Even in Nigeria, investor sensitivity to returns often influences their choice of financial products as they tend to prioritize higher returns over other factors including Shariah compliance. Yet, Cordros Asset Management is bullish that demand for Shariah compliant investments will increase with more options to be launched in the next five to 10 years.
“Investors prioritize returns. If Shariah products can match or exceed conventional fund industry returns, then they are more likely to attract a broader audience,” Senior Investment Analyst Zainab said this prognosis is especially true in the capital city Lagos, where Cordros is headquartered.
For cities in central and northern Nigeria, like Abuja and Kano, there is greater acceptance of Islamic offerings – due to larger Muslim populations in those regions. Zainab said Cordros saw its Shariah fund offerings grow following its northern outreach, compared to the Christian-majority Lagos.
Total assets under management for its Shariah funds rose from NGN53.33 million (US$35,551.59) in November 2023 to NGN130 million (US$86,679.75) as of the end of February 2025, said Zainab.
“We also need to educate investors about the benefits of Shariah compliant products, alongside improving their return profiles to enhance market penetration and acceptance.
“The high level of risk aversion among investors is influenced by economic instability and market volatility in Nigeria. Sukuk and other fixed income instruments are often oversubscribed, reflecting strong demand for Shariah compliant investment options that offer lower risk,” said Zainab.
Sukuk issuances in Nigeria are primarily government-led, which attract higher ratings and have a lower default risk. Recent Sukuk issuances in Nigeria were the Federal Government 2033 Sukuk, launched in October 2023, and Lagos State Ijara Sukuk 2030, launched on May 2023.
In terms of preferences, Zainab said institutional investors typically seek structured products that offer stable returns, capital preservation and lower risk, such as Sukuk and fixed income securities. High net-worth individuals may prefer a diversified portfolio that includes both Shariah compliant equities and alternative investments, allowing for capital appreciation alongside ethical considerations.
Retail investors often look for accessible investment options, such as mutual funds or exchange-traded funds (ETFs), that provide exposure to Shariah compliant assets while ensuring liquidity and ease of management, noted Zainab.
“There is potential for growth in the issuance of mutual funds and ETFs as the market matures and investor confidence increases. Our current focus on existing funds includes enhancing performance and investor engagement. New products are being developed to cater to both conventional and Shariah compliant investors, expanding market reach.”
