Amid Growth, CBN Warns Non-Interest Finance Institutions Exposed to Rising Governance, Technology Risks
James Emejo in Abuja
Central Bank of Nigeria (CBN), yesterday, warned that rising governance failures, operational weaknesses, and emerging technology-related threats in the non-interest financial services industry could erode public confidence and threaten financial system stability if left unchecked.
The apex bank gave the warning at the Second Annual Interactive Session with the CBN Financial Regulation Advisory Council of Experts (FRACE) and the Advisory Committees of Experts (ACE) of Non-Interest Financial Institutions (NIFIs) in Abuja.
CBN Deputy Governor, Financial System Stability Directorate, Mr. Philip Ikeazor, said although non-interest financial institutions had become increasingly strategic to the country’s financial ecosystem through ethical and Shariah-compliant financing, the rapid growth and increasing sophistication of the sector had also exposed it to new vulnerabilities.
Represented by CBN Director, Financial Policy and Regulation Department, Dr. Rita Ijeoma Sike, Ikeazor identified non-compliance risks, governance challenges, operational vulnerabilities, and emerging technological threats as key concerns confronting the sector.
He warned that failure to effectively manage such risks could undermine public trust, weaken financial stability, and damage the credibility of the country’s non-interest finance ecosystem.
According to him, the CBN remains committed to strengthening Shariah governance, regulatory clarity, and prudent risk management frameworks to sustain the orderly growth and resilience of the sub-sector.
He explained that the establishment of FRACE and the mandatory constitution of ACEs across non-interest financial institutions were aimed at institutionalising a harmonised governance framework capable of ensuring effective oversight and compliance within the industry.
In a statement, Ikeazor stressed that continuous engagement between FRACE and ACEs was essential to ensuring that regulatory expectations were clearly understood and consistently implemented across institutions.
He described the interactive session as a strategic platform designed to deepen collaboration, strengthen governance structures, and promote knowledge-sharing among regulators, scholars, and industry practitioners.
The CBN deputy governor said, “Non-interest financial institutions 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, MSME development, real sector financing, and shared prosperity.”
In his remarks, Deputy Chairman of FRACE, Professor Bashir Umar, said the engagement was designed to strengthen governance standards within the non-interest finance industry and foster constructive dialogue between regulators and operators.
Umar commended the management of the central bank for reviving the interactive session, which was first introduced in 2014.
Earlier, Sike reiterated the CBN’s commitment to building a strong, credible, and well-governed non-interest financial services industry, stating that the rapid emergence of Islamic fintech and expanding product offerings required stronger regulatory oversight and sustained stakeholder engagement.
A member of FRACE, Professor Abdul-Razzaq Alaro, commended participants for their active engagement and expressed appreciation to the CBN for convening the session.
Alaro urged stakeholders to take concrete steps towards implementing the resolutions and outcomes of the engagement, stating that the value of the session would ultimately be measured by the practical improvements recorded across the subsector.
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.
Essentially, 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, ACEs perform corresponding advisory and oversight functions at the institutional level within NIFIs.