Ijarah Agreement (Nigeria)
IJARAH AGREEMENT
CBN Non-Interest Finance Framework 2017 | AAOIFI Sharia Standard No. 9 | Companies and Allied Matters Act 2020
THIS IJARAH AGREEMENT is made this [Date of Agreement]
BETWEEN:
(1) [Lessor Name] of [Lessor Address] (CBN Licence / RC No: [Lessor RC/Licence]) (hereinafter referred to as the "Lessor" or "Mu'ajjir"); AND
(2) [Lessee Name] of [Lessee Address] (hereinafter referred to as the "Lessee" or "Musta'jir").
The Lessor and the Lessee are hereinafter collectively referred to as "the Parties".
RECITALS
A. The Lessor is the lawful owner of the asset described herein (the "Leased Asset") and is desirous of leasing the same to the Lessee on Sharia-compliant terms.
B. The Lessee desires to take on lease the Leased Asset from the Lessor on the terms and conditions set out in this Agreement.
C. This Agreement has been reviewed and approved by [Sharia Board] in accordance with the CBN Non-Interest Finance Framework 2017 and AAOIFI Sharia Standard No. 9 on Ijarah.
1. LEASED ASSET
1.1 The Leased Asset is described as follows: [Asset Description]
1.2 The acquisition value of the Leased Asset is [Asset Value].
1.3 The Lessee shall use the Leased Asset solely for the following permitted purpose: [Permitted Use]. The Lessee shall not use the Leased Asset for any purpose prohibited under Sharia law (Haram) or any applicable Nigerian law.
2. LEASE TERM AND UJRAH
2.1 The lease shall commence on [Commencement Date] and shall expire on [Expiry Date], constituting a total term of [Lease Term] months (the "Lease Term").
2.2 In consideration of the Lessor granting the right to use the Leased Asset, the Lessee shall pay the Lessor a monthly Ujrah (rental) of [Monthly Ujrah], due on the [Payment Day] of each calendar month, commencing from the first month of the Lease Term.
2.3 The aggregate Ujrah payable over the full Lease Term shall be [Total Ujrah].
2.4 The Ijarah type under this Agreement is: [Ijarah Type].
3. OWNERSHIP AND MAINTENANCE
3.1 Ownership of the Leased Asset shall remain with the Lessor throughout the Lease Term. The Lessee acquires only the right to use the Leased Asset (usufruct) and shall not, without the written consent of the Lessor, sublease, encumber, or otherwise deal with the Leased Asset.
3.2 Major maintenance, structural repairs, and insurance of the Leased Asset against total loss or theft shall remain the responsibility of the Lessor in accordance with AAOIFI Sharia Standard No. 9, Clause 5/2.
3.3 Routine and minor maintenance arising from normal use of the Leased Asset shall be the responsibility of the Lessee.
3.4 In the event of total loss of the Leased Asset through no fault of the Lessee, the Ijarah shall terminate and the Lessee shall have no obligation to pay Ujrah from the date of total loss.
4. IJARAH MUNTAHIA BIL-TAMLIK (if applicable)
4.1 Where the Ijarah type is Ijarah Muntahia Bil-Tamlik, at the expiry of the Lease Term and upon full payment of all Ujrah instalments, the Lessor shall offer to sell the Leased Asset to the Lessee at a residual purchase price of [Residual Value], pursuant to a separate Wa'd (purchase undertaking) executed by the Parties on the date of this Agreement.
4.2 The sale of the Leased Asset shall be effected by a separate Sale Agreement (Aqd al-Bay) and shall not form part of this Ijarah Agreement, in compliance with AAOIFI Sharia Standard No. 9, Clause 2/2.
5. SHARIA COMPLIANCE
5.1 This Agreement is structured to comply with Islamic Sharia principles as approved by [Sharia Board] and in accordance with the CBN Framework for the Regulation and Supervision of Non-Interest Finance Institutions 2017.
5.2 The Ujrah payments under this Agreement do not constitute or include any element of interest (Riba), excessive uncertainty (Gharar), or speculation (Maysir) and shall not be indexed to the CBN Monetary Policy Rate (MPR) or any other interest benchmark.
6. GOVERNING LAW AND DISPUTE RESOLUTION
6.1 This Agreement is governed by the laws of Nigeria and the laws of [Governing State] State.
6.2 Any dispute arising out of this Agreement shall first be referred to the Sharia Supervisory Board for non-binding opinion, and thereafter, if unresolved, to the High Court of [Governing State] State or to arbitration under the Arbitration and Mediation Act 2023.
7. STAMP DUTY
7.1 This Agreement shall be duly stamped by the Federal Inland Revenue Service (FIRS) (for institutional parties) or the relevant State Internal Revenue Service (for individual parties) under the Stamp Duties Act (Cap S8, LFN 2004), as amended by the Finance Act 2020, before it is admissible in evidence.
Lessor (Mu'ajjir)
________________
Signature
Lessee (Musta'jir)
________________
Signature
What Is a Ijarah Agreement (Nigeria)?
An Ijarah Agreement in Nigeria governs the relationship between the parties by fixing what each must do.
In Nigeria, Ijarah agreements are primarily used by the nine CBN-licensed Non-Interest Banks (NIBs) and Non-Interest Finance windows of conventional banks, including Jaiz Bank Plc — the first full-fledged Islamic bank licensed in Nigeria in 2012 — Taj Bank, and Lotus Bank. These institutions structure equipment financing, vehicle acquisition, commercial property leasing, and mortgage equivalent products as Ijarah contracts in compliance with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) standards, which the CBN mandated as the primary Sharia governance framework for Nigerian NIFIs.
The legal enforceability of an Ijarah Agreement in Nigeria rests on the Nigerian Contract Law principles applicable in each state, supplemented by the CBN regulatory framework. In northern states such as Kano, Sokoto, and Zamfara, Sharia courts established under the Sharia Court Laws of those states may also have jurisdiction over Ijarah disputes between Muslim parties. The Companies and Allied Matters Act 2020 (CAMA 2020) governs the corporate capacity of institutional lessors and lessees. No specific Federal Islamic Finance Act exists in Nigeria as of 2024, so general contract principles under the Contracts Law (applicable in southern states) and common law govern Ijarah disputes in federal and state High Courts.
An Ijarah Agreement must be distinguished from a conventional finance lease under the Finance (Control and Guarantees) Act or a hire-purchase under the Hire Purchase Act (Cap H4, LFN 2004). In a conventional lease, the lessor's return derives from interest (which is prohibited under Sharia law as Riba). In an Ijarah, the rental payment is compensation solely for usufruct — the asset must exist, be owned by the lessor at the time of lease, and be in a usable condition. The prohibition on Riba, Gharar (excessive uncertainty), and Maysir (speculation) under Sharia Fiqh al-Muamalat principles shapes the structure of every valid Ijarah.
An Ijarah Muntahia Bil-Tamlik (lease ending in ownership) or Ijarah wa-Iqtina variant allows the lessee the option to purchase the asset at the end of the lease term at a pre-agreed price, making it functionally equivalent to a hire-purchase without interest. The Securities and Exchange Commission (SEC) Nigeria issued rules in 2013 permitting Sukuk issuances structured on Ijarah principles, and the Federal Government of Nigeria issued the inaugural NGN 100 billion Ijarah Sukuk in 2017 through the Debt Management Office (DMO) to fund federal road infrastructure.
The legal framework governing the Ijarah Agreement (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a Ijarah Agreement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The CBN Guidelines on Non-Interest Financial Institutions (NIFI) sets the foundational requirements.
When Do You Need a Ijarah Agreement (Nigeria)?
An Ijarah Agreement in Nigeria is required whenever a Sharia-observant individual or institution needs to finance the acquisition or use of an asset without incurring interest-based debt.
An Ijarah Agreement is needed when an individual or business seeks to finance the purchase of a motor vehicle, machinery, or equipment through a Non-Interest Bank such as Jaiz Bank Plc or Taj Bank, where the bank purchases the asset outright and leases it to the customer for monthly Ujrah payments over an agreed term.
An Ijarah Agreement is required when a company registered under CAMA 2020 wishes to occupy commercial premises owned by an Islamic finance institution or a private lessor, and both parties require a Sharia-compliant lease structure that complies with AAOIFI Sharia Standard No. 9 on Ijarah.
An Ijarah Agreement is needed when a Federal Government ministry or state government agency engages in asset-based public financing — such as the Federal Ministry of Finance's Ijarah Sukuk programmes administered by the Debt Management Office (DMO) — requiring a master Ijarah deed as the underlying contractual instrument.
An Ijarah Agreement is required when a Nigerian real estate developer offers residential or commercial properties for lease to Muslim customers who wish to avoid conventional mortgage interest, structuring the transaction as an Ijarah Muntahia Bil-Tamlik (hire-purchase equivalent) under which the customer gradually acquires ownership.
An Ijarah Agreement is needed when a small or medium enterprise (SME) in northern Nigeria seeks equipment financing from a microfinance institution with an Islamic banking window, as the CBN Microfinance Policy Framework 2011 (revised 2012) permits Ijarah-based financing by licensed microfinance banks.
Parties in Nigeria should prepare a Ijarah Agreement (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Ijarah Agreement (Nigeria)
A valid Ijarah Agreement in Nigeria must contain the following essential elements to comply with AAOIFI standards and CBN Non-Interest Finance guidelines.
Parties: Full legal names, addresses, and descriptions of the lessor (Mu'ajjir) and lessee (Musta'jir). For institutional parties, include the CBN licence number and Companies and Allied Matters Act 2020 registration number (RC number). The lessor must have legal ownership of the asset at the commencement of the lease.
Asset Description: A precise description of the leased asset (Al-Ma'jur), including make, model, serial number, or in the case of property, the legal description and title reference. AAOIFI Sharia Standard No. 9, Clause 3/1 requires that the leased asset be precisely identified and deliverable at the time of the contract.
Rental (Ujrah): The agreed rental amount in Nigerian Naira (NGN), payment frequency (monthly, quarterly, annually), and total aggregate Ujrah over the lease term. The Ujrah must be fixed or determinable at the time of contract — variable rentals linked to LIBOR or market interest rates are prohibited under Sharia law as they introduce Riba.
Lease Term: The commencement date (DD/MM/YYYY) and expiry date of the Ijarah. The term must be specific and agreed at the outset — open-ended or perpetual Ijarah arrangements are prohibited under AAOIFI standards.
Ownership and Maintenance: A clause confirming that ownership of the asset remains with the lessor throughout the lease term, and that major maintenance and structural repairs are the lessor's responsibility under AAOIFI Sharia Standard No. 9, Clause 5/2. Minor routine maintenance may be assigned to the lessee.
Permitted Use: A description of the permitted use of the asset. The lessee may not use the asset for purposes prohibited under Sharia law (Haram activities) or in violation of any Nigerian law.
Purchase Option (if Ijarah Muntahia Bil-Tamlik): If the agreement is structured as a lease-to-own arrangement, a separate purchase undertaking (Wa'd) setting out the purchase price and transfer mechanism at the end of the lease term, consistent with AAOIFI Sharia Standard No. 9, Clause 2/2. The sale and lease must be documented as two separate contracts.
Sharia Compliance: A declaration that the agreement has been reviewed and approved by the institution's Sharia Supervisory Board or a qualified Sharia adviser, in compliance with the CBN Framework for Regulation and Supervision of Non-Interest Finance Institutions 2017.
Governing Law and Dispute Resolution: The agreement should specify Nigerian law as governing law, and may provide for arbitration at the Lagos Court of Arbitration or the Chartered Institute of Arbitrators Nigeria (CIArb Nigeria), or submission to a State High Court with jurisdiction to apply Sharia principles in commercial matters.
Additional compliance elements for a Ijarah Agreement (Nigeria) used in Nigeria include: Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Ijarah Agreement (Nigeria) (Nigeria) [Legal document template]. Forms Legal. https://forms-legal.com/nigeria/financial/agreements/ijarah-agreement-nigeria
"Ijarah Agreement (Nigeria) (Nigeria)." Forms Legal, 2026, https://forms-legal.com/nigeria/financial/agreements/ijarah-agreement-nigeria.
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author = {{Forms Legal}},
title = {Ijarah Agreement (Nigeria) (Nigeria)},
year = {2026},
howpublished = {\url{https://forms-legal.com/nigeria/financial/agreements/ijarah-agreement-nigeria}},
note = {Free legal document template. Based on CBN Guidelines on Non-Interest Financial Institutions (NIFI)}
}
Frequently Asked Questions
An Ijarah Agreement is legally binding and enforceable in Nigeria as a commercial contract under the general principles of Nigerian contract law, subject to offer, acceptance, consideration (Ujrah), capacity, and intention to create legal relations. In the six north-western states of Zamfara, Kano, Katsina, Sokoto, Kebbi, and Niger, as well as other states with Sharia courts, the agreement may also be enforceable under customary and Islamic law for parties who are Muslims and who consent to Sharia jurisdiction. The Central Bank of Nigeria's Framework for Non-Interest Finance 2017 provides regulatory oversight ensuring that Ijarah products offered by licensed Non-Interest Banks meet both Nigerian law and AAOIFI Sharia governance standards. An Ijarah agreement that lacks a specific asset description, fails to vest ownership in the lessor at commencement, or contains interest-like penalties may be challenged as non-compliant.
An Ijarah Agreement and a conventional lease both involve the transfer of usufruct (right to use) from lessor to lessee in exchange for periodic payments. The fundamental difference lies in the treatment of risk, ownership, and return. In a conventional lease under the Hire Purchase Act (Cap H4, LFN 2004) or a commercial finance lease, the lessor's profit may include an interest component that compensates for the time value of money — this interest (Riba) is prohibited under Islamic Sharia law. In an Ijarah, the rental (Ujrah) is compensation solely for the use of the asset, and the rate cannot be linked to interest benchmarks such as the Central Bank of Nigeria's Monetary Policy Rate (MPR) or LIBOR. Additionally, under AAOIFI Sharia Standard No. 9, major maintenance obligations remain with the lessor in an Ijarah, whereas in a conventional finance lease the lessee typically bears all maintenance risk. Risk of total loss of the asset also reverts to the lessor in an Ijarah, not the lessee.
Legal counsel is strongly recommended for Ijarah Agreements in Nigeria, particularly when the transaction involves a Non-Interest Bank licensed by the Central Bank of Nigeria, or when the asset value exceeds NGN 5,000,000. A qualified Nigerian solicitor can draft the agreement in compliance with CAMA 2020 (for corporate parties), ensure the Ujrah structure does not inadvertently incorporate interest-like mechanisms that would render the contract non-Sharia-compliant, and advise on stamp duty payable under the Stamp Duties Act (Cap S8, LFN 2004). For Ijarah Muntahia Bil-Tamlik (lease-to-own) structures, a solicitor should also prepare the separate Wa'd (purchase undertaking) document. A certified Sharia adviser or the institution's Sharia Supervisory Board should also review the final agreement before execution to confirm AAOIFI compliance.
An Ijarah Agreement in Nigeria is subject to stamp duty under the Stamp Duties Act (Cap S8, Laws of the Federation of Nigeria 2004), as amended by the Finance Act 2020. For lease agreements, the applicable stamp duty rate is ad valorem based on the annual rental: 0.78% for leases with a term of 1-7 years, and 3% for leases exceeding 21 years, assessed on the annual rent. For transactions involving companies or Non-Interest Banks, the Federal Inland Revenue Service (FIRS) collects stamp duty. For transactions between individuals only, the relevant State Internal Revenue Service (e.g., Kano State Internal Revenue Service for Kano property) is the collecting authority. An unstamped Ijarah Agreement is inadmissible in evidence under Section 22 of the Stamp Duties Act and cannot be registered at the relevant Land Registry if property is involved.
An Ijarah Muntahia Bil-Tamlik (IMBT) — lease ending in ownership — is structured in Nigeria as two separate legal instruments to comply with AAOIFI Sharia Standard No. 9 and CBN Non-Interest Finance guidelines. The first instrument is the Ijarah lease agreement setting out the rental term and Ujrah payments. The second instrument is a separate Wa'd (unilateral promise or purchase undertaking) executed contemporaneously but distinct from the lease, under which the lessor promises to sell the asset to the lessee at the end of the lease term at a residual value or nominal price. The two contracts must remain legally independent — a single document purporting to combine lease and sale is viewed as a Murabaha sale disguised as a lease and may be rejected by the institution's Sharia Supervisory Board. Nigerian Non-Interest Banks such as Jaiz Bank and Taj Bank have adopted CBN-approved IMBT product structures for home financing and vehicle finance.
Ijarah disputes in Nigeria may be heard by different courts depending on the state and the nature of the parties. In states such as Lagos, Rivers, and Abuja (FCT), disputes are heard by the State High Court or Federal High Court applying Nigerian common law and contract principles. In states with active Sharia court systems — including Kano, Katsina, Sokoto, Zamfara, Bauchi, and nine other northern states — Muslim parties may choose to submit disputes to the Sharia Court of Appeal, which applies Islamic law principles including Fiqh al-Muamalat governing commercial transactions. The Chartered Institute of Arbitrators Nigeria (CIArb Nigeria) and the Lagos Court of Arbitration (LCA) also offer arbitration as an alternative dispute resolution mechanism, and arbitration clauses in Ijarah agreements are recognised under the Arbitration and Conciliation Act (Cap A18, LFN 2004), now replaced by the Arbitration and Mediation Act 2023.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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