Breaking: NDIC Increases Deposits Coverage Levels for Financial Institutions

James Emejo in Abuja

The Nigeria Deposit Insurance Corporation (NDIC) Thursday announced increase in the maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions with immediate effect.
Managing Director/Chief Executive, NDIC, Mr. Bello Hassan, disclosed this at a media briefing in Abuja.

He said the maximum deposit insurance coverage for Deposit Money Banks (DMBs) had been increased from N500,000 to N5 million, to provide full coverage of 98.98 per cent of total depositors compared to the current 89.20 per cent.

In terms of the value of deposit covered, he said the revised coverage would increase the value of deposits covered by deposit insurance to 25.37 per cent compared to the current 6.31 per cent of total value of deposits.

Under the new regime, the maximum deposit coverage for Microfinance Banks (MFBs) was raised from N200,000 to N2 million to offer full coverage of 99.27 per cent of depositors compared to 98.76 per cent currently.

Hassan said this would increase the value of deposits covered by deposit insurance to 34.43 per cent compared to14.38 per cent of total value of deposit currently covered.

Furthermore, maximum deposit coverage for Primary Mortgage Banks (PMBs) was also increased from N500,000 to N2 million to provide full coverage of 99.34 per cent of depositors compared with the current 97.98 per cent.

He said this would increase the value of deposits covered by deposit insurance to 21.04 per cent compared to 10.77 per cent currently applicable.

The adjustments also involved an increase from N500,000 to N2 million for Payment Service Banks (PSBs) to offer full coverage of 99.99 per cent of depositors, to increase the value of deposits covered to 43.10 per cent from 40.60 per cent.

In addition, the maximum Pass-through deposit insurance coverage for Mobile Money Operators (MMOs) was increased from N500,000 to N5 million per subscriber per MMO as the applicable coverage level for depositors of DMBs.

The NDIC boss said the revised deposit coverage had balanced the corporation’s goals of deposit protection and financial system stability with incentives for depositors to practice market discipline and prevent banks from unnecessary risk-taking and moral hazard.

He said consideration was given to ensure that the coverage was limited but adequate enough to protect a large number of depositors and credible enough to prevent the destabilising effect of bank runs.

According to him, the adoption of the revised maximum coverage was supported by the corporation’s current funding, represented by the balances in the various Deposit Insurance Funds (DIFs), expected annual premium collection, enhanced supervision that would reduce the likelihood of bank failures, effective bank resolution frameworks and other funding arrangements provided by the NDIC Act No. 33 of 2023.
He said, “I will like to reaffirm the NDIC’s unwavering commitment to protecting depositors and contributing to the stability of the financial system.

“These adjustments to the maximum deposit insurance coverage reflect our dedication to adapt and evolve in response to the changing landscape of the financial industry, and we remain steadfast in our pursuit of a secure and resilient banking environment for all.”

Details later…