Islamic Finance Industry in Nigeria to Benefit from Sukuk –Fitch
Nigeria’s Islamic finance industry is likely to expand in 2H25-2026 on the back of increasing sovereign Sukuk issuances and Islamic banking assets, driven by new paid-in capital requirements and regulatory moves to develop the industry, Fitch Ratings says.
In May 2025, the government returned to the sukuk market after two years of no issuance. Fitch said in the commentary note that there was also structural improvement after the central bank introduced new Islamic liquidity management instruments in the form of non-interest financial institutions’ master repurchase agreements, non-interest asset-backed securities, and non-interest notes.
This addresses a market gap and provides Islamic banks with options to seek funding and invest their liquidity, which could support their credit profiles, according to the note. Nigeria has notable potential for Islamic finance supported by having one of the largest Muslim populations globally and a significant unbanked population.
Still, Islamic finance in the country is still expected to be significantly smaller than that of conventional financial institutions, with the industry facing key challenges, such as lack of awareness, strong opposition from segments of the public, limited product availability and distribution channels, a still-developing regulatory framework, and limited Islamic banks (non-interest banks).
The size of Nigeria’s Islamic finance industry was estimated to be around USD4 billion by the end of May 2025. Sukuk outstanding is the largest segment of the Islamic finance industry at 53.9%, followed by Islamic banking assets at 45.2%, and the rest includes takaful and sharia-compliant funds.
Non-interest banks’ assets recorded a growth of 110% yoy as of end-2024, driven by a significant increase from deposits and loans, each more than doubling in value.
A new non-interest bank, Summit Bank Limited, was established in 2024. Despite this substantial growth, the market share in the country’s total banking assets only increased to a still small 1.7% at end-2024 from 1.1% end-2023.
With only five non-interest banks operating within the country, their market share is still expected to be about 2% in the medium term. Jaiz Bank PLC (B-/ Stable) is Nigeria’s first fully fledged non-interest banking institution (NIB), representing 38% of NIB sector assets at end-2024.
The sovereign issued its eighth sovereign sukuk in May 2025, with the issuance oversubscribed by seven times, indicating high demand. As of 5M25, the sukuk in Nigeria (all in naira) were USD2.2 billion outstanding, a decrease of 4% yoy, with their share of the country’s debt capital market outstanding at under 2%.
Bond issuance (all currencies) in 2024 was almost twice that in 2023, while it reached USD12 billion in 5M25 (5M24: USD18 billion).
The absence of sukuk issuance by corporations and financial institutions reflects the lack of incentives and demand, additional issuance complexities, and relatively underdeveloped sukuk market.
In 2024, the Central Bank of Nigeria announced a significant increase in paid-in capital requirements (share capital plus share premium) for commercial, merchant, and non-interest banks.
Banks have three ways to comply—through equity injections, M&A, or downgrading their licence authorisation. Jaiz Bank needed only a small capital injection to meet the requirements and has already achieved compliance.
Takaful in Nigeria continues to have less than 1% of total insurance industry assets as of the end of 2024. In April 2025, Fitch upgraded Nigeria’s rating to ‘B’ from ‘B-’, reflecting increased confidence in the government’s broad commitment to policy reforms initiated following the shift to orthodox economic policies in June 2023. #Nigerian Listed Companies paid N1.1trn Dividends in 2024 – SEC
