Fitch Forecasts Growth for Nigeria’s Islamic Finance and Sukuk Market Despite Challenges
Fitch Ratings projects notable growth for Nigeria’s Islamic finance sector from the second half of 2025 through 2026, fueled by increasing sovereign sukuk issuances and expanding Islamic banking assets. The boost comes amid regulatory changes, including raised paid-in capital requirements, aimed at developing the industry. This growth follows a two-year pause after which Nigeria’s Debt Management Office (DMO) reported N2.205 trillion in sovereign sukuk subscriptions, showing strong investor interest with a 735% oversubscription rate.
Nigeria’s Islamic finance industry, though still small compared to conventional banking, benefits from the country’s large Muslim population and significant unbanked demographic. Fitch estimates the industry’s size at around USD 4 billion by May 2025, with sukuk issuance making up the largest segment (53.9%), followed by Islamic banking assets (45.2%). However, challenges remain, such as limited public awareness, opposition from some segments, restricted product availability, and an evolving regulatory environment.
Non-interest banks in Nigeria have experienced rapid growth, with assets increasing by 110% year-on-year by the end of 2024, driven primarily by rising deposits and loans. Despite this, sukuk issuance remains limited outside government offerings, with corporate and financial institution sukuk issuance hindered by lack of incentives and market complexities. Currently, sukuk make up less than 2% of Nigeria’s debt capital market.
The Central Bank of Nigeria’s 2024 increase in paid-in capital requirements for commercial, merchant, and non-interest banks is expected to further support sector development. Meanwhile, takaful (Islamic insurance) remains a very small segment, accounting for less than 1% of total insurance assets by the end of 2024. Fitch’s recent upgrade of Nigeria’s credit rating to ‘B’ signals growing confidence in the government’s reform agenda.
Overall, Fitch’s outlook suggests that while Nigeria’s Islamic finance industry faces hurdles, its growth potential remains robust, driven by demographic factors, regulatory reforms, and strong sovereign sukuk demand, which could gradually foster a more mature and diversified Islamic finance market.
Source: Nairametrics