Islamic banking declared illegal in Nigeria (By IFN)

NIGERIA: Islamic banking in Nigeria is now in limbo after the country’s highest court declared last week that non-interest financial institutions operating under the principles of Shariah law are illegal and unconstitutional.



The ruling, which was handed down by Justice Gabriel Kolawole, of the Federal High Court on the 16th June, held that any operational license granted by the Central Bank of Nigeria to any Islamic commercial jurisprudence bank under non-interest financial services is deemed as “unlawful, illegal, null and void”.

"Unlike the other specialized banks, Jaiz International Bank can only be established in the country with the intervention of the National Assembly by amending the Banks and Other Financial Institutions Act,” said Justice Kolawole.

While he agreed that the central bank does have the power to issue banking licences, he declared that only the finance minister has the power of approval.

"The central bank does not have the power to designate an Islamic bank as a specialized bank", added Justice Kolawole.

The judge added that he would have nullified the license issued to Jaiz International Bank – the country’s foremost Islamic bank – to carry out Islamic banking had it not been that the plaintiff in the case lacked the locus standi to institute the action.

Godwin Sunday Ogboji, the plaintiff, a legal practitioner sought to declare the central bank’s guidelines for the regulation and supervision of institution offering non-interest financial services in Nigeria under Islamic commercial jurisprudence ultra vires, illegal, null and void.

With this ruling Jaiz International Bank is now left in the lurch. One possibility is to emulate a similar model currently being used in India where its Shariah compliant financial institutions are allowed to perform Islamic finance transactions as long as they do not operate as a “bank”.

The abolishment of Islamic banking may also be a setback to the country’s small and medium-sized enterprises given the fact that Shariah financing is more relevant to its development through its non-profit business model.

Now the central bank has to work hard to ensure this setback doesn`t derail efforts of issuing its first sovereign Sukuk and attracting the much needed investment from the Middle East and Asia.

See: http://redmoney.newsweaver.co.uk/16lbg2la60eh38rwoni3wx?email=true&a=6&p=25060005&t=21456495