Islamic principles and economic development of Nigeria

Financial inclusion and social safety nets

Finance literature has established a positive correlation between access to finance and economic development. Finance exerts a significant and positive influence on growth. Financial sector development can contribute to achieving the goal of poverty reduction in Nigeria.

When people do not have access to financial services, they are unable to do a lot of transactions or projects that can improve their lives, including access to credit and cultivation of savings habits. In Nigeria, the banking system is far from the people as banks are concentrated where they consider as commercially viable locations, especially in the cities and places with special projects like industries or educational institutions or government agencies. Let me give some statistics to buttress my position.

Total loans to the private sector by the 22 commercial banks as of June 2017 was N22 trillion to less than 10 million people out of over 90 million bankable Nigerians. Credit penetration in Nigeria is among the lowest in the world because banking penetration itself is low. Besides, millions of Muslims do not believe and do not apply for loans under the conventional banking system.

A major contribution to the phenomenon is the reluctance of the people in Muslim dominated areas to patronise conventional banks. They shun these banks in obedience to the provisions of the Qur’an and the Hadith that prohibits usury as enshrined in Qur’an Surat 2: 275-276 and 3:130.

Qur’an 2: 275-275 states: “Those who devour interest will not stand except as stands one whom the evil one by his touch has driven to madness. That is because they say: “Trade is like usury”, but Allah has permitted trade and forbidden usury. Those who, after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat the offence are companions of the Fire: they will abide therein (forever). Allah will deprive usury of all growth, but will give increase for deeds of charity: for He loves not creatures ungrateful and wicked.”

Qur’an 3:110 states: “O you who believe! Devour not interest, doubled and multiplied; but fear Allah; that you may really prosper.”

A significant improvement is therefore expected with the availability of non-interest/Islamic banking system at both the commercial and microfinance banking levels. Interestingly, the Nigerian banking system, especially the commercial and microfinance banks, have seen the beauty of non-interest banking.

Tackling corruption

The World Bank defines corruption as “the abuse of public office for private gain”. In Islam, corruption has a broader definition and scope. In the Qur’an and Sunnah, corruption refers to a broad range of behavioural digressions that threaten the social, economic and ecological balance.

Corruption includes mischief, abuse, dishonesty, iniquity, wickedness, pervertedness, fraud, stealing, bribery, illegal earnings, falsehood, deception, etc. See Qur’an Surah Al-Baqarah 2:188 for example, which states: “And do not eat up your property among yourselves for vanities, nor use it as bait for the judges, with intent that you may eat up wrongfully and knowingly a little of (other) people’s property.”

Corruption is one of the most significant challenges that have undermined the growth and development of the Nigerian state. The revelations in the last two years are mind-bungling and attest to its heights and dimensions. Islam supports severe punishments for corruption to deter and rehabilitate. In addition, Islam advocates institutional building that discourages, insulates or makes it difficult for corrupt practices. No Muslim who fears to meet his Lord should be found among Nigerian looters and the corrupt because the punishment for corruption in Islam is harsh. We should also not condone all acts of corruption which Islam frowns at, irrespective of the status of the person. Islam treats both the rich and the poor as equals. There are various instances in the Sunnah to prove this. The Prophet (SWT) was said to have said that his own daughter would not be spared the punishment if found to have committed theft. In response to an appeal to waive the punishment for a noble woman, the Prophet said: “O Usamah, how dare you recommend in a matter concerning Allah’s ruling? O people, communities before you perished because they pardoned the accused if he was a man from a noble class but enforced the law on the culprit if he was found to hail from the poor class. By the one in whose hands lie my life, even if Fatimah bint Muhammad committed theft I would cut her hand off”. We should be role models as the Qur’an describes us as the best evolve for mankind. In addition, we should support strict application of the law to all corrupt cases and corrupt people.

Human capital development

Our productivity is low. This stems from the quality of our education and health-care. We need to pay more attention to education, skills acquisition and capacity development. Islam advocates education as a way to address ignorance and build the capacity of citizens for high productivity. Prophet Muhammad (SAW) emphasised the importance of education and urged Muslims to seek it in any part of the world. I call on all the tiers of government to give significant importance to education of citizens under their constitutional responsibility. What makes a nation is the quality of human beings and not the physical and natural endowments. We can only be as great as the quality of human development.

The Federal Government has effectively eliminated the structure and policies that limit financial investments and access to finance for Muslims. The windows of non-interest investment opportunities and banking services at the commercial and microfinance banking levels have eliminated barriers for Muslims who do wish to fulfil Allah’s injunctions in Surah Al-Baqarah 2: 275-276 where Allah prohibits usury. We need to embrace these opportunities as investors, entrepreneurs and consumers. The test case was the just-concluded N100 billion sukuk, which was over-subscribed. We hope that this will encourage future issuance of Islamic or non-interest/ethical instruments and further deepen our presence on the global financial scene.

In the same manner, we should also take advantage of the presence of various products and services on non-interest banking accounts of the banks and insurance companies that have windows for Islamic financial and non-banking financial services. The era of Muslim consumers and entrepreneurs not using the banking system because of the absence of non-interest banking services is gone. In addition, I urge entrepreneurs and Islamic organisations to venture into the establishment of non-interest microfinance banks to promote financial inclusion and make banking services available to millions of Muslims who have been yearning for this.

Allah enjoins Muslims to pursue legitimate economic and commercial activities. Surat Al-Baqarah 2:201 is a good prayer point asking Allah to give us good in this world, and good in the life to come. In a few other verses I referred to before, Allah permits us to engage in trade. Foremost Islamic states flourished in commerce and a lot of Islamic countries still do. Allah frowns at indolence and begging. Allah loves those who work hard and earn legitimate income and pay zakat and perform charities through them.

The post-recession management of our economy should focus on policies, initiatives, and programmes that would make us realise the noble economic objectives enshrined in our constitution to promote the prosperity of individuals and the nation, balanced growth and securing the maximum welfare and happiness of every citizen.

The objectives accord with the principles of Islam. But such a state will be achieved only if we achieve economic growth that is inclusive and minimize inequality. We also believe that this will make a lot of Nigerians to be better off, without making anyone worse off.

Being excerpts from a lecture delivered by the Managing Director, CRC Credit Bureau, Lagos, Alhaji Ahmed ‘Tunde Popoola, at a programme to celebrate the 57th independence anniversary of Nigeria, organised by the Nigerian Supreme Council for Islamic Affairs (NSCIA), held at the National Mosque, Abuja, penultimate Friday.