NDIC: Bank Depositors’ Funds Fully Covered, Calls for Amendments to Aide Faster Recovery

Nume Ekeghe

The Nigeria Deposit Insurance Corporation (NDIC) has assured that under the current insurance coverage of bank account holders in the country, more than 97 per cent of account holders as are fully covered and would be able to recoup their deposits in the event of the closure of a bank.

According to the Managing Director and Chief Executive of the NDIC, Mr Bello Hassan, 97.6 per cent of accounts are fully covered under the N500,000 current coverage limit of the corporation, even as he added that the limit is subject to periodic reviews.

He stressed that there is a need for an amendment to the NDIC act, to give the agency more powers to recover and liquate loans and assets.

He made this known at the opening ceremony of the 18th edition of the workshop for business editors and Finance Correspondents Association of Nigeria (FICAN), themed, “Enduring Extreme Disruptions: Resilience & Reinvention for Banking System Stability & Deposit Insurance,” in Gombe yesterday.

Hassan said: “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; 97.6; 97.5 and 97.6 per cents 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 97 per cent of depositors would be fully covered by the corporation. 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.

“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. Deposit insurance coverage should also be consistent with the deposit insurance system’s public policy objective.

“In addition, 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. The Corporation successfully reviewed upward the coverage limits from N50,000 at inception in 1989 to N200,000 in 2006 and N500,000 in 2010.”

The NDIC boss said the need to further educate depositors on the issue of coverage is paramount as the coverage limits has always been misunderstood by stakeholders.

“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 per depositor per commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200,000 per depositor per microfinance bank remain the most adequate and robust in the world.

“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.” He stated
Responding to questions on the sidelines of the event, he said: “There are a lot of areas that I think the NDIC act needs to be amended. NDIC we are liquidators 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.”