This dissertation looks at legal and institutional framework for Islamic banking in Nigeria with a view to identifying the challenges in the laws regulating Islamic banking as a part of the banking sector in Nigeria. Islamic banking unlike conventional banking derives its inspiration and guidance from the religious edicts of Islam. As such, it has to conduct its operations strictly in accordance with the directives of the Shari’ah. The main problem faced by Islamic banks is that governments often impose the laws governing the practise of conventional banking on Islamic banks. There is also a lack of understanding between the religious advisors and the bankers. This is because religious advisors do not understand the day to day operational needs of bankers and the bankers in turn do not necessarily understand the constraints of the religious principles. The objective of this research is to make analysis of the legal and regulatory framework for Islamic banking in Nigeria with a view to identifying the laws regulating Islamic banking, its limitations, its challenges and proffer solution where possible. In view of the above, the findings in this research reveal inadequacy of existing legal framework regulating Islamic banking in Nigeria. The major problems bedevilling the success of Islamic banking as a sub-sector in the banking industry have been identified. These include among others the fact that the statutory provisions regulating the operation of Islamic banking in Nigeria are inadequate. Consequently, law reforms are highly recommended. These reforms should however not lead to separate laws governing conventional and Islamic banks, but should involve proactive legislative efforts with a more robust supplemental rule addressing the idiosyncratic features of Islamic banking. Similarly, the dearth of skills and know-how for the operation and regulation of Islamic banking in Nigeria is the lack of educational institutions offering full-fledged certificate or degree programmes. In conclusion, progress needs to be made in developing stronger standardised regulations that are in line with international best practices. This would provide a more stable system within which both Islamic banking and conventional banking will flourish.

CHAPTER ONE: INTRODUCTION

1.1       Background to the Study
Nigeria’s financial system is dominated by the universal deposit money banking sub- sector. Generally, it has witnessed significant transformation since banking business started  in the country in the mid-nineteenth century. Before the establishment of the Central Bank of Nigeria in 1958, the financial system operated largely, under a Laissez faire system and was characterized by the systemic instability and episodic bank failures.1 The emergence of the Central Bank of Nigeria (CBN) brought about a measure of systemic stability as supervision and regulation were enthroned and efforts were made to ensure that only ‘fit and proper’ persons were granted a banking license.2 Similarly, the specialised financial institutions as well as the insurance and pension fund sub-sectors have remained minor players in the financial system, even after several reforms.
Historically to the Muslims, banks were looked upon as a “sinful place” meant for the rich non-Muslims, because it practiced ‘riba’3 which is prohibited in Islam. Their pessimism and fear was based on the provisions of the Quran, which provides thus;
--- they say that trade is like interest (riba), but God hath permitted Trade and forbidden interest (riba)4
At that time, no one, not even Muslims, ever thought that there would one day be such a thing as Islamic banking, Islamic finance and takaful, what more in the next two decades.5 The term takaful comes from the Arabic verb kafal meaning joint guarantee. Takaful is the concept of brotherhood and solidarity. A group of participants pool their resources with the intention of mutual assistance or mutual insurance. What had started as an attempt by Muslims to avoid committing a sin had over a period of three decades developed into a multi- million dollar business. Non-Muslims saw the benefits in it and wanted a share of it. “Conventional” banks also did not want to be left out. Hence they opened “Islamic windows” or Islamic subsidiaries in their banks as part of the banking services offered. Even countries where the word “Islam” was frowned upon and the word “Shari’ah” was almost unknown began to show interest in Islamic banking, Islamic finance and takaful. Indeed they vie to be the Islamic finance hubs in their regions.6 As a result, Islamic banking and finance has become an increasingly important component of the international financial system. As of September 2012, there were more than 600 Islamic financial institutions operating in more than 75 countries across the globe.7 One of the countries most responsible for the unprecedented expansion and popularity of the Islamic finance is Malaysia. Malaysia is the largest Islamic financial hub in the Asia-Pacific region and a role model, in terms of legal and Shari’ah infrastructure, for other countries aspiring to develop their own Islamic finance industry.8
Islamic banking is a non-interest banking that is based on Islamic Law (Shari’ah), it follows the sharia’h, called fiqh muamalat (Islamic rules on transactions). The rules and practices of fiqh muamalat come from the Quran, the Sunnah, and other secondary sources of Islamic Law such as opinions collectively agreed among Sharia Scholars (ijma), analogy (qiyas), and personal reasoning (ijtihad). Although Islamic banking (I-banking) has been institutionalised in North Africa, South Asia and the Middle East since the 1970s, Nigeria, which is reputed as the country with the highest number of Muslims in Sub-Saharan Africa is yet to fully establish it.9 The enactment of the Banks and Other Financial Institutions Act (BOFIA) in 1991, however, set the stage for the institutionalisation of “Profit and Loss Sharing banking” (PLS banking).10 Though, the BOFIA did not provide any specific guidelines for the establishment of “PLS banks”, the Governor of the Central Bank of Nigeria (CBN) has the power to make rules and regulations for the operations, control, supervision and regulation of all financial institutions, including PLS banks.11
The introduction of non-interest banking by the apex bank is seen as another major turning point in the history of banking operations in the country. As expected, the move was greeted with steep resistance from all and sundry in religious groups including experts with astounding years of practise in conventional banking, and the gullible public.12The key issues of concern, especially among the religionists were that the attempt by the CBN was meant to Islamise the industry and expose non-Muslims into some form of financial exclusion13
Nigeria’s financial industry; money and capital market is wholly conventional and secularism reigning for over a century in the country, all the financial institutions are based on the principle of taking and offering interest. However, the position of Islamic Banks on the issue of interest is very clear as enumerated in the Quran and Prophetic traditions.14  Moreover their situation is more precarious when they are required to discriminate in their deposit taking functions and investment operations. Only monies and investments that are Halal or Shari’ah compliant are considered. Those averse to the situation therefore wonder how such banking system could cope under these predicaments. The NIFI for instance does not accept the deposits from casinos, alcoholic industries, proceeds from prostitution, sale of swine, etc. Furthermore, at the level of money market operations, it cannot engage in interbank transactions with other conventional banks, neither float its excess liquidity in the treasury market nor expects any return from safe keeping with the apex bank.15
Islamic financial institutions also face additional risk exposures arising from circular laws and legal political systems that do not support or are hostile to Shari’ah and fiqh principles that govern Islamic finance.16
In the course of this research work, emphasis shall be on the legal framework of Islamic banking in Nigeria and the need for expansion and improvement.

1.2       Statement of the Research Problem
Banks in any country are considered as the nerve of the nation’s economy; they play an important role in the development of the country’s wealth. They also function as a financial intermediary between organisations, companies, government and individuals specifically for the purpose of various transactions. One problem faced by Islamic Banks is that governments often impose the laws governing the practise of conventional banking on Islamic banks, monetary control regulations and credit controls even though Islamic banks do not deal in loans or credits. This in turn tends to hamper innovation and encourage running the banking system on a routine basis. Thus many of the problems of Islamic banks stem from the attitudes of governments toward them.
Another problem is that although religious advisors and bankers are supposed to complement each other, and there is often a lack of understanding between the religious advisors and the bankers. Religious advisors do not fully understand the technical and day to day operational needs of the bankers and the bankers do not understand the constraints of the religious principles. The use of media needs to be looked into by Islamic financial institutions. Even Muslims are not aware of the fact that Islamic banking is being practised. The public needs to be informed about the nature, objectives, and working of Islamic economics and banks. Not enough has been done to bring awareness of this new banking system much less any encouragement to use it.
Increased economic growth and the good performance of Nigeria’s developmental indicators, especially since the beginning of the new and stable democracy, have raised the novel question of whether a strong relationship exists between economic growth and economic development.17 Real issues of poverty are yet to be addressed via the constant economic growth recorded by the Nigerian government and international agencies. This reality calls for a review and reappraisal of economic and banking models adopted by a developing country like Nigeria.

1.3       Aim and Objectives of the Research
The aim of this research work is to make analysis of the legal and institutional framework for Islamic banking in Nigeria with a view to achieving the following objectives:
1.         To identify the problems in the laws that regulates or governs the operation of Islamic banking in Nigeria with a view to proffering solutions
2.         To identify the limitations within the institutions that regulate the operation of Islamic banking in Nigeria with a view to identifying how this can be tackled
3.         To identify the challenges of Islamic banking in Nigeria whilst proffering solutions.

1.4       Scope and limitation of the Research
The research topic is grounded predominantly in banking in the context of Islamic law. It follows therefore that all discourse are centered on the Islamic context of banking. Conventional banking system will only be referred to where necessary for the purpose of either comparison or contrast. Other areas of Law include Law of Banking, Companies and
17 Oshodi B.A. (2014) An Integral Approach to Development Economics: Islamic Finance in an  African Context, Gower Publishing Company, Burlington. p2 Allied Matters Act (CAMA), Banks and Other Institutions Act (BOFIA) and other relevant legislation as may become relevant.

1.5       Research Methodology
The research method used for this research is doctrinal. The materials used for the research are classified into two major sources: primary and secondary sources. The primary sources consist of the Holy Quran, Hadith, Laws on Banking in Nigeria and judicial interpretations of those laws and other relevant laws. The secondary sources consist of journal articles, textbook material, workshop, and seminar conference papers.

1.6       Justification for the Research
The issue of Islamic banking is a topical issue in contemporary economic times. The benefits to the economy cannot be underestimated. However the division of opinion over the relevance of Islamic banking to the Nigerian economy or whether it is introduced in Nigeria to Islamize the country is very much present.
The laws enabling the existence of Islamic banking in Nigeria, as well as its practices have been made to benefit the people irrespective of religious affiliations. Thus the fear of Islamic banking is unfounded, and to address this issue, this research will broaden the minds of students, legal practitioners, legislators, academics and the general public to the practice of Islamic banking.

1.7       Literature Review
Several authors have written on the subject of Islamic finance both in books and in journals, a selected few of which is reviewed in this dissertation. Some of the books on Islamic finance, which have copiously quoted provisions of the Quran and Hadith as primary sources of their research dealt with the general subject of finance while some dealt with specific topic(s) or concept(s).
Abdullahi in his book, A Theoretical Introduction to Islamic Banking and Finance18 making a case for the Islamic banking, argues that the purpose of Islamic Banking is the realisation of the objectives of the Shari’ah by avoiding harm upon individuals, ensuring benefits toward them, and achieving an evil free society, without compromising investors return; all of which are absent in the conventional financial institutions that primarily aim at maximising benefits to their stakeholders, with minimum possible concern for public interests. Hence, the uniqueness of Islamic financial system.
Citing Chapra19 on the need for Islamic Banks, the author observes that every activity of rational human beings has a purpose. It is usually the purpose that differentiates it from other activities. Therefore the justification for Islamic Banks will be there only if its operations are directed towards the realisation of a purpose that cannot be realised by the conventional banking system. Hence, Islamic banks are set up generally to comply with percepts of the Shari’ah. Quoting Schacht20 he defines Shari’ah generally as being a set of norms, values, laws that go to make up a way of life. It is considered the epitome of Islamic though, the most typical manifestation of Islamic way of life, the core kernel of Islam itself. He further argues that the objectives the Shari’ah seeks to achieve have been comprehensively discussed in considerable length by various experts.21
The prohibition of riba (literally means excess increase, or growth) is central to Islamic financial transactions and contracts. He stated that riba according to some scholars22 occurs only in the six items outlined by the Prophet (PBUH) in a Hadith23 thereby allowing for the deferment or increment in the transactions of all other commodities in the same type. Majority of scholars see the cause of the prohibition as the increment or deferment in the exchange of commodities of the same type as outright riba and not necessarily in the six commodities mentioned in the Hadith.
Gafoor24  in his book, Islamic Banking and Finance; Another Approach argues that the capital entrusted to the bank by the depositor must be returned to him in full. According to  the author, whilst proposing an Islamic banking system which fully complies with this requirement, he states that Islamic banking as practised today does not provide capital guarantee in all its deposit accounts. This is one of the major reasons why establishing Islamic banks is prohibited in some countries. There is usually no objection to paying zero interest on deposits. However by guaranteeing deposits and paying zero interest, the proposed Islamic banking system satisfies both the riba-prohibition rule of Islam and the capital guarantee requirements of conventional Banking Acts. Gafoor is seen to try to bring  a balance between the conventional commercial banking system and the Islamic commercial banking system wherein both practices can be wholesome and acceptable to non-Muslim States and Muslims alike. In furtherance of this objective he argues that commercial banks perform two major functions which are money transfer services and (including all current account operations) and money lending. In general the former does not involve any interest. On the other side of the balance sheet, we have two types of deposits: current account (demand) deposits and savings deposits. Here too, the former generally does not involve any interest. Therefore current account operations are free from Riba on both sides of the balance sheet. However the problem lies in respect of savings deposits on the one side and loans on the other because both incur interest. But where the depositor refuses to receive the interest because it is prohibited in Islam then the transaction can be said to be free of riba. Although this may seem to be a viable system, it leaves room for speculation where none is necessary.
It is however worthy of note that some conventional banks have now begun opened a non- interest banking window offering non-interest banking to their Muslim customers.
In furtherance of his arguments and proposal he posits that a model is constructed where the interest charged by the bank is split into several components. Then each of these components is studied to see if it contained the prohibited riba. The idea is that if any one component contains such riba then to see if it can be removed. If some components are free of riba, and others containing riba can be removed, then we have an interest which is free of riba. If this can be achieved, and if the resulting system is viable, then we have a riba-free system that is also viable. And, since it was originally derived from the conventional mode it should also be compatible with it. the author however fails to give a graphic description of how and why these cost components come about, and how one or more will disappear under different conditions , and how all will become zero in person to person transactions have not been given in the book. The proposal may prove to be a little difficult on Muslims who haven't fully come to terms of what Islamic banking is in its ordinary sense let alone a model that seeks to combine both conventional commercial banks and Islamic Banks.
Aliyu25 in a chapter titled, Islamic banking and Finance in Nigeria,: Issues,  Challenges and Opportunities in the book Essentials of Islamic Banking in Nigeria emphasized that the major determinants of soundness of a financial system, its stability and continued survival, are public trust and confidence in its institutions and markets. He explains that as the apex regulatory institution, the Central Bank of Nigeria’s major role, among others, is the maintenance of financial stability and creation of confidence in Nigeria’s financial industry. According to the introduction of non-interest banking in Nigeria by the apex bank issue as another major turning point in the history of banking operation in the country. As expected this move by the apex bank was greeted with steep resistance from all and sundry-religious groups, industry experts, and the public. The key issue of concern was that the CBN was attempting to Islamize the industry and expose non-Muslims into some form of financial exclusion. Critics from other quarters challenge the specific features of the operations of the bank wondering how a banking system will operate without charging of interest on transactions. Other concerns were to do with the capacity of the regulatory institutions; the CBN, Nigerian Deposit Insurance Corporation (NDIC), in ensuring effective regulation and ensuring a risk-free management system in Non-interest Islamic Finance Institutions (NIFIs) at the same time achieving good corporate governance standards, honesty, transparency and accountability. He argues that these fears that the introduction of Non-Interest Finical Institutions is s grand attempt at Islamizing Nigeria is unfounded as Muslims only push for their cause within the frameworks of the constitution of the Federal Republic of Nigeria or the powers it grants to such other institutions within the country. As such the actions of the CBN should be construed in this regard and not as an attempt to Islamise Nigeria. Besides the CBN is not a religious organisation working for or against any religion. He argued further that the introduction of non-interest banking by the CBN is supported by the Banks and Other Financial Institution Act.26
On the issue of the capability of CBN and NDIC to regulate the new mode of banking operation introduced in the country. He argued that it is worthy of note that acting on the powers bestowed on it, the CBN has already demonstrated goodwill on the matter and with cooperation from institutions and government across the globe, particularly in Asia and the Middle East, Nigeria will soon fall in tune with the global best practices. He further stated that the Non- Interest Financial Institutions offer avenues for flow of cross border capital, financial market deepening, financial inclusion in both Muslim minority and majority countries, promotion of monetary policy effectiveness and creation of employment opportunities. Although the author speaks at length about the concerns it is noted that mention was not made of the fact that Islamic Banks are not solely introduced to cater to the needs of the Muslims alone. Non-Muslims are also allowed the bank with the Islamic bank if they so wish.27
Lukman28 in his book, Adopting Best Practices in the Islamic Banking Industry in Nigeria: Some Case Studies observes that it is not too late for Nigeria to join the stream of beneficiaries of Islamic Banking. However precious time and resources are wasted on debating its adoption and practices which should instead be converted to opportunities and utilised for paving the way to the many possibilities Islamic finance offers. Islamic banking systems have long become standard practice around the world, for example in the United Kingdom, Turkey, and Malaysia which can serve as benchmarks for Nigerians. He noted that the Islamic banks are fast growing in other jurisdiction. And whether bearing the Islamic bank or non-interest bank, the Islamic banking system has been successfully introduced. For what matters in the end is the Islamic substance and form of Islamic banking products which represent its value and attractiveness in the eyes of Muslims and non-Muslims alike. He discussed case studies for successful and failed banks around the world and its implications for Nigeria. However he committed to bring it home by showing pragmatic ways of launching Islamic banks in Nigeria with the Laws that are peculiar to it. He however noted that Nigeria needs to take into consideration the factors which led to the success or failure of Islamic Banks.
As to the feasibility of Islamic banking in Nigeria, Deji in her book Feasibility of Introducing Islamic Banking in Nigeria29 took the SWOT (Strength, Weaknesses,Opportunities or Threat) analysis approach. In the SWOT analysis, the Strength and or Weaknesses refer to environmental factors which are internal to the Islamic Banking industry whilst the Opportunity or Threats refer to environmental factors which are external to the nascent Nigerian Islamic banking industry. She reiterated the need for awareness and knowledge of the fields can help overcome most of the challenges encountered in this sector. The writer is in agreement with this author. Following David Romer30 in his growth theory showed that knowledge is associated with increasing returns. Hence, the assumption is that with more knowledge and awareness of Islamic banking products and concepts people especially the non-Muslims will be more receptive and less hostile to the implementation of Islamic Finance.
Mustafa and Yussof31 in their works on the Emergence and Challenges of Islamic Banking and Finance in Nigeria: a stakeholder perception pointed out that in view of the multi-religious, multi-ethnic and cultural characteristics of the country, the emergence and operation of Islamic banking has continued and might continue to witness debilitating problems and challenges such as lack of Shari’ah governance institutions, lack of adequate legal and supervisory framework ad capital inadequacy among others. They noted that for Islamic Banks to be successfully implemented in Nigeria, one of the challenges that need to be addressed is the reframing of the banking laws. Unfortunately, this has remained one of the greatest problems and challenges confronting Islamic Banks in most Muslim countries. Thus in the absence of a comprehensive legal framework, there is going to be  serious problem of proper emergence and operation of Islamic Banking system in the country and perhaps, serious lagging behind as it is the case with Nigeria since 1992 when licences were granted.
The International Shari’ah Research Academy for Islamic Finance,32 stated in their book Islamic Financial System: Principles and Operations that one concept that is closely related to Islamic banking is Mudarabah (Partnership) which is derived from the phrase “al- darb fi alard” which means to make a journey. This literal meaning is related to this type of partnership because normally it requires, particularly in the past, travelling to do business. It went further to state that, technically, mudarabah is a partnership in profit whereby one party (rabbul mal) provides capital and the other party (mudarib) provides labour. Some jurists like Hanafi and Hanbali scholars used the term mudarabah while Maliki and Shafi’i scholars used qirad. The profit, if any, will be shared between them at a mutually agreed ratio. In case of a loss, it will be borne by the capital provider (rabbul mal) and the mudarib will lose his efforts.33 Loss may occur to such partnership due to negligence on the part of the mudarib. The schools of thought have not provided for such instance as to what the fate of the rabbul mal would be where loss is incurred due to no fault of his, but that of the mudarib. Similarly, no statutory ratio is provided for the sharing of profit, thus, weak and poor partners may be manipulated by rich and insincere partners.
Oshodi34 in his book An Integral Approach to Development Economics, Islamic Finance in an African Context, stated that the welfare state signals a move away from the social Darwinist principles of Laissez faire capitalism, seeking to give cognisance to the welfare of the people rather than leaving it in the hands of market forces, but its unable to break away from Enlightenment philosophy or general faith in the sanctity of the market system. He further opines that, Islamic banking and finance is only a subset of the Islamic economic system, which must be aligned with ethics and equity.
The economic system practiced in Nigeria is largely Capitalism, as most business enterprise in the country neglects the welfare of citizens, rather, are so keen on making profit at the expense of citizens. The roles of Islamic teachers have not been highlighted.The CBN guidelines,35 provides for Islamic banking as one of the specialised banks contained in the BOFIA 1991. It is one of the models of non-interest banking, and it serves the same purpose of providing financial services as do conventional financial institutions save that they operate in accordance with the principles and rules of Islamic commercial jurisprudence that generally recognises profit and loss sharing and the prohibits interest (riba). The various guidelines of the CBN do not have the force of law. Similarly, it did not take into account other important financial instruments and modes such as qardh (loan), parallel istisna (build to order), ijarah wa iqtina and ijarah muntahia,(Islamic lease with ownership,) tawarruq(overdraft), wakala (agency), kifal (guarantee) and ju’ualah (service fee).
Abdul36  in an article titled, Corporate Governance on Islamic Banking in Nigeria in the book Essentials of Islamic Banking in Nigeria wrote on corporate governance and  Islamic Banking in Nigeria made a distinction between conventional corporate governance and Islamic corporate governance with the conventional corporate governance the essence of which is to promote efficient corporations that contribute to the welfare of the society by creating wealth, employment, solutions to existing and emerging challenges; responsive and accountable to stakeholders; recognise and protect shareholders right; and adopt an inclusive approach based on democratic ideals of legitimate representation and participation. The concept embraces the achievement through corporate management of the company’s corporate goals of ensuring greater profits for the members.37 Quoting Iqbal & Mirakhor,38 he described the corporate governance in Islamic economic system is a rule based incentive system which ensures social order and justice in the society. The observance of rules of behaviour is a guarantee for the internalisation of stakeholders’ interest alongside that of the society as a whole. He added that corporate governance is important for the development of a sound Islamic financial system. The Islamic Shari’ah board which is usually a vital of the governance system in Islamic banks ensures compliance with the appropriate Islamic principles. The board plays a vital role of supervision and consultation. He noted that the requirements for the establishment of an Islamic bank often vary from country to country. Many difficulties may arise when an Islamic bank in compliance with laws and originally conceived for conventional banks. These rules often include principles such as capital certainty and certainty as to the rate of return on deposits. Therefore it is important for Islamic banks and their sponsors to be familiar with national banking laws and regulations that would affect Islamic banking operations. Introducing Islamic banks may bring an unusual concern in a place like Nigeria. He finally called for some concessions to Islamic bank in order to meet the legal requirements set by the government; government intervention or active support is also necessary to establish Islamic banks working under the PLS scheme by introducing or adapting legislation or by giving Islamic banks special dispensation to conduct their activities.
Abikan39 writing on the Legal framework of Islamic Banking in Nigeria pointed out that the financial regulatory laws relevant to the take-off and operations of Islamic banking did not have Islamic banking in contemplation and there was no way the banking system could have been licensed under them. The BOFIA 1991 was enacted to give foundation for the takeoff of Islamic banking; but its provisions were not sufficient for the needs of a full-fledged Islamic banking. He adds that the lack of sufficient framework after this initial legislation in 1991 was responsible for the long delay in the take-off of the Islamic banking system. In his work, he examined Islamic banking under all the relevant Acts in Nigeria but stopped short of making a full analysis of the inner workings of the institutions which have mandates backed by the various Acts.
Muhammad’s work, “Meezan Bank’s Guide to Islamic Banking”40 is an exposition of
Islamic economic system as it relates to Islamic Banking. The author dealt with the prohibition of Riba and the classification thereof. He explained that the economic philosophy of Islam prohibits interest (Riba) due to the fact that:
“Riba is that curse in society which accumulates money around handful of people and its results inevitably in creating monopolies opening doors for selfishness, greed, injustice and oppression, deceit and fraud prospers in the world of trade and business. Islam on the other hand primarily encourages highest moral ethics such as universal brotherhood, collective welfare and prosperity social fairness and justice. Due to this reason, Islam renders Riba as absolutely haram and strictly prohibits all types of interest based transactions”41.
Trying to distinguish between the efficiency of the Islamic and conventional banking system he posted that:
“Economic justice is viable economic system supported by an efficient banking system interest based (Conventional) Banking has approved to be inefficient as it fails to equitably distribute wealth which is necessary for the wellbeing of mankind. On the other hand Islamic banking is efficient and ensures equitable distribution of wealth thus laying foundation for an inflation free economy and socially responsible banking”42.
Usmani43   in  his  book,  “An  introduction  to  Islamic  Finance”  treated  the  principles  of Shari’ah  governing  Islamic  investment  funds,  equity  funds,   Ijarah   funds,  commodity  funds, Murabahah funds, bai-al-dain and mixed funds. He elaborated on the conditions for investment in shares which includes that business of the company which share is being invested in must not be liquors, pork (haram meat) or involved in gambling, night club, pornography, etcetera44
While affirming the foregoing he tried to allay the misconception that making profit is not the objective of Islamic financing:
“The people not conversant with the principles of shari’ah and its economic philosophy sometimes believe that abolishing interest from the banks and financial institutions would make them charitable rather than commercial concerns which offer financial services without a return. Obviously, this is totally a wrong assumption according to shari’ah, interest  free loans are meant for cooperative and charitable activities and not normally for commercial transaction except in a very limited range. So far as commercial financing is concerned the Islamic sharia has a different setup for that purpose…. it is thus obvious that exclusion of interest from financial activities does not necessarily mean that the financier cannot earn a profit. If financing is meant for a commercial purpose it can be based on the concept of profit and loss sharing, for which Musharakah and Mudarabah have been designed since the very inception of the Islamic commercial law”45
In the work of Maulana Ejaz, translated by Maulana Sajidur Rahman Siddiqui, “Islamic Banking Uncertainty,” the concept of Gharar (uncertainty) a prohibited element in Islamic finance is specially treated with particular reference to its effects on sale – contract; on contracts other than sale contracts as well as on business of insurance.46
The book titled, “Issues on Islamic Banking” authored by Muhammad47, is a compilation of the selected papers which the author had in one form or the other contributed to international conferences and seminars in Islamic economics. In the work, the topic, “the Islamic Approaches to money, Banking and Monetary Policy” reviews the various writings on central banking and monetary policy in an Islamic framework examining the various policy instruments. It prefers the suggestion of using profit sharing ratios as an instrument of policy besides the reserve ratio, selective credit control and open market operation through sale and purchase of shares etcetera48.
In this work generally, Dr, Saddiqi demonstrated with cogent arguments that an Islamic economy is capable of freeing modern man from the debt ridden economy in which he lives and of guiding him towards a society based on justice and equity, and which ensures growth and stability.
The book titled “Shari’ah: The Islamic Law”, authored by Doi,49 devoted two  chapters to Islamic economic system. The topics of Tijraj: trade and commerce and distribution of wealth were particularly treated. The author posited that usury (interest) ultimately leads to poverty.50 On the issue of security/collateral, he further opined that where the parties cannot trust each other, something should be deposited as security, a convenient form of closing the bargain as mentioned in the Qur’an thus:
“if you are on a journey and cannot find a scribe, a pledge with possession (Ribhanum Maqabudah) may serve the purpose. And if one of you deposits thing on a trust with another tell the trustee to faithfully discharge his trust and let him fear his lord. Conceal not evidence, for whoever conceals it, his heart is tainted with sin, and Allah knows all that you do”51
Muhammad52 in his book titled: “Banking without Interest”, examined banking business and loan giving, the process of credit creation as well as banking system and public finance. On the issue of sureties or securities for loan the author posited.
“As far as securities are concerned, more or less the same conditions will apply in the interest free system as in the conventional interest charging system. Finished or semi- finished goods, goods in process of production or in transit, ready crops, commercial shares, certificate of ownership, plant or immovable properties, securities deposited in the banks, capital procured on loan or on mudarabah etc all can be produced as security. The banks should have power to advance loans even personal securities …. In general, so much security should not be demanded as to impair the freedom of action of the business community”.53
The book titled interest, Usury, Riba and the Operational Costs of a Bank by AbdulGafoor54 examined in detail the Riba elements in the operational costs, of modern day banks. The author traced the history of money lending and the fee taken in turn which was initially called usury but now called interest:
“Lending and borrowing between humans has taken place since time immemorial …. As time progressed professional money lenders appeared on the scene and they demanded a “fee” for the use of their money. This fee is called interest, but till a few centuries ago it was called usury. In Islam, interest or usury, which in Arabic is called Riba is prohibited … similar prohibitions exist also in the religious law of Judaism and Christianity … ... “55
The author identified the operational costs such as overhead cost, services cost, compensation for inflation et cetera and he used the Iranian model, Pakistan model and what he called Sissiqi model to justify charging for service costs by banks and argued that the bank may charge a fee for its services and that it is not Riba56
The book, “Islamic Banking & Murabahah” authored by Maulana Ejaz introduced different aspects of Islamic banking system as it relates to the Murabahah (cost – plus) model in some details. He gave full introduction to Murabahah in the book and elaborated its procedure and functions. The author concluded with viable solutions of the problems and reasonable answers to the queries raised about Murabahah transaction.57
Bambale’s book, “Islamic Law of commercial and industrial transactions”58 covers  the general priciples of ownership (milk), property (MAL) and its classification, contract (adq), sale (bay) sale of payment in advance (salam); gift (hiba); bequest or will (wasiyya) endowment (waqf), mortgage or pledge (rahn), suretyship (kafalah), agency (wakalah), hire and lease (ijarah) share cropping (muzara’ah and musaqah) loan or debt (qadr), Usury and interest (Riba), partnership or company (sharikah), contract of manufacturing (istisna) and Islamic form insurance (takaful). While the author identified with the saying of the Holy Prophet Muhammad (P.B.U.H) that, “Any loan that brings a profit is (a kind of) Riba”, the author identified the various components of banking other than interest which are not associates with Riba namely services cost, overhead cost, risk premium (a per naira charge), profit (a percentage of services and overhead cost) and compensation for inflation.
Muslehuddin in his book, “Banking and Islamic Law”, in addressing the issues related to banking products innovation, stated that “those who are of the opinion that interest free banks may be established, suggest that banking in Islam should have Mudarabah or partnership as its basis, but Mudarabah is of a limited scope and risky for banking59. On the question, what then is the alternative? He stated that the answer lies in the quantity of our requirements because the banking system is always geared to the economic needs of the society … we therefore have to take into consideration, our economic needs and the present condition of the society on the one hand Islam and its law on the other. For this purpose we have to find out what original avenues Islam can open in this regard and what methods will be used.60
In the book titled “Islamic banking, how far have we gone”, Pramanik is the editor of several articles authored by different people. The book covers a whole range of conceptual issues related to Riba.61
On the controversy of whether Islam forbids banking as an institution, the book posited that the reason some modern orthodox feel that Islam prohibits interest and banking system is that the society is very much interest dependent. Unlike interest, the banking system operating on profits and loss sharing (PLS) concept can be instrumental in materializing the objectives of shari’ah by mitigating the suffering of the poor. The book then concluded that banking as institution is not forbidden in Islam.62
Imam Malik’s Al-Muwatta, devotes three chapters to the subject of Islamic finance and related issues. It has narrations in the chapters of the books of business transaction; the book of loans and the book of share cropping.63
All the foregoing texts reviewed are relevant to the current research in that they either give an insight into what is to be expected as regards the prospects of Islamic banking or propel the author of this work on what line to tow in search of solutions to the perceived problems bedeviling Islamic banking in Nigeria.
The foregoing review has also featured the appeal for a successful Islamic banking system as well as the concerns in Nigeria. On the whole, the literature revealed that the legislations in place are not completely suitable for the full take off of the Islamic banking in Nigeria. However each literature lacked an in-depth analysis of the necessary changes in the legislations and the impact it will or may have on the economy. The non-interest windows opened by some conventional banks in Nigeria shows the inherent benefits of serving a neglected segment of the economy.
In view of the foregoing, this research work will examine the legal and regulatory regime of Islamic banking in Nigeria. The major challenges will be brought to fore and the relevant laws analysed.

1.8       Organisational Layout
This dissertation is divided into five (5) chapters. Chapter one lays the foundation of the dissertation by providing the general introduction which essentially brought the statement of the research, aims and objectives of the research, the scope of the research, the research methodology adopted, literature review of various authors on the subject, the justification for the research. Chapter two provides the nature and classification of banking system in Nigeria. Chapter three examines the development of Islamic Banking and Financial System. Chapter four examined the Legal framework, Supervision and Governance of Islamic/ Non-interest Banking in Nigeria. Chapter five concluded the thesis with the summary, findings, and recommendations.