The decision by the Federal Government to establish the Nigeria Deposit Insurance Corporation (NDIC) was a bold step that was born out of necessity and strong conviction. The NDIC was established by the NDIC Decree No 22 of 1988 which was later replaced by the NDIC Act No 16 of 2006 as a response to government’s search for a third leg of the financial safety-net components which comprised one, the lender of the last resort performed by the Central Bank of Nigeria (CBN), two, effective banking supervision by both the CBN and NDIC and third, the NDIC’s unique role as deposits insurer. The Corporation commenced operation in 1989 as a deposit insurer with extended mandate to supervise insured institutions and provide orderly mechanisms for bank failure resolution in Nigeria. There was absence of absolute framework for deposit insurance and bank failure resolution in the country. Therefore, it was not just another decision by the Federal Government but a conscious effort to bring out stability and engender confidence in the banking system.
Question 2: What are the rationale for the establishment of NDIC, are there compelling reasons to do so?
At the time of its establishment, there was the inevitable need to put in place a framework and an institution that would offer an additional layer of protection to depositors and to strengthen the financial system in the aftermath of the introduction of the Structural Adjustment Programme (SAP) which deregulated the economy in the direction of market-determined pricing. Furthermore, the need was also rife to invigorate government’s supervisory role over financial institutions towards avoiding a repeat of mass bank failure experienced in Nigeria between 1947 and 1954 when 21 out of the 25 indigenous banks failed in quick successions, thereby eroding public confidence in the system. The establishment of was also meant for the banking public to derive benefits of explicit DIS from other countries with such experience like USA, Canada. Government of the day was determined to protect depositors from stiff competition induced by liberalization of banking licensing in the late 1980s.
Question 3: How was it at the onset of the Corporation, Can you take us back memory lane in the light of the just concluded 25th anniversary celebration of its existence?
There was no better way to approach this question than to render glowing tribute to the founding fathers of the Corporation. The Corporation’s account of 25 years of stewardship would not be complete without recognizing the positive contributions of NDIC pioneer Chairman of the Board of Directors and the then Governor of the CBN, late Alh. Abdulkadir Ahmed of blessed memory under whose leadership the Corporation was established with a clear mandate and strong foundation. Recall the Corporation’s pioneer MD/CEO, Mr. John Uthoriah Ebhodaghe, also of blessed memory, who was not only the first staff but also served on the committee that designed the deposit insurance system Nigeria currently operates. Let also express the warm appreciation to all NDIC staff, particularly, the pioneer staff including my humble self and all the staff that are alive to witness the celebration and to the eternal memory of those who are late. The legacy of NDIC left behind had become not only the leader in Africa but also the envy of other countries. To manage, sustain and consolidate on the gains of successful achievements has also been a very challenging and motivating venture.
Question 4: Can you enumerate the core mandate of the Corporation in the light of its importance to the banking public and banking system?
The core mandate of the NDIC as explicit deposit insurance are deposit guarantee, banking supervision, failure resolution and bank liquidation. The NDIC serves as a lifeline to Depositors through the Deposit Guarantee scheme. The NDIC deposit guarantee payment to depositors up to the maximum insured limit in accordance with its statutory mandate in the event of failure of an insured financial institution. This distinct role allows the NDIC to continue to discharge its mandate and bolster the confidence of depositors in the banking system.
From its initial guarantee of N50,000 per depositor of DMBs at inception, the maximum deposit insurance coverage was increased to N200,000 in 2006 and N500,000 in 2010. As for the MFBs and PMBs from N100,000 in 2006, the coverage level was increased to N200,000 in 2010. At the moment, the Corporation provides deposit insurance cover to the all eligible CBN licensed 24 deposit money banks (DMBs), 880 microfinance banks (MFBs), 77 primary mortgage banks (PMBs) and one non-interest bank (NIB) operating in the country.
The Corporation has also considered the need for a pass-though deposit insurance to protect individual subscribers under the mobile payment services. The step was taken to further engender confidence of the public in the products of the 24 mobile money operators (MMOs) recently licenced by the CBN. The roll-out of the regulatory framework for the mobile payment services being finalized. This was part of a designed project aimed at meeting the expectation of emerging challenges Nigerian payment system as well as promoting financial inclusion.
Question 5: Can you further tell us about the banking supervisory role of NDIC in the view of its importance to the continued relevance of this function to its mandate as an explicit deposit insurer in banking system?
The NDIC as the third pillar of the financial safety-net. It collaborates with the CBN to conduct risk based banking supervision in line with global best practice. It also protect depositors and assist to promote an effective and efficient payment system by encouraging healthy competition and innovation among the insured deposit taking financial institutions through off-site and on-site supervision.
The banking supervision has migrated from compliance based framework to the risk-based supervision framework which was introduced to identify most critical areas of banking operations on an on-going basis which has now encouraged banks to adopt prudent risk management practices. This tool enables the CBN and NDIC to effectively evaluate the all areas of risks inherent in activities of banks with much focus on the critical areas while evaluating the various risk management models deployed to achieve their business plans.
The NDIC has developed frameworks for Early Warning Signals (EWS), as well as the identification and measurement of Systemically Important Banks (SIBs) whose failure could trigger systemic crisis in the economy.
Question 6: The Corporation has been described in many adjectives as sympathetic undertaker or liquidator and distressed merchant. Can you explain why any could justify any of these names for the Corporation?
The Corporation mean different thing to diverse people in line with its mandate as deposit insurer, banking supervisor, distress resolution or as bank liquidator. As it continues to guarantee deposits in all banking institutions, it has adopted various failure mechanism options to resolve bank failures in the 48 DMBs, 186 MFBs and 25 PMBs that had failed in the past 26 years. The resolutions options varied based on the peculiarity of the problems of the insured banking institutions. They ranged from Open Bank Assistance to Deposit Pay-out, Purchase and Assumption, and Bridge Bank which was the latest option adopted in August 2011 to save over 3.7 million depositors and 6,600 jobs of erstwhile AfriBank, Bank PHB and Spring Bank now bridged to become Mainstreet Bank, Keystone Bank and Enterprise Bank respectively.
The Corporation in providing financial assistance to PMBs and MFBs developed an intervention framework being fine tuned in 2014 with a sum of N16 billion to address short term liquidity challenges to eligible PMBs and MFBs with a view to ring-fencing the banks and protecting depositors’ funds.
Question 7: Can you tell us how the Corporation has been able to pay depositors of all failed banks as at December 2014?
As at 31st December 2014, the NDIC had paid the sum of N6.825 billion to 528,277 insured depositors of 48 DMBs whose operating licences were revoked. In addition, a cumulative sum of N93.65 billion had been paid as liquidation dividend to 250,497 depositors as at December 31, 2014. In the same vein, 80,059 verified depositors of 186 MFBs in-liquidation had been paid a cumulative amount of N2.8 billion for the same period following the revocation of the operating licenses in 2010 and 2003. Payment is on going to the depositors of 25 PMBs closed in 2014.
To further enhance total pay-out to all insured depositors of banks in-liquidation, NDIC had launched a novel and aggressive initiative called “Depositor Tracer” toward reaching depositors with unclaimed deposits irrespective of location. Similarly, the Corporation introduced the use of 10 agent banks to ensure that the process of deposit pay-out is further eased and sustained for longer periods for claimants who could not present themselves for payment during verification and payments at premises of closed banks. The Corporation had also appointed Debt Recovery Agents to enhance the recovery of debts owed to banks in-liquidation with 91 accounts of the DMBs assigned to 60 debt recovery agents and 81 accounts of the closed MFBs assigned to 46 debt recovery agents.
Question 8: In view of the prevalence failures in the MFBs and PMBs sub-sector across the country, can you tell us how the Corporation is set to address the situation in order to promote stability and engender confidence of depositors?
The failure of in this sub-sector is worrisome however, the NDIC had accorded priority attention to capacity building for operators of microfinance and primary mortgage banks sub-sectors. In collaboration with the CBN, the Corporation established a microfinance certification programme for operators, non-executive directors and supervisors of MFBs in Nigeria which main objective is to enhance knowledge base and impart microfinance skills and competencies on a sustainable basis in the fledgling sub-sector. With the programme, the NDIC and CBN had gradually been creating a critical mass of knowledgeable and skilled operators required to develop and drive the nascent sub-sector towards the achievement of the policy objectives of expanding access to finance, empowerment of the poor and the low-income groups, employment generation and economic development.
A nationwide sensitization workshop was also sponsored by the Corporation for all MFB/PMB operators towards providing adequate capacity building on sound banking practices.
Question 9: The Corporation has been involved in many advocacy and sensitization campaigns to foster financial education, consumer protection and financial inclusion. to what extent has been the NDIC involvement?
The NDIC, being one of the major stakeholders in the Nigerian financial system and in collaboration with the CBN has taken the various steps to promote financial literacy, consumer protection and financial inclusion to protect consumers of financial services in Nigeria. For instance, the extension of and upward review of insured sum from N100,000 to N200,000 as deposit insurance coverage to Microfinance banks (MFBs), primary mortgage banks (PMBs) and non-interest banks in the system.
Also, efforts are at advanced stage to extend “Pass Through” deposit insurance coverage to mobile money subscribers in order to boost public confidence in the sub-sector and promoting financial inclusion in the country.
- The NDIC recognizes the importance of financial literacy in achieving Financial Inclusion. The aim was to educate Nigerian and banking public to improve their understanding of financial products, develop their skills and confidence to become more aware of financial risks and opportunities. Consequently, the NDIC in 2011 conducted a study to assess the level of financial literacy in the country and to identify specific areas that might require prompt and decisive action. This level of progress was assessed in 2013 survey.
- Created Consumer protection units in operations division of the Corporation to attend to consumer petitions and complaints.
- The NDIC embarked on intensive public awareness campaign in major Nigerian languages with jingles and depositors information messages.
- Production and circulation of publications such as Books, Annual Report and Statement of Accounts and NDIC Quarterly Journal as well as Pamphlets/ Leaflets to all key stakeholders of financial services industry.
- Established toll-free 24-Hour Help Desk as part of the consumer protection strategy to address concerns of stakeholders.
- This is also supported by a robust and user friendly website. To further enhance its public awareness drive, the Corporation had redesigned its website: www.ndic.gov.ng which has been made more robust and user friendly with the adoption of social media platforms including Facebook, Twitter, Instagram and YouTube.
- Participation in road shows as well as in major International Trade Fairs holding in Lagos, Kaduna, Enugu and Port Harcourt during which people are enlightened on Financial Inclusion.
Question 10: What role is NDIC playing in the drive to adopt Sustainable banking initiatives and to what extent has been the Corporation’s involvement?
The Sustainable banking practice was the initiative of the Bankers Committee spearheaded by the CBN. The NDIC has been supporting the effort of the CBN on “Sustainable Banking Policy”. The Sustainable banking initiative was about the integration of social and environmental considerations in banks’ operation, services, procedures and strategies. The Corporation has a Desk and Committee under the office of MD/CE. As a major stakeholder in the financial services industry, the NDIC had commenced the implementation of Nigeria Sustainable Banking Principles (NSBP) through organising retreats to sensitise the Board members and management on Sustainable Banking.
Question 11: What is NDIC doing to deepen the understanding of its NDIC Mandate and Activities by its diverse stakeholders and even to meet their expectations?
It is interesting to note that Public Awareness has been a challenge of most Deposit Insurance Scheme (DIS). The ability to communicate the benefits and limitations of DIS as against the practice in conventional insurance is one the challenges facing the Corporation. The NDIC is not unaware of this challenge posed by lack of adequate public awareness on its mandate and activities through a standing Committee working with the Communication and Public Affairs Unit.
The Corporation had stepped up aggressive public awareness campaign on the benefits and limitations of the deposit insurance scheme as well as communicating its activities like deposit pay-out, increase in coverage levels, appointment of agent banks, debt recovery agents and payment of liquidation dividends amongst others through a multi-media platform.
- Television & Radio Jingles : Some of the public awareness initiatives already adopted included regular media production and transmission of weekly documentary: “NDIC Calling” on the network of NTA, AIT and Channels Television, production and transmission of depositor protection awareness jingles in major local Languages (Hausa, Yoruba, Igbo and Pidgin English) on national and local television/radio stations
- Circulation of NDIC research publications among stakeholders and the general public, distribution of flyers and pamphlets on the mandates of the Corporation. Other initiatives included school and sports programme sponsorships.
- Participation in major international trade fairs in the country, Stakeholders forum, Town Hall meeting and Sensitization of NYSC and other stakeholders.
- Partnership with the media through the annual NDIC Workshop for Business Editors and Members of the Finance Correspondents Association of Nigeria (FICAN), Editors Forum.
Partnership with professional bodies like ICAN, CIBN, NIM, NBA as well as non professional organizations like the coalition of civil societies.
Question 12: NDIC went to town across the country to mark 25th anniversary or to rebrand which is more appropriate in this context to the understanding of stakeholders?
NDIC Rebranding project was different from 25th anniversary celebration. However, both met at one point in 2015. Having been in operation for about 25 years, the Board of the NDIC approved a rebranding project in 2012 to reposition the Corporation towards the effective discharge of its mandate. The rebranding was a deliberate strategy to provide a distinct identity in the minds of all stakeholders through a new strap line and slogan on its new logo: “Protecting your bank deposits”. A set of new core values of Honesty, Respect & Fairness, Discipline, Professionalism & Teamwork and Passion were also adopted. The rebranding strategy was meant to improve operational visibility and enhance quality service delivery by the Corporation towards achieving its vision of being among the leading deposit insurers in the world.
Question 13: Can you please clear the air on the issue going round in town that the NDIC is struggling to usurp the powers of CBN to license, revoke and regulate banks in Nigeria by seeking amendments of its extant law to that effect ?
The NDIC has no intention to compete with CBN in the area of licensing and revocation of banking license as well as in regulation of banking institutions. The Corporation has been playing a complimentary role to the CBN in many areas particularly in the banking supervision and distress resolution in the last 26 years. However, the banking supervision and failure resolution functions which has been part of its core function of the Corporation cannot be in doubt after 26 years. The core mandate as explicit DIS has been performed creditably well by way of continuous discharge its mandate effectively. The Corporation merely seek amendment to enhance its operational performance by ensuring that it has powers to pay depositors after a reasonable time between 30 – 90days after any bank closes its premises to depositors whether the license is revoked or where owners have gone to court to seek injunctions, let depositors have access to the insured sum. A situation where depositors have their money trapped in failed banks without access to such funds should not be encouraged. That is the global best practice which must be allowed in Nigeria. That is the power being sought by NDIC. Cases of failed institutions without succor for depositors abound like Savannah Bank, Peak and fortune as well as many MFBs and PMBs. The amendment will enable the Corporation to discharge its core mandate in line with best practice.
The Corporation continues to seek consultation, collaboration, partnership and cooperation with the CBN as well as other members of financial stability groups and players in FSRCC.