The 9th National Assembly has gone far with the process of repealing BOFI Act 2004 and enacting BOFI Act 2020 with a view to making the banking sector strong, resilient and deterrent to financial crimes and fraud. In all of these, both NDIC and CBN have made quality inputs into making the new legislation vibrant for the banking sector. ABDULWAHAB ISA reports
The Nigerian banking sector has evolved over the years from a rudimentary banking mode to the current 21st Century fintech structured institution.
As the industry evolves in phases, so was the law, rules and regulation that guide the institution of banking. Nigeria’s banking sector operates by provisions of Banks and Other Financial Institutions Act (BOFIA).
Between 1991 when BOFI Decrees 24 and 25 repealed the Banking Decree 1969 and all its amendments, the ACT has gone through series of amendments.
As time rolled by, and in line with quick pace of banking sector, relevant portions of BOFI ACT were either amended, or repealed to align with exigency of the time. In a row, BOFI was amended in 1997, 1998, 1999, 2002 and 2004.
Today, fresh amendment exercise is in the works by the National Assembly.
Each exercise is carried out with a motive: to strengthen BOFI, make banking institution efficient and a healthy space less prone to fraud.
Like previous ones, a Bill for an Act to repeal the Banks and Other Financial Institutions Act 2004 and re-enact the Banks and Other Financial Institutions Act 2020 has gathered momentum at the upper chamber of the National Assembly.
Imperative of 2020 BOFIA amendment:
The 9th National Assembly has commenced legislative processes for the Bill for an Act to repeal the Banks and Other Financial Institutions Act 2004, and re-enact the Banks and Other Financial Institutions Act 2020.
The upper chamber organised public hearing last week. Key stakeholders in banking and economic sectors were in attendance.
The Nigeria Deposit Insurance Corporation (NDIC), Central Bank of Nigeria (CBN), Federal Ministry of Finance, Budget and National Planning, Chattered Institute of Bankers of Nigeria (CIBN), Fintech Development, Nigeria Security Printing and Minting Company, Nigeria Labour Congress (NLC), as Institute of Chartered Accountants of Nigeria (ICAN), we’re well represented.
Others are Association of National Accountants of Nigeria (ANAN), Association of Bureau De Change, Association of Senior Staff of Banks and Other Financial Institutions, NIPOST, Corporate Affairs Commission, Ministry of Communications and Digital Economy, Comrade Isa Aremu.the President, Industrial Global Union, Comrade Anthony Agbakpa, President, National Union of Banks, Insurance and Financial Institutions (NUBIFE), Prof. Uche Uwaleke, President of Market Academics of Nigeria and Head, CIBN, Abuja Chapter, and Mr. Obinna Chima, President, Finance Correspondents Association of Nigeria (FICAN, Lagos chapter) also contributed to the process of strengthening BOFI.
The Banks and Other Financial Institutions (Repeal and Re-enactment) Bill, 2020 seeks to update the laws governing Banks, Financial Institutions and Financial Services; enhance efficiency in the process of obtaining and/or granting of banking licenses; impose stiffer penalties for regulatory breaches in the financial services industry and also regulate the activities of Financial Technology Companies (FINTECHs).
The Chairman, Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Uba Sani, set the tone for the hearing with his remarks. He underscored the imperative of a stable financial sector, which, according to him, cannot be overemphasised.
He noted that given the harm on the economy by COVID-19 outbreak, Nigerians require a stable financial sector that will lift them to a new height in a post-COVID19 world. To attain the lofty dream, Uba said the Amendment of Banks and Other Financial Institutions Act 2004(Repeal and Re-enactment Bill, (BOFIA) 2020 was key.
In addition, he said a “stable and strengthened banking sector will refocus its activities and concentrate on providing credit access to Micro, Small and Medium Enterprises (MSMEs) to help grow the economy.”
Senator Sani submitted that a properly regulated electronic transactions system would enhance operational efficiency and boost customers’ confidence in the banking sector. He maintained that the Banks and Other Financial Institutions Act was long overdue for review and amendment.
A strengthened legal framework, in his view, is critical and strategic to maintaining the health of the banking sector.
“A sanctions regime that is effectively implemented will help check sharp practices in the banking sector and prevent future distress, he affirmed.
The senator said the challenge of COVID-19 had further worsened the economic situation of countries, and warmed Nigeria against taking chances.
NDIC’s inputs to new amendment
As a matter of responsibility, the Nigeria Deposit Insurance Corporation (NDIC) co-supervises banks with the Central Bank of Nigeria to protect depositors, foster monetary stability, promote an effective and efficient payment system, as well as promote competition and innovation in the banking system.
The Corporation’s Managing Director, Mallam Umaru Ibrahim, led the organisation’s team, which include Director of Legal department, NDIC, Mr. Belema Taribo, to make the corporation’s presentation to the hearing of amendment of the BOFIA.
Commending the National Assembly for initiating the public hearing, Umaru said it was most appropriate step to take in the face of current challenge facing the economy.
“A lot has happened since 2004 to the banking sector. A lot has been put in place to make it efficient; a lot has taken place by a way of introducing new products, agent banking; mobile banking. All these speak to the need to have a harder look at BOFIA. NDIC and Central Bank Nigeria are partners working for efficient and healthy banking system. We agree to disagree with CBN on certain issues. The two institutions have come a long way on shared responsibilities,” he said.
Taribo admonished the Uba-led committee to look at sections of the bills that may be perceived as overlapping mandates between the NDIC and the CBN for clarification to avoid any ambiguity in the laws governing their operations in the impending repealing and re-enact meant of BOFIA 2020.
The legal services director noted that the bill seemed to suggest the option of the appointment of other entities in the liquidation of failed banks. He suggested that the bill should be amended to reflect the NDIC as the sole liquidator of failed banks based on the corporation’s core mandate of bank liquidation.
He was of the view that clear delineation of roles between the NDIC and CBN would strengthen the legal framework and contribute towards effective and efficient collaboration in the supervision and regulation of the banking sector.
“NDIC wants prohibition of insider loans/criminalising insider loans by making it an offence punishable with imprisonment and fine for directors of licensed banks to obtain credit facilities from their own banks, whether such credit facilities are secured or not.”
Top officials of the Central Bank of Nigeria were not left out. At the hearing, a presentation by CBN’s Director, Legal Services, Kofo Salam-Alada, captured the bank’s submission.
The bank sought among others a review of framework for managing failing institutions in line with international standards.
In addition, the bank is proposing proper delineation of roles for the agency tasked with managing failing banks and other financial institutions, and those with responsibility for resolving banks and other financial institutions whose license have been revoked.
According to Salam-Alada, “the Central Bank of Nigeria does the former as provided in the BOFIA while NDIC is saddled with the latter under the NDIC Act. The global best practice is to have the banking legislation empower the Financial services industry regulator to regulate banks, promote their soundness and stability; superintend issuance and revocation of operating license without recourse to any other institution; while the Deposit insurer is in charge of bank resolution activities after the revocation of operating license.”
Stakeholders, individuals were given opportunity to make contributions by the committee.
Professor of banking and finance, Nassarawa State University, Uche Uwalake, supported the establishment of special court to try bank fraud and related criminals.
He said Nigeria was over due to have special court for banking fraud, noting that countries like Pakistan and India had special courts for resolving bank failure.
The President, Chartered Institute of Bankers of Nigeria, CIBN, Bayo Olugbemi, described the repeal and re-enactment of BOFIA as the best step taken by the Senate Committee on Banking, Insurance and Other Financial Institutions.
He said CBN’s autonomy was being strengthened with the intended repeal and reenactment. He commended the committee for taking a laudable step.
The representative of Ministry of Labour and Employment, Mr. Eyewumi Neburagho, who represented the minister, demanded that both the hearing and the bill be suspended pending when the Senate committee would formally invite the ministry and send a copy of the draft bill to it.
Mr Neburagho wondered why the ministry was not carried along, being a major stakeholder. He emphasized the need for the ministry to know how it will affect the interest of workers.
He further stated that Nigeria had ratified the ILO Convention no 144 on tripartite consultation, traditional labour standard. The ratification implies that in undertaking a process of enactment of any global policy or legislation, the Nigerian social partners, comprising governments and employers of workers organizations must consult and dialogue among themselves with a view to reaching consensus on the proposed law or policy in question.
The repackaged BOFIA 2020 is expected make Nigeria banks and financial institution more efficient, responsive and deterrent to financial crimes and fraud. Both the NDIC and CBN are healthy partners in banking sector’s progress.