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Let us talk about the word that scares most beginners away from the stock market before they even start: risk.

I want you to picture something for a second. A farmer plants maize. He waters it, weeds around it, does everything right, and still, a heavy storm could wipe out half his farm before harvest. Does that mean farming is foolish? Of course not. It means farming, like almost everything valuable in life, comes with risk attached. The wise farmer must learn to manage the risk. He plants different crops in different sections. He builds drainage. He insures what he can. He accepts that some loss is simply part of the process of growing something.

Stock investing works the same way. Risk is the price of admission for growth. Anyone who tells you they can hand you high returns with zero risk is either lying to you or selling you something haram in disguise (we’ll come back to that).

First, let us kill a Myth

A lot of people confuse “risk” with “gambling,” and that confusion keeps well-meaning Muslims away from legitimate wealth-building. So let’s be crystal clear about the difference.

Gambling (maysir) is when you put money into an outcome that is pure chance, with no real productive activity behind it, and where one person’s gain is purely another person’s loss. Nothing is earned through effort or partnership.

Investment risk is different. When you buy shares in a real company, you are accepting the natural uncertainty that comes with any productive venture, the same uncertainty a trader accepted when he loaded goods in their shop not knowing if the market at the other end would be good that season. Islam didn’t say “eliminate all uncertainty from commerce”; that would make trade itself impossible. What Islam prohibited is excessive and deceptive uncertainty (gharar), where you genuinely don’t know what you are buying, or the terms are so unclear it becomes exploitative.

When you buy a share of a real, transparent, Shariah-screened company, you know exactly what you own. You can see their financial statements. You can track their performance. That is different from gambling.

The Different “Flavours” of Risk

Now let us break down risk itself, because “risk” actually comes in different shapes, and understanding each one makes it far less frightening.

1. Market Risk: Sometimes stock prices fall not because a company did anything wrong, but because the entire market is having a rough season, maybe due to inflation, political instability, or global events. Imagine every boat in a harbour rocking because of one big wave. It is not that your particular boat is broken; the whole sea just got rough for a moment. This is normal, cyclical, and historically, markets built on real economic activity tend to recover over time.

2. Company-Specific Risk: This is risk tied to one particular company, poor management decisions, a scandal, a failed product launch, or increased competition. This is precisely why diversification matters so much. If you only own one boat and it develops a leak, you are in trouble. If you own a small stake in five different boats, one leak won’t sink your whole fleet.

3. Liquidity Risk: Some stocks trade heavily every single day, with lots of buyers and sellers, so you can sell quickly when you need cash. Others trade thinly, with fewer people buying and selling, meaning you might struggle to sell quickly at a fair price. It is the difference between selling a popular smartphone (easy, many buyers waiting) versus selling a very specific antique item (you might wait a while for the right buyer).

4. Inflation Risk: This is the risk of not investing. Cash sitting idle loses purchasing power every year due to inflation. So while stocks carry visible risk, holding only cash carries an invisible risk that is arguably more dangerous over the long run. What your N100,000 can buy now, it may not be able to buy it 2 years from now. If saved or kept idle over that period, you risk losing the value of the money.

5. Emotional Risk: This might be the most underestimated risk of all, and it is not really about the market, it’s about you. Fear making you sell at the worst possible time. Greed making you buy into hype without research. Impatience making you abandon a good long-term plan because of a rough month. Honestly, in my little years of investing and guiding people to invest, I have watched more people lose money to their own emotions than to any company’s bad quarter.

How Do You Actually Manage All This?

You do not eliminate risk, nobody can. You manage it, the way a skilled driver doesn’t avoid the road because accidents exist; they simply drive with seatbelts on, mirrors checked, and speed under control.

Diversify across sectors and companies. One storm should not wipe out your entire farm.

Only invest money you don’t need soon. Never invest your rent money or your school fees. Time is what allows the market’s natural ups and downs to smooth out in your favour, but only if you are not forced to sell during a dip.

Match your risk to your season of life. A 25-year-old with decades ahead of them can absorb more short-term volatility than someone five years from retirement. Your risk tolerance is not fixed, it should shift with your life stage and responsibilities.

Study before you buy, not after. Understand what a company actually does, how it makes money, and whether its fundamentals are solid, rather than buying because “everyone is talking about it.”

Zoom out, not in. If you check your portfolio every single day, you will experience every small wave as a crisis. Zoom out to monthly or quarterly reviews, and the picture becomes far clearer because over the long run, real businesses tend to trend upward as they grow, innovate, and generate profit.

The Faith Dimension of Risk

In Islam, we are taught tawakkul (Trust in Allah), but tawakkul was never meant to replace effort; it was meant to accompany it. The famous hadith about the man who left his camel untied, claiming he trusted Allah, and the Prophet (SAW) corrected him: “Tie your camel, then trust in Allah.”

That is risk management, in one sentence, from over 1,400 years ago.

You do your due diligence. You screen properly. You diversify wisely. You invest only what you can afford to. You manage what is in your control, and then you place genuine trust in Allah for the outcome, knowing that whether the market rises or dips in any given season, your rizq is written, and your effort was sincere and halal.

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Writer
Abdulbasit Abdulsalaam

Dr Luqman Seriki’s work begins exactly where that certainty ends.

“A product may have received Shariah approval on paper,” he says, “but Shariah audit asks: was it actually executed that way?” It is a simple question, and it opens onto one of the most consequential — and least understood — corners of Islamic finance. Because compliance, as he puts it, “is not established by the name of a product; it is established by the substance and execution of the transaction.” A perfectly structured contract can still be undone by a weak internal control, a misconfigured system, or an income posted to the wrong ledger.

Head of Shariah Audit at the Alternative Bank, with qualifications from AAOIFI and INCEIF and a PhD examining Shariah audit practice in Nigerian Islamic banks, Dr Seriki has spent his career on the unglamorous but essential discipline of checking — of providing independent assurance that what was promised is what actually happened.

In this week edition of Everything Ethical you will learn what Shariah audit really is, why Nigeria urgently needs its own framework, how technology is about to reshape the field, and what he wishes someone had told him when he was starting out. His answers move from the technical to the deeply personal experience. As shariah auditor, compliance or even a novice or professional looking to understand how Shariah audit works.

You are about to learn from a respected scholar and professional with decades of experience, but wait! subscribe and share this article as a way to appreciate what we do at Everything Ethical.

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Q1: You have built a career around Islamic finance, Shariah audit and governance, alongside qualifications from AAOIFI and INCEIF and a PhD in the field. What first drew you to this path, and what has kept you committed to it?

My journey into Islamic finance was not necessarily something I had completely mapped out from the beginning. My original background is in accounting, but as I became exposed to Islamic finance, I became fascinated by the fact that finance could be approached from a perspective that combines commercial objectives with ethics, fairness and Shariah principles.

That interest gradually became a career. Along the way, I encountered practical issues around internal controls, accounting treatment, and how transactions were actually executed and recorded. I began to appreciate that Shariah compliance could not stop at product approval or documentation. Weaknesses in internal controls, accounting processes, or system configuration could fundamentally affect the Shariah compliance of an otherwise properly structured transaction.

That understanding deepened my interest in Shariah audit, particularly as I came to appreciate that it does not exist in isolation but is an integral part of the broader Shariah governance framework. I became interested in how Shariah audit provides independent assurance that the governance structures, internal controls and processes necessary for Shariah compliance are effective, and that what is approved by the Shariah scholars is actually implemented throughout the transaction lifecycle.

I subsequently pursued further professional development. After building my foundational knowledge through classical texts on Islamic commercial jurisprudence and finance, alongside various professional certifications and specialised training, I went on to obtain the CIPA and CSAA qualifications from AAOIFI, as well as postgraduate education in Islamic finance. My decision to undertake a PhD focusing on Shariah audit practices in Nigerian Islamic banks was therefore a natural progression. I wanted the research not merely to earn another qualification, but to contribute to the body of knowledge and, more importantly, to the development and improvement of Shariah audit practice in Nigeria.

What has kept me committed is the belief that Islamic finance should make a meaningful difference in how people experience financial services. It is about fairness, transparency, shared responsibility and ensuring that financial institutions create value without compromising ethical principles. For me, contributing to a system where finance serves people responsibly while remaining true to Shariah principles continues to make the journey worthwhile

Q2: For many people, Shariah audit is still an unfamiliar concept. If you had to explain what you do to someone who knows nothing about Islamic finance, what would you tell them and why does the work matter?

I normally separate the two words: Shariah and Audit.

Shariah tells us the criteria against which we are assessing the transaction, while audit provides the systematic process through which we obtain evidence and determine whether what happened complied with those criteria.

So, in simple terms, my work is to independently examine whether an Islamic financial institution actually conducts its business in accordance with the Shariah principles, standards and rulings it claims to follow.

A product may have received Shariah approval on paper, but Shariah audit asks: Was it actually executed that way?

That is why Shariah audit matters. Shariah compliance is not established by the name of a product; it is established by the substance and execution of the transaction.

Q3: Your research on the challenges of Shariah audit in Nigeria identified issues including unclear frameworks, limited infrastructure, shortage of skilled professionals and regulatory inconsistencies. Which is the most urgent challenge today?

I would say the most fundamental issue is the absence of a sufficiently comprehensive and standardised Shariah audit framework adapted to the Nigerian environment.

The other challenges are interconnected with this.

If there is no sufficiently detailed framework, institutions may interpret the scope of Shariah audit differently. One institution may have a well-resourced independent function, while elsewhere the responsibility may be combined with another function or assigned to very few people. Reporting lines, competencies, methodology and even the expected scope of work can consequently differ.

Nigeria already has an important regulatory foundation through the CBN, FRACE and institutional ACEs. The next stage, in my view, is greater standardisation of how Shariah audit itself should operate.

Q4: What would a Nigerian Shariah audit framework need to address that existing approaches may not fully capture?

It should not simply copy another jurisdiction’s framework. Nigeria has its own regulatory architecture, institutional realities and level of market development.

At a minimum, I believe it should clearly address independence, reporting lines, scope, methodology, competency requirements, interaction with the ACE and FRACE, treatment and escalation of Shariah non-compliance, reporting requirements and follow-up mechanisms.

It should also recognise that a Shariah auditor requires multidisciplinary competence.

Understanding classical Islamic commercial jurisprudence without understanding modern banking may create a gap. Equally, being an excellent conventional auditor without understanding Fiqh al-Mu’amalat creates another gap.

A competent Shariah auditor needs to understand Shariah, accounting, auditing, banking operations, risk, regulation and increasingly technology.

The objective should therefore be localisation without compromising internationally recognised standards such as those developed by AAOIFI.

Q5: Did your conversations with auditors, regulators and former regulatory officials reveal realities that deserve more industry attention?

One important lesson was that having a governance framework on paper does not automatically translate into effective Shariah governance in practice.

People, institutional culture and management commitment matter enormously.

You can have an excellent ACE, policies and product approvals, but if the operational teams do not understand the Shariah requirements or the control environment is weak, non-compliance can still occur.

Another important issue is resources. We sometimes underestimate how broad Shariah audit is. You are looking at financing transactions, treasury activities, investments, deposit products, profit distribution, contracts, digital channels, marketing materials, non-permissible income and many other areas.

Expecting a very small Shariah team to provide meaningful assurance over an increasingly sophisticated institution creates obvious limitations.

So, for me, strengthening Shariah governance is not only about issuing more regulations. It is also about people, competence, independence, resources and institutional commitment.

Q6: How does Shariah audit work in practice when you’re dealing with real products, transactions and business decisions?

This is where Shariah audit becomes particularly interesting because reality is rarely as neat as the product paper.

We start with the approved structure and the contracts, FRACE/CBN resolutions, requirements and guidelines, ACE resolutions, applicable AAOIFI standards, , policies and procedures and then examine what actually happened.

And sometimes the audit identifies something that nobody anticipated during product development. That is where professional judgement, consultation with the Shariah function and escalation to the ACE where necessary become important.

Our responsibility is not merely to confirm that documentation exists; it is also to establish whether the economic reality of the transaction conforms to its Shariah structure.

Q7: How do you balance commercial objectives with Shariah requirements?

I don’t necessarily see Shariah and commercial objectives as opposing forces.

A well structured Shariah compliant transaction should be commercially viable. The role of Shariah governance is not to prevent business but to establish the boundaries within which business can be conducted.

There will, however, be situations where the easiest or most profitable commercial option is not Shariah compliant. At that point, the question is not how to find terminology that makes the transaction acceptable. The question should be: Can we restructure it so that the commercial objective can still be achieved legitimately?

Sometimes the answer is yes. Sometimes the structure has to change significantly. And occasionally, the correct answer is that the transaction should not proceed.

For me, that is part of the value of Shariah governance. Innovation is encouraged, but innovation must remain within principles.

Q8: What needs to happen for the growth of Islamic finance in Nigeria to be sustainable?

We need to move beyond measuring development merely by the number of Islamic banks or products available.

Sustainable growth requires an ecosystem.

That means strong Islamic banks, but also a deeper Sukuk market, Takaful, Shariah-compliant asset management, investment funds, liquidity-management instruments, Islamic fintech and a stronger pipeline of competent professionals.

Shariah governance must develop alongside that ecosystem. As products become more sophisticated, the governance around them must also become more sophisticated.

We also need greater collaboration between regulators, financial institutions, academia, professional bodies and Shariah scholars.

And perhaps most importantly, we must preserve public confidence. Islamic finance ultimately rests heavily on trust. If customers believe a product is Shariah-compliant, the industry has a responsibility to ensure that this is true not only at approval but throughout the transaction lifecycle.

Q9: What opportunities and challenges does technology create for Shariah audit and governance?

Technology presents enormous opportunities.

Traditionally, audit has relied heavily on sampling. Technology and data analytics increasingly allow us to review much larger populations of transactions, identify exceptions automatically and potentially move towards more continuous Shariah monitoring.

Imagine a system capable of flagging an Ijarah where rental commenced before evidence of asset delivery, or identifying transactions posted to an inappropriate income ledger. That makes Shariah assurance more proactive.

But technology creates new risks too.

A product can be perfectly Shariah compliant in its documentation while the system configuration executes it differently. Automated workflows can replicate one control weakness across thousands of transactions very quickly.

AI also creates questions around governance, accountability and explainability.

This means the Shariah auditor of the future cannot be uncomfortable with technology. We do not all need to become programmers, but we need sufficient understanding of systems, data and digital processes to audit the environment in which Islamic finance increasingly operates.

Q10: For a young Nigerian interested in Islamic finance, where should they begin?

My first advice is: build a strong foundation before chasing titles.

Islamic finance is multidisciplinary. Whatever your original discipline is accounting, law, economics, banking, technology or Shariah, develop competence in that area, but then deliberately learn the other dimensions of Islamic finance.

Learn Fiqh al-Mu’amalat. Understand the major contracts not merely their definitions, but why they work the way they do.

Professional qualifications are valuable. AAOIFI qualifications, for example, can provide structure and international perspective. But don’t collect certificates without developing competence.

Read financial statements. Read actual transaction documents. Follow regulatory developments. Find mentors. Ask questions.

And don’t underestimate communication skills. You may understand Shariah perfectly, but if you cannot explain a complex issue clearly to a banker, regulator, auditor or customer, your impact will be limited.

Q11: What do you wish you had known when you were starting your journey?

When you are starting out, it is easy to look at people who are already established and feel that you are behind. What you often don’t see are the years of learning, mistakes, disappointments and persistence behind their journey.

One lesson I have learned is the importance of relationships and mentorship. Books, qualifications and training are important, but there are lessons that become clearer when you have people who have travelled the road to guide you.

I would therefore encourage anyone starting out to build competence, build character, build meaningful relationships and protect your integrity. Titles and positions may change, but these qualities remain valuable throughout your journey.

Above all, be steadfast in prayer, seek Allah’s help and focus your energy on what is beneficial. Not everything will happen according to your plans or timeline. Learn from every experience without becoming consumed by what could have been. Trust Allah’s decree, keep improving yourself and continue moving forward.

Ultimately, don’t merely aspire to be successful. Aspire to be useful, trustworthy and competent, while seeking Allah’s guidance and barakah in whatever you do.

Editor
Sodiq Idowu
Yours in Ethics

New institutions are emerging. New products are being developed. Conversations that did not exist five years ago are now happening in boardrooms, at community conferences, and on social media timelines. The numbers we have covered in previous editions confirms it, assets growing, participation rising, awareness expanding.

And yet.

Walk into any room of a hundred Nigerians and ask how many of them have ever made a Shariah-compliant investment, opened a non-interest account, or even considered switching their pension to Fund VI. The hands that go up will be few, sometimes none.

So there is a question worth sitting with this week not one we are going to answer for you, but one we genuinely want to hear your perspective on.

Why hasn’t Islamic finance reached more people?

Is it awareness? Most Nigerians simply do not know these products exist, or do not know enough about them to trust them.

Is it accessibility? The products exist but getting to them, understanding them, opening an account, making a first investment, is still harder than it should be.

Is it trust? Years of conventional banking habits are not overturned overnight, and not every institution has done the work to earn the confidence of a new kind of customer.

Is it regulation? The framework is developing but there are still gaps, in liquidity instruments, in product diversity, in cross-sector coordination, that limit what the industry can offer.

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Is it innovation? The technology layer that could bring Islamic finance to millions of Nigerians on their phones is still underdeveloped compared to what conventional fintech has already built.

Is it talent? There are not yet enough trained practitioners, writers, educators, and communicators who can carry this conversation to the people who need it most.

Or is it something else entirely something we have not named here?

We are asking because we genuinely want to know.

At Everything Ethical, we have our own perspectives. But before we tell you what we think, we want to hear from yours.

Drop your answer in the comments.

Reply to this email. Send us a message on Instagram or LinkedIn. Every response will be read.

Because over the coming weeks, we are taking this conversation somewhere specific.

We are going inside the ecosystem meeting the people building it, spotlighting the ideas shaping it, and asking the questions that do not always make it into the formal reports.

This is the beginning of that conversation.

We meet again next week.

Uwaymir Sherifdeen

Program Manager

Everything Ethical

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Lets Dive In

One question people often ask about Islamic banking is simple: How do Islamic banks actually make money?

For investors, the more important questions are different:

Can the model generate sustainable returns? Can it scale? How resilient is it? And can Islamic banks create value consistently for shareholders?

One way to answer these questions is to look at the books of Jaiz Bank, Nigeria’s pioneer full-fledged non-interest bank and, by market capitalisation, the largest listed Islamic bank in the country.

I dug through Jaiz Bank’s financials from 2015 to date, more than a decade of financial performance to understand what the numbers tell us about the business model.

And my conclusion is straightforward:

Jaiz Bank is an outlier in the Nigerian banking sector, and its performance suggests that Islamic banking is not merely viable in Nigeria; it can be a sustainable banking model.

Is the business actually profitable?

Jaiz Bank generated ₦103.03 billion in gross earnings in 2025FY, with half year 2026 printing ₦58.03 billion. Based on my projections, I expect gross earnings to reach approximately ₦124 billion in FY2026.

At first glance, these numbers look small compared with Nigeria’s banking giants who cross 1 trillion in their half year numbers, But banking profitability is not determined simply by how much revenue a bank generates but how much they keep.

Three metrics are particularly useful:

• ROE: How much profit the bank generates from shareholders’ equity.

• ROA: How effectively the bank generates profit from its asset base.

• Cost-to-income ratio: How much of every ₦100 earned is consumed by operating expenses.

And this is where Jaiz Bank becomes interesting.

Jaiz’s five-year average ROE of 28.31% suggests that the bank has consistently generated strong returns on shareholders’ capital. Consistently outperforming the average top 8 ROE of banks over the last 5 years.

The picture is also supported by its 2025 ROA of 2.55%, which compares favourably with several much larger conventional banks UBA at 1.3%, ETI at 1.9%, and Access Bank at 1.3%.

This is important because it challenges a common assumption:

A smaller bank does not necessarily mean a weaker banking business.

Jaiz may be smaller in absolute earnings, but the efficiency with which it deploys its capital and assets tells a different story.

The Financing Engine: Murabaha

A significant portion of Jaiz’s financing book is concentrated in Murabaha, which accounted for more than 70% of the financing portfolio, with a 2025 profit rate of approximately 26.07%. More importantly, the numbers suggest that the Islamic finance structure itself is not preventing the bank from generating competitive returns.

Jaiz’s H1 2026 cost-to-income ratio of 45.90% means that for every ₦100 the bank generates, approximately ₦45.90 goes toward operating expenses, leaving ₦54.10 before other relevant costs. That puts the bank among the more efficient players in the sector.

The Cost-of-Risk Advantage

Perhaps the most interesting finding from my analysis is Jaiz’s cost of risk.

Cost of risk measures the level of impairment expense relative to the financing book. In simple terms, it tells us how much the bank is having to set aside for potential credit losses.

Jaiz’s cost of risk has remained remarkably low — 0.57% in FY2025 and just 0.08% in FY2024.

That suggests a financing book with relatively strong credit quality.There are several possible explanations.The structure of Islamic financing may encourage greater linkage between financing and underlying economic activity Validating the risk sharing principles of IF. +

However, there is another side to this. Low credit losses can be a strength, but they can also reflect conservative lending. Jaiz reported a CAR of 27.01% in FY2025, significantly above the applicable regulatory benchmark, while yield on assets stood at 12.99%, compared with 14.46% in 2024.The bank therefore appears to have both strong capital buffers and a relatively healthy asset-generating capacity.

The bank’s capital position provides another layer of comfort. Jaiz reported a CAR of 27.01% in FY2025, significantly above the applicable regulatory benchmark, while yield on assets stood at 12.99%, compared with 14.46% in 2024.

The bank therefore appears to have both strong capital buffers and a relatively healthy asset-generating capacity.

This is therefore an area I would continue to monitor as the bank scales.

There is also an interesting point around impairment. The low COR could be that Jaiz is excessively cautious in originating financing, the quality of the book may remain strong at the expense of growth.

The auditors identified risk-weighted assets as a key audit matter in 2024, performed additional procedures and involved specialists in assessing the ECL calculations. Their conclusion was that the calculations were adequate.That gives me greater confidence that Jaiz’s unusually low cost of risk is not simply the result of an obvious accounting anomaly and does reduce concern of future spikes and it makes the current performance more credible.

Ethics as a Double-Edged Sword

But the Jaiz story is not without complications.

In 2025, the bank disclosed a ₦5.2 billion amount assessed by the CBN as non-permissible income, linked to interbank Mudarabah transactions. Jaiz had already paid approximately ₦866 million in 2025, with the balance expected to be remitted over the following five years, The amount is material.

It represents approximately 17.24% of FY2025 PAT, and this is where Islamic banking presents an interesting paradox.

The ethical and Shariah principles that differentiate Islamic finance can also impose financial costs when income is subsequently determined to be non-permissible.

This is not necessarily a weakness of Islamic banking but point to a gap in IF banking Liquidity management as this is an area that is still developing.

From an investor’s perspective, it matters. There is historical precedent.

In 2016, Jaiz completed the payment of approximately ₦657.8 million, representing 211.33% of PAT at the time, relating to pre-operation non-permissible income held under the doctrine of necessity as approved by CBN’s FRACE. The bank also paid approximately ₦86.9 million in interest earned on right-issue proceeds.

The lesson is that investors in Islamic financial institutions must consider not only conventional financial risks, but also Shariah and compliance risks.

I believe this distinction is important.

Can Islamic Banks Compete With Conventional Banks?

After going through a decade of Jaiz’s financial performance, my answer is: Yes!

The financing opportunities exist, the model generates income, the bank can produce strong returns on capital, the balance sheet can remain well capitalised and the cost of risk can remain relatively low.

The challenge is therefore less about whether Islamic banking works and more about how far it can scale.

Jaiz has shown that a non-interest bank can operate successfully within Nigeria’s financial system. The next question is whether the model can replicate this success at a much larger scale.

What Does This Mean For Investors?

There is one final piece of the puzzle: valuation.

Jaiz is currently trading at approximately 12x earnings, based on my calculations.

In isolation, that looks expensive. Investors are effectively paying about ₦12 for every ₦1 of earnings. This is substantially above the valuation multiples at which many Nigerian banks have historically traded 2-5 x

The premium becomes even more important when we consider that the share price has risen approximately 96% over the last 52 weeks.

The market is clearly pricing in something, and that something appears to be future growth and confidence in the business model.

But this creates a high bar for Jaiz. The bank cannot simply continue performing well.

It has to continue performing exceptionally well.

At its current valuation, investors are not just buying today’s earnings. They are paying for tomorrow’s growth. If earnings growth slows materially, the valuation could become difficult to justify.

That is perhaps the biggest risk in the Jaiz story as of today.

What Jaiz Bank Reveals about the Future of Islamic Banking

For me, the most important takeaway from analysing Jaiz is not that it is a good or bad stock, rather it is what the bank’s financial history tells us about Islamic banking itself.

For years, Islamic finance in Nigeria has often been viewed as a niche alternative to conventional banking, Jaiz’s numbers tell a more interesting story.

A bank built around non-interest principles can generate strong returns on equity, maintain healthy asset quality, operate efficiently and remain well capitalised.

That makes Jaiz something of an outlier in the Nigerian banking sector not because it is immune to the challenges facing other banks, but because it has demonstrated that a different banking model can produce competitive financial outcomes.

There are still questions around scale, growth, valuation, Shariah-compliance risks and the ability to attract a larger customer base.

But the fundamental question appears increasingly settled.

Islamic banking is viable in Nigeria.

The next chapter is about how big it can become.

Writer

Suleiman Sakariyah

Editor

Sodiq Idowu

Why your money can work for you, the right way

Let me tell you a small story before we dive in.

Last year, a friend walked up to me after he realized I work in an Investment Bank. He had just gotten his first real paycheck. He said, “MJ, I have some money sitting in my account doing absolutely nothing. People are telling me to buy stocks. But is the stock market not just gambling? Is it not haram?”

That question, that exact confusion, is why I started educating my friends and associates about ethical investment and, by extension, this newsletter. Because the truth is that when money just sits still in your account, it is losing value every single day.

Inflation is like a slow leak in a tire. You don’t notice it immediately, but check that tire a year later, and it is flat. Meanwhile, there is a whole world of legitimate, Shariah-compliant wealth-building happening through real ownership in real businesses, and most people are sitting on the sidelines simply because nobody ever explained it to them in plain language.

So today, we are fixing that. Grab a cup of tea (or zobo), and let’s walk through this together.

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What Exactly Is a Stock?

Imagine your friend Hassan opens a small restaurant. It is doing well, but he wants to expand and open three more branches. He needs capital, so he says, “I will sell 10% of my restaurant to anyone willing to invest.” You give him money, and in exchange, you now own 10% of that restaurant.

That is it. That is a stock.

A stock (or “share”) simply means you own a small slice of a functioning business. When that business grows- more customers, more profit, and more branches- your slice becomes more valuable. When the business struggles, your slice loses value too. You are not betting on a number going up or down. You are literally a part-owner of a real enterprise, a business that makes shoes, grows food, sells telecom data, builds hospitals, or ships cargo across oceans. This is precisely why stock ownership, done correctly, sits comfortably within Islamic commercial principles. It is rooted in musharakah (partnership), shared ownership, shared risk, and shared reward.

This is the opposite of gambling. Gambling creates wealth for one party purely by taking it from another, with nothing produced in between. Owning shares in a real business is you becoming a partner in genuine economic activity.

So Why Doesn’t the Stock Market Feel “Islamic” to Some People?

Great question, and an honest one.

The confusion comes from the fact that not every company on the stock exchange runs its business the halal way. Some companies:

• Deal directly in alcohol, gambling, pork production, or conventional insurance

• Borrow heavily on interest (riba) to fund their operations

• Keep the bulk of their money sitting in interest-bearing accounts

Buying shares in those companies would indeed be a problem, because you would be a partner in their impermissible income.

But, and this is the beautiful part, the solution is not to abandon stock investing altogether. The solution is screening. Just like you’d check the ingredients on a food pack before buying it, Shariah-conscious investors check a company’s “financial ingredients” before buying its shares.

The Simple Shariah Screening Checklist

Scholars and Islamic finance boards (like AAOIFI) generally use two layers of screening:

A. Business Activity Screen: The company’s core business must not be in a prohibited sector: no alcohol, gambling, conventional banking/insurance, pork, adult entertainment, or weapons manufacturing for aggression.

B. Financial Ratio Screen: Even a “clean” business (say, a telecom or manufacturing company) is checked further:

• Interest-bearing debt should typically be less than 30-33% of total assets

• Cash and interest-bearing investments should typically be less than 30-33% of total assets

• Interest-based income (impure income) should typically be less than 5% of total revenue

The good news? You don’t have to run these calculations by hand. Applications like Toyyib by Halcore do this screening for you, showing you a clear “halal” or “not halal” status for stocks in the Nigerian Stock Exchange.

But What About the 5% “Impure” Income?

This is something many beginners don’t know, and it actually makes the whole system beautifully practical.

Let’s say you own shares in a well-screened, otherwise-halal company, but a small sliver of their income (say, 2%) comes from a bank deposit that earned interest. Islamic scholars don’t say “abandon the investment.” Instead, they say: purify it.

This means you calculate that small percentage of your investment income and give it away as charity (not counted as your zakat, but as purification, separate and additional). It is similar to how a trader in the past might discover a small forbidden item accidentally mixed into a large shipment of otherwise permissible goods; you don’t burn the whole shipment; you simply remove and dispose of the impure portion responsibly.

This single principle, screening plus purification, is what allows millions of Muslims globally to participate confidently in the stock market without compromising their faith.

Now Let’s Talk Strategy: How Do You Actually Start?

Let’s use another analogy. Think about farming.

A farmer does not dump all his seeds into one single spot of soil, hoping for a miracle harvest. He spreads seeds across different portions of land, because if pests attack one portion, or the soil there is poor, the rest of the farm still produces.

This is diversification, one of the oldest wisdom principles in wealth-building, echoed even in the timeless saying, “don’t put all your eggs in one basket.” This is how a beginner should approach it, step-by-step:

Step 1: Get Your Foundation Right First

Before you invest a single naira, make sure you have:

• No interest-based (riba) debt hanging over you

• An emergency fund (3-6 months of expenses) sitting safely, untouched

• Clear intention Investing is a long-term journey, not a get-rich-quick scheme.

Step 2: Start Small, Start Now You don’t need millions to start.

Many halal investment platforms allow you to begin with small amounts. Think of it like planting one tree today rather than waiting until you can plant an entire forest. The tree you plant today will be taller in ten years than the “perfect forest” you keep postponing.

Step 3: Understand the Two Ways People Make Money From Stocks

a) Capital appreciation: You buy a share at ₦50, the company grows, and five years later that share is worth ₦150. You’ve made ₦100 in value growth.

b) Dividends: Some companies share part of their profit directly with shareholders, usually once or twice a year. It is like Musa’s restaurant, from our earlier story, sharing a slice of its monthly profit with everyone who owns a piece of it, even if you never lift a spoon in that kitchen.

Step 4: Diversify Across Sectors

Don’t buy only telecom stocks, or only agriculture stocks. Spread across sectors like consumer goods, healthcare, technology, or industrials, the same way our farmer spreads his seeds. If one sector has a bad season, your whole harvest is not ruined.

Step 5: Practice Patience: The Market Rewards the Patient, Not the Panicked

The stock market moves up and down constantly, this is normal, and you should not be scared. A beginner who panics and sells every time there is a dip is like a sailor who jumps off the boat the moment he sees a wave, only to drown in water he could have simply ridden out.

Historically, despite wars, pandemics, and crashes, markets that represent real productive economies have trended upward over long periods, because human beings keep innovating, building, producing, and trading. That is the engine behind long-term stock growth.

Step 6: Use Cost Averaging

Instead of trying to “time the market” (guessing the perfect day to buy), commit to investing a fixed amount regularly, monthly, for example, regardless of whether prices are up or down. Some months you’ll buy at a “high” price, some months at a “low” price, and over time it averages out beautifully. This removes emotion and guesswork from the equation, and it is how disciplined people build extraordinary wealth over decades.

Common Mistakes Beginners Make (Avoid These)

Mistake 1: Investing money you will need soon. Never invest money you will need within the next 1-2 years (rent, school fees, business capital). Stocks fluctuate, and you don’t want to be forced to sell at a loss because you needed the cash urgently.

Mistake 2: Chasing hype. If everyone on social media is suddenly hyping one stock, be cautious. Real investing is boring and steady. As the saying goes, the stock market is designed to transfer money from the impatient to the patient.

Mistake 3: Skipping the Shariah screen. Excitement about “high returns” sometimes tempts people to skip due diligence on whether a company is actually halal. Always check first and invest second.

Mistake 4: Not diversifying. Putting all your capital into one stock because “someone said it’s going to blow up” is speculation dressed up as investing. Real investing spreads risk.

Mistake 5: Checking your portfolio every single day. This creates unnecessary anxiety. A tree doesn’t grow faster because you stare at it daily. Set a schedule, maybe monthly or quarterly reviews, and let compound growth do its work.

Brokerage and Investment Apps to Get You Started

Now let’s talk tools, because knowledge without action is like a farmer who studies soil science for years but never actually plants anything. Below are some of the mobile apps commonly used by Nigerians today, each with its own personality, so you can pick the one that fits how you want to invest.

• Trove

• Bamboo

• Cowrywise

• Afrinvestor

• InvestNaija

Always confirm any platform is SEC-registered before committing money, and start small.

In Closing

You don’t need to be a finance expert to start. You just need to:

1. Understand what you are buying (real ownership in real businesses)

2. Screen for Shariah compliance

3. Diversify like a wise farmer

4. Start small and stay consistent

5. Be patient. Very, very patient

That friend I mentioned at the beginning? He started with a small monthly amount into Shariah-compliant stocks. Today, just after a year, he is on track to build generational wealth.

You can do the same.

Until next time, invest wisely, invest ethically, and may Allah bless the wealth you build and the intentions behind it.

Written by
Abdulbasit Abdulsalaam

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Every Friday, at 7pm we’ll continue exploring the ideas, people, and opportunities shaping the future of islamic finance.

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Background

Every year, the Islamic Financial Services Board; an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry released what is arguably the most authoritative health check on the entire industry. It is the kind of report that sits on the desks of regulators, central bank governors, and fund managers from Kuala Lumpur to Lagos. Most people never read it. And I think the findings deserve more attention here in Nigeria than they are currently getting.

The IFSB’s 2026 Islamic Financial Services Industry Stability Report was released on the 26th May, 2026 and it carries both an encouraging headline and a sobering warning buried underneath it. Understanding both and what they mean specifically for us, is exactly what this edition is about.

The Headline: $4.4 Trillion and Growing

Global Islamic financial assets reached US$4.4 trillion in 2025. That is a 13.4% year-on-year growth rate, and it means the industry has added approximately US$1.7 trillion in total assets since 2020 alone.

To put that in context: five years ago, Islamic finance was widely described as a “niche alternative” to conventional finance. Today, the IFSB describes it as a “systemically important component of the international financial architecture.” Those are not the same sentence. That is a fundamental repositioning of how the global financial system sees this industry.

The drivers of growth are familiar to regular readers. Islamic banking remains the backbone, accounting for 72% of total industry assets, over US$2.7 trillion. Financing grew by more than 17% year-on-year in 2025, while deposits expanded by nearly 9%, buoyed by strong momentum in the Gulf Cooperation Council, Southeast Asia, and a fast-rising cluster of African markets.

This edition of the newsletter is sponsored by Toyyib. If you’d like to showcase your product or brand to our community of ethical-minded readers, we’d love to hear from you. Contact: readeverythingethical@gmail.com

Africa Is Moving — and Faster Than Most People Realise

One of the most striking findings in the report is the geographical rebalancing now underway within global Islamic finance. Several African jurisdictions posted Islamic finance growth rates exceeding 20% in 2025, outpacing the global average by a significant margin.

This is not a coincidence. It reflects the size of Africa’s Muslim population, the scale of its unbanked and underbanked communities, and the growing recognition among regulators across the continent that non-interest financial systems are not a religious accommodation, they are a structural tool for financial inclusion.

Tanzania, Kenya, Uganda, and Rwanda all recorded meaningful progress in their Islamic capital market development in the past year. Sovereign Sukuk momentum in East Africa is building. And here in West Africa, Nigeria, home to the largest Muslim population in Sub-Saharan Africa, sits at the centre of a conversation it did not start but increasingly cannot afford to lose.

Across Nigeria, you may be facing the same challenge as millions of other Muslim investors — wanting to grow your wealth while staying true to your faith. You may be wondering: Are the stocks I own truly halal? What should I do with my dividends? How much Zakah do I owe on my portfolio? If you’ve been asking these questions, you’re not alone. And you won’t have to find the answers alone.

Toyyib is being built for you — and for every Nigerian investor who refuses to compromise between faith and financial growth.

Join the Waitlist

What the Report Says About Markets Like Nigeria’s

The IFSB 2026 report does not single out Nigeria by name throughout, but its structural observations map almost perfectly onto where Nigeria’s Islamic finance ecosystem currently stands.

The report identifies three persistent vulnerabilities in markets at Nigeria’s stage of development. The first is limited Shariah-compliant liquidity instruments. In plain terms: Islamic banks and fund managers often struggle to park short-term funds in instruments that are both liquid and compliant. The conventional money market has deep liquidity tools, treasury bills, commercial paper, overnight lending facilities. The Islamic equivalent remains underdeveloped in most emerging markets, including Nigeria. This limits how efficiently non-interest banks can manage their balance sheets and constrains their ability to offer competitive returns.

The second is overreliance on sovereign Sukuk. Nigeria has made real progress here, the Federal Government’s Sovereign Sukuk programme and the recent Kogi State N50 billion issuance we covered earlier this year are genuine achievements. But the report notes that when a market’s Sukuk activity is dominated by government issuance, it signals that the corporate sector has not yet embraced the instrument at scale. Non-sovereign Sukuk issuance globally rose by 17% year-on-year in the first five months of 2026. Nigeria’s corporate Sukuk pipeline remains thin by comparison.

The third is insufficient diversification beyond banking. When we talk about Everything Ethical and what we are trying to document, we spend a lot of time on the banks and rightly so, because Jaiz Bank, TAJBank, Lotus Bank, and The Alternative Bank are the most visible expressions of Islamic finance in everyday Nigerian life. But the IFSB’s stability research consistently shows that markets that concentrate in banking without developing deep capital markets, takaful ecosystems, and Islamic fund management struggle to maintain long-term resilience. Banking-led growth, the report notes directly, “may not be sufficient to ensure long-term financial resilience” on its own.

The Opportunities

To be clear: the report is not a warning letter. It is a compass. And for Nigeria specifically, it points toward several concrete opportunities.

Expand Islamic liquidity management instruments. The CBN has the authority and the regulatory infrastructure to develop Shariah-compliant short-term instruments that would give non-interest banks the tools to manage liquidity more efficiently. This would lower operational costs, improve competitiveness with conventional banks, and deepen the overall market.

Encourage corporate Sukuk issuance. The infrastructure exists — the SEC licensing framework, the Shariah advisory requirements, the investor base through halal fund managers. What is needed is a concerted effort to bring mid-to-large Nigerian corporates into the conversation. A well-structured corporate Sukuk from a Nigerian manufacturer or infrastructure company would be a meaningful signal of market maturity.

Deepen Islamic fintech adoption. The global Islamic fintech market is projected to reach US$179 billion by the end of 2026. AI-driven Shariah screening, digital Sukuk platforms, and mobile-first halal investment products are already reshaping how people access Islamic finance in Malaysia, the UAE, and the UK. Nigeria has the mobile internet base, the young demographic, and the institutional foundations to move fast in this space. The question is whether the sector moves with the urgency the opportunity demands.

Key Takeaway

The IFSB 2026 Stability Report confirms what many of us in this space have felt for a while: Islamic finance is no longer asking for a seat at the global table. It has pulled up a chair, and the conversation has moved on to what comes next.

For Nigeria, the moment is genuinely promising. We have the population, the regulatory frameworks, the institutions, and the growing appetite. What the report reminds us is that promise and performance are not the same thing. The structural gaps in liquidity instruments, in corporate Sukuk, in fintech adoption, in financial literacy, are not insurmountable. But they require deliberate, coordinated attention from regulators, institutions, innovators, and platforms like this one.

Until we meet again next week.

Written by Uwaymir Sherifdeeen
Program Manager, Everything Ethical

Edited by: Sodiq Idowu

If you missed the last edition, catch up here. If this was forwarded to you and you want to make sure you never miss one, subscribe here for free.

This week’s edition is a special one, and I want you to settle in before you start reading. It was written by my friend, Abdulbasit, whose tone and perspective you are going to enjoy. He will be a regular feature here, and if this edition is anything to go by, you are in for something consistently good. Take your time. This one is worth it.

Ethical Investment Product in Nigeria

If you are reading this, you are likely part of a growing movement of Nigerians who believe that financial success should not come at the cost of one's values.

For the Islamic finance enthusiast, the question is simple but profound: How can my money work for me without violating my values? The good news?

In 2026, the Nigerian ethical investment landscape is more vibrant than ever. We have moved past the days of "burying cash under the mattress". From infrastructure to tech-driven products, your "Halal Portfolio" can now be as diverse as a Lagos market on a Saturday morning.

Let’s dive into the top ethical products currently making waves.

Federal Government Sukuk

Think of Sukuk not as a "loan" to the government but as owning a piece of the pie. When you buy Sukuk, you are an owner of a specific project, like the construction of the Loko-Oweto Bridge or the expansion of major highways.

Nigeria issued its eighth sovereign sukuk in May 2025, with the issuance oversubscribed by seven times, indicating high demand. In Sukuk, instead of earning interest, you earn a "rental" or profit share from the asset. It is backed by the Federal Government, making it one of the safest investments in the country.

Halal Mutual Funds

This is a diversified portfolio investment that includes a mix of equities, Sukuk, and other permissible financial instruments structured around trade and asset-backed transactions.

The key difference is that the screening and decision-making process is handled by professionals, guided by a Shari’ah advisory board. This means that instead of individually verifying each investment, you are relying on a system that has already been designed to ensure compliance across all its holdings. Some of these funds include the ARM Halal Balanced Fund, Stanbic IBTC Shari’ah Fixed Income Fund, Lotus Halal Investment Fund, and Afrinvest Halal Funds. These managers use a strict "Shari’ah Filter" to ensure no money goes into alcohol, gambling, or interest-based companies.

Shari'ah-Compliant Stocks

Shari’ah-compliant stocks are often misunderstood as simply “stocks of good companies", but the reality is more disciplined than that. It is not enough for a company to avoid obvious prohibited industries like alcohol or gambling; it must also pass deeper financial screenings. A company might be involved in a permissible business and still fail Shari’ah compliance if it relies too heavily on interest-based debt or earns a significant portion of its income from non-compliant sources. What this means in practice is that investing in halal stocks requires a level of scrutiny that goes beyond surface-level judgement.

Key Takeaway

If there is one thing to hold on to, it is that ethical investing in Nigeria is no longer a limitation; it is a choice. You are no longer confined to a single path or forced to compromise between faith and finance. Whether it is Sukuk for stability, mutual funds for diversification, or carefully screened stocks for growth, the tools now exist for you to build a portfolio that reflects both your financial goals and your values. But access alone is not enough. The real edge lies in intentionality. Understanding what you are investing in, why it aligns with your principles, your risk appetite, and how it fits into your long-term vision.

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Today we will focus on helping you understand the key reason why people choose ethical investment with a focus on shariah compliant/halal investing.

Introduction

In the last edition of the Halal Money Series, I explained ethical investing as an investment strategy where the investor’s ethical values which can be moral, religious, or social are the primary drivers, along with getting a decent return, and also highlighted the various types of ethical investing which include ESG, faith based, impact and social responsible investing.

When it comes to ethical investing, there's no one-size-fits-all approach. Everyone has their unique set of criteria, strategies, and principles that they abide by to steer their financial journey. One of the ethical investment strategy gaining momentum is Halal investing. This week, we will explore the top benefits of this investment approach, revealing its potential not just as a faith-based strategy, but as a viable and prudent method for investors.

Lets Reflect a Bit….

If you have ever wondered where your money goes when you deposit it in a bank, buy a stock, or invest in a fund, halal investing starts with exactly that question. It is not simply a religious checkbox. It is a framework that asks a more fundamental question before any investment decision: is what I am putting my money into actually doing good in the world?

For many Nigerians, Muslim and non-Muslim alike, that question is becoming increasingly important, and the global data is beginning to reflect it.

What Halal Investing Actually Means

At its core, halal investing means putting your money only into businesses, assets, and financial instruments that comply with Islamic principles. But let us be specific about what that means in practice, because it goes far beyond simply avoiding gambling or alcohol.

Halal investing operates on some foundational rules:

Zero riba (interest). In Islamic finance, charging or earning interest on money is prohibited. The reasoning is both moral and economic, interest creates wealth from money itself, without any real productive activity, and historically concentrates wealth in the hands of those who already have it. Instead, halal investments generate returns through real economic activity: profit sharing, asset leasing, or equity participation in actual businesses.

No gharar (excessive uncertainty or deception). Halal investing prohibits highly speculative instruments, excessive leverage, or ambiguous contract terms designed to obscure risk. Contracts must be clear, fair, and transparent.

No investment in haram industries. Your money cannot be placed in companies whose primary business involves alcohol, gambling, tobacco, weapons manufacturing, adult entertainment, or conventional interest-based finance. This is the business screening layer, every halal fund or portfolio runs its investments through this filter before anything else.

Profit and loss sharing. Instead of a guaranteed interest return regardless of whether the underlying business succeeds, halal investing ties your return to the actual performance of an asset or business. The risk is shared. If the business profits, you profit. If it does not, you carry a proportionate share of that outcome.

Why People Are Choosing It — Beyond Religion

Here is where the conversation gets interesting, because the fastest growing segment of halal investors globally is people choosing it for reasons beyond religious obligation.

It performs. This is the fact that consistently surprises people encountering halal investing for the first time. Because halal-compliant funds exclude highly indebted companies and avoid leverage-heavy sectors, they tend to hold companies with stronger balance sheets.

It is ethical by design. Shariah-compliant investing shares significant overlap with ESG (Environmental, Social, and Governance) investing as we have explained previously, a framework that has attracted trillions in capital from non-Muslim investors worldwide. Both frameworks screen out harmful industries. Both prioritise transparency and fairness. Both discourage excessive speculation. The difference is that halal investing has had this ethical framework embedded since its foundation, not added as a marketing layer.

It promotes inclusion. By prohibiting exploitative interest and requiring transparent, asset-backed transactions, Islamic finance is structurally designed to serve people who have historically been excluded from conventional financial systems.

What Halal Investing Is Not

Given how new this is for many Nigerian investors, it is worth clearing up some common misconceptions.

It is not only for Muslims. The ethical screening principles, no alcohol, no gambling, no deceptive contracts, no excessive speculation, profit-and-loss sharing apply universally. Non-Muslim investors globally are choosing halal investment products for their performance and ethical characteristics, not for religious reasons. In Malaysia, a significant portion of halal fund investors are non-Muslim.

Share

It is not charity. Returns are competitive. Halal funds generate real profits. The difference is in the mechanism, returns come from productive economic activity, not interest accumulation.

It is not more complex than conventional investing. In practice, for a retail investor, halal investing in Nigeria is as simple as investing a minimum of ₦10,000 in an SEC-approved halal fund through a digital platform like Cowrywise. The complexity sits with the fund managers and Shariah advisory boards, your job is simply to choose a certified, regulated product.

Key Takeaways

If you’re new to investing, the key takeaway from this edition is that halal investing offers a practical and credible pathway to building wealth without compromising ethical values. Shariah-compliant investments have demonstrated strong performance over time, showing that ethical principles do not require sacrificing returns. Getting started is also more accessible than many people assume, with some SEC-approved halal funds allowing entry with as little as ₦10,000.

Transparency is a core feature of these investments, as halal funds are meant to disclose their portfolios and provide Shariah compliance certifications so investors can clearly see where their money is going. Importantly, Nigeria’s halal finance ecosystem operates within a regulated framework overseen by institutions like the FRACE by Central Bank and the SEC, making it a formal and structured investment space. While rooted in Islamic financial principles, halal investing is not limited to Muslims; anyone interested in ethical investing, transparent contracts, and asset-backed opportunities can find value in the framework.

With the global Islamic funds market growing rapidly and approaching $200 billion in assets under management, Nigeria is well positioned to benefit from this expanding sector, making early financial literacy in this space a strategic advantage. Let me know if this article was in any way helpful in understanding halal investing through the comment section, and also dont forget to like and subscribe.

We meet again next week.

Yours in Ethics

Sodiq Idowu

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Last week I wrote on the CBNs approval of the Bank of Industry entry into the Non-Interest banking space.

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Before we dive into this week’s edition, let me do a quick check-in. When you first heard about the Federal Government of Nigeria’s launch of the National Halal Economy Strategy, what came to mind? Did you see it as a religious ritual, or as a global gold standard, an opportunity to strengthen food safety, build ethical supply chains, and unlock a new pathway for economic diversification?

I’d love to hear your initial thoughts before reading today’s article, and your perspective after engaging with it. Let’s get into it.

The Controversies Around the Halal Economy Strategy Launch

It is of no surprise that the original date set for the formal inauguration of the Nigeria National Halal Economy Initiative was Monday, October 27, 2025; however, it was postponed, as those who followed the news closely would recall.

The launch was abruptly called off just as stakeholders were preparing to gather at the State House Banquet Hall. What we believe was the primary reasons for the postponement was pushback from various groups and religious leaders of other faiths, who expressed concerns that the initiative was a step toward “Islamising” the Nigerian economy. Social media feeds were filled with comments about Islamising the country, which wrongly captured the true essence of what the halal economy stands for.

Another reason that drove the postponement was the need to refine the narrative. The delay from October 2025 also served as a means for the government to pivot the conversation, shifting the focus away from “religious compliance” toward global quality standards, export diversification, and ethical consumerism.

This misunderstanding, though understandable given Nigeria’s multi-faith context, stems largely from a misperception of what the halal economy truly represents

Understanding a National Halal Economy Strategy

In simple terms, the halal economy refers to an economic system where products, services, and financial activities are produced, delivered, and regulated in line with Islamic (Shariah) principles. It goes beyond food to include finance, manufacturing, logistics, tourism, pharmaceuticals, cosmetics, and other services—all guided by ethical, transparent, and socially responsible practices.

At a national level, a halal economy policy provides a structured framework for regulating and promoting halal-compliant activities across the value chain, from production and processing to distribution and consumption. Such a policy enables countries to tap into the rapidly growing global halal market, estimated to reach $7 trillion by 2030, while driving sustainable economic growth.

In practice, a well-designed halal economy framework typically focuses on clear regulation and certification standards to ensure credibility and consumer trust; financial incentives and halal-compliant financing to attract investment and support industry growth; and infrastructure development that enables efficient halal production, processing, and logistics—similar to what has been achieved through instruments such as sukuk. It also aims to strengthen halal trade and improve access to global markets, among other objectives.

Ultimately, the goal of the halal economy is to boost GDP, create jobs, attract investment, promote inclusivity, and position a country competitively in the global halal market, while ensuring that Muslim consumers can participate fully in the economy without compromising their values

Nigeria Moves to Capture a Share of the Global Halal Market

On 5 February 2026, Nigeria officially launched the previously postponed National Halal Economy Strategy, aimed at positioning the country to tap into the $7.7 trillion global halal market and diversify its economy. The move which was referenced to signal Nigeria’s readiness to join the global race for a significant share of the halal economy already embraced by several leading nations.

According to the Government, Nigeria’s strategy targets multiple sectors, including halal food production, agriculture, pharmaceuticals, cosmetics, logistics, tourism, and ethical (non-interest) finance. By creating a coordinated national framework, the government aims to improve standards, boost exports, attract foreign investment, and unlock new growth opportunities for local businesses.

The strategy is expected to contribute about $1.5 billion to Nigeria’s GDP by 2027, while creating jobs and strengthening value chains across key industries. It also aligns with Nigeria’s broader economic goals of reducing dependence on oil revenues and promoting inclusive growth that accommodates ethical and faith-based consumer preferences.

Importantly, the initiative emphasises discipline, coordination, and effective implementation, recognising that policy success will depend on strong institutions, private-sector participation, and global partnerships. If well executed, the halal economy strategy could enhance Nigeria’s global competitiveness, expand non-oil exports, and position the country as a leading halal hub in Africa.

Key Takeaway

With the launch of the National Halal Economy Strategy, Nigeria is essentially playing catch-up. Despite its large population and production capacity, the country currently accounts for less than 0.2% of global halal exports. Much of the criticism surrounding the strategy—often framed as an attempt at “Islamisation”—misses the bigger picture. Rather than viewing the initiative through a purely religious lens, it is more useful to recognise the significant economic opportunity it presents.

This is best understood as an upgrade, not an invasion. Halal certification is comparable to internationally recognised standards such as ISO certifications could be seen as a technical quality-assurance framework. Nigeria is not being asked to change what it produces, but to improve how it produces. By meeting halal standards, Nigerian products become eligible for export to over 50 additional markets that are currently inaccessible.

Importantly, global leadership in halal exports is not limited to members of the Organisation of Islamic Cooperation (OIC). Countries such as Brazil and Thailand—both non-Muslim-majority nations—are among the world’s leading halal exporters, demonstrating that halal is as much about trade standards and market access as it is about faith.

Ultimately, the success of Nigeria’s halal strategy will depend on execution: the establishment of credible standards, access to Shariah-compliant financing, strong governance structures, and active private-sector participation. If implemented effectively, Nigeria can position itself not merely as a large consumer market, but as a trusted halal production and export hub for Africa and the global market.

We meet again next week.

Yours in Ethics

Sodiq Idowu

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Welcome to another edition of our weekly newsletter. Earlier this week, we read the announcement that the Central Bank of Nigeria (CBN) approved the Bank of Industry (BOI) to operate a non-interest banking window. This week, we will explore what this approval means for Nigeria’s financial landscape.

Understanding Development Finance Institutions (DFIs)

To better understand this strategic milestone by the Bank of Industry (BOI), it is important to first understand what a Development Finance Institution (DFI) is all about.

According to the Central Bank of Nigeria (CBN), Development Finance Institution is a specialised financial institution established with specific mandate to develop and promote key sectors of the economy considered to be of strategic importance to the overall socio-economic development objectives of the country which is Nigeria in context. DFI primary objectives typically include funding MSMEs to stimulate economic development, fostering the growth of sustainable businesses, creating jobs, reducing poverty, and improving the quality of life in comparison to other financial institutions whose primary goal are majorly profit driven in practise.

In Nigeria, Development Finance Institutions operate under the regulatory and supervisory framework of the CBN. The Bank of Industry Limited (BOI) is Nigeria’s oldest and largest DFI, and one of the most successful, alongside institutions such as the Bank of Agriculture and the Development Bank of Nigeria. BOI plays a central role in transforming Nigeria’s industrial sector by providing financial and advisory support for the establishment of large, medium, and small enterprises, as well as the expansion, diversification, rehabilitation, and modernisation of existing businesses.

BOIs Entry into the Non-Interest Banking Space

Earlier this week, it was disclosed that Nigeria’s Bank of Industry (BOI) has received regulatory approval from the Central Bank of Nigeria (CBN) to operate a Non-Interest Banking (NIB) window. This development is, without a doubt, a significant milestone in the Bank’s growth and long-term development agenda.

This approval enables BOI to commence non-interest banking operations, positioning the Bank to further advance Nigeria’s sustainable and inclusive industrial development through tailored financial solutions for underserved and high-impact business segments.

In a country like Nigeria, where private capital is limited, infrastructure gaps are significant, and SMEs continue to struggle with access to finance, ethical and faith-conscious individuals and businesses often find it difficult to access financing structures that comply with Shariah principles. With this approval, BOI is now able to serve this segment more effectively.

What this means in practice is that BOI can offer financing solutions that do not rely on conventional interest charges. Instead, the Bank will deploy ethical, asset-backed, and risk-sharing structures that are characteristic of Islamic finance systems, thereby broadening access to capital while aligning with inclusive and values-based financing principles. What to expect;

1. Expanded Financing Toolkit- BoI can now provide non-interest, asset-backed financing such as Murabaha, Ijarah, and profit-sharing type structures to businesses that avoid conventional interest-bearing loans for religious or ethical reasons.

2. Focus on Real Economy & MSMEs- This move will help BoI go deeper into underserved segments of Nigeria’s economy, especially micro, small and medium enterprises (MSMEs), agribusinesses, manufacturers and faith-sensitive enterprises that are often excluded from conventional credit channels.

3. Inclusive and Ethical Finance - Non-interest banking aligns with principles like risk-sharing and asset-based financing instead of interest (riba), which can make finance more equitable or culturally acceptable for a portion of the population.

4. Regulatory Confidence - CBN’s approval signals confidence in BoI’s governance and risk management and reflects broader regulatory support for financial market diversification.

Final Thoughts

The Bank of Industry has long been one of Nigeria’s foremost development finance institution, with a mandate centered on supporting growth across various sectors, including Agro and Food Processing, Creative Industries, Engineering and Technology, Healthcare and Petrochemicals, Oil and Gas, Renewable Energy, and Solid Minerals,. The introduction of a non-interest banking window represents more than just an expansion in financing option, it signals a strategic evolution. By integrating alternative, asset-backed finance into its products, BOI is embedding ethical and partnership-based financing into national development strategy.

As we know, Non-interest banking is not new in Nigeria, institutions such as Jaiz Lotus Bank and TAJBank already operate within this space. However, BOI’s entry is different. As a development finance institution, its participation could reshape how project finance and industrial lending are structured, setting precedents for risk-sharing, asset-backed models, and impact-driven financing across the real economy.

In essence, BOI’s move positions the bank to accelerate financial Inclusion, reaching the unserved Non Interest Banking-compliant segment of the nation, and also as a credible pillar within Nigeria’s broader industrial and development financing landscape.

We meet again next week.

Yours in Ethics

Sodiq Idowu

If you missed Friday’s edition, we discussed Kogi States plan to issue 50billion Sukuk to fund infrastructure project, catch up here. If this newsletter was forwarded to you, subscribe here for free:

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Concept of Investing

Many individuals with a steady flow of income, whether from a business or a salary often keep their money in a savings accounts. These may be with Islamic banks, conventional banks, or popular digital banking platforms such as Kuda, Opay, etc. This is where the idea of investing becomes necessary, especially in a country like Nigeria, to beat inflation.

Inflation quietly reduces the value of your money over time. It is the gradual loss of purchasing power, reflected in a rise in the prices of goods and services. In simple terms, inflation occurs when the prices of items such as food, transportation, rent, fuel, school fees, and other essentials increase something that is a daily reality for many Nigerians.

If your money is just sitting in your savings account, it steadily loses purchasing power. What ₦100,000 can buy today will buy much less in a few years. This is why investing should not be seen as an option, but rather as a key skill for financial survival.

In simple terms, investing means putting your money into something today so it can grow and give you more money in the future. Instead of keeping all your funds in a savings account, you invest in things like shares, property, or mutual funds, with the expectation that the value will increase or that they will generate income over time.

Ethical Investing Explained

Ethical investing can be seen as an investment strategy where an investors ethical values, which may be moral, religious, or social are the primary drivers, alongside the goal of earning decent returns. Ethical investing does not mean giving up returns as many might perceive it to be. The objective remains to achieve returns, but without compromising personal, religious, or social values.

Ethical investing goes beyond simply putting funds into any investment, especially in this era marked by a rise in suspicious and illegal investment schemes. As a result, many individuals who want to invest are increasingly insisting that the companies they invest in have real impact whether through direct economic contributions, social change, or broader societal value.

An ethically conscious investor, for example, may choose not to invest in a betting company. Why? Betting typically involves wealth transfer rather than wealth creation. It largely moves money from individuals often low-income earners to operators, instead of generating productive economic value, and it can also reduce overall productivity.

Ethical investing is for investors who want their money to support noble causes. For instance, if an investor believes that tobacco is harmful to health, they would avoid companies that produce tobacco or hold investments in tobacco-manufacturing firms.

Common Types of Ethical Investing

1. Environmental, Social and Governance: ESG investment strategies focuses on ownership in businesses that follow good corporate, social and environmental practices. ESG funds considers the potential effects that environmental, social and governance factors may have on a company’s performance when making investment decisions.

2. Impact Investing: Impact investing is often used to describe an investment strategy where ethical improvements or positive results for the community and environment take precedence over fund performance or financial returns. Examples of this include investing in non-profits or businesses producing or using clean technology.

3. Socially Responsible Investing: Socially responsible investing means avoiding investments in companies or industries that harm society or the environment. It focuses on staying away from businesses that promote addiction, violence, or environmental damage, or that go against social justice and sustainability.
   That is why SRI funds do not invest in industries such as gambling, guns and ammunition, tobacco, alcohol etc.

4. Faith-Based Investing: Faith-Based Investing is an investment approach in which financial decisions are guided by the moral, ethical, and religious principles of a particular faith, alongside the objective of generating competitive returns. Under this approach, capital is often allocated to investments that align with faith-based values, while activities considered unethical or impermissible are deliberately avoided.

Shariah Based Investing

You might start to wonder what category shariah-based or halal investing falls under and what are the similarities with ethical investing, we touched on this in one of our previous editions. Catch up here.

Shariah-based investing falls within the category of faith-based investing and will be the primary focus of subsequent editions of this series. Notably, Shariah-compliant investing extends beyond religious observance to incorporate elements of impact investing, socially responsible investing (SRI), and environmental, social, and governance (ESG) principles, reflecting its emphasis on ethical conduct, social welfare, and sustainable economic development without compromising on shariah law.

Key Takeaway

One of the core objectives of ethical investing is to avoid allocating capital to companies or financial instruments whose products or activities conflict with an investor’s social, moral, or religious values.

Investors often chooses ethical investing not only to generate returns but also to contribute positively to society. In this approach, the primary motivation is alignment with moral, social, and religious principles, with financial returns pursued within these boundaries.

Ethical investing is a deliberate and intentional strategy, requiring careful research and due diligence to identify opportunities that genuinely reflect an investor’s values.

As mentioned earlier, every first Friday of each month will be dedicated to discussing halal investing. We will break down what it means to invest the halal way and share practical, step-by-step guidance to help you get started.

I am considering tagging this series “The Halal Money Series.” Let me know what you think.

We meet again next week.

Yours in Ethics

Sodiq Idowu

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Today, we will discuss the Kogi State Government plan to raise a 50billion sukuk to fast-track the construction of International Airport and the Lokoja International Market.

Previous Development on Sukuk

To get a better perspective on the issuance of sukuk so far in Nigeria, you can read my previous article on Sukuk via the link below.

Sukuk issuance in Nigeria is no longer a new headline, as the country has witnessed the successful repayment of the Federal Government’s Sovereign Sukuk and even earlier issuances, such as that by the Osun State Government as far back as 2013.

Last Friday, January 23rd, the Kogi State Government announced plans to raise a ₦50 billion Sukuk strictly for infrastructure projects, aimed at funding the construction of the Kogi State International Airport and the Lokoja International Market.

The Governor of Kogi State, Ahmed Usman Ododo, disclosed this during an investor engagement and market sensitisation session with capital market stakeholders including investors, fund managers, issuing houses, regulators, and development finance institutions held in Abuja, according to the News Agency of Nigeria (NAN).

The state government confirmed that both the State Executive Council and the House of Assembly had approved the transaction. It also disclosed that it had applied for an Irrevocable Standing Payment Order (ISPO) from the Federal Government to further strengthen investor confidence.

According to a Central Bank of Nigeria (CBN) circular on the guidelines for granting liquid asset status to Sukuk instruments issued by State Governments, an ISPO is a written mandate given by the issuer (the state government) to the Accountant General of the Federation (AGF), authorising the AGF to deduct predetermined sums at source from the issuer’s statutory allocation.

This arrangement serves as a secure and legally binding payment mechanism and helps ensure that the instruction remains valid until the Sukuk obligations are fully settled. It provides assurance to investors that, even if the issuer’s position changes, payments will continue automatically.

What to Know About the Structure

The ₦50 billion Sukuk will be structured as a senior unsecured Ijara Sukuk, meaning investors will earn rental income from the leased assets. While the obligation ranks high in repayment priority, it is not secured by pledged collateral and instead relies on the credit strength of the issuer which is the Kogi State Government.

The Sukuk will be issued at ₦1,000 per unit, with a total programme size of ₦50 billion and a tenure of between five and seven years. It will be offered through a book-building process, with a minimum subscription of ₦5 million.

Speaking on the structure, the Managing Director of AVA Capital Group, Kayode Fadahunsi, stated that the projects have been designed to generate sufficient revenue to support repayment. He also noted that the use of proceeds will be closely monitored through multiple oversight layers, including the Securities and Exchange Commission (SEC), a Sharia Advisory Board, and an independent Project Management Committee, which will provide quarterly reports to stakeholders.

Final Thoughts

With the Kogi State Government targeting March 2026 for the commencement of construction, a Nairametrics report notes that the state has historically faced challenges in delivering large-scale infrastructure, despite its strategic position as a key link between Northern and Southern Nigeria. Over the years, successive administrations have consistently emphasized the need for improved transport, logistics, and commercial infrastructure to unlock economic potential, stimulate trade, and attract private investment.

From a broader perspective, this issuance underscores that non-interest financing is no longer limited to federal-level projects. States can now leverage Sukuk to fund critical infrastructure, expanding its application beyond sovereign financing. This development reinforces the relevance of Shariah-compliant capital instruments for sub-national development and signals growing confidence, and acceptance, within Nigeria’s Islamic finance ecosystem.

We meet again next week.

Yours in Ethics

Sodiq Idowu

According to the SEC, the revision of the minimum capital requirements is aimed at enhancing the financial soundness and operational resilience of market operators; aligning capital requirements with the scope, complexity, and risk exposure of regulated activities; promoting market stability and mitigating systemic risk; and supporting innovation and the orderly development of new market segments, including digital assets and commodities markets.

Review of the Revised Minimum Capital

According to the circular, the SEC classified regulated entities into seven categories, clearly outlining the applicable minimum capital requirements for entities within each category. One notable feature of this classification is the formal and robust integration of digital assets and fintechs into the capital market regulatory perimeter.

Brokerage services and fund/portfolio management services fall under the Core Regulated Functions category. The Non-Core Regulated Functions category captures entities such as issuing houses, rating agencies, registrars, trustees, underwriters, and investment advisers. Other major categories include market infrastructure providers, consultants, fintechs, virtual asset service providers, commodity market intermediaries, and other regulated entities.

Under the revised framework, minimum capital requirements have now been clearly specified for virtual asset service providers. Ancillary Virtual Asset Service Providers (AVASPs) are required to maintain a minimum capital base of ₦3 billion. Digital Asset Intermediaries (DAIs) must maintain ₦500 million, while Digital Asset Platform Operators (DAPOs) including token issuers are also required to maintain ₦500 million. Real-World Asset Tokenisation and Offering Platforms (RATOPs) face a higher threshold of ₦1 billion.

The most significant increase applies to full-service broker-dealers, whose minimum capital requirement has risen from ₦300 million to ₦2 billion representing a 567 per cent increase. The circular defines broker-dealers as firms that offer client execution, proprietary trading, margin or securities lending, and advisory services.

According to SEC, issuing house that offer non-interest finance services saw minimum capital move from 200million to 2 billion, The SEC’s revised framework also introduced a tiered structure for fund and portfolio managers, based on the scope of activities, assets under management, and risk exposure, the categories are fund manager with full scope, limited scope and alternative investments with each of them having varying revised capital.

Impact of the Revised Minimum Capital

Bola Ajomale, the Executive Commissioner for Operations at the SEC, stated in an interview with CNBC that the Commission reviewed various jurisdictions, their regulatory guidelines, and minimum capital requirements before amending the framework to align with Nigeria’s unique economic realities. According to him, the revisions are expected to increase operational efficiency, improve investor protection, and enhance the capabilities of sector players.

I believe this revision will also help reduce the number of very small, inactive, or dormant operators, thereby encouraging consolidation and more efficient market participation. More importantly, I am keen to see how these revisions will support long-term market development, particularly in the area of product innovation, especially for non-interest products.

We meet again next week.

Yours in Ethics

Sodiq Idowu

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I reviewed a really comprehensive report from IFNG Media on Nigerias Non-Interest Microfinance Bank, which captured 12 fully licensed institutions, alongside an analysis of their geographic distribution showing that market concentration is highest in the North, accounting for a combined 66 per cent.

Read the full report

Enjoy the read, and I look forward to meeting you again next week

Yours in Ethics

Sodiq Idowu

In the last episode, we reviewed the Non-Interest Capital Market (NICM) Products Master Plan (2015–2025), with a focus on how it was instrumental in the launch of PenCom’s multi-fund structure to accommodate the Non-Interest Fund VI.

If you missed that edition, you can find the link to the episode below.

The NICMPs Master Plan (2015-2025):

In this edition, we focus on one of the NICM Master Plan’s key recommendations to the Debt Management Office (DMO) regarding the issuance of Sovereign Sukuk.

Last month, on 31 December 2025, news broke that the Federal Government had successfully completed the repayment of the ₦100 billion 2018 Sovereign Sukuk. It was indeed encouraging to see the successful conclusion of the second Sukuk series, a milestone that was widely welcomed by market participants.

As this achievement is celebrated, it is important to recognise the pivotal role played by the NICM Products Master Plan in making this success possible. One of the Plan’s major recommendations to the DMO was the issuance of Sovereign Sukuk to establish a benchmark yield curve for Nigeria.

Understanding Sukuk

Sukuk is a Shariah-compliant bond, but instead of lending money and earning interest (which is not allowed in Islamic finance), you invest in a real project or asset (must be ethical and not harmful to the society) and you earn a share of the profits.

Prior to the Master Plan’s key recommendation on the need for alternative instruments that appeal to ethical investors, Nigeria had already recorded its first Sukuk issuance, even before the Federal Government’s Sovereign Sukuk programme.

The first Sukuk to be issued in Nigeria was a ₦10 billion Sukuk by the Government of Osun State on 10 October 2013, with Lotus Capital serving as the Lead Manager and Principal Adviser to the issuance. It was a 7-year Sukuk Ijarah, which was scheduled to mature in 2020, with a profit rate of 14.75 per cent. The Sukuk had a minimum subscription of ₦1 million, representing 1,000 units.

Notably, the issuance was oversubscribed by ₦1.4 billion and subsequently upsized to a final value of ₦11.4 billion. This outcome validated the demand for alternative financing structures in Nigeria.

While there are several motivations behind the introduction of Sukuk, one of the most significant is its role as an alternative to conventional bonds, designed to encourage broader participation, particularly from the Muslim and ethically conscious investor base.

FGN First Issuance of Sovereign Sukuk - 2017

In September 2017, the Federal Government, through the Debt Management Office (DMO), issued Nigeria’s first Sovereign Sukuk. The issuance was oversubscribed, with the 7-year instrument making a historic ₦100 billion debut in the capital market. On 27 September 2024, subscribers received their rental payments and principal at the end of the lease period, officially bringing the debut Sukuk series to a successful close.

Since then, the momentum has not slowed. Following the inaugural Sovereign Sukuk issuance in 2017, the Federal Government has gone on to issue six additional Sukuk series. In total, the Federal Government, through the DMO, has raised over ₦1 trillion via Sukuk issuances, funding hundreds of kilometres of road construction and rehabilitation across Nigeria’s six geopolitical zones.

The most recent issuance, the Series VII Sovereign Sukuk, saw the DMO offer ₦300 billion and record an unprecedented subscription level of over ₦2.205 trillion—representing an oversubscription rate of 735 per cent. This remarkable outcome further validates the strong investor appetite for Shariah-compliant investment instruments.

FG clears N100bn 2018 SUKUK bond

On the 31st, December 2025, the Federal Government successfully completed the repayment of the ₦100 billion Sukuk purchase price relating to the Sukuk assets issued in December 2018. This milestone carries significant implications. For the second time, Nigeria has demonstrated its credibility and reliability in the global Sukuk market, a track record that strengthens investor confidence and enhances the country’s appeal to a broader pool of investors within the fast-growing global Islamic finance market.

Why This Matters

Milestones like this do more than close a financing cycle; they shape investor confidence and redefine how a market is perceived globally. With every successfully issued and fully redeemed Sukuk, Nigeria sends a strong and consistent signal to the world.

This is not unique to Nigeria, it is exactly how leading Sukuk markets were built. Malaysia, for instance, did not become the world’s largest Sukuk market overnight. Its credibility was earned through decades of consistent issuance, timely repayments, strong regulatory frameworks, and transparent governance. Today, Malaysian Sukuk are widely accepted as global benchmarks, attracting both Islamic and conventional investors alike.

In the Gulf region, countries like Saudi Arabia and the UAE have leveraged successful Sukuk issuances to diversify funding sources, attract foreign capital, and position themselves as hubs for Islamic finance. Their credibility rests not on marketing, but on performance.

Nigeria’s experience is beginning to mirror these global success stories. Each completed Sukuk cycle reinforces confidence among investors, reassures regulators, and encourages deeper participation from both domestic and potentially international markets.

We meet again next week.

Yours in Ethics

Sodiq Idowu

I want to take a moment to thank you for subscribing to the Everything Ethical newsletter, and a special thank you to those who have read, shared feedback, and engaged with our recent editions. Your comments, messages, and insights have been incredibly helpful.

This edition is a little different. Instead of discussing a new concept, we want to hear from you.

Share Your Thoughts With Us

As Everything Ethical continues to grow and prepare for 2026, we want to focus on the parts of Islamic finance that matter most to you. To help us do that, we’ve put together a short survey to understand which areas you’d like us to spend more time on going forward, whether that’s Islamic banking, investment, capital markets, fintech, or anything else in the ecosystem.

Your responses will directly shape our content plan for future editions, so your input really matters.

📝 Please take a few minutes to fill out the survey here:
Survey Form

Once again, thank you for being part of this growing community. We truly appreciate your support, and we’re excited to keep building Everything Ethical with you and around your interests.

Yours in Ethics,

Sodiq Idowu

Welcome to yet another episode of our weekly newsletter, I have personally found this an enlightening experience for me, I hope the previous editions has been insightful, my goal is to shed light on key concept about Islamic Finance, as I am particularly interested in creating awareness about innovations in the ecosystem and identifying critical gaps.

Last week, we explored the second series of the Nigeria’s Islamic Finance ecosystem with a key focus on the Islamic Fund Management space. ICYMI (In Case You Missed It):

2025 - Nigeria's Islamic Finance Map

This week, we’re back with another edition, As we are getting close the end of 2025, I thought to review the Strategic Master Plan for the Non-Interest Capital Market published in 2015, the blueprint was designed to shape the strategic direction and long-term growth of Nigeria’s Non-Interest Capital Market from 2015 to 2025. This edition of the newsletter will focus on the key strategic recommendations and analyze the progress made so far with the National Pension Commission (PENCOM).

The Strategic Master Plan for Non-Interest Capital Market Products

The Non-Interest Capital Market Products Master Plan (NICMMP) is a roadmap: a structured master-plan that sets out how Nigeria’s capital market should evolve to incorporate non-interest (Islamic) financing including Sukuk issuance, Shariah-compliant funds, Non-interest pension funds, and other instruments. The NICMPs Committee, was inaugurated on the 9th September, 2013 and was headed by Mrs. Hajara Adeola of Lotus Capital Ltd to appraise the current state of the Non-Interest Capital Market and make recommendations to set out clear direction for the next decade.

Its about 12 years now, since the committee was inaugurated, As I read through the recommendation from the Master Plan across key segments which include building strong regulatory foundation for NICM, creation of regional NICM Hub, encourage the development of NICM products and development of NICM market stakeholders. There has been some commendable implementation of the committees recommendation, a few I will like to highlight are;

• PENCOM - To fast-track the release of guidelines on multi-fund structure for Retirement Savings Account (RSA) Funds which contain a non-interest funds

• SEC - To issue guidelines on approach for regulating Shari’ah governance/model of Shari’ah advisory council.

• DMO - To issue sovereign Sukuk to establish a benchmark yield curve for Nigeria as there are no impediments in its Act.

This edition of the newsletter will focus on the master plans recommendation of implementing a multi-fund structure for retirement savings which should contain a non-interest fund and what this mean for ethical conscious individuals.

Understanding Pension Contribution

A good way to start this is by explaining how pension works, you can see pension as a money you save gradually while you are working, so you’ll have income when you stop working (retirement). In Nigeria, we operate the Contributory Pension Scheme (CPS), regulated by PenCom, an institution established and empowered by the Federal Government of Nigeria to regulate and supervise all pension matters and pension operators in Nigeria as enshrined in the Pension Reform Act, 2014. The map below illustrates the key players and their functions.

In Summary: PenCom regulates, PFAs manage, PFCs hold the money, employers remit, and contributors own the funds

Regarding the pension contribution as seen above, the Pension Act signed on 1 July 2014 requires that employers with at least 15 employees are to participate in the contributory pension scheme for their employees. The minimum contribution under the Act is 18% of monthly emolument (with a minimum contribution of 10% by the employer and 8% by the employee).

Now lets explain what the RSA means, the RSA is a pension account maintained with a Pension Fund Administrator (PFA) into which monthly contributions of employer and employee are paid. The RSA is defined by a unique Personal Identification Number (PIN) issued by the National Pension Commission (PenCom).

Multi Fund Structure to Accommodate Non-Interest Fund

Prior to now, the Nigeria Pension Commission (PenCom) operates a single fund structure which means all contributors fund are are put into one Retirement Savings Account (“RSA”) Fund without consideration for age or risk profile.

The diagram above illustrates how the single fund structure works

The NICMMP recommended a multi-fund structure for Retirement Savings Account (RSA) Funds which should contain a non-interest funds, the idea is to give ethical conscious Nigerians access to a Shariah-compliant, non-interest pension investment option under the RSA Multi-Fund Structure.

On July, 2018, the PenCom took the bold implementation of the RSA Multi-Fund Structure, enabled pension contributors to be placed into different pension-fund portfolios based on age and risk-tolerance (Fund I–IV), rather than everyone being in one pool.

For some context regarding the multi-fund structure - Fund I, Fund II, Fund III, Fund IV and Fund V was introduced by PenCom to replace the previous Retirement Savings Account (RSA) Active and Retirees Funds. Each fund differs based on their overall exposure to variable income instruments such as equities. The goal is to ensure that every RSA holder has their pension funds being invested according to their age and investment risk profile.

September, 2021 PenCom Introduced the Non-Interest / Shariah-Compliant Fund (Fund VI) to the Multi-Fund structure, offering RSA holders and retirees a Shariah-compliant investment option under pension regulation.

Operational Framework for Non-Interest Fund

A comprehensive guide on the operational framework for the Fund VI non-interest fund was issued by PenCom and it gives RSA (Retirement Saving Account) holders assurance that the asset shall not be invested in the production or trading of alcohol, pornography, weaponry, gambling/betting, speculation, interest earning ventures and other ventures of similar nature contrary to Sharia principles and as may be determined by FRACE (An advisory body on Islamic Banking and Finance established by the Central Bank of Nigeria to advice on matters relating to Islamic commercial jurisprudence for the effective regulation and supervision of Non-Interest Financial Institutions and products in Nigeria).

The guide also clearly defined prohibition from speculation, and clearly listed the instruments the funds can be invested in amongst many other guides. Allowable instruments that the fund IV asset can be invested in are;

• Government Sukuk, (including Islamic Treasury Bills and Euro Sukuk) issued by FGN, CBN or FGN Agencies and Infrastructure Sukuk, backed by FGN/CBN guarantee)

• Corporate Sukuk (including Sharia’ah compliant ABS,MBS, GDNs, Euro Sukuk & Infrastructures Sukuk)

• Supranational Sukuk

• Shari’ah compliant Money Market instruments

• Shari’ah compliant ordinary shares (including GDRs)

• Shari’ah compliant infrastructure funds

• Shari’ah compliant private equity Funds

• Shari’ah compliant Open/Closed/Hybrid Funds

• Shari’ah compliant real estate funds

Transfer Modality

Transfer to the RSA Fund VI is absolutely free without any charges, when an RSA holder wants to move their pension savings into the Non-Interest Fund VI, they must follow the same rules and procedures that apply to active fund choice under Section 7.6 of PenCom’s Investment Regulation.

• The RSA holder initiates the request by filling an “Active Choice Form” or switch request with your PFA.

• The PFA must confirm identity, usually through biometric or KYC verification.

• RSA holder select the specific fund they want (Fund VI Active or Fund VI Retiree)

• RSA holder acknowledge the risk profile

• RSA holders PFA processes the request

• Switch takes effect, usually at month-end or within a regulatory timeframe.

Key TakeAway

We can acknowledge the significance of the NICMP Master Plan’s recommendation for a multi-fund structure, specifically the provision for a Non-Interest Fund. This was pivotal in enabling Muslim and ethically conscious contributors to keep their pension contributions fully Shariah-compliant, thereby promoting financial inclusion within the Nigerian financial system.

There may be concerns about whether RSA Fund VI will perform well, given that it is an ethical option. However, it was reported that the Non-Interest Fund VI recorded the highest percentage increase on a year-on-year basis as at the end of August 2025. The National Pension Commission reported that Fund VI stood at ₦181.23 billion at the end of August 2025, compared to ₦70.63 billion in August 2024, representing a growth rate of about 157 per cent.

Fund VI remains relatively unknown to many RSA holders, and PFAs need to adopt a far more proactive and aggressive awareness strategy. At the same time, RSA holders themselves must become more conscious of their fund category and take deliberate steps to switch to the Non-Interest Fund where applicable.

Public education, greater awareness, and increased participation will not only empower contributors but will also accelerate the growth of the non-interest financial ecosystem as a whole.

We meet again next week.

Yours in Ethics

Sodiq Idowu

Welcome to another episode of our weekly newsletter. As companies begin to round off the year, the pressure to close out can be intense. I hope you’re keeping well and navigating this busy period successfully.

In our last edition, we launched the first part of the Nigeria’s Islamic Finance Map series, tracking active players across the Islamic finance ecosystem with a particular focus on the Islamic banking sector. We received valuable feedback from readers, which enabled us to make updates and include institutions that were initially omitted unintentionally. The updated map will be published before the year runs out. :)

If you missed the last edition, you can catch up through the link below.

2025 - Nigeria's Islamic Finance Map

This week, we turn our attention to the islamic fund management space, Below are the things you will learn today;

1. General understanding of Funds Management

2. Islamic fund management and key difference with ethical fund management

3. Regulation in the Non-Interest Capital Market

4. Updated list of licensed Islamic Fund/Portfolio Managers in Nigeria - 2025

5. Key takeaways

Funds Management Explained

According to Capital.com, Funds management was explained as the task of managing a pool of money on behalf of others, with the aim of maximizing the amount it grows by. This leads to the alternative name of investment management, which is also often used to describe fund management. The professionals who carries out the activities are experts in the financial market who analyze what assets to buy and sell, with the goal of increasing the value of the funds under their control.

Illustratively, fund management can be described as a situation where a licensed individual or an organization, known as a fund manager, takes care of a pool of money belonging to other people and decides where to invest it, such as in shares, property, bonds, or other assets. The primary goal is to grow that money as much as possible over time while carefully managing risk.

Islamic Fund Management

In contrast to conventional fund management, Islamic fund management is one where the fund managers do not just invest the pool of funds from contributors into any asset class but they ensure the money are invested into asset that strictly complies with Shari’ah rules. In simple terms, an Islamic or Shariah-compliant investment fund is an investment scheme where investors contribute money to a fund manager to earn halal profits that comply with Shariah principles. It is deemed a type of socially responsible investment or ethical funds that are available in the market.

Similar to the sustainable and responsible funds that are benchmarked against the environment, social and governance (ESG) pillars, Shariah-compliant funds filter potential investment instruments for specific features like avoiding companies and instruments that derive income from activities prohibited under Sharia law (such as alcohol, gambling, conventional banking interest, tobacco, or adult entertainment)

Ethical fund management and Islamic fund management are related concepts but not the same, Ethical fund management is a broad category based on values and societal principle while Islamic fund management is a specific type of ethical fund management based on shariah principles.

All islamic funds are shariah compliant but not all ethical funds are shariah compliant

Regulation in the Non-Interest Capital Market

Islamic Fund Management fall under the Non-Interest Capital Market space, In Nigeria, All the entities or individuals registered by regulator to perform specific functions within the capital market are called capital market operators (CMOs) and they are regulated and regularly supervised by the Securities and Exchange Commission (SEC), ensuring they meet the highest standards of professionalism, financial soundness and ethical conduct.

The Commission overtime has shown deep determination to deepen the non-interest capital market space with the aim to enable Nigerians invest their savings ethically, especially in a country like Nigeria which is home to the largest Muslim population in Sub-Saharan Africa, with an estimated population of over 200 million and roughly half being Muslim.

In 2004, SEC joined IOSCO Committee on Non-Interest Capital Market (NICM), aimed at launching important initiatives to maintain the growth momentum of the NICM in Nigeria and we have seen commendable improvement especially since the roll out of the NICM master plan in 2015 which was intended to boost the development of the Non-interest capital market (NICM) by providing clarity of vision and set objectives that can positively impact on market capitalization, we will discuss more on this in our next edition.

Licensed Islamic Fund/Portfolio Managers - 2025

As previously mentioned, Securities and Exchange Commission (SEC) being the regulatory agency responsible for registering and regulating the activities of the participants in the Nigerian capital market. The SEC registers and issue licenses to qualified persons and companies operating in the Nigerian capital market. The license required to operate as a fund manager is the Fund/Portfolio Manager license.

Based on my findings, there is no separate licensing category that restricts a SEC-licensed fund manager to offering only faith-based or Shariah-compliant funds. Under SEC regulations, but instead any licensed fund manager can launch a shariah compliant fund once they meet the requirements. Islamic funds are classified as faith-based funds based on SEC rules. A faith-based fund is an investment fund approved by the SEC that invests in line with religious rules or values. Rather than focusing solely on profit, it applies specific faith-based principles when selecting investments.

To launch a Shariah compliant fund in Nigeria, the fund manager must be;

1. SEC-licensed,

2. Classify the fund correctly as a faith-based fund

3. Appoint and notify a qualified Shariah Adviser

4. File the required subscription and governance documents (including evidence of Shariah compliance)

5. Comply with SEC naming and investment rules for example shari’ah complaint funds shall not invest more than 30% of the Fund’s NAV in a single entity, transaction or contract.

Below are the list of licensed Fund/Portfolio Managers that either offer only ethical/shariah compliant fund or conventional fund managers that have launched shariah compliant funds.

Please note: This list is by no means exhaustive. We’ve made a deliberate effort to capture all the SEC licensed fund managers with shariah compliant funds, If your institution is not featured, please contact us at readeverythingethical@gmail.com so we can make the necessary updates. All listed companies were verified via the SECs website section for finding licensed capital market operator.

There are a few new additions to the list of ethical fund managers compared to what we published last week such as Pennington Promise, Ascent Capital, Konooz Investments Ltd, & D’Namaz Capital Ltd. We appreciate the contributions from those who assisted via my LinkedIn post especially Ismail Rufai, CSAA, FMNES, CEO, One17 Financial Services Ltd and others who contributed.

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Conclusion - Key Takeaways

The goal of this edition is to provide an overview of the Islamic fund management ecosystem. From our review, we were able to identify eight SEC-licensed ethical fund management firms, alongside seven conventional fund management firms that have launched Shariah-compliant funds. This is quite impressive, and we look forward to seeing these numbers grow. There are also about three other players that I am aware of but who are yet to obtain SEC licences; hopefully, once they do, the list will expand further.

What this really means is that there are alternative investment options for ethically conscious investors, and a good number of these mutual fund products have recorded impressive performance so far. I will dedicate a future edition to highlighting the various products that have been launched, their performance, and how to get started with investing.

In the next edition, we will examine the Non-Interest Capital Market (NICM) Master Plan (2010–2025) and assess the progress made so far.

We meet again next week

Yours in Ethics

Sodiq Idowu

Last week, we released the maiden edition of our newsletter titled “Introducing Everything Ethical.” In it, I shared the inspiration behind this publication, the remarkable growth of the Islamic finance ecosystem, and the audience it was created for.

ICYMI: Have a great read via the link below.

Introducing - Everything Ethical

Welcome to this weeks episode. Recently, I was reading a report by Mambu and a quote resonated so well with me, it goes thus “To thrive in the next decade, Islamic banks must shift from being principle-driven to principle-enabled. This is a mindset change: values are not the endpoint, they’re the starting point. And technology is the enabler that allows these values to flourish at scale.”

This isn’t just applicable to islamic banks, but instead all institutions that offer non-interest financial services. There is a need for a mindset shift, structuring financial products to meet islamic finance principles is not the endpoint but the starting point, accessibility and awareness is key.

If the Islamic finance market is forecasted to expand to $9.75 trillion by 2029, at a Compound Annual Growth Rate (CAGR) of 10%, strategic value lies in addressing untapped segments. Regions with large Muslim populations, particularly in Africa, remain highly underserved.

Here in Nigeria, with a population exceeding 237.5 million, 53% of whom are Muslims. Technology is not merely an incremental improvement for the growth of Islamic finance. It is a transformational catalyst, driven by our digitally savvy and youthful population.

Nigerias Ecosystem - Islamic Finance Map

Today, We are witnessing significant advancements across Nigeria’s Islamic finance landscape, from the expansion of the non-interest capital market to the increasing acceptance of non-interest banking as a reliable alternative to conventional banking, and more.

Below is the Nigeria Islamic Finance Map, showcasing the key players across the major segments of the Islamic finance ecosystem.

Please note: This list is by no means exhaustive. We’ve made a deliberate effort to capture as many active institutions as possible, but Nigeria’s Islamic Finance ecosystem might be broader and more dynamic than what appears on this map.

If your institution is not featured, please contact us at readeverythingethical@gmail.com so we can make the necessary updates

Map Analysis - Non Interest Banking

Non-interest also called Islamic banking is based on the principle of profit and loss sharing and the prohibition of interest. The history of modern Islamic finance could be traced to a small rural banking experiment in a remote village called Mit Ghamr in Egypt in 1963, where Islamic thinkers began to explore ways and means of organizing commercial banking on an interest-free basis. It however, started in the Middle East in 1975.

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Today, almost five decades on, the LSEG Islamic Finance Development report 2025 indicates that Islamic banking has dominated the overall islamic finance industry, with 72% of total industry assets and a total of 681 Islamic banks including Islamic windows with banking asset worth $4.32trillion.

There is particularly strong growth in Islamic banking in sub-Saharan Africa, where there are now 104 Islamic banks and banking windows scattered across 28 countries. This has been encouraged by the region’s central banks. Uganda, for example, is now home to two Islamic banks, while Central Bank of Eswatini has said it will look to attract more Islamic banks to the country

In Nigeria, the first full-fledged non-interest bank is Jaiz Bank Plc, which commenced operations on January 6, 2012, after receiving a regional operating license from the Central Bank of Nigeria (CBN) on November 11, 2011.

Since Jaiz Bank’s establishment, the non-interest banking sector in Nigeria has grown, with other institutions like TAJBank, Lotus Bank, and The Alternative Bank also entering the market. Recently we saw the addition of Summit Bank, which was incorporated in July 2024 and licensed by the CBN in February 2025.

Map Analysis - Non Interest Banking Window

According to the CBN guide, Islamic banking window is defined as part of a conventional financial institution (which may be a branch or a dedicated unit) that provides fund management (investment accounts), financing, investment and other banking services that are Shariah compliant.

The key difference between an Islamic bank and an islamic banking window is that an Islamic bank is fully Shariah-compliant, while an Islamic banking window is a Shariah-compliant unit within a conventional bank.

As Islamic banking is gaining traction in sub-Saharan Africa, where there are now 104 Islamic banks and Islamic banking windows operating across 28 countries as mentioned earlier. Several conventional banking groups have launched Islamic windows in several countries in the region – including FNB Islamic and Coris Bank Baraka – thereby expanding the reach of Islamic banking into niche African markets such as Benin and Togo.

Islamic banking windows accounted for 48% of the total number of Islamic banks globally in 2024 and 14% of total Islamic banking assets, at US$619.9 billion. Islamic banking windows are operational in 67 countries, predominantly in Bangladesh, Indonesia and Saudi Arabia as reported in the LSEG Islamic Finance Development Report 2025.

However, some countries do not permit Islamic banking windows. These include Qatar and, potentially, Bangladesh, where the latest draft of the Islamic Bank Company Act 2024 proposes that banks must either fully convert their business model or establish a subsidiary to ensure a level playing field. In contrast, other countries are actively supporting the use of Islamic windows to broaden access to Shariah-compliant financial services, Nigeria being one of them

In Nigeria, the CBN allows conventional bank or financial institution to establish a non-interest window/branch upon written application and prior approval in writing by the CBN. The CBN also mandates that banks operating a non-interest banking window to establish a Shariah Advisory Committee (SAC) to review and provide Shariah guidance and opinions in respect of products and services offered as well as transactions and contracts involving the non-interest window or branch of a conventional bank.

As at today, 12th of December the NDIC portal captures that only one bank operates an active Islamic Banking window which is SunTrust Bank. In the past, other banks—most notably Stanbic IBTC also operated in this space. However, I have not yet obtained confirmation on whether they still do.

Why Islamic Banking & Next Steps

As we continue to experience growth in the global islamic banking sector, there is a huge untapped potentials in Nigeria especially West Africa as many individuals in this region are eager to explore alternatives that are ethical, value and people driven.

Islamic banks operate on principles of fairness, transparency, and social responsibility. Many customers both muslims and non-muslims appreciate a banking system that avoids exploitative practices and prioritizes ethical dealings.

A major appeal is the absence of interest, Instead of lending money at interest, Islamic banks use profit-sharing or asset-backed financing structures, making transactions more equitable and tied to real economic activity.

We encourage Islamic banks to make significant investments in technology, customer awareness, and overall customer experience to attract Nigeria’s growing young and tech-savvy population.

In the next edition, we will examine the Islamic fund management sector and highlight the key players shaping the space.

We meet again next week

Yours in Ethics

Sodiq Idowu

My name is Sodiq Idowu. I graduated as an Electronic & Computer Engineer; however, my professional journey has been in Product Management, where I’ve built tech-driven solutions across diverse sectors—particularly financial technology, logistics, and e-commerce.

I was a founding team member and Product Lead for the health-tech startup MyCareHut, and I’ve also built and closed some projects, including Peng and ScaleAfrica.

Recently, I developed a deep interest in ethical finance, which led me to work on Halcore, the first Shariah-compliant digital infrastructure for Non-Interest Financial Institutions.

My expertise revolves around product management, business development, and research, with a newly found passion for building digital solutions that improve how ethical financial services are delivered and accessed.

Why Everything Ethical?

The idea for this newsletter was born out of my experience building Halcore =
(Halal + Core Infrastructure), a Shariah-compliant core solution for non-interest financial institutions.

Halcore started from a random conversation I had with a colleague sometime in late 2023, who was a manager at an Islamic cooperative. I asked about how it worked and how they handled their day-to-day operations. He gave a very insightful overview of their processes the high level of manual work involved and their attempts to outsource a proposed digital solution to an independent software vendor. The challenges they faced included;

• Solution delivered was not fit-for-purpose

• Technology are structured around conventional financing model

• Systems were expensive and difficult to maintain

Our initial goal was simple: Build a digital platform that enables cooperatives to onboard members, manage operations, and offer Shariah-compliant financial products like Qard Hassan (interest free loan), Mudarabah (Profit-Sharing Partnership), Murabaha (Cost-Plus Sale), and more, without manual bottlenecks.

But as we built, we discovered deeper gaps in the ecosystem, gaps that required more collaboration, more education, and a digital infrastructure built for purpose not as an afterthought.

Launching the Everthing Ethical newsletter is a way to help bridge some gap by sharing insights, spotlight innovation, and in turn support growth in Nigeria’s ethical finance ecosystem.

Islamic Finance Growth in Nigeria at a Glance

According to the State of Enterprise Report 2024:

• Nigeria’s Islamic finance industry grew from ₦1.5T in 2022 to ₦2.5T in 2023.

• Islamic banking dominated with ₦1.36T in assets.

• Sukuk followed with ₦1.09T outstanding.

• The rest comprised Islamic mutual funds and Takaful.

More recently, the Securities and Exchange Commission (SEC) announced that the non-interest capital market had exceeded ₦1.6T as of 2025, signaling growing investor confidence and adoption of ethical financial instruments.

Global Islamic Finance Growth

Globally, the Islamic finance industry surpassed USD 5 trillion in assets in 2024, a 12% increase from 2023 and a 43% rise since 2020.

Key highlights:

• Islamic banking accounts for over 70% of global assets.

• The sector is projected to grow to USD 5.2 trillion by 2028.

• The Sukuk market is expected to expand from USD 971B to USD 1.5T within the same period.

Everything Ethical Way

Across the world, Islamic finance is rapidly integrating technology, digital onboarding, automated compliance, AI-enhanced product delivery, and fintech-enabled access.

As the market evolves, accessibility, user experience, and technology-driven transparency will be critical in promoting the next phase of growth.

This newsletter will:

• Spotlight innovative products

• Analyze global and local trends

• Identify critical ecosystem gaps

• Highlight solutions that drive adoption and awareness

Our goal is simple: promote participation, innovation, and access in ethical finance

Who is this Newsletter for?

If you’ve read this far, this is for you, but more specifically, for:

• Entrepreneurs in the Islamic finance space

• Executive leaders in non-interest financial institutions

• Islamic finance professionals learning about global trends

• Islamic finance enthusiasts seeking deeper insights

• Product managers and tech professionals in financial innovation

• And you, the curious observer who wants to understand the future of ethical finance

What Next?

The maiden edition of the newsletter is intentionally kept short. Next week, we’ll dive deeper and share valuable insights into key areas of the ecosystem. Everything Ethical drops every Friday at 7:00am, and subscribing is the only way to have it delivered directly to your inbox. Hit the subscribe button below if you haven’t and don’t forget to share it with your friends and colleagues.

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Till next week,
Yours in Ethics,
Sodiq