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  • 15 PMBs fail NDIC’s premium payment test

    15 PMBs fail NDIC’s premium payment test

    The Nigeria Deposit Insurance Corporation (NDIC) has said that 15 Primary Mortgage Banks (PMBs) have defaulted in paying their deposit insurance premium to the corporation.

    The NDIC Managing Director/CEO, Umaru Ibrahim, who disclosed this at the 2016 sensitisation workshop for PMBs’ operators held in Lagos, at the weekend, said the corporation’s records showed that 15 out of 42 PMBs are yet to meet their premium payment obligations to the corporation. He urged the affected operators to promptly pay their premium to the corporation in line with regulatory guidelines.

    Ibrahim disclosed that NDIC has the capacity to sustain its efforts in ensuring that insured institutions are put on the part of sustainable growth and development, and exercise that would depend largely of premium contribution.

    The corporation, he said, has also deployed the Differential Premium Assessment System  (DPAS) in pricing the deposit premium of Primary Mortgage Banks (PMBs).

    He said the DPAS centres of strong Enterprise Risk Management Framework (ERMF) and classifies banks into various risk buckets and apply different premium rates depending on the level of risk involved.

    He said the DPAS will mitigate insurable risks for PMBs as well as encourage effective enterprise risk management.

    According to him, the ERMF would include sound strategic planning and transformative business model and addresses the issue of moral hazard which guarantees caution and avoidance of excessive risk taking in running a PMB.

    Ibrahim said: “To the operators in particular, the risk-based premium system allows the institution to pay much less premium than would have been the case, had the alternative, flat rate system had been adopted.

    The NDIC boss said the corporation is the sole agency empowered to guarantee depositors’ funds in the deposit-taking financial institutions.

    “To stimulate the confidence and patronage of mortgage customers, the corporation continued to review the its deposit insurance coverage for depositors of PMBs is now N500,000 in the event of failure. The current coverage level represents and increase of 150 per cent over the earlier level of N200,000. Thus, the gap of the coverage between the commercial banks and PMBs is now bridged with the envisaged increase in patronage of PMBs,” he said.

     

  • 15 Primary Mortgage Banks fail NDIC’s premium payment test

    15 Primary Mortgage Banks fail NDIC’s premium payment test

    •Corporation adopts new pricing regime

    The Nigeria Deposit Insurance Corporation (NDIC) has said that 15 Primary Mortgage Banks (PMBs) have defaulted in paying their deposit insurance premium to the corporation.

    The NDIC Managing Director/CEO, Umaru Ibrahim, who disclosed this at the 2016 sensitisation workshop for PMBs’ operators held in Lagos, at the weekend, said the corporation’s records showed that 15 out of 42 PMBs are yet to meet their premium payment obligations to the corporation. He urged the affected operators to promptly pay their premium to the corporation in line with regulatory guidelines.

    Ibrahim disclosed that NDIC has the capacity to sustain its efforts in ensuring that insured institutions are put on the part of sustainable growth and development, and exercise that would depend largely of premium contribution.

    The corporation, he said, has also deployed the Differential Premium Assessment System  (DPAS) in pricing the deposit premium of Primary Mortgage Banks (PMBs).

    He said the DPAS centres of strong Enterprise Risk Management Framework (ERMF) and classifies banks into various risk buckets and apply different premium rates depending on the level of risk involved.

    He said the DPAS will mitigate insurable risks for PMBs as well as encourage effective enterprise risk management.

    According to him, the ERMF would include sound strategic planning and transformative business model and addresses the issue of moral hazard which guarantees caution and avoidance of excessive risk taking in running a PMB.

    Ibrahim said: “To the operators in particular, the risk-based premium system allows the institution to pay much less premium than would have been the case, had the alternative, flat rate system had been adopted.

    The NDIC boss said the corporation is the sole agency empowered to guarantee depositors’ funds in the deposit-taking financial institutions.

    “To stimulate the confidence and patronage of mortgage customers, the corporation continued to review the its deposit insurance coverage for depositors of PMBs is now N500,000 in the event of failure. The current coverage level represents and increase of 150 per cent over the earlier level of N200,000. Thus, the gap of the coverage between the commercial banks and PMBs is now bridged with the envisaged increase in patronage of PMBs,” he said.

    He said the DPAS has several implications for PMBs’ soundness and stability adding that in most jurisdictions that practice explicit deposit insurance scheme, the starting point for deposit insurance system pricing is usually the flat rate approach before migration to DPAS.

    “However, the flat rate method failed to compensate for effective risk management and engenders moral hazard which the DPAS incorporate the benefits of effective risk management. From the foregoing, DPAS compensates the mortgage sector since PMBs with better enterprise risk management pay less premium, while PMBs with weak risk management pay more,” he said.

  • NDIC pegs minimum deposit insured limit at N500,000

    The Nigeria Deposit Insurance Corporation (NDIC) yesterday said the minimum deposit insurance coverage (MDIC) per depositor per bank has risen from N50,000 in 1989 to N500,000 at present.

    NDIC’s Managing Director/CEO, Umaru Ibrahim, who stated this at 2016 Lagos International Trade fair, yesterday, said the upward review of the limit, which has been approved by the Finance Ministry, is meant to ensure coverage of over 90 per cent of depositors in the banking sub sector.

    He said the insured limit for microfinance banks ( MfBs) and Primary Mortgage Banks (PMBs) has increased from N100,000 to N200,000, adding that non-interest banking institutions (NIBIs) and the 21 mobile money operators (MMOs), will also enjoy the maximum limit of N500,000 per depositor.

    He said NDIC has developed a framework of Pass-Through Deposit Insurance Scheme (PTDIS) and Non-Interest Deposit Insurance Scheme (NIDIS) to the MMOs and non-interest bank subscribers respectively with a minimum insured limit of N500,000 per subscriber.

    He however noted that depositors who have funds in excess of the insured limit were entitled to liquidation dividend after recovery of debts and sale of physical assets of the closed banks.

    Ibrahim assured that the corporation has mapped out aggressive public awareness campaign strategies to promote financial inclusion.

    He disclosed that the corporation has partnered the National University Commission (NUC) to introduce a pilot scheme of two courses on deposit Insurance Scheme (DIS) in the curricular of undergraduate programme in seven selected premier universities in the country.

  • Buhari seeks NDIC MD’s re-appointment

    Buhari seeks NDIC MD’s re-appointment

    President Muhammadu Buhari yesterday asked the Senate to confirm Umaru Ibrahim for re-appointment as Managing Director, Nigeria Deposit Insurance Corporation (NDIC).
    This is contained in a letter of request for confirmation of the appointment that Buhari sent to the Senate.
    The letter was read by the Senate President, Abubakar Bukola Saraki.
    The President said the letter was in accordance with the provisions of Section 5(4) and 8(3) of the Nigeria Deposit Insurance Corporation Act, CAP. N102 laws of the Federation of Nigeria, 2004.

  • NDIC pays N2.9b to 81,328 failed MfBs’ depositors

    NDIC pays N2.9b to 81,328 failed MfBs’ depositors

    The Nigerian Deposit Insurance Corporation (NDIC) said it has paid N2.9 billion to 81,328 insured depositors of failed Microfinance Banks (MfBs) across the country as at December last year.

    It said a total of 187 MfBs whose licenses were withdrawn by Central Bank of Nigeria (CBN) were closed down within the same financial year.

    Its Managing Director, Umaru Ibrahim, who spoke  yesterday in Benin City at the LAPO Institute’s second annual conference on Microfinance and Enterprise Development, said 958 microfinance banks had been licensed by the CBN as at June 30 this year since the evolution of microfinance banking sub- sector in the 90s.

    Represented by an officuial of the agency, Etopidiok Joshua James, the NDIC chief noted that the microfinance sub-sector held the potential for achieving its public policy objectives of poverty alleviation, financial inclusion, financial literacy, economic empowerment and economic development.

    He said the Federal Government hoped to reduce the estimated 39.5 per cent population excluded financially to 20 per cent by 2020.

    Also speaking, the Chairman, Governing Council of LAPO Institute, Mr. Godwin Ehigiamusoe, said  microfinance practice in Africa has been retarded by  lack of documentation and intellectual investigation. He noted that the demand on the institute went beyond its national boundary.

    He argued that the African microfinance community is looking up to the institute to provide the leadership needed in the sub-sector.

    The theme of the conference was “Confronting the Scourge of Poverty through Microfinance-Issues and Challenges”.

  • NDIC and health of financial institutions

    Transparency and accountability is the spinal cord of corporate governance. Nothing demonstrates how genuine a corporation’s commitment to these tenets than its annual report, in which it presents to the public for scrutiny its scorecard, with a view to building confidence and conveying assurances to the public. The Nigeria Deposit Insurance Corporation (NDIC) is in the lead of league of such corporations with uncompromising commitment to transparency and accountability. The corporation has since released its 2015 annual report to the public. As usual, the report x-rays the true situation of our financial institutions. And, in doing this, it calls spade a spade.

    The importance of the NDIC’s annual report cannot be over emphasized. It is a tool for stock investors to analyse and rate the strengths of their portfolios; to bank depositors it is a barometer to measure the financial status of their banks; and to the policy makers a means to know when to apply appropriate measures to stem any downward slides that can temper with the equilibrium of the financial system of the country.

    The NDIC report is blunt where it needs to be; conversely it offers praises where there is appreciable progress; and sounds caution were it is needed. The report is blunt when it reports that out of the 42 primary mortgage banks (PMBs) in operation, a total of 14 failed to render returns to the NDIC. It reports that, as a result, unpaid premiums from nine PMBs amounted to ¦ 238.30 million in 2015.  In the same vein, it frankly reports that the quality of Microfinance Banks (MFBs) risk assets deteriorated further as the Non-Performing Loans (NPLs) increased to 23.13 percent in 2015, from 18.54 percent in 2014 which exceeded the prudential maximum threshold of 5 percent.”

    On the other hand, however, the report praises the rise in shareholders’ funds of the PMBs when it says: “The PMBs shareholders’ funds increased by 93.91 percent to ¦ 138.92 billion in 2015 from ¦ 71.64 billion in 2014. The subsector Capital Adequacy Ratio (CAR) was 74.04 percent as at December 2015 which exceeded the prudential threshold of 10 percent.”

    The NDIC 2016 reported sounded a cautionary note to shareholders of Microfinance banks that “The unaudited profit before tax for MFBs decreased by 77.63 percent to ¦ 1.68 billion in 2015, from ¦ 7.51 billion in 2014. Also, return on assets (ROA) and return on equity (ROE) for the subsector declined from 3.39 percent and 14.70 percent in 2014 to 0.47 percent and 13.74 percent in 2015, respectively.”

    In addition to x-raying the true situation of our financial institutions, the NDIC’s annual report also informs the public how it is relieving some of its obligations such payments to depositors of closed banks. The report indicates  that the corporation made a cumulative payment of ¦ 6.796 billion to 426,324 insured depositors of the closed DMBs as at December 31, 2015 as against ¦ 6.795 billion to 426,320 insured depositors in 2014. Similarly, it made a cumulative payment of ¦ 2.86 billion to 81,328 depositors of the closed MFBs as at December 31, 2015, as against ¦ 2.77 billion paid to 80,178 depositors in 2014. Also, the NDIC made a cumulative payment of ¦ 45.05 million to 595 depositors of closed PMBs as at 31st December, 2015 as against ¦ 2.02 million paid to 30 depositors in 2014.

    The NDIC’s report is a primary source of news of innovative policies the corporation is embarking upon. In the report we learn that the corporation, during the year under review, extended deposit insurance coverage to subscribers of mobile money operators (MMOs) via the concept of pass-through deposit insurance up to a maximum of ¦ 500,000. Similarly, we learn that the corporation reduced the premium paid by banks by ¦ 9.09 billion in 2015 following the reduction of the premium-base rate from 40 basis points to 35 for each DMB/NIB under the Differential Premium Assessment System (DPAS).

    But the most important aspect of the report is always the section on the risk assessment of the banks carried out usually by NDIC, in collaboration with the Central Bank of Nigeria (CBN). In the report under review the corporation reports that the two regulatory bodies duly carried out  routine risk assessments of all the 24 DMBs while the NDIC alone conducted risk-based examinations of 205 MFBs and 6 (six) PMBs. The examinations were with a view to providing reliable information on their financial health, particularly as it affects the quality of risk assets; adequacy of loan loss provisions; capital adequacy; their level of compliance with banking rules and regulations; risk appetite; and adequacy of risk management frameworks.

    It was during such risk assessment exercises that the issue of the non-performing loans and other risk management issues of banks are uncovered and appropriate remedies proffered. The example that readily comes to mind is the recent CBN intervention in the management of Skye Bank due to its high loan exposure which stood at the sum of N700 billion. It was for such a reason that NDIC has been clamouring for more powers to deal with these issues as soon as they are noticed. Part of the corporation’s proposal for an amendment to its Act is to have the power to enforce the recommendations contained in its Examination Reports, to strengthen its supervisory capacity. This is to prevent a situation where a bank is examined and the same lapses observed in previous examinations report are repeated due to failure of bank management to implement the earlier recommendations as well as to ensure prompt corrective action is taken on problem banks.

    Despite the recent Skye Bank exposure story, the NDIC 2015 report shows that for Deposit Money Banks (DMB), overall total loans and advances rose by 5.56 percent, while capital adequacy ratio stood at 17.66 percent in the period under review, compared with 15.92 percent in 2014, and exceeded the minimum threshold of 10 percent and 15 percent for national and international banks respectively. The DMBs’ total loans and advances to the Nigerian economy stood at ¦ 13.33 trillion in 2015, showing an increase of 5.56 percent over the ¦ 12.63 trillion reported in 2014. The non-performing loans to total loans ratio for the industry increased from 2.81 percent in 2014 to 4.87 percent in 2015, within the regulatory threshold of 5 percent.

    On the other hand, the unaudited profit-before-tax (PBT) of the DMBs stood at ¦ 588.86 billion as at December 31, 2015 representing a decrease of 2.02 percent over ¦ 601.02 billion reported as at December 31, 2014. The decrease is hardly a surprise to anyone, given the contraction of the economy in the last quarter of the 2015.

    Overall, the report concludes that “the banking industry remained stable and sound during the period under review.”

    Recall that this position was re-echoed by the CBN in the wake of change of management of Skye Bank Plc due to its rising loan exposure.

     

    • • Hassan is an Abuja-based business and financial analyst.

     

  • NDIC pushes for stiffer sanctions over non-performing loans

    NDIC pushes for stiffer sanctions over non-performing loans

    The Nigeria Deposit Insurance Corporation (NDIC) has expressed concern over the increasing wave of non-performing insider loans in various banks and its consequence on the stability of the banking system.

    Its Managing Director/Chief Executive, Alhaji Umaru Ibrahim, spoke while receiving the new President/ Chairman of Council of the Chartered Institute of Bankers of Nigeria (CIBN), Prof Segun Ajibola and some of its executive members who visited the NDIC’s senior management in Abuja.

    According to Ibrahim, the rise in non-performing insider loans poses credibility questions which can erode public confidence in the banking system.

    He called for strict compliance with the code of conduct and a review of laws and regulations to provide stiffer penalties for directors who take advantage of their positions and failed to pay back their loans.

    The NDIC chief observed that casual workers accounted for about 25 per cent of the industry’s workforce,  which has a negative impacted the industry.

    Ibrahim lamented the practice of some banks that assign sensitive roles to casual workers, thereby exposing the banking industry to cases of fraud and forgeries.

    On rationalisation by banks, Ibrahim urged the banks to exercise caution to avoid industrial unrest in the industry.

    He urged the CIBN to intervene by advising its members on the aim of the rationalisation which should be to weed out bad eggs from the industry.

    He said the NDIC would continue to partner the CIBN and other professional bodies to achieve effective capacity building among its staff.

    According to him,  77 staff members of the Corporation  are undergoing the Bangor/CB MBA programme which started three years ago.

    The Bangor/CB MBA programme is an initiative of the NDIC, the CIBN and the Bangor University, Scotland where staff of the Corporation undergo up to 24 months training programme and graduate with dual certification: an MBA and Chartered Banker of Scotland.

    Fourteen members of staff had already graduated from the programme.

    He further requested the CIBN to fast track the accreditation of the Corporation’s Training Academy and the introduction of the deposit Insurance System (DIS) in the institute’s curricula in order to broaden the scope of professionalism in the banking industry.

    Ajibola praised the Corporation for its contribution to stability in the banking system.

  • NDIC: bank fraud cases up by 15.71%

    NDIC: bank fraud cases up by 15.71%

    Fraud cases in banks increased by 15.71 per cent last year, the Nigeria Deposit Insurance Corporation (NDIC) has said.

    According to NDIC’s annual report, “a total of 12,279 fraud cases were reported, representing an increase of15.71 per cent over the 10,612 fraud cases reported in 2014.

    But, the amount involved decreased significantly by N7.59 billion or 29.63 per cent from N25.608 billion in 2014 to N18.021 billion in 2015.”

    The report said: “the actual loss suffered by the insured banks decreased by N3.02 billion or 48.79 per cent from N6.19 billion in 2014 to N3.17 billion in 2015.”

    The report noted that the actual loss sustained in respect of internet banking fraud was N857 million, representing 27 per cent of the total actual loss of the industry.

    The NDIC lamented that “ there was an increase in the frequency of ATM/Card-Related Fraud cases from 7,181 in 2014 to 8,039 in 2015, an increase of 11.95 per cent”.

    However, “the loss suffered by the industry due to such frauds declined significantly by 59.4 per cent from previous year figure of N1.242 billion to N0.504 billion, representing 15.9 per cent of total industry loss to frauds and forgeries.”

    Of the 12,279 fraud cases reported by Deposit Money Banks (DMBs), 425 were attributed to insider abuse. The number of fraud cases perpetrated by workers had decreased from 465 in 2014 to 425 in 2015. Similarly, losses arising therefrom substantially decreased by 70 per cent from N3.165 billion in 2014 to N0.979 billion last year. The highest percentage of frauds and forgeries cases of 38.59 per cent was perpetrated by temporary staff.

    With regard to the financial condition of DMBs, the NDIC report said the banking industry total assets grew marginally by 1.36 per cent, with total loans and advances rising by 5.56 per cent, shareholders’ funds unimpaired by losses increased by 14.02 per cent while capital adequacy ratio stood at 17.66 per cent.

    However, total deposit liabilities declined by 2.83 per cent, while unaudited profits decreased by 2.02per cent and non-performing loans increased by 82.87per cent in 2015.

    The report added that the banking industry capital base remained strong given that the Capital Adequacy Ratio (CAR) of the banking industry was 17.66per cent in 2015 compared with 15.92per cent in 2014, adding that this exceeded the minimum threshold of 10per cent and 15per cent for national and international banks respectively.

    Two DMBs which the NDIC did not name had CAR below the prescribed threshold of 10% in 2015.

    The report said total loans and advances to the Nigerian economy stood at N13.33 trillion last year-, showing an increase of 5.56per cent over the N12.63 trillion reported in 2014, while non-performing loans to total loans ratio for the industry increased from 2.81per cent in 2014 to 4.87per cent last year, but was within the regulatory threshold of five per cent.

    The banking industry was said to have operated profitably last year, “though earnings and profitability deteriorated. The unaudited profit-before-tax (PBT) of the banking industry stood at N588.86 billion as at 31st December, 2015 representing a decrease of 2.02per cent over N601.02 billion reported as at 31st December, 2014,” the report said.

    The banking industry’s liquidity position was strong as its average liquidity ratio rose slightly from 53.65per cent in 2014 to 58.18per cent in 2015. All the individual DMBs had liquidity ratios above the prudential minimum threshold of 30per cent as at 31st December, 2015. Overall, the banking industry remained stable and sound during the period under review.

    Reporting on the Corporation’s activities during the year under review, the report said.NDIC’s operating surplus for 2015 stood at N30.23 billion as against N15.52 billion in the previous year.

     

     

     

    The cumulative loans recovered over the years by the NDIC stood at N27.41 billion as at 31st December, 2015 compared with N26.75 billion as at 31st December, 2014.

    Similarly, the cumulative risk assets recovered from closed Micro Finance Banks (MfBs) amounted to N125.61 million as at 31st December, 2015 compared with N124.38 million as at 31stDecember, 2014 while the debt recoveries from the debtors of Primary Mortgage Banks (PMBs) in-liquidation amounted to N24.73 million as at 31st December, 2015.

    During the year under review, the NDIC also paid N2.41 billion as total liquidation dividends to 550 shareholders of six DMBs-in-liquidation as at 31st December, 2015 as against N2.03 billion paid to 453 shareholders of DMBs-in-liquidation as at 31st December, 2014.

    Regarding payments to clients of failed banking institutions in the country, the NDIC report revealed that the corporation made a cumulative payment of N6.796 billion to 426,324 insured depositors of the closed DMBs as at 31st December, 2015 as against N6.795 billion to 426,320 insured depositors in 2014.

    The NDIC also made a cumulative payment of N2.86 billion to 81,328 depositors of the closed MFBs as at 31st December, 2015 as against N2.77 billion paid to 80,178 depositors in 2014. Also, the NDIC made a cumulative payment of N45.05 million to 595 depositors of closed PMBs as at 31st December, 2015 as against N2.02 million paid to 30 depositors in 2014.

    The sum of N95.77 billion was paid as liquidation dividend to depositors of DMBs in 2015 compared to N94.74 billion as at December 31, 2014. That amount included the uninsured portion of private sector depositors of 11 out of the 13 banks closed post-bank consolidation which was funded by the CBN.

    Similarly, the NDIC paid liquidation dividends to creditors of DMBs-in-liquidation during the period under review while N1,728.40 million was declared as dividends to 1,308 creditors of the ten DMBs. Out of that amount, the NDIC paid the sum of N1,261.73 million to the 965 creditors who filed their claims as at 31st December, 2015 as against N1,247.77 million paid to the 889 creditors as at 31st December, 2014.

     

  • NDIC to recover N17.6b Fortune Bank debt

    NDIC to recover N17.6b Fortune Bank debt

    The Nigeria Deposit Insurance Corporation (NDIC) has filed a debt recovery suit against former chairman of defunct Fortune Bank Plc, Mr Henry Adawari MacPepple, at the Federal High Court in Lagos.

    NDIC, which is the bank’s liquidator, said an oil firm, Suffolk Petroleum Services Ltd, a member of Adamac Group of Companies owned by MacPepple, owes the bank N17,632,119,929.44.

    It said the N17.6billion included outstanding balance on the principal loan sum, crystalised guarantees and accrued interest.

    According to the corporation, efforts to reconcile the accounts with the debtor was unsuccessful, hence the debt recovery action.

    NDIC had, last November 9, obtained an ex-parte order restraining Suffolk Petroleum and MacPepple from alienating, assigning, leasing or dealing with their movable and immovable properties pending the hearing of the motion on notice for interlocutory injunction.

    The court also restrained them and their agents from withdrawing or dissipating any monies standing to their credit in all banks until the motion for injunction is determined.

    All the financial institutions were ordered to furnish NDIC with the respondents’ account details and sums standing to their credit.

    During proceedings yesterday, respondents’ counsel Mr. A.N. Udebe said he was in the process of filing his clients’ response to the suit.

    Justice Mojisola Olatoregun-Ishola expressed displeasure at the respondents’ delay. She awarded punitive cost of N250,000 against them.

    Addressing Udebe, she said: “I gave you a date for trial (on April 15) and you had to wait till now to file your processes. Why have you not filed before now? I will adjourn at your instance. I award a cost of N250,000, which is to be paid to the court, not to the plaintiff.”

  • NDIC and good governance

    In Business Insider of India, Amy Cuddy, a professor at Harvard Business School published a report based on first impressions. In the study she conducted over 15 years with two colleagues, she discovered patterns in interpersonal interactions. Also in her new book Presence, published last December, Cuddy says people quickly answer two questions when they first meet you: Can I trust this person? Can I respect this person? Psychologists refer to these dimensions as warmth and competence, and ideally we all want to be perceived as having both.

    Interestingly, Cuddy observed that most people, especially in a professional context, believe that competence is the more important factor because they want to prove that they are talented enough to handle your business. But, in fact, she says, warmth or trustworthiness is the most important factor in how people evaluate you. Cuddy gives her reason: “it is more crucial to our survival to know whether a person deserves our trust.” For example, she says, it makes sense when you consider that in cavemen days it was more important to figure out if your fellow man was going to murder you and steal all your possessions than if he was competent enough to build a good fire.

    Apply this to corporate organizations and it matches perfectly. When stakeholders deal with corporate organizations, they are looking for answers to those two questions about trust and competence. And in the corporate world, this realization —that corporations need to comply with set of codes and framework that will guarantee trustworthiness and competence — came in the hard way. It came in the wake of the collapse of corporations like Enron and WorldCom in the early 2000s and the global financial meltdown of the 2008, which were all attributed to enforceable frameworks that guide how corporations are governed. And since then measures in the form of codes have been issued to corporations by the regulators all in an efforts to address the quest for trust and competence in the way corporate organizations are governed. Those measures are today enshrined in the mantra called good Corporate Governance not only in Nigeria but across the world.

    So what is corporate governance? It is variously defined as both the processes and structures by which the business and affairs of an organization are directed and managed in order to improve long-term shareholder values by enhancing corporate performance and accountability, while taking into account the interests of other stakeholders.

    Good corporate governance seeks to address several issues all dealing with the governance of an organization from the responsibilities of its board to its composition and from the board’s structure to issues to do with risk management, financial disclosure and audit committees, etc.

    In Nigeria, the foremost formal corporate governance code could be traced to the Code of Corporate Governance for Banks and Other Financial Institutions in Nigeria which was issued by the Bankers’ Committee in August 2003. This code was the outcome of the work of the Bankers’ Committee’s Sub-Committee on Corporate Governance. It was initiated in response to the financial crises in Nigeria in the early 1990s and in the realization that poor corporate governance was one of the major factors in virtually all known instances of financial sector distress in the country.

    But because it was not issued by a regulator – having been issued by a voluntary association of the chief executives of the banks in Nigeria, otherwise known as Bankers’ Committee – not much is known about the code. However, today there a number of regulatory bodies issuing corporate governance codes to organizations in the sphere of influence. They include: Corporate Affairs Commission (CAC), the Central Bank of Nigeria (CBN), the Security Exchange Commission (SEC) and Fiscal Responsibility Commission (FRC).

    It is the mandate of these regulatory bodies not only to issue the codes but to ensure compliance. In line with this oversight function, we saw how recently Fiscal Responsibility Commission had cause to commend the Nigeria Deposit Insurance Corporation (NDIC) for its compliance with good corporate governance.

    Following the submission of its 2014 External Audit report of its financial statements and annual report to the Fiscal Responsibility Commission (FRC), the commission reviewed the report and gave the Nigeria Deposit Insurance Corporation (NDIC)  high commendation for prompt remittance of sum due to the Consolidated Revenue Account of the Federation in line with the provision of the extant law applicable in Section 21 – 23 of the Fiscal Responsibility Act (FRA) 2007 especially the submission of Audited Financial Statements and payment of 80% of its operating surplus to the Federal Government.

    Remarkably also, the Financial Reporting Council (FRC) had examined the NDIC’s 2014 Annual submission of Audited Financial Statements and Report where it was declared that the Corporation was managed in line with sound corporate governance with its complete and well above average compliance with the sections of the Fiscal Responsibility Act (FRA) 2007. It further commended the corporation for compliance with all applicable guidelines on the establishment of a General Reserve Fund (GRF) wherein 20% of its operating surplus is retained in accordance with the provisions of section 21(1) of FRA 2007.

    Part of the commendation read as follows: “It is quite commendable that NDIC is one of the few corporations that have fully adopted IFRS which has greatly improved financial reporting of the activities of the agency.”

    It went further to reiterate that “The accounts were generally of high standard and depict compliance with the international best practice. The corporation’s record keeping is commendable while the integrity of its Financial Reporting is enhanced with the adoption of   International Financial Reporting Standards (IFRS)”.

    The report also declared that the NDIC has also been consistent with the payment of 25% of Gross Revenue to Consolidated Revenue Account of the Federation in line with the Federal Minister of Finance circular to all affected agency of Federal Government. The FRC report noted with satisfaction that the contribution of the NDIC has undoubtedly increased the revenue base of the Federal Government. The FRC report also enjoined the management to continue to consolidate on its laudable achievements in compliance with section 23(3) of FRA 2007 and in pursuit of high standard in terms of financial discipline, governance.

    Such exemplary compliance with good corporate governance by bodies like NDIC that also regulate deposit-taking banks will go a long way in assuring its stakeholders that corporation is both trustworthy and respectful or, to borrow Cuddy’s terms, it is evidence of both warmth and competence. Every stakeholder will feel safe dealing with NDIC.

    Needless to say that the banking business, which NDIC regulates to large extent, is based on trust and public confidence and, as such, it is important to enthrone good corporate governance practices in the industry; for, as the saying goes, charity always begins at home.

    Thus, effective corporate governance practices are essential in achieving and maintaining public trust and confidence in the banking sector. This is even more so because of its role in the mobilization of funds, the advancing of credits to the various sectors of the economy, the payment and settlement system, and the implementation of monetary and insurance policies.

    Ensuring compliance with corporate governance is the surest way to winning the war on corruption, which the federal government has embarked upon, as a matter of national priority, to attract foreign direct investment. If we are to meet the challenge of diversification of our foreign exchange earning sources, there couldn’t be a more urgent imperative.

    • Hassan is a business and financial analyst based in Abuja.