In not too distant past, depositors in Nigeria lost money due to crisis in the global financial market or distress in banks. But the coming of the Nigeria Deposit Insurance Corporation put paid to that. Birthed 30 years ago, the NDIC is primarily tasked with ensuring financial system stability in the country through efficient and effective regulation of banks for the overall wellbeing of the economy and the safeguard of depositors’ fund.
Atypical of a government’s regulatory agency, the corporation has applied itself to the job of policing deposit funds in ways that has led to heightened confidence in Nigerian banks by investors, depositors and operators alike. It has equally succeeded in its onerous task of building and sustaining safe, sound and stable financial system that today offers strong support to the country’s strive for economic prosperity.
The NDIC was established in March 1989 following the promulgation of Decree No. 22 of 1988 with a mandate to confront multi-faceted quagmire in the banking sector that sent many Nigerian families into penury due to the sudden erosion of their hard-earned savings in 1988. The coming on board of the regulator at a time of grave financial stress in the economy did not faze the agency. The corporation hit the ground running and, within the space of a few months, sufficiently calmed the troubled banking sector through ingenious dose of cutting-edge solutions to the existential financial problem made possible by the solid vision of its founding fathers coupled with the ingenuity of those who piloted its affairs at infancy.
The agency did not only demonstrate an uncommon understanding of the issues but boldly administered solutions which led to an immediate turnaround of a catastrophic situation in some Nigerian banks. Since then, the corporation has waxed both nuclear and seminal in meeting the laudable objectives for which it was set up.
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Notwithstanding the attendant difficulties, the corporation has remained committed to its primary objectives which are to “contribute to financial system stability as well as protect small, uniformed and less financially sophisticated depositors by providing an orderly means of resolution and compensation in the event of failure of their insured financial institutions.”
To create the right motivation for the attainment of its crucial objectives, the corporation evolved and adopted an holistic and all-encompassing vision, which is “To be one of the leading deposit insurers in the world”; and an unambiguous Mission: “To protect depositors and contribute to the stability of the financial system through effective supervision of insured institutions, provision of financial/technical assistance to eligible insured institutions, prompt payment of guaranteed sums and orderly resolution of failed insured financial institutions”. Added to this are its core values of honesty, respect and fairness, discipline, professionalism and teamwork.
As a deposit guarantor, the mandate of the NDIC covers all deposit taking financial institutions licensed by the Central Bank of Nigeria (CBN). These include Deposit Money Banks (DMBs), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), Non-Interest Banks (NIBs) and the emerging Mobile Money Operators (MMOs). The corporation currently provides deposit insurance cover to the 27 DMBs, 888 MFBs, 38 PMBs and one NIB in operation today in the country.
Unarguably, the corporation has succeeded in its core mandate of deposit guarantee, banking supervision, distress resolution and bank liquidation. It is worthy to note that under the guidance and leadership of its successive leadership and staff, the corporation had in the last 30 years achieved monumental success, set records and contributed immensely to the financial system stability in the country.
For instance, the agency has attained dizzying heights in the discharge of its role of deposit guarantee. It is on record that the NDIC paid ₦8.25 billion as insured amount to 442,999 depositors of closed DMBs, ₦2.97 billion to 83,415 depositors of closed MFBs and ₦70.53 million to 869 depositors of closed PMBs as of December 2018. This feat coupled with its concomitant zeal to protect depositors against shocks in the banking sector has made the agency a darling of both the upper echelon and vulnerable segments of the Nigerian society.
The corporation had ensured that majority of bank depositors are covered in compliance with Principle 8 of the International Association of Deposit Insurers (IADI) Core Principle for Effective Deposit Insurance. Towards this end, it twice increased the maximum deposit insurance coverage from N50,000.00 per depositor per DMB at inception, to N200,000.00 in 2006 and N500,000.00 in 2010.
Similarly, the maximum coverage per depositor of PMBs and MFBs was increased from N100,000.00 in 2006 to N200,000.00 in 2010. To reflect the increased deposit structure in the sub-sector, it also increased coverage per depositor per PMBs to N500,000.00.
It is worthy of note that the NDIC has continued to proactively respond to emerging developments and dynamics in banking operations in the country through appropriate policy framework which has garnered laudable outcomes in the interest of the banking public.
The achievements recorded by the corporation in this wise include the adoption of risk-based supervision framework, development of framework for early warning signals to detect problem banks, development of framework for the identification and measurement of systemically important banks (SIBs) and the institution of a framework for the provision of financial and technical assistance to deserving insured institutions.
Additionally, the corporation has ensured that failing and failed insured institutions are resolved promptly and efficiently without disruption to the country’s payment system. This is one area where the NDIC has continued to showcase unassailable ingenuity and sagacity.
The NDIC was created when the banking system in the country was already experiencing nightmares in view of the about seven technically insolvent state-owned banks in the system in 1988 which brought the corporation eyeball to eyeball with bank failure at inception. It did not only win the battle but garnered tremendous experience in the process to help in it in future operations.
To succeed, the NDIC adopted options ranging from Open Bank Assistance (OBA), Purchase and Assumption (P&A), Bridge Bank, Asset Purchase and reimbursement (payout) of insured depositors to resolve bank failures with due regards to severity and peculiarity of the scenario in view.
Moreover, with respect to its bank liquidation roles, the corporation has acquitted itself creditably by ensuring that depositors of liquidated banks were anesthetized against loss or pain. It is an open secret that from 1994 to date, a total of 53 DMBs, 325 MFBs and 51 PMBs were liquidated without disruption to the payment system.
However, the NDIC resorted to the Purchase and Assumption (P&A) option to put to rest the challenge of 13 banks closed by the CBN in 2006 in view of their incapacity to meet the consolidation and recapitalization requirement of N25billion. The corporation also successfully recovered ₦29.01billion, ₦125.84 million and N290.43 million from debtors of DMBs, MFBs and PMBs in-liquidation respectively, as at December 2018. The sum of ₦21.396 billion was also realised from the sale of physical assets of closed DMBs, while N391.25 million and ₦78.17 million were realised from those of MFBs and PMBs respectively as at December last year.
Besides, in line with its statutory role under Section 39 (i) of the NDIC Act 16 of 2006, the corporation adopted the Bridge Bank mechanism to resolve the failure of three DMBs – Afri Bank, Spring Bank and BankPHB, which transformed into Mainstreet Bank, Enterprise Bank and Keystone Bank respectively. It also used the same method last year to resolve the failure of Skye Bank Plc, which transformed to Polaris.
The benefits of the bridge bank to the nation’s economy are enormous as the initiative safeguarded 12,667 jobs, protected deposit liabilities of over N1.759 trillion, prevented potential repercussions of the failure of the banks on the country’s financial system. This proactive action brought about macro-economic stability, sustained daily operations of the failed banks – including meeting maturing obligations – and enhanced depositor and other stakeholders’ confidence in the banking system. It is equally significant to emphasise that depositors of 17 liquidated banks who filed claims have been paid all their monies that were otherwise trapped in those banks.
While the dynamism and sophistication in the banking system in the last three decades had resulted in the emergence of different operational models, products and services that severely challenged the corporation’s ability to protect depositors and remain unshakable on its financial safety net arrangement, it nevertheless responded swiftly and superbly to these developments.
Apart from its focus on its core mandates, the corporation has also embarked on a series of internal structural and operational reforms necessary to align it with global best practices. The composition and structure of board and management of the corporation has gone through a number of re-examination to reposition it for optimum performance, while the agency now maintains 10 offices nationwide compared to two at inception.
To ensure that its varied publics are kept abreast of its financial reengineering in the last 30 years, the corporation has worked closely with the media through support, trainings and retraining for media partners
Like bees drawn to nectar, the invaluable performance of the corporation has attracted several local and international laurels like the three best-practice standard awarded to the NDIC by the British Standards Society (BSI) in IT business – IT Service Management System (ISO 20000), IT Security Management (ISO 2701) and Business Continuity Management (ISO2301) in 2017 which made the corporation the first public institution in the country to win the three ISO certification at a go.
As the NDIC rolls out the drums in a few days to mark its three decades of existence, it is trite to say that it would no doubt be a celebration of excellence in building and sustaining safe, sound and stable financial system that offers strong support to the nation’s drive for economic prosperity. Most stakeholders in the financial sector including depositors, banks and other financial institutions, can look back with pride on the Herculean task the agency has undertaken in reshaping and realigning banking operations in the country to the benefit of all.
Of course, most Nigerians are certain today that a N1000 in their bank account is as good as a N1000 in their pockets. This level of confidence is a direct function of the corporation’s impactful strides which have redounded positively on the economic life of the country, stabilized the banking sector, preserved jobs and indeed happiness for depositors who could have sunk into instant financial oblivion as a result of distress or liquidation of any bank in the absence of the NDIC.
Sani Mohammed, a public affairs analyst, writes from Abuja