The Stanbic IBTC Shariah Fixed Income Fund has grown 400%
since its launch in Q4, 2019. The growth in the Fund translates to a rise from
N1bn in Q4 2019 to N4bn as at February, 2020.

Executive Director, Stanbic IBTC Mr. Shuaib Audu revealed this in an interview with WebTV’s Islamic Finance Weekly programme.

According to Mr. Shuaib the general decline in
investor’s appetite for equities led to increased activities in the fixed
income market, which was to the benefit of Stanbic IBTC’s Shariah-Compliant
FIF.

Speaking
further he said the SFIF registered by the Securities and Exchange Commission
(SEC)
is an open-end unit trust scheme
that aims to provide investors with liquidity and competitive returns over the
short, medium and long term. The  Fund, he said, was ideal for
ethically-minded investors with low-risk appetite as well as a bias for
Shariah-compliant investment opportunities. 

He outlined the
benefits of the SFIF to include;

  • Investments in line with Islamic principles
  • The Fund is regulated by the SEC and governed by a Shari’ah
    Advisory Committee of Experts
  • Capital appreciation is competitive
  • Easy entry and exit with no penalty charges
  • Convenience (Direct Debit / Standing order)

The Executive Director noted that
the fund was not Muslim-specific but open to people of all faiths and religious
inclination.

Apart from the SFIF Mr. Shuaib said Stanbic IBTC had the Imaan fund registered in 2013 by SEC Nigeria,
which is equity-based and set out to achieve long-term capital appreciation
by investing in Shariah-compliant equity securities approved by the Shariah
Advisory Committee of the Fund.

On the current state of the
Non-Interest Finance market in Nigeria, he described it as a huge space looking at the
Nigerian population, which has about 100m Muslims which suggests that they
constitute roughly 51% of the population.

He cited The National Pension Commission (PENCOM) that
regulates Pension Fund Administrators (PFA), that is planning a new
Shariah-compliant fund which is non-interest based as an example of new
opportunities. When launched it would allow the PFAs to invest up to 20% of
their asset under management (AUM) in the non-interest market space.

Giving further details of critical developments in the
Non-Interest Market 
Shuaib also noted that the Central Bank of Nigeria (CBN)
has licenced about 23 banks to be able to participate in the non-interest
banking window which is a notable feat. 

“The opportunities are huge and Stanbic IBTC Asset
Management is creating ways to tap into it. As an end-to-end financial solution
provider we want to cater for investors, clients and customers within the
Stanbic IBTC group to meet any risk profile and investment appetite they have,
whether it is conventional investment or non-conventional investment like the
non-interest window” 
Shuaib said.

Speaking on the Challenges facing the non-interest
market in Nigeria, the major challenge according to him was the lack of
understanding of the market. He made reference to the first Sukuk issued in 2017,
where the federal government was accused of planning to Islamize Nigeria.

Other challenges facing Islamic finance in Nigeria
according to Mr. 
Shuaib include the need to develop investable products, as
Islamic finance is a relatively new segment of the financial market  in
Nigeria,  several products have not been developed to deepen and broaden
the market. 

He made a case for deepening the capital market in the
country, through Islamic Finance.

At the macro-economic level he said Nigeria’s economy
is going through interesting and challenging times. The Q4, 2019 GDP report
that was released recently showed the economy  grew at 2.55%, while
population growth level is around 2.6%.

He stressed the fact that Nigerian should grow
consistently at over 2% and aspire to hit continuously 6-7% growth, if it is to
uplift 100m people from poverty.

For this to achieved the investment expert called on
the fiscal policy authorities to drive inclusive growth for the economy.

Reviewing the financial market in Q4, 2019  he
pointed out that the Central Bank of Nigeria came with a policy in the fixed
income market where corporate and institutional investors were restricted
from  participating in the  Open Market Operations (OMO).

According to him, a lot of liquidity has resided in
institutional investors such as Pension Fund Administrators (PFAs)  with
total asset under management of about N10trillion which is close to $30billion.

Shuaib identified the fact that some of the funds
were invested in the OMO market and the CBN has prevented PFAs as well as Asset
Managers, Insurance companies and other institutional investors from
participating in the market.

“There has been a decline in yields across board
because a lot of the money that was available to institutional investors is
pursuing a limited number of securities. The price of the securities have gone
up as yields come down. In addition, interest rates across banks are falling to
0.5% or 1%. This constituted part of the reasons why interest rate in the fixed
income space has dropped drastically” He said.

In terms of inflation, Stanbic IBTC’s Shuaib highlighted the fact that it has grown close to 12% which is high. He
emphasized the need for  inflation to trend closer to single digits.

He identified the following as some of the issues that
speak to investor concerns in Nigeria;

·       
Fear of low
GDP growth

·       
High
inflation

·       
Possibility
or the risk of potential exchange rate devaluation

Since the 2008 global financial crisis, Shuaib acknowledged that many investors lost money in the market,  and learnt
bitter lessons preferring fixed income securities generally such as treasury
bills, bonds, money market placement, fixed deposit and the likes.

According to him, traditionally and historically
investors have had low risk appetite which means investors are not prepared to
take on significant amounts of risk.

He said investors still have appetite for fixed income
securities because they would rather see the protection of their principal
which is of major concern. 

Speaking on the inflationary environment, he said the
non-interest finance instrument are competitive. 
Shuaib noted that they are
competitive because they are priced into the market accordingly . On the
Inflation rate inching close to 12% he noted that non-interest products are
usually asset-backed.

“Most of the asset-backed investments must be priced
in such a way that they take into cognisance the reality of the economic
environment” he said.    

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