CBN warns against rising risks in non-interest banking industry

The Central Bank of Nigeria (CBN) has raised concerns over increasing risks confronting Nigeria’s non-interest banking sector, warning that poor management of emerging challenges could weaken public confidence and threaten financial stability.

The CBN gave the warning during the 2nd Annual Interactive Session between the CBN Financial Regulation Advisory Council of Experts (FRACE) and the Advisory Committees of Experts (ACE) of Non-Interest Financial Institutions held recently at the CBN Auditorium in Abuja.

Speaking on behalf of the CBN Deputy Governor, Financial System Stability, Philip Ikeazor, the Director of Financial Policy and Regulation Department, Dr. Rita Sike, described the session as a strategic platform for deepening the credibility, resilience, and soundness of the non-interest financial services industry.

Ikeazor noted that the engagement builds on the foundation laid during the inaugural session and reinforces the Bank’s strong commitment to sustaining a sound, credible, and resilient non-interest financial system anchored on robust governance, effective compliance, and prudent risk management.

Ikeazor emphasised that Non-Interest Financial Institutions (NIFIs) continue to play an increasingly strategic role in Nigeria’s financial system by providing ethical and Shariah-compliant alternatives to conventional finance, while contributing meaningfully to financial inclusion, real sector financing, MSME development, and shared prosperity.

The CBN deputy governor, however, noted that as the industry grows in size, sophistication, and interconnectedness, it faces unique risks, particularly non-compliance risk, governance challenges, operational vulnerabilities, and emerging technological risks.

He warned that such risks, if not properly managed, could undermine public confidence, financial stability, and the overall credibility of the non-interest finance ecosystem.

He explained that the establishment of FRACE and the mandatory constitution of ACEs in every NIFI were designed to institutionalise an effective, harmonised, and resilient governance framework across the industry.

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Ikeazor added that sustained interaction between FRACE and ACE remains central to ensuring that regulatory expectations are clearly understood and consistently applied.

“The objectives of today’s session include fostering the institutionalisation and effective operation of a robust Shariah governance system within Non-Interest Financial Institutions, and providing a structured platform for dialogue, knowledge-sharing, and collaboration,” Ikeazor was quoted as saying in a statement issued by the CBN on Tuesday, May 11, 2026.

Ikeazor further reiterated the CBN’s commitment to fostering a strong, credible, and well-governed non-interest financial services industry.

He noted that the growing diversity of products, institutions, and delivery channels particularly with the emergence of Islamic fintech, underscores the need for continuous dialogue, sound regulatory oversight, and robust advisory input from scholars and practitioners.

In his remarks, the Deputy Chairman of FRACE, Prof. Bashir Umar, stressed that the interactive session was aimed at strengthening governance in the sub-sector and providing a platform for positive and constructive engagement between the CBN FRACE and the ACEs of NIFIs.

Umar commended the CBN management for reviving the interactive session, which was first instituted in 2014.