Dear President Tinubu: Protect Bank Deposits from Imminent Risk – Reject the Controversial NDIC BILL, SB–277 to Safeguard Nigeria’s Financial Stability
The Nigeria Deposit Insurance Corporation (NDIC), as the name implies, is responsible for insuring all bank deposits in Nigeria. This means that when a bank fails, as we witnessed recently with Heritage Bank, customers do not lose their money. For over 30 years, the NDIC has functioned as an autonomous corporate entity, performing the crucial function of guaranteeing bank deposits. However, this is about to change if President Tinubu signs the Senate Bill SB–277 into law.
The process leading to this change began during Emefiele’s tenure as CBN Governor. He sent his Director of Banking Supervision to become the Managing Director of NDIC, and together, they compromised the NDIC Act 2006 amendment process. As a result, the version of the NDIC Bill presented to President Buhari on May 27th, two days before he left office, differed significantly from the voice and proceedings version passed by the 9th Assembly.
The NDIC 2023 Act includes several provisions that jeopardize the safety of bank deposits. Most notably, it strips NDIC of its autonomy by making the performance of its core functions subject to “prior approval” by the CBN. This is in contrast to global best practices, such as in the US, where the FDIC and Federal Reserve operate as distinct autonomous entities.
The Emefiele and Hassan Bello version contains 25 instances of CBN’s prior approval of NDIC’s core operations, including recruitment. Additionally, under the 2023 NDIC Act, the CBN compels the NDIC to divert annually five billion Naira of bank deposits to a fund managed exclusively by the CBN. This, it did last year. This diversion is a depletion of the deposit insurance fund, which further diminishes the NDIC’s capacity to reimburse depositors in the event of a bank failure.
In response to public outcry, the Senate initiated an amendment of the NDIC 2023 Act. However, Hassan Bello, Emefiele’s former Director of Banking Supervision and current NDIC Managing Director, has once again compromised Senator Tokunbo Abiru with millions of dollars to rubber-stamp Emefiele’s 2023 Act with minor cosmetic changes. This serves to mislead the uninformed into believing that the new Bill has restored NDIC’s autonomy.
The new Bill, SB–277, awaiting the president’s signature, retains all the provisions in the 2023 Act that stripped NDIC of its autonomy by requiring it to seek CBN’s prior approval before performing its core functions. This effectively turns the NDIC into a mere department of the CBN.
Global best practices dictate that the Central Bank should focus on monetary policy while the bank deposit insurance institution concentrates on its core mandate of guaranteeing bank deposits. The reasoning behind this is simple: separating the two functions minimizes risk.
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The country is still reeling from the problems associated with the recent currency change exercise, leaving most bank customers unable to withdraw money from ATMs. As a result, customers now have to pay fees to POS operators to access cash. Even though the currency in circulation has increased more than before the currency change exercise, the breach of trust concerning the accessibility of cash at banks or ATMs persists.
If signed into law, the CBN will take over NDIC’s function. This is the same CBN that, to date, has been unable to make currency readily available at ATMs, forcing customers to pay fees to POS operators for withdrawals.
Under the new Bill, unlike the NDIC Act, 2006 , five out of the seven NDIC board members and management will be civil servants. It is not a question of if but when the same issues that befell pension funds managed by civil servants will affect bank deposit insurance funds. Last year, the CBN took five billion Naira from it.
Senator Tokunbo Abiru, in preparation for his Lagos State governorship bid in 2027, was induced by NDIC MD Hassan Bello to get the current Bill through the Senate for an amount in the region of millions of dollars. Hassan Bello has already brought people from the CBN to take over strategic positions at the NDIC. Recently, the Senate noted that recruitment at NDIC violated the law. It’s going to get worse unless President Tinubu rejects the current Bill.
The Nigerian financial system’s stability is at risk. Nigeria is going through an economic crisis unparalleled in recent times. The last thing the country needs is a bank deposit insurance institution hamstrung by the CBN, jeopardizing the safety of bank deposits.
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