Non-interest financial institution Jaiz Bank Tuesday closed a $20 million equity investment deal with the Islamic Corporation for the Development of the Private Sector (ICD) to back its operations in Nigeria.
A subsidiary of the Islamic Development Bank (IsDB), based in Saudi Arabia’s financial hub Jeddah, ICD provides financing for projects and explores equity participation in the corporate sector and other private sector groups of member countries.
IsDB, the parent, is owned by 57 countries, led by Saudi Arabia which holds about one-quarter of the shares, and has Nigeria and more than 20 other African nations among its members.
Chief Executive Officer Haruna Musa signed the agreement on behalf of Jaiz Bank on the closing day of a series of events celebrating the golden jubilee of IsDB.
The investment agreement adds Mudarabah tier 1 capital to the bank’s core capital, and puts it on course to strengthen its suite of ethical finance offerings, including auto, household appliance and home finance, among others.
Mudarabah, under Islamic banking, is a contract whereby an investor provides capital to a business venture, authorising the other party to invest the cash for profit-sharing between the two. Where the return on such an investment is negative, both share the loss as well.
Jaiz Bank, the pioneer of Islamic banking in Nigeria with operations dating back to 2012, will commit the fund to business endeavours targeting “regional expansion through ICD’s partnership,” according to a document seen by PREMIUM TIMES.
“It’s more of supporting working capital because today, after the announcement for recapitalisation by the Central Bank of Nigeria (CBN), the qualified capital for Jaiz Bank is about N18.7 billion currently,” Mr Musa said.
He was alluding to the directive weeks back from the CBN asking non-interest banks to scale their minimum capital up to N20 billion by March 2026 from a current threshold of N10 billion.
“We only have a gap of N1.3 billion to meet up with N20 billion capitalisation, and I am sure you can remember that three months ago, we concluded a private placement by some of our shareholders, injecting additional N10.4 billion to meet up with our capitalisation requirement.”
The private placement proceeds, when combined with the bank’s qualified capital, takes its capital well above the regulator’s requirement.
On Sunday, First City Monument Bank (FCMB) entered a $15 million financing with Saudi Arabia-based International Islamic Trade Finance (ITFC) at the same conference, bolstering its capacity in import financing, infrastructure development and economic stability.
ITFC is the division of the IsDB that is devoted to offering trade solutions and trade-related support among OIC members.
The facility, called Murabaha finance under Islamic law, empowers a financial institution to facilitate the purchase of an asset for a buyer and ultimately earn a profit rather than charge interest, which Islamic finance forbids.
Gerald Ikem, FCMB’s divisional head of treasury & international banking, signed the financing agreement on behalf of the bank, with ITFC’s Chief Operating Officer Nazeem Noordali endorsing the deal for his own organisation.
The partnership with ITFC underscores finance options outside the mainstream that a commercial bank like FCMB is turning to as commercial lenders brace up to heed a tall order from the central bank to scale their minimum capital ten times above the current level by March 2026.
FCMB holds a commercial banking license with international authorisation, meaning it is expected to have raised its capital base to N500 billion by that deadline from the current N50 billion. The new capital requirement does not allow for the inclusion of shareholders’ fund.
Going by Monday’s closing exchange rate of N1,419 naira to the US dollar, the new financing could crank up the bank’s capital by N21.3 billion.
When asked about Jaiz Bank’s planned transformation into a holding company, which has been stalled for a while, Mr Musa told PREMIUM TIMES that its bank would revisit its application to the CBN any time soon.
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