ISLAMIC FINANCE, AN ALTERNATIVE STRATEGY TO PROJECT FINANCE AND

INFRASTRUCTURE DEVELOPMENT: OPTION FOR NIGERIA

Hamisu Ibrahim

Department of Business Administration

Kwararafa University, Wukari, Taraba State

ABSTRACT

Islamic finance is based on principles of Shariah or “Islamic law”. The major principles of shariah are ban on interest, a ban on contractual uncertainty, adherence to profit/ risk sharing, promotion of ethnical investments that enhances society, and asset backing. The international market for Islamic finance is growing at the rate of 10-12% annually and through international and regulatory bodies, there has been effort to standardize regulations in Islamic finance across different countries and institutions. Nigeria with a growing population of over 140 million require huge funding to provide critical infrastructure to cater for its teeming population  which is not forth coming from the conventional financial institutions. The finding shows that, due to the recent global financial crisis, conventional financial institutions were reluctant to provide funding for infrastructural development to both developed and developing economies. Alternatively, Nigeria can utilize cheap funding option through Islamic financing instruments as Sukuk (Islamic bond) and Mushakarah (Partnership/Joint venture), a non- interest instrument which can provide much needed finance for the development of critical infrastructure as well as collaborating with Islamic development bank to access free donation and non- interest loan for investment in infrastructure which is critical in achieving the target of the millennium development goals. Based on the findings, the following recommendations were made; that the central bank of Nigeria should establish the National Shariah advisory council which  would be responsible for guiding Islamic financial institutions in Nigeria, as they emerge, to ensure  that their activities fully comply with Shariah principles; and also conventional financial institutions willing to  continue rendering Islamic products and service to customers in Nigeria would also be advised by the council on ways to ensure that the product and services they specifically design for their customers are Shariah compliant.