Sanusi Lamido, CBN Governor
By Kunle Aderinokun and Obinna Chima
Despite the controversy surrounding the move by the Central Bank of Nigeria (CBN) to introduce Islamic banking into the Nigerian banking system, the apex bank Wednesday announced a capital base requirement of N10 billion for any Islamic bank applying for licence to operate nationwide.
The regulator insisted that it derived its power to license Islamic banks in Nigeria from the CBN Act and Bank and Other Financial Institution Institutions (BOFIA), which was duly passed into law by the National Assembly. It also prescribed N5 billion capital requirement for an Islamic banking licence for regional authorisation.
These were made known in Lagos by CBN’s Deputy Governor, Financial System Stability (FSS), Dr Kingsley Moghalu, at a seminar organised by the Apostles in The Market Place (AiMP) with a theme: “Re-Purposing Capital: Non-interest Banking in Nigeria.”
The CBN had on Monday disclosed that it had granted approval in principle to Jaiz Bank International Plc – the first Islamic bank in the country - and the following day (Tuesday), issued a revised guideline on non-interest banking to clarify some contentious areas in the rules released earlier.
Moghalu stated that Islamic banking and other forms of non-interest banking were part of the banking watchdog’s drive to stimulate financial inclusion in the country.
“Let us know that non-interest banking is not new banking model. It is a form of banking under the specialised banking model. The reason for an expert advisory council in the guideline is because of the nature of non-interest banking under the principle of Islamic commercial jurisdiction. All banks that are Islamic banks have that type of council. So the regulator in this context felt the need to have a council that advises it on the compliance of the products that those banks will issue with the principle of Islamic commercial jurisdiction.
“I will like to very clearly assure Nigerians that non-interest banking is part of our plans to increase the inclusion into the financial sector, people who have stayed out of the financial system for various reasons. There is no agenda; it is simply finance and not about religion. I want to further assure Nigerians very clearly that non-interest banking is open to people of all faith and all types of non-interest bank application are welcomed at the CBN,” he explained.
Earlier, the Chief Executive Officer, Pharez Consulting, Mr Eghes Eyieyen, argued passionately that the introduction of Islamic banking was against the provisions in BOFIA.
He contended that before such form of banking could be introduced into the financial system, BOFIA should be amended.
Eyieyen queried: “What is the inordinate drive and ambition behind the introduction of Islamic banking? To me, it seems as if the CBN is in a hurry to introduce it and why does the CBN think it is going to be a major driver of financial inclusion? It is not about religion, it is about the law and professionalism. Why has the CBN not given such passion and priority to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN)? You cannot use a small provision in the BOFIA that gives you the power to regulate, to now begin to legislate.”
Similarly, an Associate Professor of Law and Security Studies, Babcock University, Dr Bankole Sodipo, also argued that the CBN Act and BOFIA, in issuing out regulation on non-interest banking, did not support Islamic banking, saying that the banking sector regulator must ensure that the National Assembly legislate on the form of non-interest banking.
Sodipo said: “The way forward is to look at the BOFIA and ensure that the move is in line with the Act. On the Advisory Council, there is no way they can delegate the decision making of the body to another body because the National Assembly doesn’t give them that power. The law does not regulate that form of banking because it shut some people out. You don’t give what you don’t have and so you cannot give out what is not your own. What it means is that the CBN wants to introduce a form of banking through the backdoor.”
Responding to submissions and questions, the CBN deputy governor stated: “There is a level playing field and there is no discrimination. What the BOFIA says is that except with the permission of the CBN governor, no bank can be named with the name ‘Islamic, biblical, Qur’an and right now in Nigeria, no bank is named as such.
“We are looking at the area of capacity in the area of the advisory council. This is a new thing. It is not established in Nigeria and I'm sure there will be challenges, including challenges of capacity. We have talked about that. We have equipped our regulatory officers and banking supervisors. We have sent them on a lot of training and so we are addressing the issue of capacity in the industry.”
According to Moghalu, “the CBN has been passionate about SMEs, power and the economy at large and that is why we gave out the N500 billion loans. We believe it is part of our mandate to jumpstart the economy. We have been passionate about banking reforms, corporate governance and financial inclusion.”