What are Halal Investments?
Halal Investment in Nigeria is one of the growing aspects of Nigeria. Halal is an Arabic term that refers to something that is legal or permissible. It is a term used by Muslims to describe acceptable behavior.
As a result, halal investments are a welcoming alternative for anybody looking to invest, particularly Muslims who value social welfare and moral standards.
This type of investment has been around since the seventh century. But it wasn’t until the 1960s that formalization began. Another fascinating aspect is that the total halal financial industry has reached over $2 trillion!
How do you make money from halal investments?
Halal investments are based on the idea of paying no interest. As a result, understanding how you earn can be difficult. We dissect the earning mechanisms of Sukuk bonds, ijarah, and halal stocks in this section. Its business model emphasizes profit and loss sharing rather than explicit interest charging.
Sukuk (Islamic Bonds)
These are long-term loans that are identical to normal bonds. The lender, on the other hand, does not own a certificate that guarantees periodic payment with interest in a Sukuk arrangement. Rather, they own a piece of the asset and profit from its earnings.
Let’s take a closer look at this. If a $10 million bond is issued with a 10% interest rate for ten years to build an airport, the borrower is liable to pay (plus the agreed-upon interest) whether the airport earns money or not. A Sukuk investor (lender) on the other hand receives part payments of the $10 million each year, with no interest. Because they own a piece of the airport, they only benefit if it produces money.
The Sukuk has a number of advantages, one of which is that it supports a fair distribution of returns. The negative is that the number of Sukuk bonds is limited. They can’t be issued as easily as conventional bonds since they require an underlying asset for investors to own a piece of.
Ijarah Investments
Simply put, this refers to rental income. The owner of an asset, such as a building, transfers the rights to another party for a fee over time. Consider an ijarah agreement to construct a shopping center. The set rental price is the only source of income for the investors.
Halal Equities
As long as the company’s shares are per Shariah principles, Muslims can invest in that stock market. When you are a stock owner, you own a small percentage of the business. However, it is essential that you need to make sure the company is in accordance with Shariah rules. For example, companies like Constellation Brands (alcohol beverages) or DraftKings (gambling) do not align with Shariah’s perspective. Therefore, investing in these kinds of businesses is prohibited.
What are the finest halal investments In Nigeria?
We can’t say for sure which halal investment in Nigeria is the finest. This is due to the fact that investment profitability varies based on the type of trade involved. Experts, on the other hand, advise investing in Sukuk because of their relative stability and significant profit potential. Finally, while they may not always provide the best results, they will never cause you to lose your money.
Sukuk in Nigeria
The issue of Sukuk bonds in Nigeria has been one of the success stories of the Islamic Finance Market in the country since 2014. In 2021, Nigeria has raised about N362 billion through the issuance of three rounds of Ijarah Sukuk to finance road infrastructure across the country’s six geopolitical zones.
Investors responded positively, with a 105 % subscription in 2017, a 132 % subscription in 2018, and a 470 % subscription in 2020, demonstrating their confidence in the Sukuk market’s future. The three Sukuk Issuances have altered the nation’s socioeconomic environment because the public is aware of the market and has invested heavily in it.
Moreover, the Sukuk is project-tied, and investors can see the projects for which the funds are used is appealing to investors. In the media, there has been a lot of talk about the importance of this sort of non-interest funding and how it may help with economic development. Furthermore, the 10-year capital market master plan (2015-2025) has acknowledged the non-interest financial products. Nigeria Exchange Limited and FMDQ Securities have been supportive of this new product.
Which institutions support Halal investments in Nigeria?
Halal and other Islamic investments are becoming increasingly popular in Nigeria, with a growing number of financial institutions offering them. Furthermore, the following are some of the greatest halal investing institutions in Nigeria:
- First bank of Nigeria
- Stanbic IBTC
- Loutus Capital
- Cowrywise
- ARM investment managers
- Government sukuk bond
How can you make halal investment in Nigeria?
To invest, just go to your selected organization and ask to talk with an agent. However, if you plan to invest in Sukuk bonds, you have the option of going through third-party brokers.
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