Nigeria’s Islamic finance industry is transitioning from a niche alternative to a mainstream pillar of the
country’s financial system, according to Dr. Basheer Oshodi, Director of Arthur Group.
Speaking at the CFG Non-Interest Investment Forum held in Abuja with the theme “Shaping the
Future of Ethical Investments: Opportunities for Non-Interest Investors in Nigeria,” Dr. Oshodi
delivered a keynote presentation outlining the 2026 outlook for Nigeria’s Islamic finance market and
its expanding role in economic growth.
According to him, 2025 marked a turning point for the sector, proving its resilience amid global
economic volatility, while 2026 will usher in expansion, consolidation, and deeper financial inclusion.
From Alternative to Architecture
Dr. Oshodi noted that Nigeria’s Islamic finance market has evolved beyond being a faith-based niche
to becoming a systemically important component of the national financial architecture.
He highlighted that despite global trade tensions, oil price volatility, and geopolitical uncertainties in
2025, Nigeria’s non-interest finance ecosystem recorded strong performance across banking, capital
markets, pensions, and insurance.
Key indicators presented at the forum include:
- The ₦300 billion 10-year Ijarah Sukuk issued in May 2025 was oversubscribed by 735
percent. - Pension Fund VI assets grew to over ₦205 billion by October 2025.
- Jaiz Bank recorded a 176 percent profit jump in Q1 2025, while TAJBank saw an 84 percent
increase in total assets. - The NGX Lotus Islamic Index delivered a 93.37 percent return in 2025, significantly
outperforming the broader market.
“These figures show that the market has moved beyond proof of concept to proof of scale,” he stated.
Looking ahead, Dr. Oshodi described 2026 as a year of expansion, driven by moderating inflation,
projected GDP growth of 4.56 percent, and stabilizing external reserves.
He emphasized that the high-interest rate environment in the conventional banking system is creating
demand for asset-backed instruments, positioning Sukuk and other non-interest products as attractive
alternatives for investors.
Domestic Sukuk, he explained, remains the most dynamic segment of the industry, serving as a low-
risk, high-yield instrument used to fund infrastructure and bridge Nigeria’s estimated ₦21 trillion
housing deficit.
A major highlight of the presentation was Nigeria’s plan to issue its first-ever dollar-denominated
Sovereign Sukuk in 2026, targeting $500 million.
The move, according to Dr. Oshodi, is aimed at diversifying external funding sources beyond
Eurobonds, attracting liquidity from the Gulf Cooperation Council (GCC) and Asian markets, and
strengthening foreign exchange stability.
The keynote speaker also addressed ongoing recapitalisation efforts in the non-interest banking
sector ahead of the March 31, 2026, deadline.
He noted that industry assets are approaching ₦1.08 trillion, with strengthened capital buffers and
digital expansion strategies positioning Islamic banks for broader national reach.
The total non-interest finance industry valuation is estimated at ₦2.5 trillion, he said.
Dr. Oshodi further highlighted reforms in the insurance sector following the enactment of the Nigerian
Insurance Industry Reform Act (NIIRA) 2025.
With compulsory insurance enforcement and digital innovation, Takaful operators are projected to
achieve double-digit growth, moving from less than 1 percent penetration to stronger market
relevance.
Additionally, Pension Fund VI’s new mandate allowing up to 10 percent allocation to Shariah-
compliant private equity and infrastructure funds is expected to channel long-term liquidity into the
real sector.
Digital Innovation and Financial Inclusion
He believes Fintech will play a crucial role in expanding access to non-interest financial products,
particularly in underserved regions.
While Mobile platforms, blockchain-enabled transparency, and Shariah-compliant financing structures
such as Murabaha and Ijarah are expected to deepen inclusion and democratize access to ethical
investments.
Risks and Outlook
Despite the positive outlook, Dr. Oshodi cautioned against potential risks, including pre-election fiscal
pressures ahead of 2027, global geopolitical tensions, monetary policy uncertainties, and possible oil
price shocks.
He concluded that the 2026 outlook reflects a convergence of ethical principles and market
pragmatism.
“Islamic finance in Nigeria is no longer an alternative. It has become a core pillar of economic architecture, driving infrastructure funding, capital market deepening, and inclusive growth,”
The CFG Non-Interest Investment Forum brought together policymakers, investors, financial
institutions, and industry stakeholders to explore opportunities within Nigeria’s rapidly expanding
ethical finance ecosystem.
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