Working capital is where most businesses first meet riba: the overdraft, the stock loan, the revolving line whose interest ticks daily. The halal replacement is Murabaha, and in its working-capital form it is the single most used contract in Nigerian non-interest banking. Understanding its mechanics, and the one discipline that keeps it from collapsing into a disguised loan, is the difference between financing your business cleanly and merely re-labeling an overdraft. Product details below verified August 4, 2026.
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The mechanics, step by step
Classic Murabaha: you need stock or raw materials; the bank buys them from the supplier, takes ownership, and sells them to you at cost plus a disclosed margin, payable later, as a lump sum or instalments. The bank's profit is a trading margin on goods it actually owned, not interest on money. Nigerian banks mostly run the efficient variant, agency Murabaha: because you know your suppliers better than the bank does, it appoints you as its purchasing agent. You negotiate and source the goods, the bank pays the supplier directly and takes ownership, then sells the goods to you at the agreed cost-plus price. Jaiz Bank describes exactly this for its working capital line, as does TAJBank for domestic raw materials and Lotus Bank for its all-purpose and SME facilities.
The discipline that matters: real goods must actually flow, with the bank in the ownership chain. The money goes to the supplier, never into your account as cash. An arrangement where the goods are a paperwork fiction over a cash disbursement has the form of Murabaha and the substance of an interest loan, and both the Shariah and the practical protections evaporate with it. AltBank's AltBiz states the rule with unusual bluntness: funds strictly for raw materials, stock or equipment, NOT for payment of services, on a we-pay-you-take basis. Insist on that flow in your own deal, whichever bank you use; it is your evidence the contract is what it claims.
Who offers it, on what terms
| Product | Structure detail | Published terms (Aug 2026) |
|---|---|---|
| AltBank AltBiz | Supplier-paid purchases of stock and equipment | N5m cap, 15.5% flat p.a., 3% insurance, 20% Hamish, 24 months |
| TAJBank Murabaha for Traders | Short-cycle purchase of trading stock | N500k-N5m (N10m repeat), 90 days, margin unpublished |
| TAJBank Working Capital | Agency purchase of domestic raw materials | Margins and limits unpublished |
| Jaiz MSME / Working Capital | Agency-Murabaha; customer sources own suppliers | 1 yr in business, 3 months on a Jaiz account; pricing unpublished |
| Lotus SME Finance (Murabaha leg) | Stock and materials on 90-day trade cycles | 1-year tenor, 90-day cycles; zero fees; markup negotiated |
| Lotus Traders Coins | Bank buys traders' goods for onward sale; lien on inventory | Requires 6 months' market association membership; markup negotiated |
Reading the terms like an accountant
Two features of Murabaha pricing deserve cold attention. First, flat versus reducing: AltBiz's 15.5% is flat per annum, charged on the original amount for the full period, which on an amortizing facility is materially more expensive than the same number on a reducing balance. When a bank quotes you, ask which basis applies; the same digit can mean two different prices. Second, the deposit drag: a 20% Hamish means a fifth of your facility is locked as security, so the money actually working in your stock is smaller than the amount you are paying a margin on. Fold both into your true cost before comparing against your gross margin on the stock being financed. If the finance cost approaches your trading margin, the facility works for the bank and not for you.
Matching the cycle
The best Nigerian products are honest about tenor because Murabaha punishes mismatch: the price is fixed at signing, so a 90-day facility rolled repeatedly costs you a fresh margin each cycle, while a 24-month facility on stock you turn in 60 days has you paying for time you do not need. TAJ's MFT (90 days) fits fast-turning market stock; Lotus's one-year facility with 90-day cycles fits seasonal layering; AltBiz's up-to-24-months fits equipment-flavored working capital. Choose the product whose clock matches your stock turn, and resist the comfort of longer tenors you would pay for.
Practical checklist before signing
- Confirm the money flows to your supplier against invoices, never to your account as cash.
- Get cost and margin separately stated in the contract; that disclosure is a validity condition of Murabaha, not a courtesy.
- Ask flat or reducing, and get the total repayment figure in naira.
- Clarify the late-payment treatment: a compliant Murabaha cannot grow the debt; some banks charge amounts to charity instead, and you should know the policy.
- Check the security stack: deposit (Hamish), lien on goods, personal guarantees; AltBiz requires a guarantee with an undated cheque, which deserves legal advice.
- Bring AltBank's published grid to every unpublished-rate negotiation as your anchor.
Murabaha working capital is the halal market's bread and butter, and done with discipline it is exactly what it claims: trade finance tied to real goods, at a fixed price, with no compounding. The wider SME landscape it sits in is mapped in our complete SME finance guide, and the trader-specific products in the MFT review and Lotus SME review.
Frequently asked questions
Can a Murabaha facility revolve like an overdraft?
Not literally: each Murabaha is a discrete sale of specific goods, and there is no compliant equivalent of a standing cash balance you dip into. What the market builds instead is the master-agreement pattern: terms agreed once, with each stock purchase executed as its own transaction under it, which is functionally close to revolving credit while keeping every draw tied to real goods. Lotus's one-year facility with 90-day cycles is exactly this shape. If a bank offers you something that behaves like cash-on-tap with a Murabaha label, the goods leg has probably become fiction, and you should ask hard questions.
What if my supplier demands cash and will not deal with a bank?
The agency structure exists for this: the bank appoints you its purchasing agent, you transact with the supplier as usual, and the bank pays against the invoice you present. What the structure cannot survive is invoicelessness: purely informal supply chains with no documentation leave the bank nothing to own and nothing to verify. If your suppliers are fully undocumented, your realistic sequence is to formalize the largest supply relationships first, or to route through the microfinance layer, whose face-to-face models tolerate thinner paper. The documentation is not bureaucracy for its own sake; it is what makes the transaction financeable at all.
How should seasonal businesses time their facilities?
Backwards from the selling season, with the contract clock in mind. A Murabaha's margin is priced on its tenor, so the cheapest structure buys stock as late as operationally safe and repays as soon as the season's sales allow: a 90-day facility wrapped tightly around your peak beats a lazy annual one. TAJ's 90-day MFT and Lotus's cycle-based drawdowns fit this; AltBiz's 90-day and 180-day repayment cycles do too. The mistake to avoid is financing off-season storage on a markup product; if holding stock across quarters is the strategy, negotiate that tenor explicitly rather than rolling short facilities and paying the margin repeatedly.
Compare providers in your state
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Does the bank take ownership risk for even a moment, really?
In a correctly executed deal, yes, and it matters. Between paying your supplier and selling to you, the bank owns the goods: if the consignment burns in that window, the loss is the bank's, which is precisely why the contract sequence (bank buys, then bank sells to you) must be real and documented rather than simultaneous signatures on a fiction. Serious institutions manage the window with logistics and takaful rather than eliminating it on paper. Asking a bank how it handles that ownership window is one of the fastest ways to learn whether its Murabaha is genuine.