Nigeria’s two leading financial system regulators, the Central Bank of Nigeria (CBN) and the National Deposit Insurance Corporation (NDIC) are at loggerheads over moves by the Senate to amend the NDIC Act to give more powers to the corporation.
This came to the fore yesterday during a one-day public hearing held by the Senate Committee on Banking, Insurance and other Financial Institutions on the “NDIC Act 2006, Cap N102 LFN 2012 (repeal and re-enactment) Bill, 2015” at the National Assembly.
Making a presentation at the public hearing, the Governor of the CBN, Godwin Emefiele, cautioned against the proposed empowerment of the NDIC through amendment of the Act establishing the corporation. The NDIC insisted however, that such powers would only enhance its operational independence.
Emefiele, who was represented by his Deputy, Sulieman Barau, noted that the proposed amendment would end up creating instabilities in the nation’s financial system operation.
While arguing that some of the powers which the Senate sought to give to the NDIC amounted to usurpation of some of the fundamental duties of the CBN, he warned that this would result in anarchy in the financial administration of the country.
He observed that part of the amendment proposals would confer executive powers on the NDIC to coordinate and supervise Nigeria’s financial institutions without recourse to the CBN, adding that NDIC, being the undertaker, could not seek to be both judge and prosecutor in its own case.
This, the CBN said, would make NDIC a parallel/coordinate regulator for banks like CBN thus creating overlapping regulatory responsibilities for the NDIC.
The amendments to the NDIC Act, included power to licence banks, power to supervise banks without reference to the CBN, power to determine the licences of banks and powers to assume a liquidator for banks.
“It is pertinent to mention that all the above powers, which the NDIC seeks to assume and exercise, are ostensibly to ensure that it carries out its function as a risk minimiser and that depositors of distressed banks and other deposit-taking financial institutions are paid in good time to avoid delays.
“While the CBN supports the desire to pay depositors of distressed institutions in good time, the proposal to make NDIC “the judge and juror” in cases involving banks is fraught with danger and is a recipe for financial instability,” CBN warned.
However, the Managing Director of NDIC, Umaru Ibrahim, responded by stating that what the amendments wanted to achieve was not outside its constitutional mandate, arguing that the amendments would guarantee sound and viable banking system in Nigeria.
While noting that NDIC was not competing with the CBN, he emphasised the need for the NDIC to have some level of operational freedom from the CBN as intended in the Act establishing it.
“Yes, we may have disagreements here and there, we are not reinventing the wheel. I noticed from the presentation of Mr. Barau that apparently he may not be aware of the fact that a lot of these have been resolved and will be resolved.
“We are for collaboration, we are for the safety and soundness of the system. We are not in competition with the CBN. At the same time, we cherish our own operational independence and we cherish our mandate as provided by our Act.
Meanwhile, the Senate President, David Mark, represented by the Senate Leader, Victor Ndoma-Egba, declared the public hearing open by saying that the exercise was aimed at obtaining authentic information from various shades of interests and opinions to guide the Senate in its legislative action.
“It is hoped that this exercise, if successfully completed, would produce results that are acceptable to the generality of our citizenry,” he said.
Also, the Chairman, Senate Committee on Banks, Insurance, and other Financial Institutions, Bassey Otu, said the amendments being proposed in the Bill were targeted at revitalising and enhancing the operational framework of the nation’s financial institutions.
This, he said, would strengthen their capacities in addressing challenges in line with international best practices.