Stakeholders Raise Concerns Over Proposed Amendment To NDIC Act

Stakeholders from the banking and insurance sectors are expressing differing views and concerns regarding a bill aimed at amending the Nigeria Deposit Insurance Corporation (NDIC) Act No. 63, 2023. The objective of the bill is to enhance the effectiveness, independence, and autonomy of the Corporation.
The bill, sponsored by Mukhail Abiru, Chairman of the Senate Committee on Banking, Insurance, and other Financial Institutions, has passed the second reading in the Senate.

One of the most contentious proposed amendments is the removal of the “Concurrence”
role for the Central Bank of Nigeria (CBN) and its substitution with a more “collaborative”
role. This change is intended to grant the NDIC greater independence in decision-making regarding its policy objectives.

During a public hearing on the bill at the Senate, the Central Bank of Nigeria expressed its opposition to this amendment. However, the bankers, directors, and other stakeholders endorsed the change.

The bill proposes amendments to sections 2, 3, and 4 of the principal Act, replacing the word “concurrence” with the word “collaboration.”John Onoja, acting director of the financial policy and regulation department of the CBN, explained that “collaboration“ means that the NDIC makes decisions and collaborates with the CBN.

On the other hand, Mustafa Chike-Obi, Chairman of the Bank Directors Association of Nigeria, applauded the removal of the CBN concurrence requirement in Section 32. He stated that this change aligns with the NDIC‘s mandate to independently regulate insured deposit liabilities.

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The Financial Services Regulation Coordinating Committee (FSRCC), in its memoranda to the Senate Committee, also protested against the amendment to section 16. This amendment aims to increase the capital base of the NDIC from 50 billion to 500 billion, which will be subscribed and held only by the federal government.

The FSRCC argued that increasing the authorized share capital to 500 billion, fully owned by the federal government, renders the additional capital redundant as it would not yield the required return on investment. They suggested that the existing share capital structure should be maintained between the Ministry of Finance and CBN, as stated in the principal Act.

Furthermore, Nestok Ikeagu, director of legal at the Securities and Exchange Commission (SEC), objected to the amendment that removes 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.

Meanwhile, the NDIC boss voiced his support for the bill, stating that it will strengthen the NDIC.

Ronke Sokefun, the former chairman of the NDIC board, also spoke in favor of the bill. She expressed concerns about the NDIC losing its independence as a liquidator to the CBN. She appreciated the bill for considering the traditional role of the corporation as the liquidator in the event of a bank‘s winding up. She emphasized that the NDIC should not be subject to the whims and caprices of the CBN, which could decide to appoint another liquidator.

Chairman Abiru assured that the Senate will carefully consider all the objections raised by stakeholders.