According to the Nigeria Deposit Insurance Corporation (NDIC), as of the end of December 2022, at least N103.509 billion had been paid to uninsured depositors of the country’s collapsed banks.
Exactly at this time, the Corporation reaffirmed that about N11.835 billion had been paid to insured depositors of a number of different types of banks, including Deposit Money Banks (DMBs), Micro-Finance Banks (MFBs), and Primary Mortgage Banks.The Corporation revealed that as of September 2022, 100% liquidation dividends had been announced for 20 insolvent banks and that recipients of those monies had already begun to arrive.
According to Mr. Bello Hassan, Managing Director of the Nigeria Deposit Insurance Corporation (NDIC), the Corporation’s efforts at insuring deposits and ensuring depositors and shareholders of failed banks get their deposits and dividends respectively, were aimed at building the stability of the financial system in the Country for stronger reliability and confidence.Bello, who spoke at the NDIC Editors Forum with the theme “Deposit Insurance System (DIS) and Financial System Stability”) for 2022, said deposit insurance in the country was crucial to bolster the confidence of the majority in the system in order to push financial inclusion and get more Nigerians incorporated into the banking system.One of the essential services needed for greater financial stability is deposit insurance. It serves as a crucial safety net for the financial system, fostering greater public trust in the banking industry and formal onboarding.
“Deposit insurance protects a depositor’s money in the event that a bank is liquidated, preventing them from losing their money. Because when a bank is liquidated, you typically find out that it has more liabilities than assets, so which means potentially depositors are going to lose money and that is why deposit insurance must be taken to ensure they don’t lose (their) money,” Bello said.He added that the NDIC Act reviewed last in 2006 is under expeditious consideration in the National Assembly to review its provisions to meet with the dynamics of the financial system.Presenting a paper titled “Contributing to Public Confidence in the Financial System: Examining Critical Issues in Deposit Guarantee and Bank Liquidation,” at the editors forum, NDIC Director, Claims Resolution Department, Mr. Kazeem Sule, noted that on compliance audit carried out on the Corporation by the International Association of Deposit Insurers (IADI) in 2011, NDIC has been established to be compliant with deposit coverage, with a coverage capacity of 97 percent of depositors.He said, “Even with the N500,000 for each of those categories of banks, including the DMBs, Primary Mortgage Banks, Payment Service Banks, and N200,000 for Micro-Finance Banks, 97 per cent of total deposits within the banking system,” has been under the Corporation’s coverage.
He asserts that the Corporation began with a deposit coverage limit of N50,000 in 2006 and increased it to N500,000 in 2010, as well as N50,000, N100,000, and now N200,000 for Micro-Finance Banks.The key is to make sure that whatever guarantee limit you have, it’s sufficient to build systemic confidence so that depositors can leave their money in the bank and feel secure in the knowledge that, in the event of a bank failure, they won’t need to panic and, in cases where we have recoverable assets, even those who have more money than the guarantee limit will still be paid. As a result, the IADI’s fundamental criterion according to which a DI system is deemed fully compliant if it covers the majority of depositors is reinforced,’ particularly the small and unsophisticated ones, that will create system of confidence within the financial system for stability,” he said.
The challenges highlighted by the Corporation which it believes the bill under review would go a long way to address include, judicial misleading verdicts such as distinguishing NDIC assets against that of financial institutions; protracted legal actions; delayed resolution.Other issues include low levels of understanding of the Corporation’s mission; inadequate record-keeping practices in most financial institutions that have an impact on the process of liquidating assets to prove a debtor’s status; and issues with litigation.
According to him, the Corporation has kept paying depositors of bankrupt banks in order to uphold its obligation to protect depositors and prevent financial instability in the nation.Asserting that the Corporation does not wait until banks fail but rather takes preventative measures to ensure NDIC insured banks “are run in a safe and secured manner by supervising their activities to prevent failure,” he claims that the NDIC operates the explicit insurance system on a formal framework established by an Act of Parliament.
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