Nigeria has remained an insignificant player in the over $2 trillion Islamic global finance market which it now needs for financial sector reforms and bolsters much-needed growth.
This is according to Zainab Ahmed, minister of Finance, Budget and National Planning, who spoke during the fifth edition of the African International Conference on Islamic Finance held in Abuja on Tuesday.
According to her, significant financial sector reforms are needed to bolster the growth and penetration of Islamic finance as well as deliver on overall economic growth.
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She noted that the Federal government, in order to mitigate the risks of development setbacks, has explored Islamic finance as a financing option that offers a long-term viable source of finance for its infrastructure projects.
“Islamic finance has distinguished itself in bridging Nigeria’s infrastructure gap by promoting investments in key economic sectors like healthcare, education and transportation.
“The asset-backed nature and risk-sharing components of Islamic finance structures help improve financial sector stability and make them appropriate for infrastructure public-private partnerships,” she said.
Speaking further, the minister noted that Islamic finance instruments like Sukuk are being utilised by sovereigns and corporates around the globe for post-pandemic recovery, adding that one of the impediments to the development of Islamic finance is the notion that Islamic finance is just for Muslims.
“To combat this, we must establish comprehensive operational frameworks for Islamic financial products and services and improve awareness of these financing options to the real sector.
“The recorded success of our sovereign Sukuk issuances and the market anticipation towards the recently announced FGN Sukuk III demonstrates the huge potential that Islamic finance offers in achieving the private sector participation, financial inclusion and fiscal discipline needed to attain an inclusive, resilient and sustainable Nigerian economy,” she said.
In his remark, the Vice President, Islamic Development Bank, Muhtar Mansur, noted that while the socio-economic conditions facing Africa today may appear to be a confluence of many multi-faceted structural problems, lack of economic diversification is a major factor to urgently address.
According to him, the Africa continent needs to finance sustainable and resilient infrastructure that would facilitate a clear shift from commodities reliance.
“As in many other places, sustainable infrastructure forms the foundation of all economic activity in Africa and when judiciously channelled towards
facilitating an array of productive activities aimed at economic diversification, it forms the launch pad for sustainable economic growth and prosperity.
“Africa was making only modest progress towards the SDGs pre-Covid-19 pandemic. this modest progress has been further derailed by the
pandemic,” he said.
Speaking further, Mansur said the African infrastructure financing gap is estimated to
be $170 billion per year by 2025, which represents roughly 5 percent of Africa’s
annual GDP.
“The amount of gap will be even larger if we integrate climate friendliness, resilience and sustainability in our infrastructure design and
implementation,” he said.
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