An Assessment of the Legal Regulation of Banking Supervision and Deposit Insurance in Nigeria

The stability of Nigeria's banking sector depends critically on the effectiveness of its supervisory and deposit insurance frameworks, which were tested significantly during the 2009 banking crisis and the ongoing challenges posed by non-performing loans, digital banking risks, and the 2023 recapitalisation directive. This study assesses the legal framework for banking supervision under the Banks and Other Financial Institutions Act 2020, Central Bank of Nigeria Act 2007, and the Nigerian Deposit Insurance Corporation Act, examining the adequacy of supervisory powers, intervention tools, and depositor protection mechanisms. A doctrinal methodology was adopted, combined with analysis of CBN enforcement actions and NDIC resolution records from 2018 to 2023, supplemented by interviews with 10 banking lawyers and 5 NDIC officials. Results indicate that the CBN's supervisory powers under the revised BOFIA 2020 are substantially strengthened compared to earlier legislation but that the deposit insurance maximum of 500,000 Naira has not kept pace with deposit growth and inflation. Early warning systems remain reactive. The study concludes that the framework requires index-linked deposit insurance limits and a formal prompt corrective action regime that triggers automatic supervisory responses to deteriorating bank indicators. Recommendations include adopting IADI core principles as a compliance benchmark, strengthening the CBN-NDIC resolution coordination mechanism, and publishing annual depositor protection adequacy assessments.

Keywords: banking supervision, deposit insurance, BOFIA 2020, NDIC, CBN