Nigeria: Islamic Development Bank to Invest U.S.$6 Billion in the Country – Executive Director

The Islamic Development Bank (IDB) was formed in October 1975 to foster economic development and social progress of member countries in accordance with Islamic principles. It currently has 56 member countries, Nigeria being the most recent (in 2005) country to become a member. Gambo Shuaibu is an Executive Director at the bank as Nigeria’s representative. In this interview, he said the bank plans to make cumulative investments worth $6 billion in Nigeria in the next three years.

The bank assists member countries in accordance with Islamic principles. Does that mean you don’t give loans? If you do, don’t you charge interest? How does the bank get its investment back?

The bank supports its members in various forms, financially and through technical assistance. It could be grant. There is loan too. The loan is broken into two, ordinary loan and concessionary loan and also through consultancy. Now, when you say in accordance with Islamic principles, it has to do with the way its products are packaged. Interest is forbidden in Islam.

All IDB does is to ensure that its own financial products are packaged in compliance with Islamic laws and basically there is no interest element and they do not finance things that are forbidden Islamically like gambling, prostitution. That is why even hotel business has not been attracting the attention of IDB much due to sale of alcohol. But it does not discriminate against the beneficiary. Only that it has to be structured in a way that it will not contravene the Islamic principles.

There are a number of predominantly Christian countries who are members of the IDB. It doesn’t discriminate who benefit. It is the packaging that differs. In the conventional banks, when you go there to take loan to purchase a house maybe, the main component is interest that you have to pay.

Nigeria has increased its subscription in the bank. How much is that and what is Nigeria’s position in the bank in terms of ranking?

When we first joined, it was at a very insignificant level of 2.2 percent. The increase now is at the level of 7.6 percent of the ordinary shares capital. The figures I gave the other day was the authorized capital which is $30 billion. The shareholding fund of the bank is just about 6.3 billion Islamic dinar which is equivalent to about $10 billion. The shareholding fund includes reserve and profit. The paid up capital is $4.6 billion.

When you are calculating the capital of a multilateral development organization, you have to be very careful. Even that includes cash payment and callable shares. Callable share is the portion of the capital that is just there, that you have subscribed to in principles but there is no financial commitment. In the event, the bank is to raise money in the market, the shareholder supporters are called to provide the money.

That is a basic standard. If you were to do the calculation, it should be half of 7.5 percent of the paid up capital which is at present a little over $6 billion. When the last increase of the paid up capital was done in 2006, a substantial portion of it, 70 percent, is payable over a period of 10 years.

Basically, in the next 10 years, the investment of Nigeria in the bank will be in the region of $400 million. I can assure you, given the project that will be financed by the bank in Nigeria, in the next three years; IDB will have invested $2billion in different facilities in the country. This will be used in education, poverty alleviation and other human capital development related projects.

If IDB is investing $2 billion in Nigeria, it has the capacity to generate counterpart funding up to $4billion. That means, we are targeting $6billion investment in the next three years in Nigeria.

You had spoken about some key projects in certain states where IDB is playing some roles. Can you expatiate on them?

The focus of the bank is economic and social development of the member countries. But before you benefit as a member country, you have to apply. Just as any other bank will not come to you and say ‘come and take loan.’ It’s based on your need that you will apply. Since becoming member and the advocacy that has followed some of the 36 states (in Nigeria) have applied. IDB relates with countries on the basis of sovereignty.

Although, it has affiliates that takes care of private sector interest. IDB deals with the federal, state and local governments. A number of facilities were granted and prominent among them is the ones given to the federal government of Nigeria. At the time of president Obasanjo, there was this food crisis. One of the approaches agreed by the Nigerian government was to work with multilateral agencies; African Development Bank, World Bank, European Investment bank and similar ones that were interested in supporting Nigeria including the Islamic Development Bank. A project called food security was established. It is basically to support food production.

The states applied to get loan from the World Bank, some European banks and the Islamic Development Bank. The states that the federal government approved to access the IDB facilities are Gombe, Yobe, and Anambra states. It was mainly to do with food production; agro allied and anything that will improve the activities of the farmer such as access roads, research institutions, and development of small earth dams, irrigation facilities and warehousing.

These state governments came up with their own project concepts based on their needs and the initial estimate was $50 million for the first phase of the project for the three states. It was after thorough review that the project which takes about 5 years, was reduced to $38 million made available. The states and federal government will also contribute by way of counterpart funding. Then, the figure will become higher.

Kaduna state, when the Vice president was the governor, came up with the Zaria water works which is under construction. The African Development Bank and IDB have interest in it. And also science model schools in each of the three senatorial zones as well as comprehensive health centre are to be built in Kaduna. Facilities were approved for these projects.

The federal government had to come in and also the national assembly for a final clearance. At the moment, it is at the national assembly to get the final clearance for the loans.

We also have Jigawa rural integration project as it is one of the poorest states in Nigeria. IDB is all out to give assistance. Osun and Oyo states, last years, made submissions. That is being worked on now by the bank. There are a number of other states that are talking to IDB.

IDB is planning a business forum in Nigeria next month. What is the bank up to in this direction?

It is normal to inform the general public about the presence of the IDB and its activities. The forum is a form of enlightenment campaign, showcasing IDB as a group. Given the transformation agenda of the federal government there is a prominent role for the private sector. To that extent there is need to ensure that the private sector is adequately involved. The forum is to further enlighten Nigerians on the activities of the IDB and its affiliates especially on how to access its facilities.

Islamic banking recently took off in Nigeria. Given the opposition it is facing especially from the leadership of the Christian Association of Nigeria (CAN), do you think the bank has got prospects of survival?

I think more of an abandoned prospect for the project. If you can recall, the minister of finance and coordinating minister of the economy, Mrs. Ngozi Okonjo-Iweala, when she appeared before the senate committee, this question was asked. She said Islamic banking in Nigeria is another window of banking. That it is quite beneficial. It is not only in Nigeria but even in developed economies.

In the UK, there is the Islamic banking window, also in the United States, Germany, and France. Like the minister said, it is another window of banking allowing some unbanked people to be in cooperated into the sector. Many people because of their belief had refused to participate in banking in Nigeria. This is an opportunity to get them in. Any money that is in the bank is available for the development of the economy.

There is a CBN guideline that states there shall be no discrimination against a beneficiary on the basis of culture, race, religion, language and even in employment, it doesn’t discriminate. That is why there are Christians who are shareholders of the Islamic bank in Nigeria. It is on the basis of this that I feel there is good prospect for the bank.

Is Nigeria rated high at the bank?

Out of the 56 members of the IDB, 27 are from the African continent. Nigerian being a member of OPEC, other members in the gulf region and North Africa also members of the OPEC have been relating with Nigeria before we became member. The membership of Nigeria improved the bank’s assistance to Africa. It will be a voice that once heard will be taken seriously. It is like with Nigeria now, the influence of Africa has gone up at the bank and if you have that influence, then you can also channel the available resources to support the members. The bank has special fund for the development of Africa. It was started in 2008.

I remember the President of IDB, Dr Ahmed Muhammed when I had a meeting with him, what he told me. He said whatever we can do to improve on the position of Africa, in Africa, we will do so. In the course of my discussion with him, he told me that I reminded him of his encounter with the late Nigerian head of state, General Murtala Muhammed in Jedda (Saudi Arabia). They went to market the bank to him for Nigeria to become a member. He said Murtala told him that, ‘ yes, it is a good idea, good concept but Nigeria will only be ready to join if it is in a position to influence the activities of the bank in a way that will aid the development of Africa.’

The special fund for the development of Africa is to mainly focus on the development of the continent. Under the first phase, the Bank has a budget of $12billion; $4 billion directly from the bank and $8 billion from the development partners. Due to the rating of the IDB, any project it is identified in, it attracts the participation of other partners.

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