Critical stakeholders in the banking, financial, and insurance sectors have raised opposing views and concerns over a bill to amend the Nigeria Deposit Insurance Corporation (NDIC) Act No. 63, 2023. The bill aims to enhance the Corporation’s effectiveness, independence, and autonomy.
The Bill which is sponsored by Tokunbo Abiru, chairman Senate Committee on Banking, Insurance and other Financial Institutions have passed second reading at the Senate.
Among several proposed amendment, one of the most contentious is 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.
While the Central Bank of Nigeria noted its opposition against this amendment during a public hearing on the Bill at the Senate on Thursday, the bankers directors and other stakeholders however endorsed it.
The CBN tackled proposed amendment to sections 2, 3 and 4 of the principal Act substituting the word “collaboration” for the word “concurrence.”
Section 2 of the principal Act which provides the Corporation shall protect depositors by providing an orderly means of compensation in the event of failure of their insured institutions or the inability of such insured institutions to make payment to depositors “provided that in the latter case such payment shall only be
made with the concurrence of the Central Bank of Nigeria” was deleted.
Also Section 2 subsection C (iii) which stipulates “with the concurrence of the Central Bank of Nigeria, providing a
framework for the resolution of failing insured institutions.” The word “concurrence” was substituted with collaboration.
John Onoja, acting director, financial policy and regulation department of CBN the meaning of Collaboration means that NDIC takes the decision and collaborates with CBN, but in the situation with concurrence they must first of all, get the input of the CBN, rather than to just collaborate with the NDIC on its own decision.
Conversely, Mustafa Chike-Obi, chairman of the Bank Directors Association of Nigeria, applauded the removal of the CBN concurrence requirement in Section 32. He noted this change aligns with the NDIC’s mandate to independently regulate insured deposit liabilities.
However, Pius Olanrewaju, president of the Chartered Institute of Bankers of Nigeria, urged the Senate to restore the concurrence requirement.
Read also: How NASS shut governors in with passage of new minimum wage bill
The Financial Services Regulation Coordinating Committee (FSRCC), in its memoranda to the Senate Committee also protested amendment to section 16, increasing the capital base of the NDIC from 50 billion to 500 billion which shall be subscribed and held only by the federal government.
“The FSRCC is suggesting to retain the current authorised share capital of 50 billion because NDIC does not require such huge capital to operate as it is not in the business of lending or creating risk assets.
“Increasing authorised share capital from 50 billion to 500 billion and fully owned by the federal government render the additional capital redundant as it would not be yielding the required return on investment. The extant share capital structure should be between the Ministry of Finance and CBN as sustained in the principal Act”, it read.
Additionally, Nestok Ikeagu, director of legal at the Securities and Exchange Commission (SEC), objected to the amendment removing the SEC Director-General from the NDIC board. He emphasized that the SEC’s role in investor protection justifies its position on the board, and removing it would hinder interagency collaboration.
“We are objecting to this and our reason is that the Commission was granted a seat in recognition of its investor protection mandate in respect of the shareholders and investors and shareholders of the banks which are public companies as well as in furtherance of the pivotal role the Commission is expected to play under the NDIC Act, 2023. Accordingly, the proposed removal of the commission will be a major retrogressive step on the interagency collaboration”, he said.
However, the CIBN applauded the proposed removal noting that SEC is a regulator of the capital market and has nothing to do with deposit insurance business.
Meanwhile, the NDIC boss voiced his support for the Bill, which he said will strengthen the NDIC.
Also speaking in favour of the Bill, Ronke Sokefun, the former chairman of the NDIC board decried that the NDIC lost its independence as liquidator to the CBN.
“Thank you for taking a look at the traditional role of the corporation, which is to act as the liquidator in the event of a bank’s winding up. From the traditional role which the corporation has always executed, all of a sudden, it has to be at the whims and caprice of the CBN, the CBN can decide to have another liquidator.
“Those are powers that were inherent in the corporation prior to the enactment of the 2023 Act. The issue of concurrence has been appeared several times throughout the Act, powers that the corporation has exerted throughout its 35-year existence, all of a sudden, they have to seek concurrence to be able to exercise their traditional role.”
Abiru, chairman of the Committee said the Senate will look into all the objections. He also mentioned that the recapitalisation of the NDIC is targeted a meeting the $1trillion economy.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
