CBN warns Islamic Banks over compliance risks

CBN Islamic Banks risks warning highlights governance and compliance concerns in Nigeria’s growing non-interest finance sector

The Central Bank of Nigeria has warned non-interest financial institutions against governance and compliance failures capable of threatening public confidence and financial stability within Nigeria’s expanding Islamic finance sector.

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The warning was issued on Monday following the second annual interactive session between the CBN Financial Regulation Advisory Council of Experts and the Advisory Committees of Experts of Non-Interest Financial Institutions held at the apex bank’s auditorium in Abuja.

Speaking through the Director of the Financial Policy and Regulation Department, Rita Sike, Deputy Governor for Financial System Stability, Philip Ikeazor, said the rapid growth of the industry had exposed operators to increasing operational and regulatory vulnerabilities.

According to the statement issued by the CBN, Philip Ikeazor identified non-compliance risks, governance weaknesses, operational vulnerabilities and emerging technological threats as major concerns facing the sector.

“He warned that such risks, if not properly managed, could undermine public confidence, financial stability and the overall credibility of the non-interest finance ecosystem,” the statement said.

The apex bank explained that the engagement formed part of broader efforts to strengthen Shariah governance, improve regulatory clarity and reinforce risk management standards across non-interest financial institutions.

The CBN noted that Islamic finance institutions were becoming increasingly important within Nigeria’s financial system by providing ethical and Shariah-compliant alternatives to conventional banking services.

According to the bank, the sector is also contributing significantly to financial inclusion, real sector financing and the growth of micro, small and medium-sized enterprises.

The statement further explained that the establishment of the Financial Regulation Advisory Council of Experts and the mandatory creation of Advisory Committees of Experts across non-interest financial institutions were intended to institutionalise a harmonised governance framework for the industry.

Philip Ikeazor stressed that regular engagement between regulators and advisory committees remained essential to ensuring that regulatory expectations were properly understood and consistently implemented.

“The objectives of today’s session include fostering the institutionalisation and effective operation of a robust Shariah governance system within Non-Interest Financial Institutions, and providing a structured platform for dialogue, knowledge-sharing and collaboration,” he said.

Deputy Chairman of the Financial Regulation Advisory Council of Experts, Bashir Umar, said the session was designed to strengthen governance practices within the non-interest finance sub-sector.

Bashir Umar also commended the management of the CBN for reviving the engagement platform, which was first introduced in 2014.

In her remarks, Rita Sike reaffirmed the apex bank’s commitment to building a resilient and well-regulated non-interest financial services industry.

She observed that the increasing diversity of products and delivery channels, particularly the rise of Islamic fintech, had intensified the need for stronger oversight and sustained collaboration among stakeholders.

“The growing diversity of products, institutions and delivery channels, particularly with the emergence of Islamic fintech, underscores the need for continuous dialogue, sound regulatory oversight and robust advisory input from scholars and practitioners,” Rita Sike stated.

The session featured technical presentations on Shariah non-compliance risks and the role of Islamic fintech in expanding financial inclusion across Nigeria.

Participants included members of the Financial Regulation Advisory Council of Experts, chairmen and members of Advisory Committees of Experts, managing directors of non-interest banks, senior CBN officials and representatives of the Bank of Industry and the Securities and Exchange Commission.

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The development comes amid growing calls by experts in Nigeria’s non-interest finance sector for larger and more frequent Sukuk issuances to deepen the market and unlock long-term infrastructure financing opportunities.

Victory Emmanuel