Africa's top oil producer and second biggest economy is trying to establish itself as the African hub for Islamic finance, having approved rules for issuing sukuk in March.
The guidelines, issued last month, require each takaful firm to establish an advisory council of experts; at least two of the experts must be sharia scholars appointed to four-year terms, which are subject to renewal.
Nigeria's insurance commission will in turn establish a takaful advisory council of its own to oversee industry products and practices, mirroring the centralised approach favoured by countries such as Malaysia and Oman.
Advisory council members must comply with eligibility criteria and an internal code of conduct, and attend a minimum 75 percent of meetings or face disqualification.
Under the guidelines, sharia scholars can only be members of one advisory council at a time and must undergo a formal assessment to ensure appropriate training and experience.
Islamic scholars are experts in financial and religious law, but they are not certified or accredited like other professions, so regulators are increasingly developing ways to ensure the hiring of experienced and financially literate scholars.
Conventional insurers in Nigeria will also be allowed to offer services through takaful windows, as long as operations are ring-fenced to avoid leakage and comingling with funds that are not sharia-compliant.
The use of takaful windows has been limited to a few countries such as Indonesia, Kenya and Pakistan. The latter prompted a legal challenge from full-fledged takaful firms against Pakistan's efforts to encourage competition.
Nigeria currently has a total of 58 insurance companies which posted gross premiums of 233 billion naira in 2011, a 16.6 percent increase from a year earlier.
A separate circular sets a relatively low minimum capital requirement for takaful firms, which need to place a deposit of 100 million naira with the central bank.
Regulators opted to allow three takaful operating models under the new guidelines: mudaraba, wakala and hybrid.
Under the mudaraba model, a takaful firm acts as a managing partner for a policyholder's money, working under a profit-sharing contract with any losses borne by participants.
In wakala, the firm operates under an agency agreement, managing funds on behalf of policyholders in exchange for a management fee, which can also include a performance fee.
The hybrid model uses the mudaraba format for investing and the wakala format for underwriting.
All takaful investments must be in sharia-compliant assets but if these are limited, firms may engage with conventional instruments subject to approval by their advisory councils.
Firms are also encouraged to consider guidelines issued by the Malaysian-based Islamic Board and the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions, though they are not legally binding.