NDIC seeks exemption from FG deductions, warns of strain on deposit insurance fund

The Nigeria Deposit Insurance Corporation (NDIC) has raised concerns that mandatory fiscal deductions imposed by the Federal Government are limiting its capacity to build a strong Deposit Insurance Fund (DIF), a critical buffer required to protect bank depositors in the event of bank failures.

The Managing Director and Chief Executive of the Corporation, Mr. Thompson Oludare Sunday, disclosed this during a courtesy visit to the Managing Director/Chief Executive of Ministry of Finance Incorporated (MOFI), Dr. Armstrong Takang.

According to Sunday, the mandatory 50 per cent cost-to-income policy, among other fiscal remittances, is constraining NDIC’s ability to accumulate adequate reserves in line with global best practices.

Mr. Sunday explained that although NDIC remains fully compliant with all statutory financial and fiscal regulations, including the Fiscal Responsibility Act (FRA) 2007, the deductions significantly weaken the Corporation’s operational flexibility and its preparedness to respond effectively to banking sector distress.

“These deductions affect NDIC’s ability to build a strong Deposit Insurance Fund, which is needed to respond effectively when banks fail,” Sunday said, adding that the Corporation is seeking an exemption from the mandatory fiscal deductions to strengthen its resilience and readiness.

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In a statement issued on Tuesday and signed by Hawwau Gambo, Head of Communications and Public Affairs, the NDIC boss reiterated that compulsory remittances reduce the funds available for building the DIF, which is central to the Corporation’s statutory mandate of depositor protection.

He noted that international benchmarks set by the International Association of Deposit Insurers (IADI) require deposit insurers to maintain sufficient funds to reimburse depositors without recourse to government intervention.

According to him, the current fiscal deductions undermine this objective and run contrary to international best practices.

Despite these concerns, Sunday reaffirmed NDIC’s strict adherence to statutory remittance obligations, including the payment of 20 per cent of gross earnings or 80 per cent of net surplus to the Federal Government, depending on the applicable rule. He also noted that the Corporation consistently submits its audited financial statements ahead of statutory deadlines and operates within the Federal Government’s fiscal discipline framework.

“This culture of compliance is central to our credibility as a key institution within Nigeria’s financial safety net,” he stated.

Responding, MOFI’s Chief Executive, Dr. Armstrong Takang, commended NDIC for what he described as its exemplary record of collaboration, transparency and fiscal responsibility.

He assured that MOFI, which represents the Federal Government’s 40 per cent equity stake in NDIC, would continue to engage with the Ministry of Finance to address the Corporation’s concerns.

Takang stressed that a financially strong NDIC is vital to maintaining depositor confidence and ensuring overall financial system stability, pledging institutional support to enable the Corporation to effectively discharge its mandate.

The Deposit Insurance Fund is primarily funded through Deposit Insurance Premiums, which are statutory payments made by deposit-taking institutions to guarantee the reimbursement of deposits—currently up to a maximum of N5 million per depositor—in the event of a bank failure.