DESPITE the modest progress made in the institutionalisation of non-interest banking in the country, the Central Bank of Nigeria (CBN) has disclosed that the absence of Islamic insurance to protect investments of  such  banks against unforeseen hazards could impair the growth of the Islamic banking industry.

Governor of the apex bank, Mallam Sanusi Lamido Sanusi, delivering a keynote  address, on Wednesday   in Yola, the Adamawa State capital, at the 16th CBN seminar for Finance Correspondents and Business Editors,  listed the odds against the new banking model to include limited knowledge of accounting and auditing standards pertinent to Islamic financial institutions.

Other odds identified by the CBN were a dearth of knowledge, skills and technical capacity to regulate and supervise non-interest banks, lack of Sharia-compliant liquidity management instruments,  the absence of which permits the investment of excess liquidity in interest bearing instruments and lack of robust comprehensive legal guidelines, especially at the level of conflict adjudication involving Islamic financial contracts, products or entities.

The challenges in the initiation and implementation of  non-interest banking notwithstanding, the apex bank said it had not rested on its oars in embarking on  a learning process towards developing a robust regulatory guideline that meets international standards.

In 2008, Mallam Sanusi, who was represented at the event by a CBN board member, Mallam Dairu Mohammed, said  some key officers of the apex bank undertook a study tour of Bank Negara, Malaysia, with a view to understudying the Malaysian Islamic banking model and  its regulatory and operating practices.

He said the CBN capacity development drive got an additional boost, following the approval in January 2010 of a technical assistance grant provided for the purpose of capacity development on Islamic banking, by the Islamic Development Bank.

In addition, the CBN boss said  it had organised and sponsored several training programmes and other initiatives aimed at enhancing capacity towards effective regulation and supervision of  Islamic banking in Nigeria.

Reiterating the CBN’s commitment to the development of a conducive and inclusive financial system that is safe and sound, the governor said the bank would be guided by extant banking laws as enshrined in the Banks and Other Financial Institutions Act 1991.

Earlier in his opening remarks, the Acting Director,  Governor’s Department, Mr Mohammed M. Abdullahi, had said the seminar series was initiated with the objective of educating and improving the capacity of Finance Correspondents and Business Editors to accurately interpret and report on contemporary financial and economic issues, as well as CBN activities as they relate to its mandates.

He said the theme of this year’s seminar “Non-interest banking in Nigeria: Issues, Challenges and Prospects” was apt and timely going by current controversies which the issue of non-interest banking had generated in the country.

Meanwhile, the  CBN has described most critics of Islamic banking as ignorant.

CBN board member Mallam Mohammed made the disclosure while commenting on  a paper “Overview and Conceptual Issues of Non-Interest Banking in Nigeria,” which was presented by  the Special Adviser to the CBN Governor on Non-Interest Banking, Dr Bashir A. Umar.

According to Mallam Mohammed, many of those who were opposed to the Islamic banking model did not have knowledge of what they were commenting on and thus were speaking from an ignorant point of view.

He said the Islamic banking model was for all and sundry and did not discriminate against anybody.

Mallam Mohammed said it was unfortunate that everybody claimed to know many things on the new banking model and in the process misconstrued the apex bank role in the new banking model.

He said that rather than brand the CBN as a promoter of Islamic banking, the apex bank must be seen as a regulator and was doing all things within its powers to educate the general public on the concept and modus operandi of the new banking model.

Dr Umar, in his presentation, said the approach to the introduction of non-interest financial services in Nigeria was anchored on the need to provide alternative and complementary services to the financial service sector of the economy.

Other considerations for Islamic banking according to him are the deepening and broadening of  the financial markets through the introduction of new market players, products, services and instruments; the diversification of the sources of funds and investment outlets for both the private and public sectors and developing a more inclusive financial system in the country.

Disclosing that the introduction of Islamic banking system in Nigeria does not go against the alleged secular nature of Nigeria , Dr Umar said the banking model was thriving in countries like the United Kingdom and France that are undisputedly  secular.

Dr Umar, who said Islamic banking was not limited to observing the prohibition against dealing with interest alone, stated that there were other prohibitions that  were specific to Islamic banking , such as the prohibition of excessive speculation which underlines the rejection of  dealing in derivative financial instruments by Islamic banks and the prohibition to deal in commodities that were regarded as non-permissible in Islamic commercial jurisprudence like dealing in pork, liquor, casinos, pornography, among others.

Dr Umar, who said the apex bank was seen to be promoting Islamic banking, disclosed that this was farther from the truth, adding that the burden of public enlightenment placed on CBN as a regulator made people to misconstrue the apex bank’s roles.

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