CBN, FRACE deepen governance framework for non-interest financial institutions

The Central Bank of Nigeria (CBN) has reaffirmed its commitment to strengthening Shariah governance, regulatory clarity, and risk management in the non-interest financial services industry as part of efforts to sustain public confidence, financial stability, and the orderly growth of the sub-sector.

The commitment was restated at 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 on Thursday, May 7, 2026, at the CBN Auditorium.

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

Mr. 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.

He 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 Deputy Governor, however, observed 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. He 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” he stated.

In his opening remarks, the Deputy Chairman of FRACE, Prof. Bashir Aliyu 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. He commended the CBN Management for reviving the interactive session, which was first instituted in 2014.

Earlier, in her welcome remarks, Dr. Rita Ijeoma Sike, Director, Financial Policy and Regulation Department, reaffirmed the Bank’s commitment to fostering a strong, credible, and well-governed non-interest financial services industry.

She 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.

The session featured two technical presentations. The first, delivered by Prof. Bashir Aliyu Umar, was titled “Shariah Non-Compliance Risk in Non-Interest Banks and its Impact on the Non-Interest Financial Services Industry.” The second presentation, on “Islamic Fintech and Financial Inclusion,” was delivered by Muhammad Kabir Muhammad and Mustapha Ishaq.

A major highlight of the programme was the interactive session between FRACE and ACE members, which allowed for frank discussions on practical challenges, capacity building, independence of ACEs, risk mitigation strategies, and measures for enhancing governance and innovation in the sub-sector.

In his closing remarks and vote of thanks, Prof. Abdul-Razzaq  Alaro, a member of FRACE, commended participants for their active engagement and expressed appreciation to the CBN for convening the session. He urged stakeholders to take concrete steps towards implementing the resolutions and outcomes of the engagement, noting that the value of the session would ultimately be measured by the practical improvements recorded across the subsector.

FRACE serves as a bridge between conventional financial regulation and specialised faith-based financial practices by promoting consistency, credibility and investor confidence in Nigeria’s non-interest finance sector. Through its advisory role, it supports standardised interpretations, assists the CBN on complex regulatory issues, and contributes to ensuring that non-interest financial activities are legally regulated, ethically grounded and properly aligned with applicable principles. Similarly, the ACEs perform corresponding advisory and oversight functions at the institutional level within NIFIs.

The 2nd Annual FRACE–ACE Interactive Session brought together members of FRACE, Chairmen and members of various ACEs, Managing Directors of Non-Interest Banks, senior CBN officials, and other key stakeholders including representatives of the Bank of Industry and the Securities and Exchange Commission.