Economic development has been the focus of many studies in Islamic economics. This paper seeks to highlight the invaluable contributions that Islamic insurance (Takaful) can make to the goal of economic reforms enunciated by the present Nigerian government. The paper generally argues that there is no inherent conflict between the values prescribed and propagated by Islam and the values required for economic growth and development. After contextualizing the study within Nigeriaís post-military economic era, the paper discusses the history and objectives of Islamic insurance as a social-economic measure originating from the pre-Islamic era. The study also showcases the global scorecard recorded by Takaful among teeming Muslim masses since its foray into the world economic arena from the early eighties with further promising prospects in non-Muslim countries of Europe and North America. The paper presents the operational features and the social-economic contributions that Nigeria can enjoy from the rapidly growing patronage of Takaful while highlighting likely teething problems that the ethical insurance scheme could face. While acknowledging the need for further empirical analysis in a future study, the paper concludes with recommendations that policy makers and private entrepreneurs must adopt pragmatic measures to surmount the challenges that might face Takaful. These include designing of appropriate models to regulate the activities of the Shariah boards of existing Takaful offices, training of technical manpower to underwrite Islamic insurance products, addressing problems of limited awareness, dearth of technical partners and limited range of Shariah-compliant investments and products.