Senate amends NDIC Act to safeguard depositors’ fund

…Restores president’s appointing power

The Nigerian Senate on Tuesday passed the Nigeria Deposit Insurance Corporation (NDIC) Act (Amendment) Bill, 2024 (SB.277) after its third reading.

The bill, sponsored by Adetokunbo Abiru, chairman of the Senate Committee on Banking, Insurance and other Financial Institutions, was read for the third time and passed after the majority of lawmakers voted in favour of it, during plenary.

The bill seeks to amend the Nigeria Deposit Insurance Corporation Act No 33 of 2023 to make the corporation more effective, safeguard its independence and autonomy and bring it in line with current realities and best practices.

Though the 2023 Act made substantial improvements to the 2006 Act, its implementation has been fraught with continuous debates and there have been a series of appeals from and consensus among stakeholders on the need for an amendment of the Act to address all concerning issues about its implementation.

Abiru explained that the Nigerian Deposit Insurance Corporation (Amendment) Bill, 2024 will enhance the NDIC’s capacity to safeguard depositors, ensure the stability of financial institutions, and promote trust in the banking system.

Key amendments

Section 7 of the Principal Act was amended to restore the president’s power to appoint the managing director and executive directors. The president shall appoint the chairman and other members of the board subject to the confirmation of the Senate.

The Principal Act restricts the president’s power to appoint the managing director and executive directors and provides that they are to be persons recommended by the Central Bank of Nigeria governor. But the bill amended this provision to bring it in line with and in consonance with the president’s power of appointment as enshrined in the Constitution of the Federal Republic of Nigeria 1999 (as amended).

It also makes provisions for the chairman of the corporation to be different from the permanent secretary.

The bill provides for the establishment of an interim management committee for the corporation within 30 days after the expiration or termination of the tenure of the board by the minister of finance. This is to forestall the recent situation where the corporation faces challenges in its operations as a result of the absence of a board.

Section 25 was amended to increase the maximum amount payable to insured depositors upwards and also empowers the corporation to review the amount upwards from time to time taking into consideration the prevailing economic realities.

The section stipulates that in the event of revocation of the operating licence of an insured institution or actual suspension of payment to depositors of such insured institution, a depositor shall receive N5 million in the case of an insured institution other than a micro-finance bank; and N2 million in the case of a depositor of microfinance bank up from N200,000. This payment shall be made in concurrence with the central bank.

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Section 62 of the principal Act was amended to provide that the corporation has the power to succeed to all rights, titles, powers, and privileges of the insured institution, and of any shareholder, depositor, officer, accountholder or director of such institution with respect to the institution and the assets of the institution provided the succession shall not include monies received by the insured institution, application monies, and other monies paid prior to allotment of shares or other securities.

This is to ensure that proceeds of public offerings in the custody of intervened/failed banks should not be treated as deposits and come with other monies in the coffers of the bank for subsequent utilisation by the NDIC in pursuance of its mandate.

The bill proposed the removal of the “Concurrence” role for the Central Bank of Nigeria (CBN) and substituting it with a rather “collaborative” role in an attempt to make the NDIC more independent in taking decisions bordering on its policy objectives.

But this provision was deleted due to concerns that it may erode the regulatory powers of the central bank and grant the NDIC powers in the regulation and supervision of banks and other financial institutions contrary to the limited role reserved for deposit insurers.

The Senate committee on banking, insurance and other financial institutions also believes that the provision may conflict with the underlying philosophy of the BOFIA which limits the role of the NDIC to the orderly resolution of failed banks, with the rescue and rehabilitation of failing banks, being the exclusive preserve of the CBN.

The bill will be transmitted to President Bola Tinubu for assent.