Securities and Exchange Commission (SEC) Friday approved rules allowing firms to issue Islamic bonds as part of a broader economic innovation, in a move aimed at attracting foreign direct investment (FDI) from the oil rich Middle East Emirates.

Ms. Aruma Oteh, director general of the SEC, who is having a torrid time with the National Assembly and had her commission’s budget annulled by the legislators told journalists in Lagos that the Islamic bond is a way of opening up the economy to fresh investors.

“We have opened up the market to attract investments into Nigeria, particularly from Middle East investors,” said Oteh.

Nigeria has the largest Muslim population in sub-Saharan Africa, and is trying to establish itself as the African hub for Islamic finance, emulating the success of Malaysia. Islamic banking assets globally exceed $1 trillion and could reach $4 trillion by 2020, analysts say.

Last year, Islamic wealth manager Lotus Capital and Nigeria’s bourse (NSE) launched a debut index of Nigerian Stock Exchange-listed companies deemed compliant with centuries-old Islamic investment principles.

Oteh also said the regulator had licensed a new over-the-counter platform that will facilitate trading in shares of unlisted companies; a move she hoped would deepen the capital market and support companies raising long-term finance.

“We are essentially broadening the market to include unlisted securities. Think about all the public companies that are under the regulatory oversight of the SEC (but not listed) … the potential is enormous.”

In Nigerian law, any firm owned by more than 50 people is a public company.

Nigeria, Africa’s top oil producer and second biggest economy, is growing in popularity as an investment destination after its stock index rose 35 percent last year to end as one of the world’s best performing markets.

Oteh said the stock exchange had developed a pipeline of firms in the telecoms, cement, power and oil and gas sectors for listing this year, marking the resumption of new issuance after the primary market for new shares dried up during a 2008 crisis.

A stock market bubble burst in 2008, wiping 60 percent off the value of shares on the NSE in a year and nearly forcing nine banks into liquidation, until the central bank intervened to prop them up.

“We will start this year to see a number of companies come to the market, some of them want dual listings,” she said, adding that oil firm Seplat and fertiliser business Notore were among those preparing to list on the stock exchange.

She said 15 firms sold shares last year via rights issues and placements, compared with 20 in 2011, noting that new issuers had been wary of selling shares at low valuations after the 2008 crisis.

Oteh said the mutual fund industry in Nigeria will also help grow the stock market as funds collectively target assets under management of 1 trillion naira by 2018, from 103 billion naira currently.

She said retail investors had started to sign up to schemes and that the number was set to grow to 5 million over the next five years, from 169,000, driven by increased disposable income.