Regulation not Mere Legislation: The Issue of Enhancing Islamic Banking Performance Across Nigeria

Abstract

The subsisting economic hardship underscores the promotion of financial stability through inclusive financial regulations. The low-performance of conventional policies warrants the striving for uniform regulation and protection of conventional and non-interest financial institutions. In Nigeria, financial regulations do not pay attention to inventive Islamic financial products and Islamic delivery mechanisms. This situation does not help to achieve a positive performance in Islamic banking services in the country. Via a review of previous literature, this paper aims to discuss the policies of the Central Bank of Nigeria (CBN) on conventional and Islamic banking systems. The review outcomes suggest that only restricted policies are available for non-interest financial institutions across Nigeria, and the existing protections are far from creating long-term welcoming results. According to the review outcomes, many studies are not conclusive about the particular aspects that need improvements between regulation and legislation of financial institutions in Nigeria. We argue that existing regulations do not treat all financial systems equitably, and thus, it becomes difficult for Islamic financial institutions to contribute efficaciously and positively to the country’s economic growth. A such, this paper recommends the re-composition of the regulatory framework on equitable protection basis for every financial institution across Nigeria. This review contributes to the existing literature on the heightening of the economic and financial system across Nigeria by proposing regulation and legislation amendments. Further research may explore how effective policies can be formulated to achieve a positive performance of Islamic banking in Nigeria.