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The Legality of Islamic Banking in Nigeria: A Critical Approach

Article  in  SSRN Electronic Journal · October 2011

DOI: 10.2139/ssrn.1941010

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 THE LEGALITY OF ISLAMIC BANKING IN NIGERIA:
{A Critical Approach}

By

Abdul Azeez Maruf Olayemi*1

Abstract

Dual banking system has emerged the current order of the global economic
system. The dualization of the banking system is generally construed in the context
of the practicing of the non-interest Islamic banking system alongside the
conventional interest-based banking system. The system is currently in practice in
the best economic jurisdictions of the world, and it has been proved to be viable.
Hence, the Nigerian federal government moves to improve its banking system, by
its dualization to meet the country’s economic challenges. However, the proposal
is met with stiff rejection from a religious group. This paper takes a critical look at
the premises on which the objection is based. It also examined the legal basis for
the introducing of the product into the Nigerian banking system. Nevertheless, the
outcome of the study shows that, the introducing of the non-interest Islamic
banking product into the Nigeria banking system is lawful and its benefits to the
country abounds.

1. Introduction:

Nations, like plants and human beings, grow. And if the development is thwarted they are

dwarfed and overshadowed.’2 Aspiring to grow and join the league of the advanced economic

countries of the world, the Nigerian federal government through the Central Bank of Nigeria

(CBN), approved the introduction of Non-Interest Financial Institution vis-a-vis the Islamic

1
Abdul Azeez Maruf Olayemi is a Ph.D research candidate in International Islamic University, Malaysia. He can be
reached on E-mail: ma1129uk@yahoo.co.uk, or educationola@yahoo.com.
2
Claude Mckay, Claude Mckay Quotes <http://www.people.ubr.com/authors/by-first-name/c/claude-mckay/claude-
mckay-quotes/nations-like-plants.aspx>(Retrived on 30/09/2011).

Electronic copy available at: http://ssrn.com/abstract=1941010

banking product into the Nigerian Banking system.3 The Islamic Banking has evolved over the

decades around the world and it has emerged as the most impermeable shield against all sort of

economic downturn. The system is in practice across the world, including some of the most

economically strong countries, such as UK4, USA5, Germany6, Italy7, France8, Singapore9,

Japan10, China11, Malaysia12, Australia, South Africa13 and even the Vatican city14, to mention a

few.

Surprisingly, the disposition of the Central Bank is perceived by some group as a way of

promoting Islamic religion in the country.15 This generated a very heated and a dangerous debate

that includes threat of legal battle and war-fair from both side of the argument16. The questions

that are raised by the anti-Islamic banking group include; alleged disparity in the definitions of

‘Non-Interest Financial Institution’, between the Guideline of the Non-Interest Financial, 2011,

and the Banking and other Financial Institution Act, (BOFIA), 1991, the irrelevancy of Religious
3
Mustapha Salihu, Soludo approved Islamic banking – Sanusi, <
http://www.punchng.com/Articl.aspx?theartic=Art20110704134654>(retrieved on 4 Jul 2011)
4
Islamic Bank of Britain (IBB) plc, PO Box 12461, Birmingham, B16 6AQ< http://www.islamic-
bank.com/>(retrieved on 01/09/2011).
5
Paul Wiseman, Islamic loans turn profit for banks in USA, USA TODAY, osted 3/26/2008, <
http://www.usatoday.com/money/industries/banking/2008-03-26-islamic-finance-sharia_N.htm>(01/09/2011).
6
Germany: Deutsche Bank Launches Sharia-Compatible Funds, WEDNESDAY, DECEMBER 13, 2006, <
Http://Islamineurope.Blogspot.Com/2006/12/Germany-Deutsche-Bank-Launches-Sharia.Html >(01/09/2011).
7
Italy: First Islamic bank in Italy to open in 2008, <
http://www.adnkronos.com/AKI/English/Business/?id=1.0.1351258771>(01/09/2011).
8
Eleanor Beardsley, France Adjusts Laws To Allow Islamic Banking, October 13, 2009, <
http://www.npr.org/templates/story/story.php?storyId=113742191 >(01/09/2011).
9
1st Islamic Bank in Singapore, Publication time: 8 May 2007, 08:14,
<http://kavkazcenter.com/eng/content/2007/05/08/8232.shtml > (01/09/2011).
10
Jasim Ali, Islamic finance is gaining importance in non-Muslim nations,
<http://islamicbanking.blogsome.com/category/islamic-banking-news/japan/>(01/09/2011).
11
Islamic finance reaches China, August 26th, 2009, <http://www.silkroadeconomy.com/2009/08/26/islamic-
finance-reaches-china/>(01/09/2011).
12
See,< http://www.bnm.gov.my/index.php?ch=13&cat=banking&type=IB>,(01/09/2011).
13
Islamic Banking in Africa,< http://www.halaljournal.com/article/3802/islamic-banking-in-africa >(01/09/2011).
14
Developments in Islamic Banking,
<http://www.oikonomia.it/pages/2003/2003_febbraio/avvenimenti_2.htm>(retrieved 01/09/2010).
15
The body that opposed Islamic banking are not the Christian community in Nigeria. The people that oppose it are
the Christian politician that find their way into the exalted office of CAN.
16
See,< http://www.punchng.com/Articl.aspx?theartic=Art20110727115281>(retrieved on 22/09/2011).

Electronic copy available at: http://ssrn.com/abstract=1941010

based banking to a secular state such as Nigeria, the possibility of discrimination against the

non-Muslims in the services of the Islamic bank in the country, the presumed impossibility of the

upholding of the principle of ‘Federal Character’ as enshrined in the Nigeria constitution, in the

composition of the membership of the CBN Council of Shariah/Council of experts, and finally,

the portraying of Islamic banking institution as a means of islamization of Nigeria. Conversely,

the protagonists of Islamic banking insist that Islamic banking is actually enshrined in the

Nigerian banking legal framework.17 They maintain that the arguments of the antagonist of

Islamic banking do not hold water. In their opinion, it is a mere inclination to religious sentiment

on the account of national advancement, intellectual liberalism, positivism, objectivism, realism

which are antitheism to patriotism. They conclude that the act is a savagery and superfluous.

2. The Argument Of The Protagonists Of Islamic Banking:

To start with, the protagonists of Islamic banking maintain that the introduction of Islamic

banking into the Nigerian banking system is lawful and appropriate, given the legal provisions

on its establishment and the prospects it has in the country, in the one hand. In the other hand,

they argues that it is intellectually and legally erroneous for the antagonist of the Islamic

banking, to ignore the reality of the legality of the inclusion of the product in the Nigerian

banking system on the bases of mere inclination to religious sentiment. They emphasis that such

disposition is contrary to the provisions of the Nigerian banking legal system,18 and that it is

unpatriotic and inhumane for them to overlook the benefits the introduction of the product will

17
Section 61, BOFIA, 1991.
18
Ibid.

3
bring to the country, in terms of job creation to cater for the problem of the teaming unemployed

graduates in the country, as well as the attracting of foreign investments from the most wealthiest

investors of the world who are located in Gulf Cooperation Countries (GCC). The practice of

Islamic banking will attract the investors, and such investment will certainly contribute

immensely to the growth of the economy of the country.

In addition, they then lament that it is surprising that, the educated class of the group will allow

so few politically minded people from their midst to met intellectual ignominy to the country

before the international community, as their vehement rejection of the Islamic banking

institution purports the obsoleteness of our educational curricular. Otherwise, the claim of

ignorance about a system which is currently part of the economic globalization is an hoax. It is

an indication that Nigeria is lagging behind in this area. They add that worst of all, is their

abdication of the principles of objectivism, positivism, pragmatism, and realism which are the

guiding light in any intellectual discourse, and instead, confusingly or hypocritically, clutch to

some Sections of the Nigerian statutes, in all attempts to quash the introduction of the Islamic

banking product into Nigerian banking system.

Moreover, the group asserts that Islamic banking which is a product of the Non-Interest

Financial Institution is overtly provided for under the Nigerian Banking legal framework. The

developing of the Guideline for the supervision and regulation of Islamic banking as a category

of the Non-Interest Financial system is based on the provision of Section 33 (1) (b) of the Central

Bank of Nigeria Act, (CBN), 2007, which empowers the Central Bank of Nigeria to ‘issue

4
guideline to any person and any institution under its supervision’19 to carry out banking services.

Section 23 (1)re-asserted this legal framework with a provision in that ‘profit and loss sharing

banks’ are less affected by the provision that binds other banks. The Section exonerates ‘profit

and loss sharing banks’ from the requirement of mandatory display of information on the interest

rates of their lending and deposits and the rendering of such information to the Central Bank of

Nigeria’.

In addition, Section 52 gives Central Bank governor the discretionary power to ‘exempt

community banks or profit and loss sharing banks from the provision’20 of BOFIA, 1991.

Likewise, Section 55 (2) of the Act gives the Central Bank Governor the power to make ‘rules

and regulations for the operation and control of all institutions under the supervision21’ of the

Central Bank, while Section 61 of the Banks and other Financial Institutions Act (BOFIA), 1991

(as amended) overtly lay the legal foundation for the establishment of special bank, including the

‘profit and loss sharing banks’ in the country. This is the Section that defines Profit and loss

sharing banking as ‘a bank which transacts investment or commercial banking business and

maintains profits and loss sharing accounts’,22 which is nothing but the disputed Islamic banking

system.

The group emphasis, that Islamic banking vis-à-vis profit and loss sharing banking is provided

for, in the Section 4 (1) (c) of the Regulation on the Scope of Banking Activities and Ancillary

Matters, No 3, 2010. The Section states that; ‘… the only types of banks that will be permitted to

19
Section 33(1) (b) of the Central Bank of Nigeria Act, (CBN), 2007.
20
Section 52, ),BOFIA, 1991.
21
Section 55 (2),BOFIA, 1991.
22
Section 61, Ibid.

5
carry on banking business in Nigeria under BOFIA (are): (a) Commercial banks; (b) Merchant

banks; and (c) Specialized banks, which include non-interest banks, microfinance banks,

development banks and mortgage bank.’23 it shall be read together with the provisions of the

relevant Sections of BOFIA, 1991 (as amended), the CBN Act 2007, Companies and Allied

Matters Act (CAMA), 1990 (as amended), and the other circular and Guidelines that are issued

by the Central Bank of Nigeria CBN from time to time.’24

In a nutshell, the protagonists of Islamic banking therefore conclude that it was the diligent and

brilliant work of the Nigerian legislature that culminated in the legality of introducing profit and

loss banking, otherwise known as Islamic banking into the Nigerian banking system. Therefore,

it is the Nigerian lawmakers in their wisdom who envision the need for Nigeria to join the league

of the nations that practice dual banking system by allowing the operation of Islamic banking.

However, having adduced the argument of the protagonists of Islamic banking in Nigeria, as

maintain by the protagonists of Islamic banking, it will be appropriate, at this juncture, to

examine the premises on which the arguments of the antagonists of Islamic banking funded.

3. The Antagonist of Islamic banking:

The antagonist of Islamic banking in their part, premised their arguments on four different legal

questions regarding the Nigerian banking legal framework. The arguments are as follow:

23
Regulation on the Scope of Banking Activities and Ancillary Matters, No 3, 2010.
24
Section 3.1, Framework for the Regulation and Supervision of Institutions Offering Non-Interest Financial
Services in Nigeria, FPR/DIR/CIR/GEN/01/010, January 13, 2011.

6
a. That there is Variation in the Definition of ‘Non-Interest Financial Institution’ between
‘BOFIA 1991’ and ‘NIFI Guideline,2011’

The antagonists of Islamic banking claim that there is a variation between the definitions of

‘Non-Interest Financial Institution/ Profit and loss banking’ in BOFIA, 1991 and the Guideline

of Non-Interest Financial Institution, 2011, and consequently, alleged that the introduction of

Islamic banking in the country to the extent of such variation is illegal.

However, the protagonists of Islamic banking argue in this regard that the claimed of variation or

contradiction in the definitions of such laws is nothing but a mere intellectual confusion. They

assert that, had the antagonists of Islamic banking taken a critical look at the definitions with a

view to sustain objectivity, they would have realized that despite the appearance of differences in

the words of the definitions, the wordings do not defer as such, they are rather synonymous in

meaning and purpose. The definitions are as follow:

1. BOFIA, 1991, Section 61, Non-Interest Financial Institution is: a bank which transacts
investment or commercial banking business and maintains profits and loss sharing
accounts’.25

2. The Guideline of Non-Interest Financial Institution, 2011, Non-Interest Financial Institution

is : a bank or other financial institution under the purview of the Central Bank of Nigeria
(CBN), which transacts banking business, engages in trading, investment and commercial
activities as well as the provision of financial products and services in accordance with the
Shariah principles and rules of Islamic commercial jurisprudence.26

Thus, the reality is that the application of shariah rules and the principles of Islamic

jurisprudence are tantamount to the operation of ‘profit and loss sharing account as reflects in the

Section 61 of BOFIA, 1991. Therefore, the argument that the establishment of Islamic banking is

25
BOFIA, 1991, Section 61
26
The Guideline of Non-Interest Financial Institution, 2011.

7
illegal based on the alleged inconsistency of definitions does not arise in any way because what

the principles of shariah and the rules of Islamic commercial jurisprudence requires in banking

system is the operation of ‘profit and loss sharing account. In fact, it is this statute (as the

paramount regulatory law for banking in Nigeria) that provides for the establishment of Non-

Interest Financial Institutions in the country, and in reality, the only overtly known non-interest

banking system in the world today is Islamic banking. Thus, save if the hard-work of the

Nigerian legislature which led to the enactment of the Section 61 of BOFIA, 1991 will be

jeopardized, the only way to implement the Section 61 of BOFIA, 1991, is to give way for the

introduction of Islamic banking product into the Nigerian banking system. Undoubtedly, no

reasonable Nigerian will allow the hard work of his legislators to be jeopardized.

Moreover, the difference between BOFIA, 1991 and the NIFI Guideline, 2011, as legal

instruments, should be identified. BOFIA, 1991 is an Act of parliament while NIFI Guideline,

2011 is a delegated legislation which is meant to amplify and address the ambiguous and

unresolved areas in the Section 61 of BOFIA, 1991. The Guideline is to be explicit on all that is

required to put the Section into practice. In other words, a delegated legislation is a law which is

made by a person or body other than Parliament, such as the Central Bank of Nigeria (CBN); the

law may be in the forms of a Guideline, Framework or Regulation. Its importance is to clarify

the parts of the statutes which need further clarification or explanation for proper

implementation27.

27
See, < http://www.lawteacher.net/english-legal-system/resources/delegated-legislation.php >(retrieved
28/08/2011).

8
Therefore, the function of the Guideline of NIFI 2011, in this sense, is to be explicit and specific

in its definition of Islamic banking, as against the generic definition of the Banking and Other

financial Institution Act (BOFID) 1991). Thus, the guideline shed light on the BOFIA, 1991’s

definition of Non-Interest Institution’, as ‘a bank which transacts investment or commercial

banking business and maintains profits and loss sharing accounts’, that it is;‘…a bank or other

financial institution under the purview of the Central Bank of Nigeria (CBN), which transacts

banking business, engages in trading, investment and commercial activities as well as the

provision of financial products and services in accordance with the Shariah principles and rules

of Islamic commercial jurisprudence’’. For further understanding of the definition, there is a

need for the explanation of the account that is maintained by Islamic bank.

A close study of the practices of Islamic banking system shows that the account which it

maintains in its operations is based on the doctrine of profit and loss sharing system.28 In other

words, Islamic bank maintains ‘profit and loss sharing account’ in all its practices.29 That is, at

both the micro and the macro levels of banking operation systems. For instance, although,

Islamic bank operates on the same template with the conventional bank, in term of the creation

of deposit facilities, such as deposit account, current account, saving account, investment account

etc. for the convenience of its customers, however, its practices defers from the conventional

practice as regards the contracts that governs the relationship between the bank and the

customers. The relationship between the depositors and the bank under the conventional banking

28
Ahmad Sanusi Hussin and Md. Ali bin Md. Sariff, Islamic Banking Handbook, Financial Sector Talent
Enrichment Programme, (Institut Bank-Bank Malaysia (35880), 2010), at 36.
29
Other models of the transaction of the bank such as al-Murabarah, BBA, al-Inah, al-Twaruq, etc… are also more
or less profit sharing system, because they are not interest based.

9
system is a ‘debtor-creditor relationship’30, whereas in the Islamic banking system, the

relationship between the depositor and the bank is ‘investor-entrepreneur relationship’,31 that is,

a partnership relationship.

Thus, while interest is paid to a depositor on his deposited money in the conventional bank, the

profits that accrue or loss that is incurred from the partnership of the ‘invested fund’ of the

depositor in the Islamic bank is shared between the bank and the customer. Mostly the contract

between a depositor and a bank under Islamic banking system is al-mudarabah contract32, which

simply means ‘profit sharing and loss bearing contract’. In this regard, the argument on whether

Islamic bank product is inclusive in the Non-Interest Financial institution which was generally

provided for in the Section 61 of BOFIA, 1991, and was explicitly clarify in the Guideline of

NIFI 2011, is unfounded; it has no basis in fact and in law. The introduction of Islamic banking

into Nigerian banking system is based on nothing, but the profit and loss sharing account as

provided in Section 61 of BOFIA, 1991.

Furthermore, looking at the macro level of the Islamic banking operations, that is, the Islamic

financial market transaction which includes; the capital market, money market, the forex market

etc. In reality, the products are known in the conventional banking system. However, the Islamic

banking fashion of the products defers, in that, its operation in the macro level is based on

investor and entrepreneur relationship in the capital market, and between the central bank and the

commercial banks and other financial institutions in the money market, and among the banks and

other financial institution in the interbank money market, as opposed to the creditor-debtor

30
T. A. Ibitoye & O. A. Ajayi, Elements of Banking, (Ibadan: Bash-Moses Printing Company, 1999), at 154.
31
Ahmad Sanusi Hussin and Md. Ali bin Md. Sariff, ibid.
32
Ibid.

10
relationship of the conventional system. In short the relationship of the participants in the macro

level of the Islamic financial institution is basically profit and loss sharing relationship otherwise

known as al-mudarabah contract/relationship.33

Thus, it can be seen that the macro and micro levels of the banking system which are the core

areas of the banking system, are operated on the basis of profit and loss sharing in the Islamic

banking system. Therefore, it will be illogical to conclude that merely because Islamic banking

draws its modus operandi from the principles of Islamic law of transaction ‘al-muamalat’, which

forbids usury, gambling, speculations, uncertainty, but legalizes trade and the principle of justice

(certainty) in its dealings, the ‘profit and loss sharing’ of its model is not in tandem with the

provision of the Section 61 of BOFIA 1991. This statutory provision does not draw any line of

demarcation between the practices of ‘profit and loss sharing accounts’ of the Non-Interest

Financial Institution systems. It is actually inclusive of the Islamic banking product and any

other credible profit and loss sharing products of the banking system.

In this regard, it can only be logical and reasonable to insist that, the Banking and other Financial

Institutions Act (BOFIA) 1991, provides for, and legalizes the operation of Non-Interest

Financial Institution which it defines as a system which ‘maintains profit and loss sharing

account.’ In extension, since Islamic banking is a non-interest banking product which also

maintains a ‘profit and loss sharing account’ its introduction, establishment and operation,

whether partially through the opening of window system in the available conventional banks, or

33
Ibid, 176.

11
fully, such as that of Jaiz Bank international34, is legal and lawful, pursuant to the provision of

Section 61 of BOFIA 1991. In fact, the law that establishes Islamic banking and other related

banking practices in Nigeria is the Banking and Other Financial Act (BFIA) 1991. The NIFI

guideline is nothing but an operational framework.

To sum up, it is proper to assert that, suppose the Section that provides for the establishment of

Non-Interest Financial Institution in Nigeria is not in existence, it would have been ultra vires for

the Central Bank of Nigeria (CBN) to develop the Guideline of NIFI, 2011, to serve as a

framework for the operation of the Non-Interest Financial Institutions, including the Islamic

banking product. As mentioned early. BOFIA, 1991 is the paramount law of the Nigerian

banking system, from which all the guidelines that are developed by the Central Bank of Nigeria

CBN, for the various financial activities, whether it is conventional or Islamic, are drawn. Thus,

the duty of the Central Bank of Nigeria is to develop guidelines on the bases of the existing

provisions of the statute, which was what the CBN did in this respect. Therefore the CBN does

not in any way, contravene or violate any law, since what it did was actually, the performance of

its duty.35

b. That there is the Possibility of Discrimination against non-Muslims in the Services of

Islamic Banks:

Enormous concern and anxiety have been demonstrated, as to whether Islamic bank will give

equal right and opportunity to non-Muslims and the Muslims in its services. In reality, the

anxiety is a mere lack of understanding of the operations of the Islamic law of transaction. The

34
See, <http://www.thisdaylive.com/articles/cbn-licenses-first-islamic-bank-in-nigeria/93594/>(retrieved
01/09/2011).
35
Section 33(1) (b) of the Central Bank of Nigeria Act, (CBN), 2007.

12
Islamic law of transaction ‘al-muamalat’, of which Islamic banking is a branch does not, in any

way, precludes non-Muslim from transacting under its purview. That is to say that, the Islamic

commercial law which is an embodiment of the rules of contracts, agreements, obligations and

liabilities does not differentiate between the human family whether they are Muslims or non-

Muslims.

The practice of shariah in the contemporary time is different, in any way, from that of the early

period. The application of the rules of Islamic law of transactions on the contracts that exist

between the Muslims and non-Muslims in those days was apparent. One of the ever glaring

examples on this was some of the transactions that existed between the Holy Prophets

Muhammad (S. A .W) and some non-Muslim. For instance, at the time of the demise of the Holy

Prophet (S. A. W.), his amour was in the custody of a Jewish merchant. The prophet had

received the loan of food from the person for his family, and placed his armour with him as

collateral for the loan.36 In this case, if the holy Prophet (S. A. W.) would go that far in

transacting with a Jewish, ‘a non-Muslim’, what then will restrict a Nigerian non-Muslim from

benefiting from the services of the Islamic banking product, vis-à-vis, investment, employment

or subscription to any of its services.

Furthermore, the study of the contemporary practice of Islamic banking across in the world

shows that the bank is an institution which renders its services to the general public, regardless of

their religious profession, affiliation or inclination. For example, one of the countries that boast

the most developed product of the Islamic banking in the world today is the United Kingdom

36
Hadrat Mirza Bashiruddin Mahmud Ahmad, Life Of Muhammadsa, (UK: Islam International Publicatins Limited,
2005) , at 300.

13
‘UK.’37 The country is only second to Malaysia in this respect. Despite the fact that the majority

of the populations of the country are Christians38. Similarly, although, the Muslims in Malaysia

outnumbered the non-Muslims, as they constitute the 60.4% of the total population, like

Nigeria,39 however, there are other major religious groups in the country. These include the

Buddhism, 19.2%, Hinduism 6.3%, Christianity 9.1%, and the others 2.6%.40 Imaginably, if

Islamic banking is meant to serve only the Muslim communities, how would these countries

emerge as global hubs of Islamic banking? All the members of the various religious groups in

these countries are strong participants in the Islamic banking system, regardless of their religious

diversity. They participate as depositors, investors and employees of the bank. In fact, this is

what culminates into the rapid growth and development of the Islamic banking system in the

world today. The Islamic banking practice in Nigeria cannot be different from the other practice

of the world. It will give equal opportunity to all Nigerians.

In a nutshell, Nigerians, whatever their religion might be, should be rest assured that the

Constitution of the Federal Republic of Nigeria, 1999, (as amended) has preserved their right to

derive benefit from any economic out-fit in the country. The Section [16 (1) (d)] of the

constitution preserves this right ‘without prejudice to the right of any person to participate in

area of the economy within the major sector of the economy, protect the right of every citizen to

engage in any economic activities outside the major sectors of the economy’41. Therefore, no

37
Michael Ainley, Ali Mashayekhi, Robert Hicks, Arshadur Rahman and Ali Ravali, Islamic Finance in the UK:
Regulation and Challenge, Financial Services Authority, 2007, at 6.
38
Richard Kerbaj, Muslim population 'rising 10 times faster than rest of society', January 30, 2009, The Times, <
http://www.timesonline.co.uk/tol/news/uk/article5621482.ece >(02/09/2011).
39
CIA - The World Factbook - Nigeria, see, < https://www.cia.gov/library/publications/the-world-
factbook/geos/ni.html#People >(retrieved 02/09/2011).
40
Malaysian government statistics department (2001). "Population and Housing Census 2000". Web.archive.org.
Archived from the original on 23 March 2007. (Retrieved 27 October 2010).
41
Section 16 (1) (d), Constitution of the Federal Republic of Nigeria, 1999.

14
Nigerian shall be deprived of the benefits of the Non-Interest financing system of the Islamic

banking system, in term of investment, deposit, financings, employment etc. What Islamic bank

stands for is the realization of the principles of equity, justice and fairness, and most importantly

the safeguarding of the economic system from derailing through the interest based practices.

c. That the Composition of the Shariah Council/ Council of Experts Violates the Principle
of Federal Character:

Another issue that requires critical discussion is the misconception over the creation of the

Sahriah Council or the Council of Experts to assist the Central Bank on the supervision and

regulation of Islamic banking practices in Nigeria, as well as the creation of Shariah Boards and

the employing of a Shariah advisor in each of the Banks that practice Islamic banking or opens

Islamic banking window42. This is in accordance with provision of the Guideline of the Non-

Interest Financial Institutions, 2011. The Guideline states that ‘the ‘duty of ‘the CBN Council of

experts or Shariah Council’43 is to advise the Central Bank of Nigeria CBN on shariah matters

for the effective regulation and supervision of non-interest financial institutions in the country44.

However, the antagonists of Islamic banking contend in this regard that, since the council of

shariah experts will be comprised mainly of the experts of Shariah law, there is tendency that

some geopolitical zones or states of the federation will not be represented in the council. They

therefore, conclude that the creation of the council is illegal because it will not conform to the

42
Section 5.1, Guideline on non-Interest Window and Branch Operations of Conventional Banks and other Financial
Institutions,Financial Policy & Regulation Department Central Bank of Nigeria, Abuja, December 31, 2010.
43
Section 9.0, Framework for the Regulation and Supervision of Institutions Offering Non-Interest Financial
Services in Nigeria, FPR/DIR/CIR/GEN/010, January 13, 2011.
44
INFI Guideline, 2011, ibid.

15
Principle of ‘Federal Character’ which was enshrined in the Section 14 (3) of the constitution of

the Federal Republic of Nigeria.

However, the protagonist of Islamic banking maintains that the present argument is not different

from the previous ones. They emphasis that the argument is unnecessary, given that, it is the

Banking and other Financial Institutions Act (BOFIA), 1991 which provides for the

establishment of Non-Interest Financial Institutions in Nigeria, therefore, it must be construed

that the law has implicitly provided for all that is necessary for the operation of the bank. This is

because the Shariah council or Council of Expert is an integral part of Non-Interest Financial

Institution product of Islamic Banking. Thus, since BOFIA, 1991 is economical in its definition

of the system, it is necessary that the Guideline of the Non-Interest Financial Institution,2011

which is an operational framework that was developed on the bases of Section 16 of BOFIA,

1991 be explicit in this respect. This is what was done by the Guideline.

Moreover, they refer to the argument as to whether the creation of Council of Shariah in the

CBN violates the principle of the ‘federal character’ or not as a weak attempt of playing to the

gallery. This is because the claim is premature. The antagonists of Islamic banking in Nigeria

need not to cross a bridge before they arrive at it. All the six geopolitical zones of Nigeria are

blessed with experts of Islamic law ‘shariah, including the south-south, south-east and north

central zones that are predominantly non-Muslim. Therefore, the principle of federal character as

enshrined in the constitution needs not to be violated in the composition of the members of the

Council of Shariah since all the geopolitical zones of the country can be represented. However, it

must be emphasized that the fact that the principle of federal character will be observed in the

16
composition of the shariah council of the Central Bank does not negate the requirement of

Shariah expertise of the members of Council or boards.

Therefore, the composition of the members of the shariah council, in the Central Bank or in the

Shariah board of any bank that operate Islamic banking or opens a window for the system must

strictly be comprised of only the experts of shariah law whose areas of specialization is ‘Islamic

law of banking, securities and takaful (Islamic Insurance)’.

In the other words, if Islamic banking is going to thrive and be successful in Nigeria, like that of

the other countries of the world, such as those of Asia, America, Europe and even some African

countries, the members of the Shariah board must strictly be experts of the modern Islamic law

of banking, securities and takaful. This must be emphasized because, not every scholar of shariah

is a specialist in the area of Islamic banking. In fact, one of the challenges that face the Islamic

banking system today globally is the dearth of experts of Islamic law of Banking, Security and

Takaful. The experts of Islamic law of banking are very scanty. Therefore, the Nigerian nascent

system of Islamic banking needs to thread with caution.45 Nevertheless, the principle of ‘federal

character’ as enshrined in the constitution of the federal republic of Nigeria must be observed.

The section (14 (3)) of the constitution, states that ‘the composition of the government or in any

of its agencies and the conduct of its affairs shall be carried out in such a manner as to reflect

the federal character of Nigeria and the need to promote national unity, and also to command

national loyalty, thereby ensuring that there shall be no predominance of persons from a few

state or from a few ethnic or other sectional groups in that Government or in any of its

45
Azrul Azwar Ahmad Tajudin, Overview of Islamic Finance, (Kuala Lumpur: Bank Islam, 13 December 2010), at
45.

17
agencies’46. This principle must be implemented in the composition of Shariah council of the

Central bank, subject to expertise.

d. That the Introduction of Islamic Banking into Nigeria is the part of the agenda of
Islamization of the Country:

In response, the protagonists of Islamic banking perceive this argument as laughable, illogical

and outright the unpragmatic segment of the discourse. They add that this is the argument which

exposes the innate sentimental disposition of the antagonists of Islamic banking, and that it is a

clear attempt of instigating religious sentiments in country. It is hypocritical, barbaric and

excommunicated way of settling scores. This type of diverting from the main argument was the

instrument which was adduced by the same group to compel the Nigeria federal government in

198647 to shelve its proposal of joining OIC and later IDB, purposefully, to receive interest free

loan from the organizations, to executive the developmental goals of the country. The

government was rather forced to obtain interest-base-loan which hitherto has subjected the

country to the slavery of endless payment of huge interest to date48. This is one of causes of the

bad economic situations of the country, today.

Thus, the claim of ‘islamization’ is a hoax. It is only meant to bully the gullible and to mislead

the general public. Supposedly, can it be said that Islamic banking which is been mostly

championed by non-Muslim in the Western world is meant to Islamize the people? Is this claim

relevant to UK, USA, Germany, South Africa, Japan, Italy and even the Vatican City where

46
Section 14 (3), Constitution of the Federal Republic of Nigeria.
47
Omo Omoruyi, AN APPEAL TO PRESIDENT OLUSEGUN OBASANJO: Nigeria: Neither an Islamic nor a
Christian Country,< http://www.biafraland.com/Islamization%20of%20Nigeria.htm >(retrieved 02/09/2011).
48
Esther O. Adegbite, The impact of Nigeria's external debt on economic development,<
http://www.emeraldinsight.com/journals.htm?articleid=1733107&show=pdf >(retrieved 02/09/2011).

18
Islamic banking and finance is currently booming? The majority of the population of these

countries is non-Muslims. Yet, the practice of Islamic banking which is claimed to be the tool of

Islamizing Nigeria, is allowed to flourish in the countries, and it has contributed immensely to

their economic growth. Thus, the protagonists of Islamic banking questioned whether the

Nigerian anti-Islamic banking forces are claiming be more intelligent or more educated than the

citizens of those great nations? They continued that, as educated fellows, the antagonist of

Islamic banking should not have allowed sentiment to override their positive thinking. Education

is a guiding-light to the discovery of the means of solving the human problem. Undoubtedly,

Islamic banking institution is discovered to be one of such means.

Nevertheless, the antagonists of Islamic banking are poised of putting something on nothing, as

they resort to some Sections of Nigerian statutes to create the impression that will justify their

allegation of ‘islamization agenda’ of Islamic banking in Nigeria’. They erroneously claimed that

the imposition of the Guideline of Non-Interest Financial Institution (NIFI, 2011) ab initio; (1)

violates ‘the right to freedom of religion’ as enshrined in the Nigerian constitution that ‘every

person shall be entitled to freedom of thought, conscience and religion’,49 (2) that, the guideline

also contravene the principle of secularity of Nigeria, as provided in the constitution, that ‘the

government of the Federation or of a state shall not adopt any religion as state religion’50, and

finally (3) that it violate the section 9 (1) of the banking and financial institution Act (BOFIA),

1991, which states that; ‘Except with the written consent of the Governor; (a) no bank shall, as

from the commencement of this Decree be registered or incorporated with a name which

includes the words “Central”, “Federation”, “National”, “Nigeria”, “Reserve”, “State”,

49
Section 38 (1) of the constitution of the Federal Republic of Nigeria.
50
Section 10 ibid.

19
“Christian”, “Islamic”, “Moslem”, “Qur’anic”, “Biblical”51. Thus, they draw the conclusion

that, the Central Bank of Nigeria (CBN) will be violating these laws if Islamic banking product

is allowed to be introduced into the Nigeria banking system.

The protagonist of Islamic banking respond to this argument that, first of all, it is quite

unfortunate that some Sections of the Nigerian statutes are been invoked in an attempt to retard

the development of the country and to deprive the citizens of the immense benefits of non-

interest Islamic banking system. They assert that it is a clear manifestation of playing on the

Nigerians intelligence.

They however, maintain that, the reality is that, none of the Nigerian statutes or laws is violated.

They explain that since the antagonists of Islamic banking have realized their failure before the

objective and positive minds of Nigerians, they try to achieve their goal by any means and

thereby clutch onto straw. Imaginably, if the establishment of federal commissions, such as the

Jerusalem Pilgrim Commission and the Hajj Commission which are part and parcel of the

executive harm of government, as well as the pilgrim welfare boards in the states level, which

are all maintained and financed with public funds cannot constitute the violation of the right of

the freedom of religion or amount to the adoption of state religion, in which way will the

establishment of Islamic bank, which legal status may not necessarily be a public corporation,

but, either a private or public companies, constitute the violation of the right of freedom of

religion or the adoption of state religion? Is it logical to say that a trading company which is

owned by a group of shareholders in the likeness of any other company amount to the violation

51
Section 9 (1) of the banking and financial institution Act (BOFIA), 1991

20
of freedom of religion and the adoption of state religion? Can the bank restrict any Nigerian from

worshiping in his/her shrine, church or mosque?

In the other word, in which way will banks, such as the newly licensed Jaiz Bank International

which is to operate full Islamic banking system, and the Guarantee Trust Bank, Diamond Bank,

Zenith Bank, and the host of others that are aspiring to open Islamic banking windows, violate

the Section 9 (1) of BOFIA 1991, which prohibits the registration or incorporation of a bank

under the prohibited names. Although, the Islamic banking product draws its operational models

from the Shariah, it may not necessarily register under religious name, and of cause, most of the

banks are registered companies in the country already. Their aspirations are just for the inclusion

of the Islamic banking product in their practices. What should be understood is that Islamic bank

is a trading company. It is bond by all the laws that bind other banks. The fact that even a church

can invest in Islamic bank and use the produce/profit of the investment to finance its gospel or

evangelistic mission cannot be refuted. Then in which way does the introduction of Islamic

banking into the Nigerian banking system violate the fundamental right of freedom of religion

which is divinely provided for in the holy Qur’an?52

3. Conclusion:

To sum up, Nigerians should be rest assured that the introduction of Islamic banking into the

Nigerian banking system does not in any way violate any law. The definition of ‘profit and loss

sharing banking in BOFIA 1991 does not contradict that of the Guideline of NIFI 2011 as it was

claim. The allegations of the possible of discrimination against non-Muslims and violation of the

52
Qur’an 2. Verse 256.

21
‘Federal Character’ are premature and unrealistic. The claim of the implementation of the agenda

of the islamization of Nigeria (a democratic state for the matter) is a phobia. The truth is that

Islamic banking is a trading company which objective is to liberate the economic system from

the slavery of the interest based banking, and to justly and equitably distribute global wealth

among the world citizens.

To be frank, it is a high time for the Nigerian religious mongers to totally refrain from dragging

the country down. Islam and Christianity are of the same religious family.53 They are members of

the Abrahamic religious family.54. Instead of being the source of joy and happiness, these two

religions which are the cradle of modern civilization have been used by some unscrupulous

elements in various stages to foment chaos and jeopardize the country’s development. While the

role which was negatively played by the few Muslim bigots in this regard, is that of defensive,

reactionary and some times, unnecessary violence, the Christian supremacists’ role is offensive,

provocative, exploitative, and developmentally degradative. It must be noted that Islam and

Christianity are not the only religions in Nigeria. Nigeria is a multi-religions state. However, it is

only the Christian that opposed any developmental proposal that emanate from Islam, while the

reverse is not the case.

Nigeria needs to emulate the Western world on its way to achieve developmental objectives. it

must be understood that the introduction of ‘Islamic banking’, which is rapidly growing in the

Western Hemisphere, into the Nigerian banking system, will not do but good to the country. The

disposition is not in violation of any law. Nigerians must learn to be tolerant and respect their

53
Hunter, Preston. "Major Religions of the World Ranked by Number of Adherents". See <
http://www.adherents.com/Religions_By_Adherents.html >(23/09/2011).
54
The Abrahamic religion family are Judaism, Christianity and Islam.

22
religious differences. Any opportunity which will bring development to the nation, whether it is

from Islam, Christianity or even from the African Traditional Religions (ATR) must be earnestly

grabbed and utilized. This is one of the ways in which the country can develop. In this regard,

the antagonist of Islamic banking must see their opposition to the introduction of the banking

product into Nigerian as encroachment on the fundamental right of Nigerians in general. Their

position violates Section 16 of BOFIA (as amended)1991.

Amazingly, it has been discovered that some of the leadership of the anti-Islamic banking forces

and their cohorts in the National Assembly who resolve to filibuster the introduction of Islamic

banking product into the Nigeria Banking system, are beneficiaries of the unique system of the

Islamic banking in the foreign land. They are some of the few biggest invest in the United Arab

Emirate and other GCC countries. They invested in the countries through the Islamic banks

system, and they benefit from it so much that they habitually enjoy the profits of their investment

by spending their holidays in the U. A. E. and other GCC states. Is it not funny then that this

same people resolve to deprive the larger Nigerians who are not opportune to travel to the GCC

from the same benefit at home?

23
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25
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26

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