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The Central Bank of Nigeria (CBN) said the new phase of reforms
will positively impact on the provisions and requirement of Islamic banking,
and hasten the progress of that arm of banking.

Mohammed Abdullahi, spokesperson for the CBN, said that Islamic
banking is not a Sanusi Lamido Sanusi programme, but started by his
predecessor, Chukwuma Charles Soludo.

“This policy has been on for about three years and has been
approved in principle for some time now. I can recall that Jaiz International
Bank Plc has been given approval in principle to operate as an Islamic Bank.
All that the Central Bank is waiting for them to do is to mobilise their
capital base of ₦25 billion required for operations in the Nigerian banking
system.”

He also noted that under the current reforms, banks have been
falling in line with the CBN requirement, adding that the recent announcement
on the categorisation of Nigerian banks for bank specific solutions will boost
Islamic banking operations.

“I believe that Islamic banking or Zero interest banking would
fare very well under that arrangement and it is possible that they may not be
required to raise exactly ₦25 billion before they can start operating. Islamic
banking and the Central Bank are trying to introduce a supervisory framework
for easy supervision,” he said.

Interests are growing

Mr. Abdullahi said few banks have also indicated interest and
indeed have actually started processing their setup for Islamic banking in Nigeria,
without disclosing their identities. He added that the CBN will rely much on
the success and experience of the Negara of Malaysia. “They have gone far in
the operations of Islamic banking and I believe we have a lot to learn from
them, and we hope to use their experience to develop our own locally. As soon
as that is done, everything would become clearer. Islamic banking has been
provided for in the Banks Act and Approval-in-Principle has already been given
during Soludo’s time,” he said.

Apart from Jaiz International, he also revealed that BankPHB was
also given approval in principle to operate Islamic banking, and has been
operating the system for some time now.

Bank PHB offers the classic Bank PHB interest free account. A
statement on the bank’s website said, “This product is designed for Muslim
faithful desiring banking services without compromising their religious
beliefs.”

The interest-free banking offer the following products: Current
Account, Savings account, Investment account, and Hajj Target Savings account,
with minimum account opening balances ranging from ₦2,000, and attracts no
penalty for account closing.”

The statement also added that with simplified account opening
procedures, the interest-free products are expected to accommodate all Muslim
faithful of bankable age group, irrespective of gender or income level,
including women in Purdah.

No Knowledge, no banking

A non-interest bank, according to the Central Bank of Nigeria,
means a bank which transacts banking business, engages in trading, investments
and commercial activities, as well as the provision of financial products and
services, in accordance with the principles and rules of Islamic commercial
jurisprudence.

Last year, the CBN governor, Sanusi Lamido Sanusi, said
operators needed to have the knowledge of modern banking and of Islamic banking
before they can participate in the system because, “The services would be
available to Muslims and non-Muslims. It is not a religion; it is a product
available to the public. If things are set in place, I would be in support.”

In March 2009, the Central Bank released a framework for
non-interest banking. It also expressed the desire to collaborate with the
Securities and Exchange Commission (SEC), Nigerian Stock Exchange (NSE),
National Insurance Commission (NAICOM), Economic and Financial Crimes
Commission (EFCC) among others, to ensure the successful implementation of
Islamic banking system in the country.

Many of the banks are still weary of delving into this branch of banking
because according to them, the framework states that the funds cannot be mixed
and the institutions should be treated as separate entities, even if they are
owned by the same bank.