Finance

Applauding The NDIC Safety-Net Role In Nigeria

The Nigerian Deposit Insurance Corporation (NDIC) is an agency of government shouldered with the responsibility of supervising the banking sector and safeguarding depositors’ funds from the adverse effects of bank failures.

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As an agency charged with this safety-net role, NDIC has consistently lived up to the expectation of ensuring that depositors of banks are not defrauded or lose their hard-earned deposits.

The Corporation has done this through its several enlightenment campaigns at fora such as the NDIC Day at trade Fairs, Workshop for Finance Correspondents Association of Nigeria (FICAN), and Business Ediotrs, workshop for Lawyers and judges across the country, among numerous others.

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The aim was to forge a common front to educate bank depositors, especially, the operators of Micro, Small, and Medium Scale Enterprises (MSMES) on the need to bank with a licenced financial institution in the country.

NDIC said, the Deposit Money Bank (DMB) is the safest, smartest, and most prudent
place to save money because of its protection, therefore, advised the members of the public, particularly those in the MSMES sector, and informal segment of the economy to keep their money in the formal banking system.

The Corporation noted that such deposits also enjoy the benefit of effective regulation and supervision of relevant authorities, and take people’s hard-earned money beyond the ambit of illegal fund managers and loan sharks that currently awash the investment landscape and fleecing unsuspecting members of the public.

It said, as the unscrupulous elements get more and more creative in their ignoble acts, and as the NDIC and other regulatory bodies device more ingenious approaches to tackling their menace. It was pertinent for the Corporation to continue to sensitize the public on their expected roles in protecting their bank deposits.

Speaking last month, at the NDIC’s Special Day at the 18th Abuja International Trade Fair, the Managing Director/Chief Executive of the NDIC, Mr. Bello Hassan, warned the depositors against patronising illegal fund managers.

He said, “we at the NDIC hold the strong view that “Knowledge is Power”, and we believe that an informed depositor can make better financial decisions.

“I urge the public to be cautious of illegal fund managers, often referred to as “Wonder Banks” or “Ponzi Schemes.” These entities offer high interest rates and profits that are too good to be true, leading to devastating losses for many.

“It’s important to note that these “wonder banks” are neither licensed by the Central Bank of Nigeria nor covered by the NDIC deposit insurance scheme. Members of the public are therefore advised to patronize only banking institutions with a display of the NDIC Stickers carrying the words: “Insured by NDIC” in their banking halls or entrances and various branches across the country”, he said.

As an insurer, NDIC guarantees the payment of deposits up to the maximum limit in accordance with its statute in the event of failure of an insured financial institution.

Mr. Hassan said, recently, following the revocation of licenses for 179 Microfinance Banks and 4 Primary Mortgage Banks by the Central Bank of Nigeria (CBN), the NDIC immediately commenced liquidation of the banks and began disbursing insured sums to depositors within just 7 days of the closure of these banks.

He noted that as of 22nd September 2023, the Corporation had paid a cumulative insured sum of N1.084 billion naira to 29,573 depositors of the closed MFBs/MPBs.

He informed that payments are still ongoing and depositors with funds exceeding the insured limit would receive liquidation dividends after recovery of debts and sale of physical assets of the closed banks.

According to him, the Corporation was in the process of verifying and paying liquidation dividends to depositors and stakeholders of 20 closed banks: They are Allied Bank, Peak Merchant Bank, Commerce Bank, Continental Merchant Bank, Financial Merchant Bank, Fortune Bank, Gulf Bank, Hallmark Bank, Icon Merchant Bank, Liberty Bank, Nigeria Merchant Bank, North-South Bank, Premier Commercial Bank, Prime Merchant Bank, Progress Bank and Merchant Bank.

He said, “following the revocation of licenses for the 179 Microfinance Banks and 4 Primary Mortgage Banks by the Central Bank of Nigeria (CBN), the NDIC immediately commenced liquidation of the banks and began disbursing insured sums to depositors within just 7 days of the closure of these banks.

“It’s important to note that as of 22nd September 2023, the Corporation had paid a cumulative insured sum of N1.084 billion naira to 29,573 depositors of the closed MFBs/MPBs.

“It is, however instructive to let you know that payments are still ongoing and depositors with funds exceeding the insured limit will receive liquidation dividends after recovery of debts and sale of physical assets of the closed banks”, he said.

Just recently, at the 2023 Sensitization Seminar, organized by the Corporation in partnership with the National Judicial Institute (NJI) for Judges of the Federal High Courts in Uyo, Akwa-Ibom State, the MD commended the judiciary for its deeper understanding of the deposit insurance practice towards promoting financial system stability in the country.

With the theme: “Strengthening Depositors Confidence in Banks and Other Financial Institutions through Speedy Dispensation of Justice”, the Seminar was organised to bring the Judges up to speed with some of the corporation’s laudable programmes and achievements on deposit insurance practice in the country.

Mr. Hassan stated that the overarching objective of the Deposit Insurance Scheme in Nigeria was to protect depositors in the event of failure of the insured institutions, thereby engendering confidence and curtailing the incidence of bank runs in the system.

He, however, noted that in carrying out its mandate efficiently, the Corporation required an effective collaboration with the judiciary, in view of its critical role in resolving disputes that often arise from revocation of banking licences, liquidation of failed banks, and termination of liquidation activities.

While stating that the Corporation, since inception, has been confronted with many challenges such as misconception of its mandate and basic principles of Deposit Insurance, the NDIC Boss expressed gratitude that the seminar organized in collaboration with the NJI has resulted in a better understanding of the Corporation’s distinct roles by members of the Bar and the Bench as well as speedy dispensation of cases involving banks in-liquidation for the sake of financial system stability in Nigeria.

To deepen knowledge of the Deposit Insurance practice and law, Hassan disclosed that papers presented at previous editions of the annual events have been published by the Corporation under the title: “Law and Practice of Deposit Insurance in Nigeria’’ in two volumes to serve as a veritable reference material, adding that the publications are being distributed free of charge to stakeholders.

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