The Nigerian Stock Exchange (NSE) has signed a Memorandum of Understanding (MOU) with an indigenous financial and investment institution, Lotus Capital, for the development of a certified Shari’ah compliant Index, according to a statement from the exchange on Wednesday.
“This bold initiative would increase the variety of investment classes in Nigeria as the Islamic Equity Index joins the family of indices of the NSE,” the statement said..
According to the statement, the Islamic Equity Index will be known as the “NSE Lotus Islamic Index” and will consist of companies that are in conformity with the principles of Shari’ah, the Islamic law.
The index will increase the breadth of the market and create an important benchmark for such investments as the alternative non-interest investment space widens.
It is the first index created to track the performance of Shari’ah compliant equities on the floor of The Nigerian Stock Exchange.
The Chief of Staff/Head of Corporate Division of the Exchange, Mr Bola Adeeko, said: “The NSE Lotus Islamic Index would further illuminate the massive investment opportunities available to ethically minded investors, both in Nigeria and overseas. All the companies that will appear on the index have been thoroughly screened by Lotus Capital, in accordance with a methodology approved by a Shari’ah Board.
“Even after companies are accepted into the index, they will still be subject to periodic screenings to ensure their continued compliance. If any company fails to meet the required standards, they will be removed from the index.”
Chief Executive Officer of Lotus Capital, Hajara Adeola, noted that many ethical investors are not sure whether they can invest in the stock market but with the signing of the MOU, the NSE is taking a crucial step to make the market more accessible and inclusive.
Under Islamic law Muslims are clearly forbidden to invest in some industries, such as alcohol and interest based financial services.