World Bank lauds NDIC’s Target Fund Ratio

The World Bank has commended Nigeria Deposit Insurance Corporation (NDIC) for what it describes as the “Corporation’s robust Target Fund Ratio Framework,” which enables the Corporation to meet its obligation to depositors. The Target Fund Ratio is the ratio of fund that determines the optimal fund level that enables a deposit insurer to effectively meet its obligation to depositors. Under the International Association of Deposit Insurers (IADI) Core Principle 11 for Effective Deposit Insurance System, “the Fund Reserve Ratio should be based on clear, consistent and well developed criteria”.

In a statement, the NDIC disclosed that the World Bank technical team, headed by Mr. Julian Casal, gave the commendation at the end of its 4-day working visit to the Corporation for a formal presentation of the Target Fund Ratio Framework and capacity building to NDIC staff.

According to the statement, Casal said that the NDIC’s Target Fund Ratio Framework was suitable in determining the adequacy of the Corporation’s Deposit Insurance Fund (DIF). It added that the framework was a ‘model’, which the Bank would adopt as a benchmark for other African deposit insurance Corporations. Responding, the NDIC’s Managing Director and Chief Executive, Alhaji Umaru Ibrahim, expressed appreciation to the World Bank for its continuous support towards the Corporation’s capacity building initiative and effective discharge of its mandate.

The development of the Target Fund Ratio by the Corporation was premised on the recommendation at the end of an IADI international workshop on the methodology for assessing compliance with the IADI core principles for effective deposit insurance system, which was hosted by the Corporation in 2011.

The NDIC was advised to comply with some core principles, among which was Core Principle 11 on funding. Consequently, the Corporation approached the World Bank for technical assistance towards the development of the Target Fund Ratio and the request was granted in 2014 under the World Bank Financial Sector Reform and Strengthening (FIRST) Initiative.