Urgent Warning: NDIC Raises Alarm Over 50% Mandatory Deductions Draining Nigeria’s Deposit Insurance Fund Growth
In a stark revelation that underscores challenges facing Nigeria’s financial safety net, the Nigeria Deposit Insurance Corporation (NDIC) has voiced serious concerns about the federal government’s 50% cost-to-income ratio policy, which forces the agency to remit half its surplus earnings to government coffers. NDIC Managing Director Thompson Sunday warned that these mandatory deductions are severely limiting the corporation’s ability to build a robust Deposit Insurance Fund (DIF), essential for promptly reimbursing depositors in the event of bank failures.
Sunday made the disclosure during a courtesy visit to the Ministry of Finance Incorporated (MOFI) on December 30, 2025, emphasizing NDIC’s commitment to fiscal compliance under the Fiscal Responsibility Act. While the agency has consistently met its remittance obligations, the policy creates “operational constraints,” he said, hindering the growth of funds needed to protect depositors without relying on government bailouts.
The NDIC boss highlighted alignment with international best practices from the International Association of Deposit Insurers (IADI), which stress that deposit insurers should maintain independent, adequate reserves to handle crises effectively. To address this, NDIC is actively seeking an exemption from the 50% deduction rule, arguing it would strengthen the corporation’s financial independence and capacity to safeguard Nigeria’s banking system.
This comes amid NDIC’s broader efforts to enhance depositor protection, including recent increases in maximum insurance coverage to N5 million for commercial banks—covering over 98% of depositors. The DIF, funded primarily by premiums from insured institutions, plays a critical role in maintaining public confidence and preventing bank runs.
Experts note that a well-funded DIF is vital for Nigeria’s evolving financial landscape, especially with ongoing reforms and potential risks from economic pressures. While NDIC collaborates closely with the Central Bank of Nigeria (CBN) on supervision and resolution, depleted reserves could delay payouts during failures, eroding trust in the sector.
For U.S. readers with interests in global finance or emerging markets, this NDIC mandatory deductions concern mirrors debates on deposit insurance sustainability worldwide, similar to FDIC discussions in the U.S. A constrained DIF in Nigeria could indirectly affect international investors, remittances, or diaspora banking ties, highlighting the need for balanced fiscal policies that prioritize systemic stability.
As Nigeria’s economy navigates inflation and growth challenges, NDIC’s push for exemption from these deductions signals a proactive stance on financial resilience. With MOFI acknowledging the importance of a strong NDIC, stakeholders await potential policy adjustments to bolster the Deposit Insurance Fund amid rising demands for depositor security.
By Sam Michael
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