank: Lotus Bank is a newer entrant in Nigeria's Islamic banking landscape. Its innovative approach to non-interest banking has gained traction and aims to capture a considerable market segment. 

3. Taj Bank: Another significant player is the TajBank, which offers a range of Islamic banking services and products and has been expanding its footprint across various states in Nigeria. 

4. The Alternative Bank: The Alternative Bank by Sterling Bank is one of the most innovative players in the Non-interest banking sector in Nigeria with products that are renowned for their uniqueness. 

3. Takaful Insurance Companies: Takaful Insurance, also known as Islamic Insurance, offers Shariaria-compliant alternatives to conventional insurance in Nigeria. The introduction and growth of Takaful Insurance have been influenced by the increasing demand for financial services that comply with Islamic laws.

Market Share Analysis

Based on the estimated size of the Nigerian Islamic Financial Market (N1.2 trn) total assets, this is a table showing the estimated value of each player’s share in the market: 

Note:

• The market share values were derived from the summation of all three Islamic institutions in Nigeria's total assets, and they were proportionally divided according to the market shares of each segment. 

• These calculations are approximated and based on financial annual reports as of 2022 provided by these banks. 

Market Dynamics

The Nigerian Islamic finance market is characterised by its growth potential and supportive regulatory environment provided by the Central Bank of Nigeria and other regulatory bodies; however, the industry has benefited from the following; 

• Increased awareness and understanding of Islamic Finance products 

• Regulatory support with frameworks that foster growth in Islamic finance 

• There is a growing preference for ethical financial products because of zero interest charges, no late or default fees, etc.