Sharia Compliance Auditing Practices in Nigerian Islamic Banks: An Analytical Assessment

This study analytically assesses the Sharia compliance auditing practices of Islamic banks operating in Nigeria, examining the structures, methodologies, and effectiveness of internal and external Sharia review mechanisms. As Nigeria's Islamic banking sector grows, the credibility of Sharia compliance oversight has become central to investor confidence, regulatory trust, and customer assurance. The study employs a qualitative case study design, using document analysis of Sharia compliance reports, internal audit policy documents, and annual reports of three major Islamic financial institutions in Nigeria, supplemented by semi-structured interviews with 20 Sharia supervisory board members, internal Sharia auditors, and Central Bank of Nigeria Non-Interest Banking regulators. Data are analysed using institutional analysis and thematic coding. Findings reveal that Sharia compliance auditing in Nigerian Islamic banks is largely procedural rather than substantive, with limited evidence of systematic product-level Sharia risk assessment or independent verification of profit calculation methodologies. Sharia supervisory boards vary significantly in their composition, meeting frequency, and reporting independence. The study identifies the absence of a standardised Nigerian Sharia audit methodology as a critical gap. Recommendations include the development of a Central Bank of Nigeria Sharia audit framework, mandatory Sharia auditor certification, and the establishment of an independent Sharia Compliance Oversight Authority for Nigeria's non-interest banking sector. Keywords: Sharia compliance auditing, Islamic banks, non-interest banking, Nigeria, regulatory oversight.