By Sunday Etuka, Abuja
The Nigeria Deposit Insurance Corporation (NDIC) has increased the maximum deposit insurance coverage of
Deposit Money Banks (DMBs) from N500,000 to N5,000,000.
Managing Director/Chief Executive, NDIC, Mr. Bello Hassan who announced this during a Press Conference on Thursday in Abuja, said, the decision was taken by the NDIC’s Interim Management Committee (IMC), during its 18th meeting held on April 24th and 25th, 2024.
Mr. Hassan said, the current amount would provide full coverage of 98.98% of the total depositors compared with the current cover of 89.20%, stating that in terms of the value of deposit covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37% compared with the current cover of 6.31% of total value of deposits.
NDIC also increased the maximum deposit insurance coverage of Microfinance Banks (MFBs) from N200,000 to N2,000,000, which it said, would provide full coverage of 99.27% of the total depositors compared with the current level of 98.76%, and would increase the value of deposits covered by deposit insurance to 34.43% compared with 14.38% of total value of deposit, currently covered.
It adjusted the maximum deposit insurance coverage of
Primary Mortgage Banks (PMBs) from N500,000 to N2,000,000, which would provide full coverage of 99.34% of the total depositors compared with the current 97.98%, and would increase the value of deposits covered by deposit insurance to 21.04% compared with 10.77% of total value of deposit, currently covered.
The Payment Service Banks (PSBs)’s maximum deposit insurance coverage was also increased from N500,000 to N2,000,000, which would provide full coverage of 99.99% of the total number of depositors, and would increase the value of deposits covered by deposit insurance to 43.10% of the total value deposits from the current cover of 40.60%.
The Corporation increased the maximum Pass-through deposit insurance coverage of Subscribers of Mobile Money Operators, from N500,000 to N5,000,000 per subscriber per MMO as the applicable coverage level for depositors of DMBs.
Speaking further on the development, the NDIC Boss said, the maximum deposit insurance coverage was determined through periodic research-based studies, to ensure its adequacy and credibility, adding that the various factors considered in setting the coverage level were, deposit distribution, impact of inflation, per capita GDP, exchange rate and other statistical models, among others.
He pointed out that the high level of uninsured deposits in the system posed a risk of bank runs, noting that the International Association of Deposit Insurers (IADI) Brief No. 9 of 2023 that examined the recent bank failures in the United States of America and Switzerland, concluded that, high levels of uninsured deposits in insured institutions might increase the likelihood of bank runs with dire impact on the stability of the financial system.
He however, emphasised that, the revised deposit insurance coverage has balanced the NDIC’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.
“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 destabilizing effect of bank runs”, he added.
It would be recalled that the maximum deposit insurance coverage for depositors of DMBs was set at N50,000 at the inception of the Corporation in 1989 through a research survey.
The amount was set in such a way that up to 85% of the total depositors in the nation’s insured banks would be 100% covered. Subsequently, 96% of all depositors were protected when 2 the coverage ceiling was raised from N50,000 to N200,000 in 2006.
The coverage limit of N100,000 was also set, for the first time, for MFB and PMB depositors in the same year. In the year 2011, the coverage limits for DMBs increased from N200,000 to N500,000 and from N100,000 to N200,000 for depositors of MFBs and PMBs.
The coverage level was further adjusted to N500,000 in 2016 for PMB depositors as well as subscribers of licensed Mobile Money Operators (MMOs).
Coverage of N500,000 was equally extended to depositors of Payment Service Banks (PSBs) in 2020. Meanwhile the coverage for DMBs remained at N500,000, before this current adjustment.
