Friday, January 07, 2022 / 11:00 AM / Bukola Akinyele-Yisau  forWebTV / Header Image Credit: WebTV

Despite global economic uncertainties, the IslamicFinance industry will continue to attract new players in 2022 and beyond,creating more value and supporting economic stability.

Mr. Ndako Mijindadi, the Head, Investments andResearch, Lotus Capital Limited, made this point while providing his views on "Non-Interest Finance Market and Nigeria's Sustained Economic Recovery in2022".

Providing further insight on what would constitutesuccess for Islamic finance and investments in Nigeria, Mijindadi believedIslamic finance was on an upward trajectory. He noted that it has evolved intokey segments like insurance, banking, pensions, microfinance and capital marketinvestments. Mijindadi believed that the market would continue to expand with afavourable regulatory environment.  

On key trends that will shape the non-interest financemarket in Nigeria, Mijindadi was optimistic that the Sukuk market wouldbe a significant driver, and this also hinges on effective structuring.

According to him, "With proper structuring of the Sukukmarket, there will be multiple issuance from the national and subnationalgovernments, more innovative products and a significant growth in the assetmanagement space".

Speaking on the new variant and how it affected theglobal and national markets, he described Islamic finance, also known as thenon-interest finance market, as resilient regardless of the pandemic. He notedthat the institutions and the industry have continued to grow despite thechallenges that came with the COVID 19 induced lockdowns and slowdown ineconomic activities.

In 2020 and 2021, he said that Nigeria witnessedsignificant growth in the asset management segment, an increase in the numbersof asset management firms operating non-interest finance products due to thepandemic. There was also an increase in savings for some people restricted fromtravelling, as they deployed their funds in areas that created value for them.

Also, in the banking space, other non-interest financeinstitutions were operating in the market, the takaful companies performed wellamongst operators. In contrast, the Sukuk market continued to achievemomentum in the capital market space.

Speaking from a fiscal standpoint, he acknowledged thenation's revenue challenge and high debt cost. He noted that a lot of work isneeded to improve Nigeria's revenue base through the effective implementationof the national development plan 2021-2025.

"Through this development plan, revenue to GDP ratioshould increase from 8%. Also, tax revenue needs to increase to create asustainable base for the country" - Mijindadi added.    

On the side of challenges facing investorsparticipating in Sukuk issuance, he admitted that the level ofoversubscription in the Sukuk market shows an appetite for thenon-interest market.  He stressed the need for more issuances and improvedliquidity in the rapidly growing market.

Looking at the performance of Mutual funds in Nigeriain the previous year, the halal equity index compared with the ASI and theprospects in 2022.  He said it was an exciting year for the equities market.In Q1 2021, he noted that the All Share Index (ASI) was down by 5.8%, and theIslamic lotus index was also down by 3%, which showed more resilience than thebroad market by half-year(H1,2021).   

From Q3, 2021, the analyst highlighted that theIslamic index was back positive by 2%, while the broad market index was stillnegative. The Islamic index finished 2021 with 5.74%, which marked the secondconsecutive year that it recorded gains.  He explained that this wouldcontinue in 2022 as some of the major drivers of the activities in the Islamiccomponent index that range from the telecommunication market players like MTN,industrial goods segment players, and those from the consumer goods willcontinue to serve as significant components of the Islamic NGXIndex.   

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