The Legal Framework of Non-Interest Banking in Nigeria
THE LEGAL FRAMEWORK OF NON-INTEREST BANKING IN NIGERIA BY
AISHA, MAHMOUD H.
DEPARTMENT OF ACCOUNTING
AHMADU BELLO UNIVERSITY, ZARIA AND
OMOLOLA, ADEGBENGA O.
DEPARTMENT OF ACCOUNTING
AHMADU BELLO UNIVERSITY, ZARIA
DECEMBER, 2012
Abstract
A Central Bank (CB) in any economy is regarded as the apex regulatory institution of the Banking Sector and indeed the entire financial system. This is in view of the fact that it is empowered by law to (amongst others functions) license, control, regulate and supervise financial institutions in the economy. Hence, the Central Bank of Nigeria (CBN) is no exception to this unique characteristics and functions. It is in exerting these powers that the CBN decided to institutionalize Non-Interest/Islamic Banking business in Nigeria. Recently, the decision of the CBN to license specialized institutions that engage in non-interest banking business as well as conventional banks to operate non-interest windows in Nigeria has continued to generate mixed reactions from various stakeholders. While some (mainly Muslims) are applauding the initiative, others especially non-Muslims are raising objections; citing the secularity of the Nigerian nation as basis. However, progressives which include Muslims and non-Muslims alike are beginning to look at the peculiarity of the initiative, debating the pros, cons, opportunities, and challenges that can forestall the maximization of the inherent benefits of a successfully developed non-interest/Islamic banking system in Nigeria. Talking about challenges, experts have identified weak legal framework as one of the many challenges facing the development of a successful Non-interest Banking system in any economy. Therefore, it is the focus of this study to appraise the Legal Framework upon which the CBN is exerting its powers concerning Non-interest banking in Nigeria. Also, a cursory attempt is made at benchmarking, by reviewing international legal frameworks, particularly
AISHA, MAHMOUD H.
DEPARTMENT OF ACCOUNTING
AHMADU BELLO UNIVERSITY, ZARIA AND
OMOLOLA, ADEGBENGA O.
DEPARTMENT OF ACCOUNTING
AHMADU BELLO UNIVERSITY, ZARIA
DECEMBER, 2012
Abstract
A Central Bank (CB) in any economy is regarded as the apex regulatory institution of the Banking Sector and indeed the entire financial system. This is in view of the fact that it is empowered by law to (amongst others functions) license, control, regulate and supervise financial institutions in the economy. Hence, the Central Bank of Nigeria (CBN) is no exception to this unique characteristics and functions. It is in exerting these powers that the CBN decided to institutionalize Non-Interest/Islamic Banking business in Nigeria. Recently, the decision of the CBN to license specialized institutions that engage in non-interest banking business as well as conventional banks to operate non-interest windows in Nigeria has continued to generate mixed reactions from various stakeholders. While some (mainly Muslims) are applauding the initiative, others especially non-Muslims are raising objections; citing the secularity of the Nigerian nation as basis. However, progressives which include Muslims and non-Muslims alike are beginning to look at the peculiarity of the initiative, debating the pros, cons, opportunities, and challenges that can forestall the maximization of the inherent benefits of a successfully developed non-interest/Islamic banking system in Nigeria. Talking about challenges, experts have identified weak legal framework as one of the many challenges facing the development of a successful Non-interest Banking system in any economy. Therefore, it is the focus of this study to appraise the Legal Framework upon which the CBN is exerting its powers concerning Non-interest banking in Nigeria. Also, a cursory attempt is made at benchmarking, by reviewing international legal frameworks, particularly
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