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Islamic Banking in Nigeria: A Critical Appraisal of its Effect on the Nigerian Economy

Echekoba Felix Nwaolisa and Ezu Gideon Kasie

Islamic banking came as a result of Islamic belief which prevents dealing in interests. It is carried out on a sharing of profit and loss basis. Islamic banking operates on two principles called Mudarabah and Musharak. Many Muslims do not put their money in the bank thereby encouraging idle cash. Several literature’s were reviewed to assess different authors view on Islamic banking impact in a country’s banking sector. Questionnaires were conducted to ascertain public opinions on the Islamic banking concepts and its desirability in the Nigerian banking sector as well as necessary inference were drawn from such a survey accordingly. The paper recommends adequate supervision and normal prudential guidelines to streamline its operation. The paper concludes that Islamic financing as a part of a financial sector development strategy should be encouraged by regulations and supervision authorities, that accommodate its forms while ensuring that their unfamiliarity is not exploited to defraud clients.