The Central Bank of Nigeria has warned that growing risks in Nigeria’s non-interest banking sector could weaken public confidence and threaten financial stability if they are not properly managed.
The apex bank said the rapid growth, increasing sophistication and stronger connections within the banking industry have exposed Non-Interest Financial Institutions (NIFIs) to several challenges, including non-compliance with regulations, weak governance structures, operational weaknesses and emerging technology-related risks.
Speaking during the second Annual Interactive Session between the CBN Financial Regulation Advisory Council of Experts (FRACE) and the Advisory Committees of Experts (ACE) of Non-Interest Financial Institutions in Abuja, the Deputy Governor in charge of Financial System Stability, Mr. Philip Ikeazor, said the risks facing the sector require stronger oversight and improved governance.
Represented by the Director of the Financial Policy and Regulation Department, Dr. Rita Ijeoma Sike, Ikeazor said poor management of these risks could damage the credibility of the non-interest finance industry and reduce public trust in the system.
He explained that the creation of FRACE and the mandatory establishment of ACEs in all Non-Interest Financial Institutions were meant to build a stronger and more coordinated governance structure for the industry.
According to him, regular engagement between FRACE and ACE members is important to ensure that institutions clearly understand regulatory expectations and apply them properly.
“The objectives of today’s session include fostering the institutionalisation and effective operation of a robust Shariah governance system within Non-Interest Financial Institutions, and providing a structured platform for dialogue, knowledge-sharing, and collaboration,” he said.
Ikeazor said the CBN remains committed to strengthening Shariah governance, improving regulatory clarity and promoting effective risk management in the non-interest financial services sector in order to maintain financial stability and public confidence.
He noted that the current engagement builds on discussions from the inaugural session and reflects the CBN’s determination to sustain a sound and resilient non-interest banking system driven by good governance, compliance and prudent risk management.
The deputy governor added that Non-Interest Financial Institutions have become increasingly important to Nigeria’s financial system by providing ethical and Shariah-compliant financial services while supporting financial inclusion, financing for the real sector, Micro, Small and Medium Enterprises (MSMEs), and shared economic growth.
In his opening remarks, the Deputy Chairman of FRACE, Prof. Bashir Aliyu Umar, said the meeting was organised to strengthen governance in the non-interest finance industry and encourage constructive engagement between the CBN and advisory committees of the institutions.
He also praised the management of the CBN for reviving the interactive session which was first introduced in 2014.
Earlier, Dr. Rita Ijeoma Sike said the central bank remained focused on building a credible and properly governed non-interest financial services industry.
She said the increasing variety of products, institutions and financial service channels, especially the rise of Islamic fintech, has made continuous dialogue, strong regulation and quality advisory support more important.
The event featured technical presentations on Shariah non-compliance risks and the impact such risks could have on the non-interest financial services industry. Another presentation focused on Islamic fintech and its role in promoting financial inclusion.
Participants at the session also held discussions on practical challenges affecting the sector, including capacity building, the independence of advisory committees, risk management strategies and ways to improve governance and innovation within the industry.
In his closing remarks, Prof. Abdul-Razzaq Alaro commended participants for their contributions and thanked the CBN for organising the session.
He urged stakeholders to take practical steps towards implementing the resolutions reached during the engagement, saying the success of the meeting would depend on visible improvements across the non-interest financial sector.
FRACE serves as an advisory body that helps bridge the gap between conventional financial regulation and faith-based financial practices. The council supports consistency, investor confidence and proper regulation within Nigeria’s non-interest finance industry, while the ACEs carry out similar oversight responsibilities within individual institutions.
