The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have been empowered by the Banks and Other Financial Institutions Act (BOFIA) 2020 act that has been signed by President Buhari to set up a banking sector resolution fund to operate a bridge bank and ensure protection of depositors fund. The CBN is expected to inject N10 billion or any amount to be determined by its board into the fund every year. This new fund is separate to AMCON which was established to buy bad loans following the banking crisis eleven years ago.
The new act provides that each bank makes annual contributions that are equivalent to 10 basis points of their total assets or a percentage that the CBN will still have to finalize. The funds are expected to be used to offset operating costs of a bridge bank, to pay the costs of transferring the whole or any part of the business of a bank, specialized bank, or other financial institution pursuant to a resolution measure.