How NDIC paid N12b to 527,283 depositors of failed institutions

In 30 years of operations, the Nigeria Deposit Insurance Corporation (NDIC) has paid a cumulative sum of N11.93 billion to depositors of failed financial institutions in the country.

The depositors, numbering 527,283, cut across the Deposit Money Banks (DMBs), which is the largest at 442,999; Microfinance Banks (MFBs), 83,415; and Primary Mortgage Banks (PMBs), 869.

The cumulative insured amount paid to depositors of DMBs is estimated at ₦8.25 billion, while about ₦2.97 billion was paid depositors MFBs and ₦70.53 million was paid to the depositors of closed PMBs.

The Managing Director of NDIC, Alhaji Umar Ibrahim, who made the disclosure at the ongoing celebration of the institution’s 30th anniversary, in Abuja, said the corporation has successfully responded to economic realities and yearnings of depositors since its inception.

According to him, NDIC has periodically increased the Maximum Deposit Insurance Coverage to enhance the confidence of the public in the Nigerian financial system, which on average, is done every five years, in line with global best practice.

“The Corporation increased the maximum deposit insurance coverage twice, from ₦50,000 per depositor per deposit money bank at inception, to N200,000 in 2006 and N500,000 in 2010.

“Similarly, maximum coverage per depositor of PMBs/MFBs was increased from N100,000 in 2006, to N200,000 in 2010.

“Coverage per depositor per PMB had since been increased to N500,000 to reflect the structure of the increased deposit in the sub-sector and to stimulate mortgage savings.

“In light of the foregoing, it is gratifying that in 30 years, the corporation has fulfilled the public policy objectives for which it was established,” he said.

Noting that deposit guarantee is a key and distinct mandate of the corporation, he said that NDIC guarantees payment of deposits up to a maximum limit in accordance with its statute in the event of failure of an insured financial institution.

The Deposit Insurance System covers all deposit-taking financial institutions licensed by the apex bank, which broadly include the Non-Interest Banks (NIBs) and subscribers of Mobile Money Operators (MMOs).

Currently, NDIC provides deposit insurance cover to 27 DMBs, 918 MFBs, 34 PMBs, and two NIBs.

“The NDIC collaborates with the CBN to ensure that the institutions remain healthy at all times and/or where there are problems, they are detected and addressed promptly.

“Supervision guarantees stability, integrity, soundness, and efficiency in the banking system and is employed by NDIC for the protection of depositors’ interest.

“The supervisory activities of the corporation are carried out through a combination of on-site examination and off-site surveillance.

“The collaboration between CBN and NDIC over the years has reduced the bank examination cycle, enhanced monetary policy, promoted safe and sound banking practices as well as assist in resolving troubled financial institutions,” he said.

Speaking on banking failure resolutions of NDIC, he noted that depending on the severity and peculiarity of each bank, it had in collaboration with CBN, adopted multiple options.

Citing the 2005 Consolidation/Recapitalisation requirement of N25 billion, he pointed out that the Purchase and Assumption option was used to resolve problems of 13 banks closed by the CBN in 2006.

Also, the option was adopted by the corporation to resolve the problems of banks affected by the Global Financial Crisis of 2009, which manifested in poor asset quality and weak risk management, as well as weaknesses in corporate governance.

Still in 2011, both institutions used the Bridge Bank mechanism to resolve the failure of three banks- Afribank, Spring Bank and BankPHB.

Similarly, in 2018, that mechanism was used to resolve the failure of Skye Bank Plc, even as NDIC has extolled the merits of the model, particularly in preventing job losses.

“It should interest you to note that the bridge bank initiative safeguarded 12,667 jobs, protected deposit liabilities of over ₦1.759 trillion, which ensured that depositors had uninterrupted access to their funds, and prevented the systemic repercussions of the failure of the bank on the entire financial system.

“The Bridge bank option engendered macro-economic stability sustained daily operations of the failed banks including meeting maturing obligations and enhanced the confidence of Depositors and other Stakeholders.

“The Corporation is identified with ensuring that Depositors of liquidated banks suffered little loss or pain. Between 1994 to date, 53 DMBs, 325 MFBs, and 51 PMBs were put under liquidation without disruption to the nation’s payment system,” he added.