TOWARDS A SUSTAINABLE AND INCLUSIVE ISLAMIC FINANCE INDUSTRY IN NIGERIA: KEYING INTO THE MALAYSIAN EXPERIENCE

Abstract

Islamic finance was introduced into Nigeria's formal financial system in the late 1990s to bridge endemic financial exclusion and provide Shariah-compliant alternatives for Muslim Nigerians historically excluded from interest-based banking. Despite genuine progress — including the licensing of three full-fledged non-interest banks, multiple sovereign Sukuk issuances, and regulatory frameworks developed by the Central Bank of Nigeria and the Securities and Exchange Commission — the industry remains significantly underdeveloped relative to its potential. Fragmented regulatory instruments, legal ambiguities, weak institutional coordination, inadequate human capital, and public misconceptions collectively constitute a regulatory vacuum constraining industry growth. This paper examines how Nigeria can draw on Malaysia's experience — the world's leading Islamic finance jurisdiction — to establish a sustainable and inclusive Islamic finance industry. Both countries share significant historical, legal, and demographic similarities as former British colonies with plural legal systems and substantial Muslim populations. The study adopts doctrinal and qualitative methodologies drawing on primary legal sources and secondary literature. It finds that Nigeria urgently requires a comprehensive Islamic Financial Services Act modelled on Malaysia's Islamic Financial Services Act 2013, alongside the establishment of a National Shariah Advisory Council, deliberate human capital investment, tax neutrality reforms, and a scaled sovereign Sukuk programme. These reforms, collectively implemented, would transform Nigeria's Islamic finance enabling environment and position the country as Africa's leading Islamic finance market.