The objective of the framework, according to the Nigerian banking regulator, is to provide minimum standards for the operation of institutions offering non-interest banking and financial services in Nigeria.

It is no secret that Nigeria is highly sensitive to sectarian politics. Recent rumors, no doubt spread by people with certain political agendas, have alleged that the new Governor of the CBN Mallam Sanusi Lamido Sanusi has introduced Islamic or interest-free banking in the country as part of a “northern agenda”. This refers to the north of the country, which is predominantly Muslim and as such to an alleged Muslim agenda for the country.

This may be pure political mischief making because the same people are also spreading rumors that the CBN is trying to privatize five of the local banks or allowing them to sell off shares to foreign investors, as if there is a God-given law that local banks must only be owned by Nigerians. There have been further rumors that the CBN has also bailed out the above banks to "fatten" them for foreign investment. The CBN stressed that the injection of 420 billion naira into the five affected banks was neither an equity injection nor a bailout but “a normal central banking function of lender of last resort to the banks.”

“On the allegation that the governor is introducing Islamic banking as part of the alleged Northern Agenda,” explained the CBN in a statement, “the fact is that Islamic banking/non-interest banking (or whatever it is called) has already been approved by the CBN during the tenure of Professor Chukwuma C. Soludo (a Christian southerner). In fact, provisions of the Banks and Other Financial Institutions Act (BOFIA) 1991 as amended, Sections 9, 23 and 52, provided for the establishment of Islamic banking in Nigeria. Consequent upon this, the former Habib Bank was given an approval in 1992 to operate a window of Islamic banking which is still operational with Bank PHB. The approval by the CBN under Soludo saw the emergence of the proposed JA’IZ Bank which has been working to raise 25 billion naira capital base as required (under BOFIA). It is obvious therefore that Islamic banking was already in Nigeria years before Sanusi Lamido Sanusi became the governor of the Central Bank of Nigeria.”

Several other Nigerian banks including Christian-owned ones are seeking to introduce interest-free financial products to serve both their Muslim and non-Muslim clients or any others interested in ethical finance. Their view is that Islamic finance is now part of the international financial system, albeit it a small niche, and that its has its merits purely as an alternative system of financial management as opposed to the market-based conventional system whose excesses so nearly caused the collapse of the global banking system in the recent financial crisis because of the greed and excessive speculation through investment in junk derivatives such as collateralized debt obligations (CDOs) backed by junk US mortgages.

Nigeria has an estimated population of roughly 150 million of which half is Muslim. In recent years, Nigeria has become a member of the Organization of Islamic Conference (OIC) and the Islamic Development Bank (IDB), the multilateral development bank of the Muslim world. However, several Muslim minority countries such as Mozambique and Uganda are also members of the IDB. This is the same principle as the Commonwealth where a few countries have acceded to membership but which were not former British colonies.

In fact, Africa’s influence in the IDB received a major boost in 2010 when the IDB board of governors approved the increase of Nigeria’s subscription in the IDB capital to reach 1.384 billion Islamic dinars (one Islamic dinar equals one unit of the IMF Special Drawing Rights) (about $600 million). Following that increase, Nigeria was afforded the right to appoint a permanent executive director representing it in the board of executive directors subject to paying the first share of the announced subscription in IDB capital.

As for the framework for the regulation and supervision of institutions offering non-interest financial services in Nigeria, it was released in mid-January 2011 together with guidelines on Shariah governance for non-interest financial institutions in Nigeria and guidelines on non-interest window and branch operations of conventional banks and other financial institutions, after “extensive consultation with and receipt of comments/inputs by stakeholders,” according to the CBN.

The new framework defines a non-interest financial institution (NIFI) as “a bank or other financial institution (OFI) under the purview of the Central Bank of Nigeria (CBN), which transacts banking business, engages in trading, investment and commercial activities as well as the provision of financial products and services in accordance with Shariah principles and rules of Islamic commercial jurisprudence.

“Transactions, instruments and contracts under this type of services are non-permissible if they involve interest; uncertainty or ambiguity relating to the subject matter, terms or conditions; gambling; speculation; unjust enrichment; exploitation/unfair trade practices; dealings in pork, alcohol, arms, ammunition and pornography; and other transactions, products, goods or services which are not compliant with Shariah rules and principles.”

According to the CBN, it developed this framework and guidelines following the increasing number of requests from persons, banks and other financial institutions desiring to offer Shariah-compliant products and services in Nigeria. It further added, that all NIFIs are required to comply with this and any other guidelines that may be issued by the CBN from time to time.

The framework and reference to NIFIs applies to a wide-ranging type of financial institutions including a full-fledged non-interest deposit money bank or subsidiary; a full-fledged non-interest microfinance bank or subsidiary; a non-interest branch of a conventional bank or financial institution; a non-interest window of a conventional bank or financial institution; a development finance institution registered with the CBN to offer non-interest financial services either full-fledged or as a subsidiary; a primary mortgage institution registered with the CBN to offer non-interest financial services either full-fledged or as a subsidiary; and a finance company registered with the CBN to provide non-interest financial services, either full-fledged or as a subsidiary. This makes the framework arguably the most comprehensive in terms of the reference to the types of enabling non-interest financial institutions, save the Malaysian Banking and Financial Institutions Act (BAFIA) and the Islamic Banking Act.

The framework sets out in detail the legal basis for authorizing NIFIs in Nigeria; the licensing requirements; non-interest financial instruments; commissions and fees; the establishment of NIFI branches and/or subsidiaries; cross-selling of products/services and shared facilities (the non-interest subsidiaries, windows or branches may operate using the existing facilities or branch network of the conventional bank. The non-interest subsidiaries, windows or branches however shall not sell non-Shariah compliant products/services on behalf of the parent conventional bank.); the execution of service level agreements in respect of shared services; intra-group transactions and exposures; corporate governance; conduct of business standards; profit sharing investment accounts; audit, accounting and disclosure requirements; prudential requirements; risk management; and anti-money laundering and combating of the financing of terrorism measures.

As far as Shariah governance for NIFIs is concerned, the CBN is following the Malaysian model by establishing an advisory body on non-interest banking and financial services at the central bank to be called the CBN Shariah Council (CSC). The CSC shall advise the CBN on Shariah matters pertaining to Islamic law relating to financial transactions (Fiqh Al-Muamalat) for the effective regulation and supervision of NIFIs in Nigeria.