The Islamic finance fixed to growth such as Sukuk, bank reforms earn momentum

The Islamic finance industry of Nigeria is ready for a renewed expansion from the second half of 2025 to 2026, led by an increase in the issue of Sovereign Sukuk, growing Islamic banking and regulatory reforms, Fitch rating have provided.

According to the global rating agency, recent developments, including new paid capital requirements for non -affected banks and support policies reforms, will accelerate the growth of the financial sector in accordance with Sharia, despite the persistent structural and market challenges.

After a two -year break, the Nigeria debt management office (DMO) resumed Sukuk offers, reporting a cumulative subscription of N2,205 trillion from the emission of girl in 2017.

This represents a rate of registration at the 735 percent stroke, underlining a strong appetite of investors for Islamic tools in the debt capital market in Nigeria.

“Nigeria has a significant potential for Islamic finance, supported by one of the largest Muslim populations globally and a significant non -banking demography,” Fitch observed.

However, the agency warned that the sector remains significantly smaller than conventional finance due to a series of limitations, including low awareness, limited availability of the product, weak distribution networks and a underdeveloped regulatory framework.

At the end of May 2025, Fitch estimates the total dimension of the Islamic finance industry of Nigeria at $ 4 billion. The Sukuk segment dominates the market with 53.9 percent, followed by Islamic banking at 45.2 percent, with the rest divided between Takaful (Islamic insurance) and investment funds in accordance with Sharia.

The rating agency highlighted a solid growth of the not interested banks, with the activities that double the year by year in 2024. “Deposit and loans have more than doubled, contributing to an increase of 110 % of the activities of the not interested banks”, said Fitch.

Despite this growth, Sukuk’s business and financial institutions remain absent due to the lack of incentives, the constraints of demand and the greater complexity of the structure in accordance with the sharia.

Starting from May 2025, Sukuk in suspense (called in Naira) was $ 2.2 billion, marking a 4 % decrease on an annual basis and, representing less than 2 % of the total capital market of the debt of Nigeria.

Fitch also observed that the issue of bonds on all currencies has almost doubled in 2024 compared to the previous year, for a total of $ 12 billion in the first five months of 2025, although Sukuk represented a marginal share.

Takaful remains underdeveloped, contributing less than 1% of the total activities in the Nigeria insurance sector at the end of 2024.