Nigeria’s Islamic finance industry is likely to expand from the second half of 2025 through 2026 on the back of increasing sovereign sukuk issuances and Islamic banking assets, driven by new paid-in capital requirements and regulatory moves to develop the industry, Fitch Ratings says.
After a two-year break, the Debt Management Office (DMO) announced that the Federal Government has successfully recorded a total of N2.205 trillion subscriptions through the Sovereign Sukuk since its debut in 2017, representing an oversubscription of 735%, demonstrating strong investor appetite for sharia-compliant instruments in Nigeria’s debt capital market.
Fitch stated, “Nigeria has notable potential for Islamic finance, supported by having one of the largest Muslim populations globally and a significant unbanked population. Still, Islamic finance in the country is still expected to be significantly smaller than that of conventional financial institutions, with the industry facing key challenges, such as lack of awareness, strong opposition from segments of the public, limited product availability and distribution channels, still-developing regulatory framework and limited Islamic banks (non-interest banks).
“The size of Nigeria’s Islamic finance industry was estimated to be around USD4 billion by end-May 2025. Sukuk outstanding is the largest segment of the Islamic finance industry at 53.9%, followed by Islamic banking assets at 45.2%, and the rest includes takaful and sharia-compliant funds,” the rating agency noted.
According to Fitch, non-interest banks’ assets recorded a growth of 110% year-o-year as of end-2024, driven by a significant increase from deposits and loans, each more than doubling in value.
“As of 5M25, the sukuk in Nigeria (all in naira) were USD2.2 billion outstanding, a decrease of 4% yoy, with their share of the country’s debt capital market outstanding at under 2%. Bond issuance (all currencies) in 2024 was almost twice that in 2023, while it reached USD12 billion in 5M25 (5M24: USD18 billion). The absence of sukuk issuance by corporations and financial institutions reflects the lack of incentives and demand, additional issuance complexities, and a relatively underdeveloped sukuk market,” Fitch stated.
In 2024, the Central Bank of Nigeria announced a significant increase in paid-in capital requirements (share capital plus share premium) for commercial, merchant, and non-interest banks.
Takaful in Nigeria continues to have less than 1% of total insurance industry assets as of end-2024.
In April 2025, Fitch upgraded Nigeria’s rating to ‘B’ from ‘B-’, reflecting increased confidence in the government’s broad commitment to policy reforms initiated following the shift to orthodox economic policies in June 2023.