An Islamic Finance Executive and Business Management Expert, Ambassador Asiwaju Busari Shaamsuddeen Akande is the founder of the first Islamic Institute of Accounting and Finance in Africa since 2010. In this interview, he declares that Islamic financing or Sukuk which is the vogue around the world is the sure bet to revamp Nigeria’s dwindling economy positively. Excerpts:
By Akpan David, Calabar
What opportunities are there in this amplified Sukuk?
Sukuk financing offers a great financing opportunity not just for the government, but the private sector as well. It is a financial instrument for raising capital.
Would you advise that Nigeria should join the countries that are patronising Islamic financing?
I strongly advise the federal government to go innovative with the use of Sukuk financing, not limiting it to road construction without having plans to generate revenue from it. To go innovative, federal government can also finance the proposed Nigeria Air with Shariah compliant aircraft finance transactions using Ijara Sukuk.
What’s Ijara Sukuk?
It is a form of lease pursuant to which the owner of the aircraft transfers the legal right to use and derive profit from the aircraft to another person for an agreed period and agreed rent. An ijara can be combined with sale and purchase undertakings between lessor to lessee to create a product akin to a finance lease. Nonetheless an ijara is different from a conventional lease. The requirements of shariah challenge the traditional allocation of risk and responsibility between lessor and lessee in an aircraft lease transaction.
Are there countries or firms that have adopted this form of airlines financing?
Over the last few years we have seen a number of aviation entities make a foray into the Islamic Finance market. We have the Emirates, Etihad Airlines, Saudi Arabian Airlines, Air Arabia, Royal Jordanian, Pakistan International Airlines, Sri Lankan Airlines , Garuda Indonesia, Malaysian Airlines, Turkish Airlines , Ethiopian Airlines and Air Asia.
What can the country benefit from this form of financing?
Nigeria as a country and an Islamic Finance hub in the sub Sahara can benefit from the growth of the global Islamic Finance assets. Already, Nigeria government is into Sukuk financing with a structured special purpose vehicle (SPV) named FGN Roads Sukuk Company 1 Plc created to serve as the Investment entity for investors. Nigeria can also benefit from the Islamic Finance global asset as it is sharing common goal with sustainable societal impacts. Nigeria in particular and West Africa in general could further go innovative.
How can the country do this?
The Security and Exchange Commission (SEC) can establish what we call a Green Sukuk Framework, under which SEC and its subsidiaries could raise Green Sukuk in conjunct with SEC’s sustainability strategy. But, major concern here is that, Nigeria as a country has no benchmarking with any country. USA is looking at China as a benchmark, which country is Nigeria benchmarking? Nigerian economy is growing at 2%. We ought to make use of our population advantage like India, Brazil and China do.
How can the country revamp the economy?
I implore the President Muhamnadu Buhari led government to look critically into the recent World Bank advice regarding total removal of Fuel Subsidy because this only benefits the rich. Nigeria should open all closed borders for trade, reduce delays in border and port clearance and cut down conventional debts as well as explore the Global Islamic Finance Windows. Let me also recommend that toll gates should as a matter of urgency be embarked upon. All Nigerian Government needs is multiple channels of revenue generation.
Are you saying that Islamic financing is the way forward?
Islamic Finance remains one of the rapid growing sectors in the international finance industry. It is a principled approach to financing and an alternative view of leasing. Estimates of the current size of the Islamic Finance market range from US$2.5 trillion to US$2.7 trillion, with an expectation that the market will expand to reach US$3.4 trillion by the end of 2023. Islamic Finance is well suited to asset finance and has adapted to provide an alternative to conventional financing structures, building upon the religious and legal principles which are it’s foundations.It is necessary to also note that, No unfair exploitation, any return on money employed should be linked with the profits of the enterprise. There must be full disclosure by both parties to a transaction.
What’s your advice?
My strong advice is for the federal government to go innovative with the use of Sukuk financing, not limiting it to road construction without having plans to generate revenue from it. Sukuk financing offers a great financing opportunity not just for the government, but the private sector as well. It is a financial instrument for raising capital.
Yes with the view and the explanation of sukub financial institution it will be of great benefits if Nigeria and other countries can do it