NIGERIA: Still on the matter of Islamic banking

It is now clearly obvious that hardliners on both sides of the religious divide have dominated the debate on the introduction of Islamic banking and fouled the atmosphere of what ought to have been a trenchant national discourse with bigotry and incendiary verbiage. Perhaps, with the benefit of hindsight, we should not be surprised at the high note of bellicosity given the fragile nature of religious interrelationships in the country. This is chiefly why we posit that the matter of the introduction of Islamic banking should have been more professionally and ethically conducted by the financial regulatory authority, the Central Bank of Nigeria (CBN).

The rather cavalier manner the apex bank went about the issue was bound to stoke the smouldering fire of religious discord – in the light of recent and ongoing sectarian violence – and lay the framework for aggravated tension in the polity. For example, we are yet to comprehend why critics of the Islamic banking model should be derisively asked “to go to court to challenge it” when all that was required was a public enlightenment campaign. We equally fail to comprehend why any individual – no matter how highly placed – in a secular democracy should give the impression that decisions can be foisted willy-nilly on the citizenry, regardless of their strong reservations on the subject matter.

If it is true that the apex bank reduced the start-up capital for Islamic banks seeking to register as ‘National Banks’ from N25billion to N10billion – even as other applicants seeking the same status are still required to fulfil the more stringent requirement – it ought to be clearly obvious to the top management that they were ab initio laying themselves open to charges of engaging in double standards and fostering a hidden agenda, more so when such a special treatment is solely based on a hot potato religious label.

Besides, at a time when the CBN is implementing a reform programme that focuses on a full repurposing of bank capital, it certainly makes no sense to lower the bar of minimum capital requirement to selectively prop up a particular class of banks.

Ordinarily, Non-Interest Banking – of which Islamic banking is only a subset – should generate no controversy because it is simply another form of financial intermediation where instead of charging interest, profits and losses are shared between the lender and the borrower. The truth is that only very few economies can survive – talk less develops – with the kind of usurious interest rate profile that has been prevalent in this country.

What the real sector requires to actualize its full potentials is affordable and easily accessible long-term capital. This is exactly why this newspaper has consistently canvassed the commencement of a robust national discourse aimed at reaching a consensus on developing alternatives to the Anglo-Saxon banking and financial model that has practically failed to fast-track economic development. The Non-Interest Banking model is clearly a candidate for discussion, just like the hybrid German and Asian models. It is pertinent to mention that the clear advantage the Non-Interest Banking model has is that it is in sync with the traditional esusu system that is widely practised in many parts of the country.          

It is highly regrettable that rather than seizing the moment to initiate the long overdue national debate on a transformational model for the nation’s backwater banking and finance industry the apex bank chose to stir up a hornet’s nest by triggering a raging debate along purely religious lines. Quite expectedly, energy and time are being needlessly dissipated on this issue while weightier questions of how to grow the economy and improve the standard of living of the citizenry are sidelined.

There are quite a number of measures the apex bank and political authorities can still do to nip the heightening palpable tension in the polity in the bud. Firstly, we call on the CBN to discard its arrogant stance and commence on an extensive enlightenment campaign amending damaged fences and raising public awareness on the benefits and workings of Non-Interest Banking. In doing so, it would be advisable to correct the wrong impression being overtly conveyed that Non-Interest Banking and Islamic banking are interchangeable terms. One way to go about this is to revert to the old terminology, adopted under the regime of former CBN Governor Chief Joseph Sanusi that classifies such financial intermediaries as ‘Profit and Loss Sharing Banks.’

The authorities must not allow themselves to be largely perceived as being more interested in winning a battle only to ultimately lose the war of economic renaissance, by inexplicably insisting on the use of a controversial religious epithet in a secular democracy like Nigeria. Meanwhile, we strongly urge the security agencies to ensure that all those threatening the corporate existence of this nation by employing intemperate and warmongering language should be made to face the full weight of the law in order to prevent the exchange of brickbats to degenerate to the level where people would openly start calling for the nation’s disintegration along religious lines. Hopefully, those involved have learnt appropriate lessons on how to manage similar controversial matters that may arise in the future.