The Nigeria Deposit Insurance Corporation (NDIC), which issued the warning threatened to deploy the criminal provisions of the Banks and Other Financial Institutions Act (BOFIA) against erring institutions and individuals involved.
According to the corporation, covering up insider-related abuses, particularly those involving non-performing or improperly granted loans, could undermine the stability of the banking system and contribute to bank failures.
NDIC’s Head of Legal unit Oladipo Kushimo spoke during a breakout session titled: “Too big to fail?” at the ongoing Nigerian Bar Association (NBA) Annual General Conference in Port Harcourt.
Kushimo said the regulator had encountered cases where banks failed to properly report or expose offences involving insiders, stressing that such practices could not be allowed to undermine the financial system.
He said: “Sometimes you find out that the bank covers the offence. It is one of the experiences of the regulator, and it is necessary to stem such practices and maintain financial sustainability.”
Noting that financial system stability required effective prevention, regulation and supervision, Kushimo said that NDIC would not shy away from pursuing those who compromised the banking system.
According to him, the NDIC has criminal enforcement powers under the law and would use them where necessary to deal with infractions and suspected criminal conduct.
He urged lawyers, bank employees and other stakeholders with information about insider abuses or assets connected to such activities to report them to the regulator.
Kushimo said: “If you have a record of any insider, you can submit that to the regulator. Tell us; write to us, NDIC. If you have any information, any property or software owned by a director, whatever it is, we need to know.”
Kushimo said such disclosures would assist the corporation in protecting depositors and maintaining the integrity of the banking system.
He also stressed the importance of dealing decisively with parties who compromise banking operations, saying the NDIC’s mandate extends beyond protecting depositors to bringing to justice those responsible for infractions.
Kushimo He said the corporation conducts examinations to determine what went wrong, who was responsible and whether criminal conduct occurred, after which cases could be referred to law-enforcement agencies for prosecution.
“We have a criminal part to the Act. We examine what was not done, who should have done it, and we refer cases to the police,” he said.
Kushimo, who acknowledged that uncovering sophisticated financial crimes could be difficult, assured participants that the NDIC was intensifying efforts to detect and prosecute such offences.
He said: “These are incidents related to banking and, of course, incidents related to committing crimes. You have to be extremely diligent to uncover such fraud.
“But I stand here before you to tell you that NDIC is up to it. We are checking it. We are bringing those who committed infractions against banks and depositors to justice.”
He also explained the importance of deposit insurance in protecting ordinary depositors when banks fail.
According to him, the NDIC’s deposit insurance framework is designed primarily to protect small depositors, noting that insured deposits of up to N5 million cover about 98 per cent of depositors.
“The essence of deposit insurance is to protect the low depositors, the street market, you and I, so that at the end of the day, our savings are not lost,” he said.
Kushimo said the remaining depositors, whose funds exceeded the insured limit, were generally expected to have greater awareness of the financial system and its risks.
He also defended the role of monetary policy in controlling inflation and maintaining the value of money, saying interest rates could not be considered in isolation from broader economic conditions.
Thw NDIC official said the Central Bank of Nigeria (CBN) periodically reviews monetary conditions, including money supply and inflation, to arrive at policies aimed at maintaining financial stability.
Kushimo said banks must operate within a regulated environment, adding that lending rates and other banking decisions were influenced by broader macroeconomic objectives.
He urged stakeholders to recognise the importance of a sound banking system to the wider economy, saying the regulator could not afford to ignore practices capable of destabilising financial institutions.