The Central Bank of Nigeria has cautioned non-interest financial institutions against governance and compliance risks that could weaken public confidence and threaten financial stability in the country’s expanding Islamic finance sector.

The warning was issued in a press statement on Monday after 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, Dr Rita Sike, the Deputy Governor for Financial System Stability, Philip Ikeazor, said the rapid growth of the industry has increased its exposure to operational and regulatory risks.

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 Central Bank of Nigeria, the engagement forms part of ongoing efforts to strengthen Shariah governance, enhance regulatory clarity, and reinforce risk management standards within the non-interest financial services industry.

The apex bank also noted that non-interest financial institutions are playing an increasingly significant role in Nigeria’s financial system by offering ethical and Shariah-compliant alternatives to conventional banking services.

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

The CBN further explained that the establishment of the Financial Regulation Advisory Council of Experts and the mandatory creation of Advisory Committees of Experts across all non-interest financial institutions were aimed at institutionalising a harmonised governance framework for the sector.

According to the statement, continuous engagement between FRACE and the ACEs remains essential to ensuring that regulatory expectations are clearly understood and consistently applied across the industry.

“The objectives of today’s session include fostering the institutionalisation and effective operation of a robust Shariah governance system within Non-Interest Financial Institutions, and providing a structured platform for dialogue, knowledge-sharing, and collaboration,” Ikeazor was quoted in the statement.

In his remarks, the Deputy Chairman of Financial Regulation Advisory Council of Experts, Prof Bashir Umar, said the interactive session was designed to strengthen governance within the non-interest finance sub-sector and encourage closer engagement between regulators and industry advisory committees.

He also commended the management of the Central Bank of Nigeria for reviving the session, which was first introduced in 2014.

Earlier in her welcome remarks, Dr Rita Sike reaffirmed the commitment of the Central Bank of Nigeria to building a strong and well-governed non-interest financial services industry.

She noted that the increasing diversity of products and delivery channels—especially the rise of Islamic fintech—has heightened the need for stronger regulatory oversight and sustained engagement among industry stakeholders.

“The growing diversity of products, institutions, and delivery channels, particularly with the emergence of Islamic fintech, underscores the need for continuous dialogue, sound regulatory oversight, and robust advisory input from scholars and practitioners,” she said.

The session featured technical presentations focusing on Shariah non-compliance risks in non-interest banking and the role of Islamic fintech in expanding financial inclusion.

Participants at the event included members of the Financial Regulation Advisory Council of Experts, chairmen and members of various Advisory Committees of Experts (ACEs), managing directors of non-interest banks, senior officials of the Central Bank of Nigeria, as well as representatives of the Bank of Industry and the Securities and Exchange Commission.