Boosting Depositors’ Confidence Amidst Challenges

Nume Ekeghe writes on Nigeria Deposit Insurance Corporation’s recent activities and strides at furthering depositors’ faith in the banking system

While many are familiar with their banks or the Central Bank of Nigeria (CBN), not many are conversant with the activities of the Nigeria Deposit Insurance Corporation (NDIC). The corporation came into being in 1988 through the promulgation of Decree No.22 of 15 June 1988 as part of economic reform taken by the government to strengthen the safety net for the banking sector. 

Basically, the establishment of the NDIC was part of measures to boost the confidence of the banking populace in the industry as the frequent collapse of banks and loss of funds would erode public confidence in the system and thus lead to the collapse of the financial industry. 

Mandate of the NDIC 

While bank failures and cases of distressed banks are no longer as prevalent as they used to be, the protection of depositors remains a crucial part of ensuring financial stability. The mandate of the NDIC includes the coverage of all deposit liabilities in Deposit Money Banks (DMBs, including Non-Interest Banks), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), and Mobile Money Operators (MMOs). 

The corporation is also saddled with the adoption of differential premium assessment system to encourage effective risk management system in banks as well as insurance coverage which guarantee payment of up to N500, 000.00  and N200,000 to depositors for DMBs/PMBs and MFBs respectively in the event of bank failure. 

Asides from these, it also implements pass-through deposit insurance for the subscribers of mobile money operators (N500,000 Coverage per subscriber of MMOs). Alongside these, the NDIC also participates in other safety-net policies, which include an on-site examination and off-site surveillance of licensed deposit-taking financial institutions to ensure safety, soundness and stability of the banking system. 

It also performs Risk-Based Supervision in collaboration with the CBN to ensure effective risk management in banks and promote stability and ensures zero tolerance for unethical practices in insured financial institutions in the interest of depositors thereby promoting safe and sound banking practices. 

At a recent three-day workshop on, “Boosting Depositors’ Confidence Amidst Emerging Issues and Challenges in the Banking System,” NDIC Director of Communication and Public Affairs Department, Bashir Nuhu explained that the corporation in collaboration with the CBN, carries out the efficient and cost-effective resolution of distressed banks to promote public confidence and protect depositors. 

“Effective resolution of failing banks is carried out to enhance the safety, soundness, and stability of the banking system” he stated, adding that mechanisms that had been used include open bank Assistance and Depositor Reimbursement amongst others.” 

Achievements in recent times 

In his opening remark at the 19th edition of NDIC Workshop the Finance Correspondents Association of Nigeria (FICAN) and Business Editors, the Managing Director/Chief Executive, Nigeria Deposit Insurance Corporation (NDIC) Mr. Bello Hassan, stated that the corporation has cumulatively paid N11.83 billion to over 443,949 insured depositors and over N101.37 billion to uninsured depositors of all categories of banks in-liquidation. This brings the total amount to N113.2 billion. 

According to him, “As of June 2022, the NDIC had cumulatively paid N11.83 billion to over 443,949 insured depositors and over N101.37 billion to uninsured depositors of all categories of banks in-liquidation. 

“It is most profound for me to say that out of the 49 DMBs in liquidation, the Corporation in September 2022 declared 100 per cent liquidation dividend in 20 of those institutions, meaning that the Corporation has realised enough funds from their assets to fully pay all depositors of the listed banks.” 

He added that as at June 30, 2022, the NDIC provided deposit insurance coverage to a total of 981 insured financial institutions. The breakdown included: 33 DMBs made up of 24 commercial banks, six merchant banks, and three non-interest banks (NIBs). 

Others, he added was: two non-interest windows, 882 Microfinance Banks (MFBs), 34 Primary Mortgage Banks (PMBs), three Payment Service Banks (PSBs), and 29 Mobile Money Operators. Hassan added that the corporation was determined to ensure a faster and orderly resolution of liquidated banks. 

He said: “In the area of scaling up the deposit insurance framework and ensuring faster and orderly resolutions of liquidated insured institutions, in May this year, with the active participation of the relevant stakeholders, we developed and deployed the Single Customer View (SCV) platform for the Microfinance and Primary Mortgage Banks in order to strengthen our processes and procedure for data collection. 

“The platform would not only ensure availability of quality, timely and complete data to the NDIC, but would eliminate delays often experienced in reimbursing depositors following revocation of institutions’ licences by the CBN. 

“The final phase of the implementation of the SCV for Deposit Money Banks (DMBs) will be achieved through the incorporation of the SCV template as part of the ongoing Integrated Regulatory Solution (IRS) jointly being developed with the CBN.” 

He added that in the area of consumer protection, the corporation has strengthened its complaints resolution platforms, which include the Toll-Free Help Desk, social media handles and Complaints Desks in the Bank Examination, Special Insured Institutions and Claims Resolutions Departments, as well as our Zonal Offices, to receive and process complaints from depositors. 

Educating the populace

Asides from these, the NDIC also takes a step further in educating the populace particularly to protect them from being victims of fraud and Ponzi schemes. Over the years, Nigerians have fallen victim of fraudsters through wonder banks and Ponzi schemes.  

Ponzi scheme, experts say is a form of fraud in which belief in the success of a non-existent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors. 

Historically, Ponzi schemes in Nigeria were common in the 1980s and early 1990s. The earliest in the recall were the Umana-Umana investment platform in Port Harcourt and Calabar and the Planwell scheme in Edo State. 

Other ponzi schemes in Nigeria include, MMM, Twinka, Ultimate Cycler, Givers Forum, Crowd Rising, among others. 

NDIC’s Director, Bank Examination Department (BED), Mr. Michael Oladele, said the Corporation is constantly building both human and regulatory capacities to meet up with evolving activities of ponzi schemes was necessary. 

Oladele said that the Corporation was also encouraging the public to report such schemes known as ‘wonder banks’ via the NDIC website. 

The director in a lecture with the title ‘Rising Ponzi Scheme and Investment Scam in Nigeria: What we need to know’, advised the public to only patronise regulated entities and always conduct due diligence while trying to invest. 

He said the Corporation was a member of the inter-agency committee on illegal fund managers including the Central Bank of Nigeria (CBN), and the Securities and Exchange Commission (SEC), among others. 

Oladele said Ponzi was an aspect of investment fraud, saying that there was a paucity of data for Ponzi scheme frauds in the country. 

The director listed some of the methods of operations of Ponzi schemes to include; the offering of abnormal return on investment and a desperate search for new investors. 

He suggested stiffer penalties for operators of Ponzi schemes. According to him, women are mostly being used to perpetrate Ponzi schemes, and advised them to desist from being used as ambassadors for such scheme testimonials.