How to Obtain a Non‑Interest (Islamic) Banking License in Nigeria ( 2025 Guide)

This comprehensive guide answers: How to obtain a non‑interest (Islamic) banking license in Nigeria — directly based on Central Bank of Nigeria (CBN) official licensing guidelines and implementation requirements. It includes clear‑cut steps, requirements, costs, process flow, a timeline, tables, FAQs, and common misconceptions. All data is backed by sources from the CBN and legal analyses.

1. Overview of Non‑Interest Banking Licensing

• The CBN classifies Non‑Interest Financial Institutions (NIFIs) under its guidelines for institutions offering non‑interest financial services (especially Islamic banking) .

• Banks offering Islamic banking must follow Islamic commercial jurisprudence (Shariah law) and are regulated as specialised banking institutions.

2. License Categories & Capital Requirements

• The capital thresholds were revised in March 2024 and take effect April 2025 for new applications; existing NIFIs must comply by March 2026.

3. Step-by-Step Process to Obtaining the License

Step 1: Application for Approval in Principle (AIP)

Promoters must submit to the Governor of CBN:

• Cover letter by promoters

• Non‑refundable application fee: ₦500,000

• Minimum paid-up capital deposit in escrow with CBN: ₦10 bn (Regional) or ₦20 bn (National)

• Feasibility/business plan: five-year financial projections, business model, risk management, Shariah governance, IT, HR, branch network

• Draft Memorandum and Articles of Association stating non‑interest banking intention

• List of promoters, shareholders, directors, and key officers

• Proposed Shariah Advisory Committee (Advisory Committee of Experts) with their credentials for Islamic Banking

• Technical agreement with an existing reputable Islamic bank for at least 3 years

Step 2: Grant of Approval in Principle (AIP)

• CBN may grant the AIP valid for 6 months.

• Conditions include incorporation with CAC, securing premises, hiring management, IT setup, staff training in Shariah principles.

Step 3: Preparation to Fulfill AIP Conditions

During the 6‑month AIP period, promoters must:

• Register the company with CAC

• Appoint CBN‑approved Board of Directors and management

• Secure operational infrastructure and offices

• Install IT/banking systems

• Recruit and train staff

• Establish Shariah Review & Compliance (SRC) Unit and appoint internal Shariah auditor

Step 4: Submission for Final License

Not later than 6 months after AIP:

• Application to Director of Banking Supervision, CBN

• Non‑refundable licensing fee: ₦5,000,000

• Certified true copies of CAC incorporation Certificate, MEMART, Status Report or Forms CAC 2/ CAC 7

• Evidence of capital deposit at CBN

• Final inspection report confirming operational readiness

• Governance and risk policies: AML, cybersecurity, Shariah compliance, corporate governance

• Details of Board/mgmt team as approved by CBN

Step 5: Final License Issued & Commencement

• Once CBN is satisfied, the final license is granted and operations may begin.

• At this point, registration with FIRS (Federal Inland Revenue Service) and SCUML (Anti‑Money Laundering Unit) is required.

4. Requirements Summary

Documents & Reports

• Feasibility/business plan, MEMART, shareholder/director lists, Board governance

• Technical agreement with established Islamic financial institution

• Shariah advisory structure details

Financials

• Application fee: ₦500,000

• Final license fee: ₦5,000,000

• Minimum paid-up capital escrow: ₦10 bn / ₦20 bn

Organisational

• CAC registration

• Board of Directors (7–15 members; independent directors requirements per size)

• Shariah Review & Compliance (SRC) Unit and Internal Shariah Auditor

• IT infrastructure, staffing, office premises

Regulatory

• Risk‑weighted asset ratio (minimum 10 %) and Capital Adequacy Ratio per CBN mandates

• SCUML and FIRS compliance post-incorporation

5. Timeline & Process Flow

• Week 0–2: Submission of AIP application

• Week 1–8: CBN review and issuance of AIP (if compliant)

• Month 0–6: Fulfill AIP conditions

• Month 5–6: Submit final license application

• Month 7–8: CBN conducts final inspection and issues license

6. Frequently Asked Questions (FAQs)

Q1: What’s the difference between Islamic bank and other non‑interest banks?
A: Islamic banks operate under Shariah law with a Shariah Advisory Board, offering Islamic modes like Musharakah, Murabaha, Ijarah. Other non‑interest banks avoid interest but need no Shariah governance.

Q2: Can a conventional bank open an Islamic window instead?
Yes. A conventional bank can operate a non‑interest window or branch, following CBN’s guidelines for windows, without needing full NIFI capital requirements.

Q3: What if I fail to meet AIP conditions within 6 months?
The AIP lapses and you must reapply. No business operations may commence until final license is issued.

Q4: Can the name “Islamic Bank” appear in bank’s branding?
CBN prohibits the use of “Islamic” in the banking name unless approved; licensed institutions may use a uniform logo approved by CBN instead.

Q5: Are there penalties for non-compliance?
Yes, under BOFIA and the Banks and Other Financial Institutions Act. Operating without license may attract heavy penalties.

7. Common Misconceptions Addressed

• Misconception: Islamic banking is illegal in Nigeria.
  Fact: CBN regulates Islamic banking under non‑interest guidelines per BOFIA & CBN Act 2007. No bank is registered as “Islamic Bank” unless within these special licensing categories.

• Misconception: Islamic banks offer charitable services only.
  Fact: Islamic banks are profit‑seeking, offering profit‑sharing products—no riba, just ethical, asset‑backed transactions like Musharakah, Murabaha, Ijarah.

• Misconception: It’s cheaper to start an Islamic bank than a conventional one.
  Fact: Capital requirements for national NIFI are ₦20 bn, vs ₦25 bn for conventional national commercial bank. The gap is narrowing but oversight and governance needs are significant .