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By NBF News
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In an effort aimed at further deepening the nation's stock market, The Nigerian Stock Exchange (NSE) has signed a Memorandum of Understanding (MoU) with Lotus Capital for the development and management of a certified Shari'ah-compliant index.

This initiative would increase the variety of investment classes in Nigeria as the   Islamic Equity Index joins the family of indices of the NSE.

According to the management of the Exchange, 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 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.

Speaking at the signing ceremony, the chief of staff/head of corporate division of the exchange, Mr Bola Adeeko, explained that the investment instruments like Exchange Traded Funds can be built on the Index, and that investors with a preference for ethical/Shari'ah-compliant investments can invest in same. He described the signing of the MoU as a vital development step for the market.

'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,' he said.

The chief executive of Lotus Capital, Hajara Adeola, said: 'Many ethical investors are not sure whether they can invest in the stock market but the NSE is taking a crucial step to make the market more accessible and inclusive.

Whilst there are some industries, such as alcohol, 'interest based' financial services, to name a few, that are clearly prohibited, there are several companies that are suitable for investment by an ethically minded investor.

'Previously, an individual or corporate investor would have to conduct thorough research and be knowledgeable in Shari'ah law permissible investments in order to discern such suitable companies.

With the advent of the NSE Lotus Islamic Index, more ethically minded investors will be able to easily and safely participate. This can only be good for the Nigerian capital market as it will attract more investors to our market.'