Islamic finance in Nigeria has grown substantially, now representing approximately three percent of the country’s financial market with a total estimated value of $3.8 billion.
Speaking at the second African Takaful and Non-Interest (Islamic) Finance Conference, Mr. Olusegun Ayo Omosehin, Nigeria’s Commissioner for Insurance, highlighted the increasing demand for Shariah-compliant financial products. Omosehin reported that Sukuk bonds dominate the sector, making up 59.3 percent of the Islamic finance market, followed by non-interest banking at 39.8 percent, while Islamic funds and Takaful insurance collectively hold 0.9 percent.
The country’s Islamic finance industry currently comprises four non-interest banks, five Takaful operators, 15 microfinance institutions, and 10 non-bank financial entities. Mr. Omosehin noted that NAICOM, in collaboration with other regulators, is working to support the industry’s growth by expanding Shariah-compliant investment opportunities, particularly for Takaful and other non-interest financial sectors.
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In discussing Takaful’s unique role within Islamic finance, Omosehin explained that it stands apart from conventional insurance by focusing on mutual aid and shared responsibility. Unlike traditional insurance, which often involves risk transfer and interest, Takaful operates through a model where members contribute to a shared fund that supports those in need, fostering a sense of community and solidarity.
“By enabling individuals to collectively contribute to a fund designed to assist each other, Takaful embodies the ethical principles of Islamic finance,” he noted.
Since the issuance of the Takaful Operational Guidelines in 2013, NAICOM has licensed five Takaful companies, with the sector now comprising about 1-2 percent of Nigeria’s insurance market. The sector’s future looks promising, with a reported average annual growth rate of over 34 percent in contributions over the last four years.
To support this expansion, NAICOM has adopted a risk-based capital approach, which lowers capital requirements for Takaful operators and encourages new entrants to the market. Additionally, NAICOM has established Market Conduct and Enterprise Risk Management Guidelines for Takaful and Retakaful providers to ensure adherence to best practices and effective risk management.
NAICOM has also conducted public awareness programs to inform citizens about Takaful’s benefits. It works closely with international regulatory bodies, including the Islamic Financial Services Board and the Accounting and Auditing Organization for Islamic Financial Institutions, to provide regulatory guidance, technical training, and industry support.
Emphasizing principles of risk-sharing, social responsibility, and sustainable development, Islamic finance—including Takaful—aims to foster resilience, inclusivity, and ethical, long-term growth across Nigeria’s financial landscape.
