Some Nigerians feels that the Deposit Insurance limits are inadequate, and this has been engendering misinformation among both banked and unbanked Nigerians. Can you throw insight into these assertions?
To answer your question straightaway, I think those that are sharing such view are ignorant of the factual situation. They must have being misinformed. To this end, let me assure you that the deposit insurance limits are adequate and one of the best in the world. In fact, the maximum coverage limits of N500, 000.00 per depositor per commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200, 000.00 per depositor per micro-finance bank remain the most adequate and robust in the world. It is expedient to inform you in this workshop that the issue is so fundamental and needs to be thoroughly interrogated in the interest of all depositors. More assuring is that in order to sustain the Corporation’s rich legacies and the multiple ingenuous operational landmarks it was able to achieve in it’s over three decades of existence despite daunting challenges, the NDIC remain resolute to carrying out its mandate with all sincerity of purpose.
I was made to understand that the issue also provoked strong reactions during some of the presentations at the workshop held in Ibadan. Much of the concerns are predicated on the lack of adequate understanding of the principles, rationale and realities that informed the determination of our coverage limits. It is in that respect that we urge the media through this forum to make Nigerian depositors aware that the NDIC’s maximum coverage limits of N500, 000.00 per depositor per commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200, 000.00 per depositor per micro-finance bank remain the most adequate and robust in the world. Nonetheless, I need to reiterate that, as it is today, these limits are not only adequate; they are also consistent with the extant provisions and recommendations of the International Association of Deposit Insurers (IADI) in its Core Principle for Effective Deposit Insurance System on the determination of coverage limits.
Can you explanatorily tell us the essence of IADI in this issue?
The acronym, IADI, simply translates to International Association of Deposit Insurers. Its core principle No. 8 on coverage limits specifically requires that the thresholds should be limited, credible with the capacity to fully cover substantial majority of bank depositors, while the rest remain exposed to ensure market discipline. Its principles also have it that deposit insurance coverage should also be consistent with the deposit insurance system’s public policy objective. In fact, the coverage limits are not designed to be static, but subject periodic reviews to ensure that they are consistent with the public policy objectives of the Deposit Insurance System.
What are the salient successes you can say the NDIC has recorded?
NDIC has successfully reviewed upward the coverage limits from N50, 000 at inception in 1989 to N200, 000 in 2006 and N500, 000 in 2010. The corporation has also recorded laudable successes as in 2016, 2017, 2018 and 2019, the total number of accounts in the deposit money banks stood at 83.0 million; 99.1million; 112.0 million and 128.4 million respectively. Out of these numbers, the N500, 000 coverage limit fully covered 99.4 per cent; 97.6 per cent; 97.5 per cent and 97.6 per cent of accounts, respectively.
What does this figures entail?
What these figures entail is that only less than 3 per cent of accounts/depositors are not fully covered by the prevailing coverage limits. The implication of this is that in the event of failure of a bank, above 97 per cent of depositors would be fully covered by the corporation.
How far has NDIC gone in the settlement of liquidation dividends of depositors of banks which licenses were revoked by the Central Bank of Nigeria (CBN)?
NDIC is currently settling the liquidation dividends of depositors of banks whose licenses were revoked by the Central Bank of Nigeria (CBN). One of our mandates is also to liquidate license deposit institutions whose deposit has been revoked by the CBN. So you have various categories that are currently in liquidation, the Deposit Money Banks (DMBs), Micro Finance Banks (MFBs) and Primary Mortgage Banks (PMBs). As liquidator what we do immediately is the revocation of license. After that, we proceed to recover the loans and advances that were granted by those institutions before revocation and also realise the assets that are left behind so that we can pay it to the depositors.
How is the mode of payment like?
We only pay maximum insured amount at the point of liquidation then, subsequently, begin to pay depositors and after that we wind up but the payment is currently ongoing.
The surveillance of MFBs, PMBs and DMBs has been in the news lately. What is the present situation?
NDIC’s Surveillance Department had successfully closed 325 MFBs, 50 PMBs and 49 DMBs whose licenses were revoked by the CBN with minimal diverse effect on the stability and confidence in the banking sector. We have cumulatively paid N8.27billion to insured depositors of DMBs, N3.38billion to insured depositors of MFBs and N11billion to insured depositors of PMBs. And these represent 60.71 per cent, 46.94 per cent and 18.10 per cent of the insured amounts, respectively. The payment to uninsured depositors, creditors and shareholders of DMBs cumulatively stood at N100.85bn, N1.27billion and N4.83billion, respectively. This also represents 51.07 per cent, 73.13 per cent and 92.81 per cent of the respective amounts.
Nigerians, particularly those that have accounts in various commercial banks have been worried about how safe their monies are as a result of experiences they had in the past. What assurance are you giving them in terms of NDIC’s coverage of their deposits in event of bank failure?
I can assure you that in the event of bank failure that NDIC can guarantee depositors to the tune of 97%. In fact, NDIC’s total number of accounts in the deposit money banks in 2016, 2017, 2018 and 2019, stood at 83.0 million; 99.1million; 112.0 million and 128.4 million respectively. Out of these numbers, the N500, 000 coverage limit fully covered 99.4per cent; 97.6per cent; 97.5 per cent and 97.6per cent of accounts, respectively. What these figures entail is that only less than three per cent of accounts/depositors are not fully covered by the prevailing coverage limits. The implication of this is that in the event of failure of a bank, above 97per cent of depositors would be fully covered by NDIC. From the foregoing statistics, it could be observed that the Corporation’s deposit insurance coverage limits are not only adequate but robust enough to engender confidence in our banking system. I will at this juncture reiterate that maximum coverage limits remained the most adequate and robust in the world. This is what we have achieved in NDIC as the maximum coverage limits of N500, 000.00 per depositor per commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200, 000.00 per depositor per micro-finance bank remain the most adequate and robust in the world, and that is our standard. I need to reiterate that, as it is today, these limits are not only adequate, they are also consistent with the extant provisions and recommendations of the International Association of Deposit Insurers (IADI) in its Core Principle for Effective Deposit Insurance System on the determination of coverage limits. As earlier mentioned, the IADI Core Principle No. 8 on coverage limits specifically requires that the thresholds should be limited, credible with the capacity to fully cover substantial majority of bank depositors while the rest remain exposed to ensure market discipline.
What assistance do you think NDIC needs from the government going forward?
For the corporation to remain successful, it must be efficiently empowered to be able to recover assets as expeditiously as possible, so that depositors could be paid. There are a lot of areas that I think the NDIC Act needs to be amended. NDIC, as you are aware, is a liquidator and what happens is that at the point of liquidation, we try to recover the assets, especially the loans and advances that were granted by those banks that are in liquidation. One of the challenges that we are facing is slow recovery and if the act is to be amended, I think it is important that the corporation is efficiently empowered to be able to recover those assets as expeditiously as possible so they can pay the depositors.
