CBN warns non-interest banks against governance, compliance risks

The Central Bank of Nigeria has warned non-interest financial institutions against governance and compliance risks capable of undermining public confidence and financial stability in the country’s growing Islamic finance sector.

The warning was contained in a statement issued by the apex bank on Monday following the 2nd Annual Interactive Session between the CBN Financial Regulation Advisory Council of Experts and the Advisory Committees of Experts of Non-Interest Financial Institutions held at the CBN Auditorium in Abuja.

Speaking through the Director of the Financial Policy and Regulation Department, Rita Sike, the Deputy Governor, Financial System Stability, Philip Ikeazor, said the rapid expansion of the industry had increased exposure to operational and regulatory vulnerabilities.

The statement read, “The Deputy Governor, however, observed that as the industry grows in size, sophistication, and interconnectedness, it faces unique risks, particularly non-compliance risk, governance challenges, operational vulnerabilities, and emerging technological risks.

“He warned that such risks, if not properly managed, could undermine public confidence, financial stability, and the overall credibility of the non-interest finance ecosystem.”

According to the CBN, the engagement was part of ongoing efforts to strengthen Shariah governance, improve regulatory clarity, and reinforce risk management standards within the non-interest financial services industry.

The apex bank noted that non-interest financial institutions continued to play an increasingly important role in Nigeria’s financial system by providing ethical and Shariah-compliant alternatives to conventional banking.

It stated that the institutions were also contributing to financial inclusion, real sector financing, micro, small and medium enterprises development, and shared prosperity.

The CBN further explained that the establishment of FRACE and the mandatory constitution of ACEs across all non-interest financial institutions were designed to institutionalise a harmonised governance framework for the sector.

According to the statement, sustained interaction between FRACE and ACEs remained critical to ensuring that regulatory expectations were properly understood and consistently implemented across the industry.