Saudi Islamic banks positioned for robust growth amidst economic expansion: Fitch Ratings 

Saudi Islamic banks positioned for robust growth amidst economic expansion: Fitch Ratings 
According to the report, Islamic banks demonstrate a better impaired financing ratio compared to conventional banks. Shutterstock
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Updated 26 June 2024
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Saudi Islamic banks positioned for robust growth amidst economic expansion: Fitch Ratings 

Saudi Islamic banks positioned for robust growth amidst economic expansion: Fitch Ratings 

RIYADH: Saudi Islamic banks are poised to maintain a robust performance this year and in 2025, buoyed by non-oil economic growth and favorable operating conditions, a new report stated. 

According to Fitch Ratings, these banks leverage a substantial retail customer base which helps improve profitability, secure lower-cost funds, and maintain high-quality, diversified assets. 

In the Kingdom, where all residential mortgages must comply with Islamic law, strong demand for Shariah-compliant financial products leads individuals to Islamic banks for mortgages and other services, thereby increasing deposits. 

“In general, financing growth has outpaced lending over the past few years, supported by the requirement for residential mortgages to all be Shariah-compliant. Islamic banking is dominant in Saudi Arabia, with the largest proportion of Islamic financing (85 percent) of any country that allows conventional banks to operate alongside Islamic banks,” the agency added. 

Customers’ trust in Islamic banking principles further encourages them to deposit funds in banks that uphold these values. Additionally, mandatory Shariah compliance for mortgages also solidifies Islamic banks as the preferred option for such financing. 

Asset quality 

According to the report, Islamic banks demonstrate a better impaired financing ratio compared to conventional banks, attributed to their lower exposure to risky corporate financing. This ratio stood at 1.5 percent for Islamic banks, contrasting with slightly over 2 percent for conventional banks. 

Islamic banks also improved their impaired financing ratio from 1.7 percent in 2022 to 1.5 percent in 2023, indicating enhanced loan performance.

This progress was bolstered by robust financing growth, which facilitated portfolio diversification and reduced overall risk. Favorable economic and regulatory conditions further supported these gains, leading to better borrower performance and reduced default rates.   

This key financial metric, also referred to as the non-performing financing ratio, is used to evaluate the quality of loans within banks or financial institutions. It specifically measures the proportion of loans that are experiencing difficulties or are at risk of default. 

Profitability 

According to the agency, Islamic banks show higher profitability with operating profit relative to risk-weighted assets exceeding 3 percent, compared to approximately 2.5 percent for conventional banks. 

In 2023, sector profitability remained stable at high levels, despite facing increased funding costs that offset the benefits from credit growth and reduced impairment charges. 

Islamic banks stood out with profit exceeding that of conventional banks, largely due to their ability to maintain higher margins supported by lower funding costs. 

This advantage stemmed from their strong retail franchises, which attracted a larger base of non-profit-bearing deposits compared to conventional banks. These stable and cost-effective funding sources allowed Islamic banks to sustain profitability levels above their counterparts, highlighting their resilience in a challenging financial environment. 




Fitch Ratings produced the report analyzing the Saudi Islamic banking sector. Shutterstock

Capital levels 

Islamic banks maintained a strong capitalization with an average common equity Tier 1 ratio of 16.4 percent as of the end of 2023, closely aligned with conventional banks’ ratio of 16.6 percent. 

This ratio indicates robust core equity capital relative to risk-weighted assets, ensuring solid financial stability. Additionally, Islamic banks’ lower risk-weighted assets to total assets ratio of 70 percent — compared to 84 percent for conventional banks — reflects a strategic emphasis on retail banking and reduced off-balance-sheet activities. 

These factors collectively enhance Islamic banks’ resilience by minimizing risk exposure and supporting sustainable growth amid challenging financial conditions.   

Conventional banks’ capital adequacy ratio, which measures their financial health by comparing capital, including equity and reserves, to risk-weighted assets, ensuring sufficient capital to absorb potential losses, stood at around 20 percent, similar to Islamic banks. 




Al Rajhi Banking stands out by having a more diversified retail deposit base than other institutions. Shutterstock

Funding and liquidity 

As of the end of 2023, customer deposits constituted 80 percent of the funding for Islamic banks, slightly less than the 84 percent observed for conventional banks, the agency noted in its report. 

Islamic banks saw their average financing-to-deposits ratio rise to 102 percent, up from 99 percent in 2022, indicating that their financing activities grew faster than their deposit base. 

Fitch Ratings noted that deposit concentration, where a substantial proportion of a bank’s deposits originates from a limited number of depositors or sources, tends to be prevalent among Islamic banks.

However, Al Rajhi Banking and Investment Corp. stands out due to its advantage of having a more diversified retail deposit base. 

Despite challenging financial conditions, Islamic banks have effectively managed liquidity, supported by increased availability of government sukuk and liquidity-management tools provided by the central bank.   

These measures ensure that Islamic banks maintain adequate liquidity levels to meet their financial obligations and operate smoothly amidst fluctuating market conditions. 

According to another June report from the agency focusing on emerging markets debt, Saudi Arabia is actively working to expand and strengthen its sukuk and debt markets. 

This strategic initiative is primarily motivated by the Kingdom’s need to address budget deficits effectively. By deepening these markets, Saudi Arabia aims to not only raise essential funds to bridge fiscal gaps but also to foster greater liquidity and diversification within its financial sector. 

This approach not only supports the government’s financial planning and infrastructure development goals but also strengthens the overall resilience and attractiveness of the Kingdom’s capital markets on a global scale. 

Saudi Arabia’s sukuk and debt capital market have demonstrated robust growth, with annual increases of 7.9 percent overall and 9.6 percent for unlisted issuances, as reported by the Capital Markets Authority in the same month. 

The market size for unlisted sukuk and debt expanded from SR72 billion ($19 billion) in 2019 to approximately SR105 billion by 2023. Corporate sukuk and debt reached SR125 billion by 2023, up from SR95 billion in 2019, with the number of issuing companies tripling. 

Government contributions dominated, comprising 70 percent of the market at SR529.8 billion by 2023. Market activity surged, with traded value hitting SR2.5 billion and transactions rising to 36,961. 

The Capital Market Authority aims to enhance market attractiveness through regulatory improvements and infrastructure expansions, supporting economic diversification and international investor interest in Saudi Arabia. 

According to Fitch Ratings, in 2024, GCC countries, Malaysia, Indonesia, and Turkiye have significantly increased their issuance of US dollar-denominated debt within emerging markets, collectively accounting for 51 percent of total EM dollar debt, up from 43.7 percent in 2023 and 32.8 percent in 2020. 

This rise reflects governmental efforts to develop debt capital markets, diversify funding sources, finance fiscal deficits, and manage maturing debts. Sukuk, a pivotal Islamic financing tool, comprised 12.4 percent of EM dollar debt issuance during this period. 

Their inclusion in global bond indices has bolstered demand from international investors, prompting Fitch to upgrade ratings for several countries due to improved fiscal outlooks and investor-friendly policies. 

Outlook 

In Fitch Ratings’ outlook for 2024 and 2025, Saudi Islamic banks are anticipated to maintain robust standalone credit profiles. 

This strength is bolstered by high oil prices and favorable operating conditions. However, strong credit growth is expected to exert pressure on banks’ capital, funding, and liquidity positions. 

To mitigate these pressures, Islamic banks are likely to diversify their funding sources beyond traditional deposits. This diversification includes increasing reliance on wholesale funding options such as sukuk issuance, which are expected to play a larger role in their funding mix. 

Despite this shift, deposits are anticipated to remain the primary and most stable source of funding for Islamic banks. Overall, while facing challenges related to capital, funding, and liquidity, Saudi Islamic banks are poised to uphold strong credit profiles supported by favorable economic conditions and strategic funding diversification efforts. 


Oman, India revise deal to avoid double taxation

Oman, India revise deal to avoid double taxation
Updated 27 January 2025
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Oman, India revise deal to avoid double taxation

Oman, India revise deal to avoid double taxation

JEDDAH: Oman and India have finalized an updated protocol to prevent double taxation and curb financial evasion related to income taxes, further bolstering their economic ties.

The agreement was signed in Muscat on Jan. 27 by Nasser bin Khamis Al-Jashmi, Chairman of Oman’s Tax Authority, and Indian Ambassador to Oman Amit Narang, as reported by Oman News Agency.

Al-Jashmi highlighted the importance of the new protocol in strengthening economic relations between the two countries, noting that the agreement is the result of ongoing efforts to enhance bilateral cooperation in the tax sector.

In December, Oman also signed a similar agreement with Tanzania to deepen their strategic partnership.

That deal aimed to foster an attractive investment climate, protect investors from double taxation, and increase transparency in financial transactions.

In October, Al-Jashmi represented Oman in signing a similar agreement with Estonia. The agreement adhered to the standard framework set by the Organization for Economic Co-operation and Development.

According to a statement from Estonia's Ministry of Foreign Affairs, the agreement was designed to provide a stable tax environment for both foreign entrepreneurs investing in Estonia and Estonian businesses expanding internationally.

The ministry emphasized that the primary goal of double taxation avoidance agreements was to foster investment between the signatory countries.

Additionally, the ministry highlighted that foreign investors value the assurance that they will not face a higher tax burden than local businesses operating in the target country.

As of October 2024, India exported $410 million worth of goods to Oman and imported $743 million, resulting in a trade deficit of $334 million, according to the Observatory of Economic Complexity.

India’s top exports to Oman included petroleum products valued at $146 million, processed minerals at $24.4 million, and basmati rice at $15 million. Iron and steel exports totaled $13.9 million, while ships, boats, and floating structures contributed $9.93 million.

On the import side, India’s purchases from Oman were led by fertilizers, totaling $118 million. Petroleum products accounted for $92.5 million, and ships, boats, and floating structures reached $77.5 million. Other commodities amounted to $45.2 million, while crude petroleum was valued at $43.5 million.


Asir region offering further $5.3bn in investment opportunities: top official 

Asir region offering further $5.3bn in investment opportunities: top official 
Updated 27 January 2025
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Asir region offering further $5.3bn in investment opportunities: top official 

Asir region offering further $5.3bn in investment opportunities: top official 

RIYADH: Saudi Arabia’s Asir region is working on securing a further SR20 billion ($5.3 billion) in private investments as part of its transformation into a year-round tourism destination, with significant projects already underway. 

With 7.8 million visitors recorded in 2024, the region is rapidly approaching its formal target of 9.1 million annual tourists by the end of the decade, revealed a senior official. 

In an interview with Arab News at the Real Estate Future Forum in Riyadh, Hashem Al-Dabbagh, CEO of the Asir Region Development Authority, said that private sector investments in the region have already exceeded SR7 billion ($1.87 billion).

“Aside from that SR7 billion of investments from the private sector, we also have another SR20 billion or so that we are working on, and it’s in the pipeline, but it’s not yet realized,” said Al-Dabbagh. 

He added: “So hopefully, between the investments that are realized and the ones in the pipeline, we have from the private sector somewhere around SR27 billion that hopefully is going to happen in Asir.”  

Al-Dabbagh noted that while some of the projects currently in the pipeline are expected to be finalized this year, others are slated for completion in 2026 or 2027, with certain long-term initiatives extending beyond 2030.  

He expressed optimism about the progress of investments in Asir, noting that the region has been “moving full speed ahead” in this area.  

Al-Dabbagh emphasized that the ongoing projects in Asir are primarily driven by private sector investments, while also highlighting significant initiatives led by the Public Investment Fund. 

Among these, he pointed to the Alwadi project, a SR14 billion waterway development located in the heart of Abha.  

The project will include commercial, cultural, residential, and agricultural spaces on both banks, all designed with pedestrians in mind and catering to both locals and visitors.  

“I claim that with that investment, Abha is going to be the most livable and beautiful city in the Arab world as a whole,” Al-Dabbagh added.  

He also highlighted the Al Soudah Development Project, another mega initiative with an investment of SR14 billion.  

“This is in the forest-covered mountains of Asir, where there’s going to be, again, development of hotels and residences, high-end for the most part, in six different areas within Al Soudah,” he said. 

Both projects are expected to remain under development through 2030. 

Al-Dabbagh noted that smaller-scale projects are also in the pipeline which some slated for completion by 2025.  

He further discussed the role of the Asir Investment Co. in spearheading mega developments across the region.  

“AIC has a number of iconic projects in a number of areas, not just within Abha, but in other regions on the coast, in the north, on the mountain ridge, and of course, in Abha as well,” he said, adding that these projects “are going to be announced formally in the next months, in 2025.”  

Al-Dabbagh highlighted that the region’s strategy is focused on transforming Asir into a year-round destination for visitors. 

“The formal target for Asir is 9.1 million annual visitors by the year 2030. I expect this target to be raised,” he said, explaining that the unofficial number of visitors to Asir in 2024 already neared 7.8 million.  

Additionally, he pointed to the broader national tourism target for Saudi Arabia, which was recently increased from 100 million to 150 million visitors, suggesting that regional goals, including Asir’s, are likely to be adjusted upward.  

“Without a doubt, this is going to have an impact on the economic development in the region and on the number of jobs,” Al-Dabbagh added.  

He noted that Asir has traditionally been an exporter of workforce to other parts of Saudi Arabia, such as Riyadh, Jeddah, and Eastern Province, due to limited job opportunities in the region. 

However, he emphasized that the tide is turning. “Now with everything that is happening in Asir, we find that there is a reverse migration, if you like,” he said.  

Al-Dabbagh added that he has observed this shift firsthand within the Asir Development Authority and through reports from larger investment projects, as more local residents are choosing to return to Asir to work on the new developments.   

He noted that Saudi Arabia only opened its doors to international tourism a few years ago, meaning that due to the country’s prior restrictions, “the vast, vast majority” of tourists in Asir were domestic visitors, along with some travelers from Gulf countries, he said.  

Al-Dabbagh added that, while the majority of tourists to Asir are expected to be from Saudi and the Gulf region, the proportion of international visitors is anticipated to grow significantly — from around 1 percent to approximately 10 percent, even as the total number continues to rise.  


Closing Bell: Saudi main index sheds, Nomu gains 

Closing Bell: Saudi main index sheds, Nomu gains 
Updated 27 January 2025
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Closing Bell: Saudi main index sheds, Nomu gains 

Closing Bell: Saudi main index sheds, Nomu gains 

RIYADH: Saudi Arabia’s Tadawul All Share Index dropped on Monday, losing by 13.27 points, or 0.11 percent, to close at 12,372.89.   

The total trading turnover of the benchmark index was SR7.1 billion ($1.9 billion), as 91 of the listed stocks advanced, while 147 retreated.   

The MSCI Tadawul Index also dropped by 6.80 points, or 0.44 percent, to close at 1,538.59. 

The Kingdom’s parallel market Nomu increased, gaining 118 points, or 0.38 percent, to close at 31,014.29. This comes as 40 of the listed stocks advanced while 45 retreated.    

Jabal Omar Development Co. was the best-performing stock of the day, with its share price surging by 10 percent to SR25.85.   

Other top performers included Knowledge Economic City, which saw its share price rise by 9.89 percent to SR16.66, and Makkah Construction and Development Co., which saw a 9.84 percent increase to SR106.    

Taiba Investments Co. and Jadwa REIT Al Haramain Fund also saw a positive change, with their share prices surging by 9.81 percent and 5.78 percent to SR51.50 and SR6.59, respectively.    

Raoom Trading Co. saw the steepest decline of the day, with its share price easing 5.18 percent to close at SR183.    

Nice One Beauty Digital Marketing Co. and Al-Baha Investment and Development Co. recorded declines, with their shares slipping 4.92 percent and 4.26 percent to SR56 and SR0.45, respectively.   

ARTEX Industrial Investment Co. also faced a loss in today’s session, with its share price dipping 4.06 percent to SR16.08 while Lumi Rental Co. saw a 4.01 percent drop to settle at SR76.60. 

On Nomu, International Human Resources Co. saw the highest gain, with a 10.95 percent increase, reaching SR5.98. 

Knowledge Tower Trading Co. followed with a 9.28 percent increase to SR17.42, while Enma AlRawabi Co. reached SR24.44 — a 6.26 percent growth. 

National Building and Marketing Co. and AME Co. for Medical Supplies were also among the top performers, with 5.44 percent and 5.14 percent increases to reach SR189.80 and SR122.80, respectively. 

Mulkia Investment Co. was Nomu’s worst performer of the day, witnessing a 9.86 percent decline to settle at SR33.35. 

Albattal Factory for Chemical Industries Co. and Arabian Food and Dairy Factories Co. also saw declines of 6.25 and 5.91 percent to settle at SR60 and SR94, respectively. 

Academy of Learning Co. and Leaf Global Environmental Services Co. saw drops of 5.71 and 5.08 percent to settle at SR9.58 and SR112. 


Qatar official calls for GCC real estate boom to drive sustainable growth beyond oil

Qatar official calls for GCC real estate boom to drive sustainable growth beyond oil
Updated 27 January 2025
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Qatar official calls for GCC real estate boom to drive sustainable growth beyond oil

Qatar official calls for GCC real estate boom to drive sustainable growth beyond oil

RIYADH: Oil-dependent countries in the Gulf Cooperation Council should focus on strengthening sectors such as real estate and tourism to ensure sustainable development, according to a Qatari official. 

Speaking at the Real Estate Future Forum in Riyadh on Jan.27, the president of the Real Estate Regulatory Authority-Aqarat, Khaled Al-Obaidli, said that Saudi Arabia’s success in the property sector exemplifies the growth of the entire GCC region in developing a thriving market. 

These comments regarding the Kingdom’s expanding property sector come just days after the nation reported a 3.6 percent year-on-year increase in its real estate price index.

Saudi Arabia’s Real Estate General Authority expects the country’s property market to reach $101.62 billion by 2029, with an expected compound annual growth rate of 8 percent from 2024. 

“The success of Saudi Arabia in the real estate sector is the success of all GCC countries because we see them as one,” said Al-Obaidli. 

He added: “Most of our countries are oil-based economies. It is very important to diversify the resources across sectors like real estate and tourism. We (Qatar) are not just a country that depends only on oil, we are now trying to affirm our presence in sports, and tourism, and we are also developing high-level universities.” 

Aligned with its Vision 2030 program, Qatar established the Real Estate Regulatory Authority-Aqarat in 2023 to enhance transparency and clarity of information as well as encourage investment in the country’s property sector. 

“The Real Estate Authority in Qatar was created to enhance the sector and we also try to make it more attractive to generate more investments,” said Al-Obaidli. 

Regarding the Real Estate Strategy launched by the authority in December, Al-Obaidli said that the initiative has five pillars, with the first one being developing a comprehensive national real estate plan and introducing policies that promote sustainable development. 

The second focuses on strengthening Qatar’s regulatory frameworks to support the sector, while the third aims to improve industry standards by enhancing real estate valuation governance.

The fourth pillar focuses on driving digital transformation in the industry, while the fifth aims to boost real estate investment and position Qatar as a global destination for family living.

“Technology is one of the most important tools to develop the real estate sector. Technologies like artificial intelligence and virtual reality can be used to enhance the customer experience. The experience of customers should be easy and seamless,“ said Al-Obaidli. 

He added: “In our countries, most of our doors are open. People get inside here without feeling uneasy. This is part of the real estate. If you want to retire, so, you have the regulations, health systems, and service products.” 

The Qatari official added that the country now hosts nearly all major international universities, allowing students to pursue higher education without traveling to Western countries.

Al-Obaidli also hinted at the plans to establish an institute of real estate in close cooperation with national universities.

“We are about to establish an institute for real estate in close cooperation with the private sector and some universities. So, it gives you the ability to get engaged in the sector, and you will also get a license specialized in this,” said Al-Obaidli. 

He added that people who receive real estate licenses from the institute can pursue part-time jobs in the property sector after completing their day jobs, which could boost the market. 

Al-Obaidli further said that both citizens from the GCC nations and foreign countries have sufficient opportunities to own residencies in Qatar. 

“The GCC citizens have privileges such as they can own a piece of land up to 3,000 sq. meters for residential and housing purposes in Qatar. Also, they can own their own land for their own entities or establishments for other businesses or factories. There are some regulations where we can increase these privileges for GCC citizens,” said the Qatari official. 

He added: “For foreigners, if you have $1 million, you can have a permanent residence and it will also have some features. This can be done through the Real Estate Authority.” 

According to the Aqarat website, permanent residency benefits are available for properties valued at $1 million or more, covering areas such as health, education, and investment.

Al-Obaidli further said that Qatar is not just trying to promote its own real estate sector, but it is also trying to accelerate the growth of the industry in other GCC nations. 

“We want our countries to be the best, as one of the good destinations for real estate development. Our ambition is to come to a stage that is very much high. We are promoting GCC countries, not just Qatar. We want to be integrated, where opportunities will be ample,” concluded Al-Obaidli. 

In November, a report released by Statista projected that the real estate sector in Qatar is expected to grow at a compound annual growth rate of 1.96 percent from 2024 to 2029, reaching a market value of $492.10 billion. 

Earlier this month, another report released by Qatar’s Ministry of Justice revealed that the country’s real estate sector recorded sale contracts worth $284.6 million in December. 

The ministry data added that 283 real estate transactions were recorded during December, with the number of properties sold recording an increase of 12 percent compared to November. 


Saudi Arabia’s National Housing Co. sees robust sales in 2025 amid lower interest rates

Saudi Arabia’s National Housing Co. sees robust sales in 2025 amid lower interest rates
Updated 27 January 2025
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Saudi Arabia’s National Housing Co. sees robust sales in 2025 amid lower interest rates

Saudi Arabia’s National Housing Co. sees robust sales in 2025 amid lower interest rates

RIYADH: The CEO of National Housing Co. stated that lower interest rates in 2025 are expected to help the company exceed its 2024 achievements, with the reduced rates likely to boost sales.

During a session titled “Enhancing Quality of Life: The Role of Real Estate in Community Development” on the opening day of the Real Estate Future Forum in Riyadh, Mohammad Al-Buty highlighted that despite the challenges posed by higher interest rates in 2024, NHC successfully delivered high-quality products to meet market demand.

This achievement aligns with NHC’s ambition to become the leading real estate developer in the region, positioning itself at the forefront of the industry. It also supports the company’s commitment to delivering 300,000 housing units by 2025 and 600,000 by 2030, addressing the diverse needs of all societal segments.

“We’ve doubled our sales in 2024, and with the expected lower interest rates in 2025, we anticipate an even greater positive impact on the real estate market,” Al-Buty said. “Our goal now is to surpass what we achieved in 2024. We expect the reduction in interest rates to further boost sales."

“In 2023-2024, interest rates had an impact on mortgage demand for us,” he explained. “While 2024 saw the highest interest rates, it also recorded the highest sales. We were able to navigate these challenges by offering high-quality products that could effectively accommodate the higher rates.”

The CEO further emphasized that NHC does not focus on developing units for specific segments, but instead designs for entire communities, catering to all classes and segments.

“We develop based on market needs, using data to identify the desires and demands of our customers. We conduct thorough market studies,” Al-Buty explained.

He also highlighted: “Our pricing is highly competitive compared to neighboring countries for housing units.” 

During a separate panel discussion titled “New Frontiers: Balance and Innovation in the Real Estate Landscape,” Qatar’s Municipality Minister Abdullah Al-Attiya  highlighted that the World Cup was already integrated into the country’s Vision 2030, long before it was announced or hosted.

“The World Cup accelerated the execution of our plans, driving progress and resource allocation toward developing world-class infrastructure, ultimately positioning us as a global leader in infrastructure,” Al-Attiya explained.

Also participating in the panel, Maldives Minister of Construction, Housing, and Infrastructure Abdulla Muththalib addressed the significant challenges his country faces, noting that tackling environmental issues and providing essential services to the population come at a considerable cost. 

“We need to build safer islands to address the environmental challenges we're facing, which will involve relocating people— an expensive process for us,” Muththalib said.

“Given that our GDP is under $10 billion per year, it requires a significant investment for a country like ours to protect the islands and build homes for those who need to relocate,” he added.

The minister went on to explain that the government has launched an ambitious plan to reclaim a nearby lagoon near the capital city, covering an area of 1,100 hectares. 

“We plan to build a city for over 200,000 people, focusing on relocating residents from smaller islands. We must do this because, with climate change, we know we can’t sustain all these islands in the long term,” Muththalib said.

Ahmed Dangiwa, minister for housing and urban development of Nigeria, who was also part of the panel, discussed the National Social Housing Fund currently being developed in Nigeria. The fund aims to ensure that vulnerable populations, those with no income, and the underprivileged can access affordable housing.

“When the fund is complete, Nigerians will be able to access funding for housing, with some homes priced low enough for even low-income individuals to afford,” Dangiwa explained.

He further emphasized: “Building materials will be sourced locally, reducing the need to import them, making the houses more affordable for the population.”