Islamic Banking Is Illegal - Court

A Federal High Court sitting in Abuja, on Friday, declared the non-interest financial institution operating under the principles of Islamic jurisprudence as illegal and unconstitutional. 

 Delivering judgement, in a suit filed by one Godwin Sunday Igboji, challenging the licence issued to Jaiz Bank by the Central Bank of Nigeria (CBN), Justice Gabriel Kolawole, held that had it not been that the plaintiff lacked the locus standi to institute the action, he would have nullified the licence issued to the Jaiz International Bank Plc to carry out Islamic banking in the country. 

 According to him,”There are no provisions in the CBN Act and the banks provided for in the Banks and other Financial Institutions Act (BOFIA) that empowers the CBN Governor, Sanusi Lamido Sanusi, to issue license for non-interest financial institution to operate under the principles of Islamic jurisprudence without the approval of the Head of State through the Minister of Finance. 

 ‘’Unlike the other specialised bank, the Jaiz International Bank Plc can only be established in the country with the intervention of the National Assembly by amending the BOFIA Act. ‘’If not that the plaintiff has no locus standi to maintain this action, I would have nullified the illegal license issued to the Jaiz International Bank PLC by the CBN to operate non-interest banking under the principles of Islamic jurisprudence.

 ‘’This case is hereby struck out for lack of locus standi, but the AGF should take steps to remedy the situation, and further ensure that the CBN carries out its duties within the provisions of the law establishing it,” he argued. Ogboji had asked the court to declare a license issued to Jaiz International Bank Plc by the Central Bank of Nigeria (CBN) illegal, null and void. 

 The plaintiff had joined the CBN Governor, and the Attorney-General of the Federation (AGF) as co-defendants. He asked the court to hold that the CBN’s guidelines for the regulation and supervision of institutions offering non-interest financial services in Nigeria under Islamic commercial jurisprudence published in the Thisday newspaper of June 23, 2011 is ultra vires, illegal, null and void. Share

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Nigeria’s first Islamic bank begins business in three branches

Nigeria’s first licenced Islamic bank, Jaiz Bank Plc, has commenced full operation of non-interest commercial banking in Nigeria from three branches in Abuja, Kaduna and Kano.

A staff of the bank in Abuja Office said most of the early customers were groups of business institutions and private individuals from different religious persuasions making enquiries as well as opening different accounts.

The officer in Operations Department said the service of the bank was opened to everyone that is interested in the non-interest products.

The introduction of Islamic banking is part of a drive by the Central Bank of Nigeria, CBN, to propel Nigeria’s economy and promote financial inclusion by introducing alternative products. The non-interest regime offers veritable incentives and attractive options for investors.

At its inaugural Annual General Meeting (AGM), Chairman of Jaiz Bank, Alhaji Umar Mutallab said: “The whole idea of the banking option is to bring more people into banking in Nigeria that provides banking without interest.”

Mutallab, who was Chairman of FirstBank, further added: “This kind of banking is for all religions because no religion wouldn’t want to help, especially funding critical project without using interest elements.

“Whether it is Christianity or Judaism, every community wants to borrow money without being bugged down with multi-layer interest structure.

“This banking option is a product with a difference. We hope our brothers from the divide will see it as an ethical bank which is not meant to promote a particular religion. It is for all Nigerians and not Muslims alone. Once you have a viable project proposal which is ethical, which doesn’t cater for such things as liquor, gambling etc, it becomes a halal (lawful) project and would be looked into by the bank.”

Islamic banking, also known as participant banking, is banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. The system prohibits the fixed or floating payment or acceptance of specific interest or fees like usury for loans of money.

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Islamic banking licenced in Southwest in 1963 (short history)

An Islamic Scholar and University of Ilorin Lecturer, Dr Ibraheem Abikan, has disclosed that Islamic banking was first licenced in the South-West zone in 1963.

Abikan made the disclosure on Monday in Ibadan while delivering the 13th Ramadan Lecture entitled “Viability of Islamic Banking in Nigeria, Issues, Challenges and Prospects”.

The event was organised by the Muslim Lawyers Association of Nigeria (MULAN), Oyo State branch.

He said that the bank was then known as “Muslim Bank of West Africa“ and was licenced under the regulatory body of the financial institution of the era.

The lecturer explained that the licence was later withdrawn by the authorities of the then Western region barely after four years of operation.

Abikan said that it was unfortunate that the government at the region did not allow the bank to operate fully.

He said, “unlike the fixed deposit account that operates in the conventional banks, Islamic banking only allows for the general purpose investment account”.

According to him, general purpose account encourages distribution of wealth according to the profit or loss made by the bank on every investment it undertakes with the active backing of the shareholders on its deposit.

The bank, according to him, was interest-free and was capable of giving a leap to Nigeria’s socio-economic advancement as being witnessed in other countries.

The lecturer admonished those criticising the CBN Governor, Mr Lamido Sanusi to be fair on their criticisms and allow the bank to operate and see whether the wide gap between the rich and the poor would not be drastically reduced.

He called on all Nigerians to do away with sentiments and give the bank a chance.

The Chairman of MULAN, Tajudeen Abdul-Ganiyu, said the lecture was chosen on the need to enlighten the public on why Islam forbade interest-taking by the banks, saying “Islam totally forbids interest on loan”. (NAN)


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Islamic banking: PFN urges Jonathan to sack Sanusi

Pentecostal Fellowship of Nigeria, PFN, yesterday, urged President Goodluck Jonathan to sack Governor of Central Bank of Nigeria, CBN, Malam Lamido Sanusi, over the controversial Islamic banking system.

PFN Vice-President, South-West zone, Bishop Francis Wale Oke, said that Sanusi had lost the capacity to regulate the nation’s banking industry.

He said: “Having become a promoter of a sensitive and volatile issue as the Islamic banking project, we have lost confidence in the CBN boss.”

Bishop Oke said the Islamic banking project was capable of eroding the nation’s territorial integrity and sovereignty.

He said: “The secular status of the country still remains non-negotiable as provided for in the 1999 Costitution. The approach of the CBN governor should be reviewed, especially as he is the governor of an Islamic bank.”

Bishop Oke cautioned Islamic clerics threatening fire and brimstone over Sanusi’s banking system to be “mindful of the consequences of their unguarded inflammatory utterances.”

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