Financial Institutions Regulation

Introduction

• Regulatory institutions are established by the Federal Government to maintain standards and ensure a well-functioning financial system.
• These institutions oversee the activities of operators within the financial system to prevent excesses.

Central Bank of Nigeria (CBN)

• CBN acts as the principal regulator and supervisor of Nigerian financial institutions, standing at the apex of the banking system.
• Responsible for licensing, supervising banks, and controlling credit through:
  • Open Market Operations
  • The Bank Rate
  • Moral Suasion
  • Special Directives
• Promotes a sound financial structure and provides services such as:
  • Bankers’ Clearance
  • Examination of banks
  • Foreign Exchange Monitoring
  • Prudential Guidelines
  • Lender of Last Resort functions
  • Reserve Requirements and Cash Reserve Requirement
  • Interest Rate Policy and Capital Funds Adequacy

Nigerian Deposit Insurance Corporation (NDIC)

• Established by Decree No. 27 in June 1988 to complement CBN's efforts.
• Functions include:
  • Providing deposit insurance for banks
  • Examining books and affairs of insured banks
  • Identifying and restructuring distressed banks
  • Resolving issues affecting the financial system
• Collaborates closely with the CBN to ensure the health of banking operations.

Federal Ministry of Finance

• Acts as the government's agent in the financial system with responsibilities like:
  • Advising on monetary and fiscal operations in consultation with CBN.
  • Preparing the Federal Government Budget.
  • Licensing bureau de change; previously licensed banks until 1991, when CBN took over.
  • Executing financial directives from the Presidency.

Securities and Exchange Commission (SEC)

• Established in 1979 to regulate capital market operations, succeeding the Capital Issues Commission.
• Key functions include:
  • Promoting an orderly and active capital market
  • Determining timing and amount of privately offered securities
  • Registering and supervising stock exchanges and related bodies
  • Approving companies for capital market listing
  • Regulating mergers and acquisitions per the Companies and Allied Matters Decree of 1990
  • Issuing guidelines on foreign investments and maintaining market surveillance.

National Insurance Commission (NIC)

• Established in 1997 to supervise insurance business in Nigeria, taking over from the National Insurance Supervisory Board.
• Functions include:
  • Regulating insurance business standards
  • Establishing a bureau for public complaints against insurance companies
  • Approving insurance premium rates for various classes of insurance
  • Expected to help resolve distress in the insurance industry.

Federal Mortgage Bank of Nigeria

• Established by Decree No. 7 in 1997 to address housing issues in Nigeria.
• Took over the functions of the Nigerian Building Society, aiming to act as the apex mortgage institution.
• Functions include:
  • Licensing and supervising primary mortgage institutions
  • Managing the National Housing Fund
  • Advising other mortgage finance institutions
  • Conducting research to improve housing standards.

Microfinance Banks

• Functions include receiving and processing applications for establishing microfinance banks.
• Supervise and control activities of microfinance banks and provide long-term financing.

Conclusion

• The Central Bank serves as the government’s representative in the financial system, closely associated with both the government and the financial sector.
• Effective regulatory measures help in early identification of potential problems in financial institutions, aiding in prevention of failures.

Summary

• Comprehensive focus on the control of financial institutions is crucial for enhancing efficiency and effectiveness within the financial system.