Tuesday, July 12, 2011

Islamic Banking: Campaign Of A CBN Governor Or Kano Prince

Post 31

The previous post featured an article on Islamic Banking in Nigeria by my friend Dr. Aliyu Tilde, a Nigerian Muslim journalist.  Today I feature an article with quite a different perspective by Ifeanyi Izeze, also a Nigerian.  The next post will be written by yours truly. I will give my perspective on the subject.   At this very point, this is a hot issue in Nigeria right now.  A Nigerian correspondent friend of mine is currently forwarding numerous articles on the subject to me.  However, it is also causing debate in the West, where it is a growing institution.

So, ladies and gentlemen, please welcome:

Ifeanyi Izeze

Honestly, the controversy the said commencement of Islamic banking in Nigeria has generated was not only unnecessary but caused because the man in charge could not decipher that the disposition and carriage of the Governor of the Central Bank of Nigeria (CBN) should be entirely different from that of a Kano prince who sees himself as an emir in waiting.

Sanusi Mischief? 
Most Nigerians think the Islamic finance concept was ‘crazy’ simply because of the way the Central Bank Governor, Sanusi Lamido Sanusi has gone about it with pronouncements and attitudes that painted a hidden sectional agenda. The timing and spirit behind Sanusi’s disposition obviously paints a picture of mischief. Initially, I belonged to this group until I studied the principles of the banking model.
Keeping Religion out of Banking
Lending money to people without interest is also in the Bible so there is nothing Islamic about lending money without interest. It is also biblical. But the question is why not outrightly call it interest- free banking system? Must it be Islamic banking or Christian banking or some other kind of religious banking? We must not bring religion into our political setting or our economic life. This is what we have to guard against as a people with common destiny except we are not. 

Sanusi for himself, government or Islam?
Although the concept of a non- interest banking system might be a very good idea, it’s introduction obviously has proven to be wrongly timed by the CBN governor.  Judging by the displayed disposition of the CBN governor, it would have made a better sense if he had done this advocacy for Islamic banking as a religious leader rather than as a federal government official.  There is need for Sanusi to come out and tell the nation whose errand he is running and for who he speaks; is it for himself, Islam, or government of Nigeria?
Christian Opposition
We all should be concerned that this act coming now is further tearing us apart along ethno-religious lines. The Pentecostal Fellowship of Nigeria (PFN) has already called on government to stop Sanusi “before he throws Nigeria into financial and even religious fire.” The PFN is afraid that the primary interest of the CBN Governor as far as this Islamic banking matter is concerned is nothing other than positioning Islamic religion and pushing sharia agenda to the front doors of most Nigerians. While some Muslims see others’ (Christians) refusal of Islamic banking in today’s Nigeria as a distaste for Islam. This situation would have been avoided if Sanusi had seen himself more as the CBN Governor than a Kano prince and an emir in waiting by his pronouncements and displayed arrogance.

Bad timing
All well meaning Nigerians should strongly condemn the attitude of the Central Bank governor more so at a time like this in Nigeria when we are still battling to douse the tension created by the last ‘political’ crisis with all the evident religious manifestations. This obviously is an insensitive and reckless act of the highest order coming from such a high ranking officer of the Federal Republic of Nigeria

Militants Seize It?
The CBN found no other time to talk about Islamic banking except this time of Boko Haram menace? How do you ensure that extremist organisations shall not hijack the entire concept and capitalize on that to further intimidate Nigerians -Christians and Moslems alike?  If Sanusi is not playing mischief, why name it Islamic banking rather than what it is: merely non-interest banking? The saying that you leave the messenger and take the message cannot apply here at all because the messenger and his disposition is as important as the message itself.

Setting Standards
The draft framework for this banking concept was issued in March 2009 by the Central Bank of Nigeria (CBN). The objective of the framework was to provide minimum standards for the operation of non-interest banking in Nigeria while serving as an exposure for comments, suggestions and/or inputs by stakeholders. The suggestions and/or inputs from stakeholders never came. More than two years after, Sanusi the CBN governor released the final guidelines which cover only non-interest banking according to Islamic commercial law and jurisprudence and has been campaigning for it as if he is on a jihad.

Necessary Distinctions

Fair enough, in the revised guidelines, the CBN recognised two types of non-interest banking: non-interest financial products and services based on principles of Islamic commercial jurisprudence, as well as financial products and services based on any other established rules and principles. So why not introduce all forms of the concept together at the same time? Unfortunately, even if the CBN turns today to introduce the other variants of the non-interest banking concept, people on the other side of the divide can never trust the sincerity of such action because they will only see it as a damage control measure.
Pro-People Policy

The Central Bank said it was introducing Islamic banking in order to open up the financial space to those who were locked out. “Financial inclusion is a major challenge. Almost 50 percent of adult Nigerians do not have access to capital. What is keeping them out? Many things. But to the extent that non-interest banks can address some of the reasons for their staying out, we should encourage them,” said CBN deputy governor (financial systems stability), Kingsley Moghalu, while assuring Nigerians on the genuine intentions of introducing the Islamic variant of non-interest banking.
The CBN seems to be elusive of the fact that while there is a need to redefine the function of capital, it is equally necessary to ensure that such redefinition is not seen to favour one religion over another because it’s not only in the Islamic faith that we have Nigerians who have been excluded from the conventional banking system. Go to Okija shrine, you will find people (pagans) who have been denied access to capital for whatever reasons. You see what I mean?

Islamic Banking in the West

It is irresponsible of the CBN governor to allege that those opposed to the introduction of Islamic banking in Nigeria are not conversant with current happenings in the world as the system is being practised in the United Kingdom and other countries of the world dominated by Christians. He should have told us how that model of banking is doing in those countries. He deliberately dodged that.

What is the point of this banking concept in a developing country which is struggling with mere social amenities? Who will support it and with what resources. The problem with us Nigerians is that we always like to cite countries that are well ahead of us. The government will soon remove subsidy from petroleum products and it tends to hike tariffs on non-available electricity, where will the money come to subsidise for Islamic banking or are we going to get the monies from outside and under what conditions?

Some advanced European and Asian countries may have Islamic banks, but such banks are never the prime movers of those nations’ economies. At best, such non-interest banks are heavily subsidised either by the host state or some oil-rich Middle East countries that want to promote the initiative.

Threat of Corruption and Failure

In a developing capitalist economy like Nigeria, those who may “donate” their heard-earned monies for Islamic banking may never be those who earned their money through honest means. If dishonest people “donate” start-up funds for Islamic banks, we may eventually have situations where depositors’ monies evaporate like during the early and mid 90s’ banks in Nigeria. And above all, taking monies from dubious sources defeats the entire concept of Islamic banking which stipulates that all monies used for transactions must come from honest earnings.

A report last June by the New York-based Wall Street Journal warned that “Islamic banking has not necessarily produced great returns. Regulators must do a thorough job before approving any application for Islamic banking.” Quoting Junaid Bhatti, part of the team that set up Islamic Bank of Britain (IBB), the report said “the first Sharia-compliant bank approved by the Financial Services Authority has been a big disappointment. Sharia-compliant banking products have been a flop in Britain.”


Those who are well-informed on the matter would agree that there is no market for Islamic Banking in Nigeria yet or anywhere in Africa and this is the truth. The current gimmick is merely political. The banking system is too sophisticated and given the human mindset, very difficult to practice. It’s like communism, very nice ideas, but a failure in practice. Only in countries in which Islamic Banking is heavily subsidised by the state, has it been practicable.

For whatever reasons Sanusi is just deceiving Nigerians and seeking to divided them on such a very emotive issue.


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