The Central Bank of Nigeria (CBN) has raised concerns over increasing governance and compliance risks within Nigeria’s growing non-interest banking sector, warning that weak oversight and operational failures could threaten public trust and financial stability.
The apex bank issued the warning during the 2nd Annual Interactive Session between the CBN Financial Regulation Advisory Council of Experts (FRACE) and the Advisory Committees of Experts (ACEs) of Non-Interest Financial Institutions held at the CBN Auditorium in Abuja.
According to the CBN, the rapid growth and expanding complexity of Nigeria’s Islamic finance industry have increased exposure to operational, regulatory, and technological risks that require stronger governance structures and more effective compliance systems.
CBN Raises Concern Over Governance Weaknesses in Islamic Banking
Speaking through the Director of the Financial Policy and Regulation Department, Dr. Rita Sike, the Deputy Governor for Financial System Stability, Philip Ikeazor, stated that the increasing sophistication of non-interest financial services demands stricter oversight and improved risk management practices.
According to the apex bank, governance failures and non-compliance issues within the sector could weaken investor confidence and damage the credibility of the country’s Islamic finance ecosystem if not properly addressed.
The statement noted:
“As the non-interest finance industry grows in size, sophistication, and interconnectedness, it faces unique risks, including governance challenges, operational vulnerabilities, non-compliance risks, and emerging technological threats.”
The CBN warned that failure to effectively manage these risks may negatively affect financial stability and reduce public confidence in ethical and Shariah-compliant financial institutions.
Non-Interest Banks Playing Bigger Role in Nigeria’s Economy
The apex bank acknowledged that non-interest financial institutions have become increasingly important in Nigeria’s financial system by providing ethical banking alternatives and expanding access to financial services.
According to the CBN, Islamic finance institutions are helping to support:
- Financial inclusion
- Real sector financing
- Small and medium-sized enterprises (SMEs)
- Infrastructure development
- Shared economic prosperity
The bank explained that the non-interest banking sector has continued to attract attention from investors and customers seeking Shariah-compliant financial products and ethical investment opportunities.
Industry experts also believe the sector has strong growth potential as more Nigerians explore alternatives to conventional banking systems.
CBN Strengthens Shariah Governance Framework
As part of efforts to strengthen regulation within the sector, the CBN stated that the establishment of the Financial Regulation Advisory Council of Experts (FRACE) and the mandatory creation of Advisory Committees of Experts (ACEs) across non-interest financial institutions were designed to promote a harmonised governance framework.
According to the apex bank, continuous engagement between FRACE and ACEs remains essential for ensuring that regulatory expectations are properly understood and consistently implemented across the industry.
The CBN explained that the interactive session was organised to deepen collaboration, improve regulatory clarity, and strengthen governance practices within Nigeria’s non-interest financial services sector.
The apex bank stated:
“The session aims to strengthen the institutionalisation and effective operation of robust Shariah governance systems within non-interest financial institutions while promoting knowledge-sharing and collaboration among stakeholders.”
Islamic Fintech and Technology Risks Under Spotlight
The CBN also expressed concern about emerging risks linked to the rapid growth of Islamic financial technology platforms, commonly referred to as Islamic fintech.
Dr. Rita Sike noted that the growing diversity of products, institutions, and digital delivery channels has increased the need for stronger regulatory oversight and ongoing dialogue among regulators, scholars, and industry practitioners.
According to her:
“The emergence of Islamic fintech and the growing complexity of financial products underscore the importance of continuous engagement, sound regulation, and robust advisory systems.”
The apex bank stressed that while technology presents new opportunities for expanding financial inclusion, it also introduces cybersecurity, operational, and compliance risks that must be carefully managed.
FRACE Commends CBN for Reviving Stakeholder Engagement
In his remarks during the event, the Deputy Chairman of FRACE, Bashir Umar, praised the CBN for reviving the annual interactive session, which was first introduced in 2014.
He described the engagement as an important platform for improving governance standards, strengthening communication between regulators and industry players, and promoting healthy growth within the Islamic finance sub-sector.
According to Umar, regular collaboration between financial experts, scholars, and regulators is necessary to ensure the sector develops sustainably and remains compliant with both regulatory and Shariah principles.
Industry Stakeholders Attend High-Level Session
The event attracted several stakeholders from Nigeria’s non-interest finance sector, including:
- Members of FRACE
- Chairmen and members of Advisory Committees of Experts
- Managing directors of non-interest banks
- Senior CBN officials
- Representatives of the Bank of Industry
- Representatives of the Securities and Exchange Commission (SEC)
The session also featured technical presentations focusing on Shariah non-compliance risks in non-interest banking and the role of Islamic fintech in promoting financial inclusion across Nigeria.
Experts Push for Expansion of Sukuk Market
The latest warning from the CBN comes at a time when experts in Nigeria’s Islamic finance industry are calling for larger and more frequent Sukuk issuances to deepen the market and unlock long-term capital for infrastructure financing.
Analysts say rising volatility in global financial markets has increased investor interest in ethical and asset-backed financial instruments such as Sukuk.
Industry observers believe expanding Nigeria’s non-interest finance ecosystem could help attract new investments, strengthen infrastructure funding, and improve access to capital for businesses and government projects.
CBN Seeks Stronger Confidence in Non-Interest Banking Sector
The apex bank reiterated its commitment to building a resilient, transparent, and well-governed Islamic finance industry capable of supporting Nigeria’s broader economic development goals.
The CBN stressed that maintaining strong governance systems, regulatory discipline, and effective risk management practices will remain critical as the sector continues to expand.
With Nigeria’s non-interest banking industry experiencing steady growth, experts say improved compliance, stronger governance structures, and effective regulatory oversight will play a major role in sustaining investor confidence and long-term financial stability.
