The Way out of Economic Recession

1. TURNING RECESSION TO ASCESSION THROUGH FINANCIAL DIVERSIFICATION.
Islamic finance option:
Since the official confirmation by the Federal Government through the Ministry of finance by the
Minister of Finance that the Nigerian economy has truly plunged into economic recession, many
reasons were advanced by the Nigerian Government for the disaster that is eroding our economic
value in an unprecedented way. Niger Delta militancy which has reduced the daily crude oil sale
in the international market, the price per barrel of the crude oil that has crashed substantially, which
is a major source of our earning, corruption by the past regimes and amongst the public and civil
servants, cum lack of political will to save for the rainy day this was responsible for the lean pocket
of the government both at the state and the federal level..
The direct consequences of this crisis is what we are battling with now. Massive job lost, Budget
deficit, infrastructural decay, civil unrest, volatile economic environment, investors loss of
confidence and loss in the stock exchange market, inability to pay salary to list but a few. Unethical
and immoral activities are wide spread, increase in crime/criminality, series of kidnapping are the
order of the day. This has affected the low and high in the society, male and female, children and
adult, aides and currently government functionaries. Examples are bound in this area. Senator
Anisulowo was kidnapped in Ogun State, the CBN Governor’s wife was kidnapped, school
children and their in Lagos, amongst others. The consequences are being felt by all. From
commodity market to foreign exchange to the extent that even the meat and yam seller in the local
markets will tell you that the dollar has affected everything in the market. You wonder how the
American dollar turned to Nigeria naira to the extent that meat and pepper sellers tell you dollar
has affected the price of pepper and meat.
However, the Federal Government of President Muhammadu Buhari has been consistent in its
desire to change the future of the Nation for better through fighting insurgency, corruption and
making agriculture its priority. Mr. President confessed to the nation about a month ago that if
possible he could have absconded after having realized the level of corruption and decay in the
system but the damage has been done, the only hope is for Mr. President to take out this mess. So
in the last one year after the appointment of minister and now, series of town hall meetings were
held across the geopolitical zones. Ministers were at hand to present to Nigerians how much they
are committed to the government and how they intend to explore the opportunities within their
ministry to realise the vision of Mr. President of stamping out corruption, increase the revenue
base of the government, attract foreign direct investment, expanding the economy through tourism
and entertainment industry and turning it into money spring machine, exploration of mineral
resources and creating jobs through agriculture. Recently, the Ministry of Labour and Productivity
proposed the creation of job centres in the 774 Local Government of the Nation.
The above efforts in progress are key, germane and noble. However to the keen observers of
events, there is nothing much new or different from the past government since post-independence,
from Green revolution to Operation feed the Nation, Structural Adjustment program, the list is
endless. The drivers of the programs and ideas seems not to have been overhauled. The present
minister of agriculture is a testimony to this observation. Perhaps what seems to be different is

2. personal commitment and integrity of Mr. President to stem out the cankerworm of corruption and
ineptitudes in our lives as a nation.
From the public affairs commentators and analyst including financial analyst, they all submitted
to most commonly featured terms today in Nigeria: Economic diversification” however, in their
definition of Economic diversification, it means Government should diversify its revenue base
from oil to non-oil such as revenue from tax, exploration of mineral resources, local production
and consumption. In my own view point that is inadequate, there is more to economic
diversification than increasing revenue base. Taking a look at definition of economy; it is defined
as the state of a country or region in terms of the production and consumption of goods and services
and the supply of money. Therefore, the commonly expressed definition of Economic
diversification to my view is inadequate and has taken only one aspect of the Economy: production
and consumption of goods and services and left out the most critical, the supply of money. To this
end, we must urgently take a cursory look at our financial system. The current conventional
financial system that is rooted in interest (usury) and money trading has done more damage than
good to our Economy. If we fail to take the bull by the horn, be firm, resolute, with strong political
will and take the giant stride, the opportunity might gone forever and this current recession might
be a tip of the iceberg and last beyond how we expected. One of the surest ways that can lift us up
from this mud is to create the economic middle class through entrepreneurship. Entrepreneurship
cannot thrive in the face of double digit interest rate. The simple question to ask is if the Minister
of Finance is proposing a Nigerian Development Bank, what has the Bank of Industry and the
Infrastructure Bank achieved and if the CBN Governor is instructing commercial Banks not to
lend to the farmers above single digit rate, what has the Bank of Agriculture achieved. The problem
lies in the financial system and the creation of many more “development banks” cannot bring the
desired results without taking diversifying the financial system. We are all witnesses to the event
that led to the creation of Asset Management Company of Nigeria (AMCON), bad
loans/nonperforming loans coupled with executive recklessness and desire for this world alone
amongst other reasons. The CBN Governor has repeatedly warned us in recent times that non-
performing loan is increasing on a daily basis and it poses a threat to our economy. Do not forget
that the interest based financial system has a connection with survival of the fittest theory.
Therefore, Nigeria as a matter of urgency must diversify its financial system by officially
accommodating Islamic Financial system in its constitution through the amendment of relevant
Acts and Section, most especially BOFIA. This is a work of the National Assembly through its
various committees. I am not theorizing and I believe the references below are more convincing
as evidences to show that Nigeria must officially embrace and pronounce dual (Conventional and
Islamic Banking and Finance) financial systems by researching, funding and creating within her
relevant institutions Islamic finance department and units the way it did in promoting and
safeguarding conventional systems. This will allow it to create departments and unit within its
funded conventional banks and related entities because financial diversification is beyond the
hands of private sector alone.
Pre and Post World Economic meltdown or financial meltdown as case study, examples from
developed and developing nations.

3. Asian Pacific: Malaysia as a case study
With a robust and dynamic Economic/Financial diversification through combination of
conventional banking and finance, and Islamic finance, Malaysia remain the most vibrant economy
in the whole of Asian pacific with 3 Malaysian ringgit exchanging to a dollar as at today.
The UK
After the LIBOR rate scandal in the UK that aggravated the already tensed and chaotic financial
meltdown which originated from the United State through recklessness of individual and self-
centered Wall Street, the UK realized it was high time for financial diversification of its economy
through the Islamic Finance. Today, Britain can boast of Islamic bank of Britain and has set the
agenda of being the Islamic Finance hub in the Europe. The recent Brexit could have been more
threatening if not for this giant stride.
The USA
Through the early eighties and the late eighties, Canada and the US have embraced Islamic
Banking and Finance. Islamic Cooperative Housing Corporation, Toronto (1980), Albarakah
Bancorp, California (1982), ALbarakah Bancorp (Texas) Inc. (1987). Post financial meltdown
have seen expansion of Islamic Banking and Finance in the USA and Canada.
Coming to Africa, the first full fledge Islamic Bank, Al Baraka was registered 1988 in South
Africa. Today South African Islamic Banking and Finance services have gone beyond banking
services, it has extended to the investment of Pension Funds. This has contributed and helped the
South Africa economic challenges of recession too.
Islamic Banking and Finance has not only been allowed and embraced by various Governments
from Asian Pacific to the UK, from US to Canada and back home in Africa but also by renowned
international conventional banks such as Chase Manhattan, Citibank, the Hong Kong and Shanghai
Banking Corporation (HSBC), ANZ Grindlays, Union Bank of Switzerland, National Commercial
Bank and Standard Chartered bank.
If Islamic Financial system is embraced by the Governments of most advanced Countries in the
World and International Corporations, it means it is a veritable tool for Economic growth and
Development and most profitable.
In shaa ALLAH (God willing) I, would have time to dwell on Islamic Finance itself.
Mutiu Akinbami is an Actuary and a Chartered Islamic Finance Professional wrote through:
aaremutiullah@gmail.com