In a significant financial development, Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, revealed on Wednesday the government’s contemplation of implementing a non-interest finance window for financing crucial infrastructure and green projects. Edun emphasized the urgency of adopting non-interest financing to address Nigeria’s escalating debt crisis, highlighting its potential to unlock substantial economic opportunities and reduce reliance on traditional borrowing methods.Thank you for reading this post, don't forget to subscribe!
Speaking at the 1st Securities Exchange Commission (SEC) Nigeria-Islamic Financial Services Board (IFSB) International Forum on Non-interest Capital Markets in Abuja, Edun underscored the strategic importance of this decision in the context of the government’s participation in COP28 in Dubai, UAE. He advocated for alternative financing mechanisms based on equity participation rather than interest, emphasizing their critical role in addressing the global debt crisis and fostering rapid, inclusive growth.
Edun drew attention to the high revenue-to-debt service ratio, fiscal exhaustion in various parts of the world, and the imperative to explore equity-based financing mechanisms. He stressed the significance of non-interest financing, providing participatory opportunities that align with the equity and non-interest financing principles.
Highlighting the necessity of financing green projects and reducing dependence on foreign direct investment, Edun cited examples such as the production of electric vehicles and mass transit vehicles, aligning with the global climate action agenda.
Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), reiterated the apex bank’s support for key stakeholders in the non-interest banking ecosystem, aligning efforts with President Tinubu’s proposal to build a one trillion-dollar economy.
Lamido Yuguda, Director-General of the SEC, acknowledged the vast opportunities in the Islamic financial market but expressed regret over Nigeria’s underutilization of this economic potential. He emphasized the transformative growth of the non-interest capital market and its pivotal role in the country’s economic development.
Yuguda advocated for the use of Sukuk, a non-interest capital market instrument, for infrastructure financing, citing its asset-backed arrangement that allows issuers to clear their balance sheets of debt. He encouraged corporates and governments to explore Sukuk as an alternative mode of financing, particularly in the face of a high debt-service to revenue ratio.
Bello Lawal Dambatta, Secretary-General of the Islamic Financial Services Board, spoke on the alignment between non-interest finance and public-private partnerships in the infrastructure sector. He emphasized the flexibility of the non-interest finance window, its diverse structures, and the need to transition towards climate and sustainable finance principles for green and inclusive economic growth.