By Kayode Tokede and Oduola Funmi
The Nigerian Deposit Insurance Corporation (NDIC) in the last 30 years has contributed to the nation economy through building customers confidence via sustained increase in deposit.
The corporations with other government agencies have enhanced the banking sector framework, which has translated into making Nigerian banks ranked world’s 500 most valuable and strongest banking brands.
NDIC under the leadership of, Umaru Ibrahim has witnessed tread for failed resolution of banks which has saved thousands of job, enable banks to grant loans to real sector and support government in key projects needed for the nation’s economy to thrive.
NDIC that was established in March 1989 following the promulgation of Decree No. 22 of 1988, now replaced with NDIC Act 16 of 2006.
The public policy objectives of the NDIC are to contribute to financial system stability as well as to protect small and less financially sophisticated depositors by providing an orderly means of resolution and compensation in the unlikely event of failure of their insured financial institutions.
The Corporation was established to provide a further layer of protection to depositors and complement the role of prudent bank management as well as the Central Bank of Nigeria (CBN) supervisory activities in ensuring a safe and sound banking system.
In the past 30 years, NDIC has exhibited a strong determination to maintain a high level of professionalism and excellence in its operations.
The Corporation had gone through a series of structural and operational reforms necessary to align its activities with global best practices and also give the right impetus to the realisation of its mandate. With the reforms, the Corporation has been able to institute Systems, Processes and Procedures that makes it operationally ready to effectively discharge its mandate.
To build a robust skilled Human Resource Base to deliver the Corporation’s mandate, the NDIC Academy was established and commissioned in June 2013.
The NDIC’s Academy, was recently accredited as a Training hub for the financial services industry by the Council of the Chartered Institute of Bankers of Nigeria (CIBN) after a rigorous accreditation process. By that certification, the Academy is poised to fulfil the goal of serving as a ‘’Centre of Excellence’’ on DIS for sister Agencies in Africa.
In the past 30 years, the Corporation adopted several innovations to enhance internal control and strengthen its processes and procedures. They include sound Risk Management Framework leading to the establishment of Enterprise Risk Management Department, adoption of Sustainable Banking Principles in its operations, Zero-Based budgeting and many other operational systems in line with International best practices.
In 2011, the Corporation articulated a Strategic Plan (2011 – 2015), now reviewed and replaced with 2016 – 2020 Strategic Plan. The 5-year plan is designed in line with the Balanced Scorecard Performance Management System aimed at achieving its mandate through four key perspectives, namely: Stakeholders’ Satisfaction, Process Improvement, Financial Planning and Organisational Learning and Growth.
The discharge of the NDIC’s mandate has been within the context of this articulated plan, which is based on four thrusts of Operational Readiness; a Culture of Continuous Performance Management; Strategic Partnering and Collaboration, and Promoting Public Confidence on Deposit Insurance System (DIS). The Strategic Plan ultimately guides the setting of corporate objectives and the allocation of resources in the Corporation.
In 2017, the Corporation was awarded the best performing Ministerial SERVICOM Unit (MSU) in the country, following an assessment of its public service delivery by SERVICOM Office in the Presidency.
The rejuvenated system and procedure led to three best-practice standards awarded to the NDIC by the British Standards Institution (BSI) in IT Business: IT Service Management System (ISO 20000), IT Security Management (ISO 2701) and Business Continuity Management (ISO2301) in 2018. NDIC thus became the first public institution in the country to be certified with all three ISO certifications simultaneously.
The NDIC has done a lot in the areas of promoting financial literacy and consumers protection in the system. For example, the NDIC has published several books including two story books (“The Little Piggy” for Nursery and Primary schools and “The Money Tree” for junior secondary schools). The NDIC adopted the “Catch Them Young” approach in Financial Education to instil the right values, attitudes and perceptions towards financial management in children and youth.
Annually, the Corporation Sponsors Capacity Building for PMBs and MfBs Operators in areas of “Moveable Collaterals”, Enterprise Risk Management as well as Assets & Liabilities Management (ALM).
The NDIC is involved in several International Exchange and Cooperation Activities, geared towards effective experience-sharing and capacity building with Local and International partners, since its establishment. The Corporation is a co-founder of the esteemed International Association of Deposit Insurers (IADI) and serves as the current Chair of IADI’s Africa Regional Committee (ARC). The NDIC participates at several IADI Executive Council (EXCO) Meetings and Conferences as well as provides Technical Assistance to other African deposit insurance agencies. A recent commendable event is the hosting of the 2018 IADI-Africa Regional Committee (ARC) Technical Workshop by the NDIC. Over the years, the Corporation confronted and successfully resolved many challenges. Such challenges include lack of enforcement powers; protracted litigation initiated by owners of closed banks; recovery of debts owed failed banks, inadequate public awareness, amongst others. Our proposed solutions to these are contained in our proposed amendment to the NDIC Act, 2006. Also, NDIC is to provide the right impetus that drives its philosophy and operations, the Corporation adopted a propelling Vision for itself: “To be the best deposit insurer in the world by 2020”; and a lucid Mission: “To protect depositors and contribute to financial system stability 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”.
It was designed as a risk-minimiser with the mandate of Deposit Guarantee, Banking Supervision, Distress Resolution and Bank Liquidation. The Corporation had in the last 30 years achieved some milestones in the discharge of its mandate to the satisfaction of its stakeholders. It is in the light of this that I present the Corporation’s scorecard on its mandate and other achievements in last three decades.
Other major achievement of NDIC in 30 years
Since its inception, the Corporation has successfully responded to economic realities and yearnings of depositors of banks, others by periodically increasing the Maximum DIS to enhance the confidence of the public in the Nigerian financial system. On average, this is done every five years in line with Global best practice.
The corporation has saved N1.7trillion depositors fund from different failed banks across the country which has continued to build on banks customers’ confidence.
Asides saving N1.7trillion depositors’ money, the Corporation also saved 12,677 jobs which could have been lost in the process.
The NDIC guarantees payment of deposits up to a maximum limit in accordance with its statute in the event of failure of an insured financial institution.
The DIS covers all deposit-taking financial institutions licensed by the CBN which include Deposit Money Banks (DMBs), Microfinance Banks (MfBs), Primary Mortgage Banks (PMBs), Non-Interest Banks (NIBs) and subscribers of Mobile Money Operators (MMOs). Accordingly, the NDIC, currently provides Deposit Insurance cover to 27 DMBs, 918 MFBs, 34 PMBs and two NIBs.
The Corporation increased the maximum deposit insurance coverage twice, from N50,000.00 per depositor per deposit money bank (DMB) at inception, to N200,000.00 in 2006 and N500,000.00 in 2010. Similarly, maximum coverage per depositor of PMBs/MFBs was increased from N100,000.00 in 2006 to N200,000.00 in 2010.
Coverage per depositor per PMB had since been increased to N500,000.00 to reflect the increased deposits structure in the sub-sector and to stimulate Mortgage Savings.
To date, the NDIC has paid a cumulative sum of over N8.25 billion as insured amount to 442,999 depositors of closed DMBs; paid over N2.97 billion to 83,415 depositors of closed MfBs, and over N70.53 million was paid to 869 depositors of closed PMBs.
The Corporation is identified with ensuring that Depositors of liquidated banks suffered little loss or pain. Between 1994 to date, 53 DMBs, 325 MfBs and 51 PMBs were put under liquidation without disruption to the nation’s payment system. Otherachievements include, NDIC’s liquidation activities involved recovery of debts and realization of assets of closed banks. To date, a cumulative amount of over N29.112 billion was recovered from debtors of DMBs in-liquidation. N129.10 million was realized from debtors of failed MfBs, while that of PMBs stood at N300 million.
On realisation of assets, currently N21.502 billion was collected from the disposal of physical assets of closed DMBs, while N404.74 million and N78.17 million were realised in respect of MfBs and PMBs, respectively.
Debt collection and Assets sales culminated in the payments of over N116.258 billion as Liquidation Dividends to Depositors, Creditors and Shareholders of closed DMBs, MfBs and PMBs as at today. It is important to stress that through sustained and diligent liquidation activities, NDIC has realized assets to pay in full, deposits of the customers of 17 of the DMBs (in-liquidation). In effect, all the depositors of the 17 defunct banks who came forward to file their claims have been paid all their monies (both insured and uninsured) erstwhile trapped in those banks.
Failure Resolution by NDIC
NDIC continued in the last 30 years to demonstrate great ingenuity and sagacity. At inception in 1989, the banking system was already in distress with seven technically Insolvent state-owned banks. The experience garnered by the Corporation in those early years have proved invaluable. Depending on severity and peculiarity, NDIC in collaboration with the CBN had adopted multiple resolution options to resolve failures in the system.
The options range from Open Bank Assistance (OBA), Purchase and assumption (P & A), Bridge Bank, and reimbursement (payout) of Insured Depositors. The NDIC used Purchase and Assumption (P & A) to resolve problems of 13 banks closed by the CBN in 2006 as a result of their inability to meet the Consolidation/Recapitalization requirement of N25 billion.
The P&A option was adopted by the Corporation to resolve the problems of banks affected by the Global Financial Crisis of 2009, which manifested in poor Asset Quality and Weak Risk Management, as well as weaknesses in Corporate Governance. Furthermore, in the discharge of its statutory role under Section 39 (i) of the NDIC Act 16 of 2006 and in consultation with the CBN, the Corporation adopted the Bridge Bank mechanism to resolve the failure of three DMBs namely Afribank, Spring Bank and BankPHB in 2011. Similarly, in 2018, that mechanism was used to resolve the failure of Skye Bank Plc. Indeed, the merits of the bridge bank to the nation’s economy are numerous.
The Managing Director/Chief Executive, NDIC, Umaru Ibrahim in a statement said, “In light of the foregoing, it is gratifying that in 30 Years since its establishment, the Corporation has fulfilled the public policy objectives for which it was established.
“As the Corporation marks the milestones of the past three decades, we would like to assure Stakeholders in the banking system in particular and the economy in general of its readiness, not only to sustain the high standard recorded, but to raise its bar in line with our core values of Honesty, Respect & Fairness, Discipline,Professionalism, Teamwork and Passion.”