The Nigeria Deposit Insurance Corporation, NDIC, on Tuesday, cleared the air of misunderstand of stakeholders regarding its deposit insurance coverage limits, stating that ‘the NDIC’s maximum coverage limits of N500,000.00 per depositor per commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200,000.00 per depositor per microfinance bank remain the most adequate and robust in the world.’
Managing Director, NDIC, Mr Bello Hassan, who made the disclosure at the opening ceremony of the 18th edition of the workshop for business editors and Finance Correspondents Association of Nigeria, in Gombe, described the issue as ‘simple but knotty,’ stating that it is ‘fundamental and needs to be thoroughly interrogated in the interest of all depositors in order to sustain the Corporation’s rich legacies and the multiple ingenuous operational landmarks it was able to achieve in its over three decades of existence despite daunting challenges.
While saying that the theme of the workshop, “Enduring Extreme Disruptions: Resilience and Reinvention for Banking System Stability and Deposit Insurance,” is apt, he noted that it has become expedient and highly desirable, for supervisors to come up with appropriate strategies that are required to build resilience into our financial system as we seek to provide the much-needed support to the Federal Government’s economic recovery agenda.
According to the NDIC boss, the concerns are predicated on the lack of adequate understanding of the principles, rationale and realities that informed the determination of NDIC’s coverage limits. He recalled that ‘participants at the Ibadan workshop had been very critical that the coverage limits are not only small, but required an urgent upward review in order to engender stronger public confidence in the banking system.’
The NDIC boss said: ‘Nonetheless, I need to reiterate that, as it is today, these limits are not only adequate, they are also consistent with the extant provisions and recommendations of the International Association of Deposit Insurers (IADI) in its Core Principle for Effective Deposit Insurance System on the determination of coverage limits.’
He explained that the IADI Core Principle No. 8 on coverage limits specifically requires that the thresholds should be limited, credible with the capacity to fully cover substantial majority of bank depositors while the rest remain exposed to ensure market discipline, stating that deposit insurance coverage should also be consistent with the deposit insurance system’s public policy objective.
According to him, coverage limits are not designed to be static but subject to periodic reviews to ensure that they are consistent with the public policy objectives of the Deposit Insurance System.
‘The Corporation successfully reviewed upward the coverage limits from N50,000 at inception in 1989 to N200,000 in 2006 and N500,000 in 2010.
‘In the same vein, the Corporation invites you to note that in 2016, 2017, 2018 and 2019, the total number of accounts in the deposit money banks stood at 83.0 million; 99.1million; 112.0 million and 128.4 million respectively.
‘Out of these numbers, the N500,000 coverage limit fully covered 99.4%; 97.6%; 97.5% and 97.6% of accounts, respectively. What these figures entail is that only less than 3% of accounts/depositors are not fully covered by the prevailing coverage limits,’ adding that the implication of this is that in the event of failure of a bank, above 97% of depositors would be fully covered by the Corporation.
‘From the foregoing statistics, it could be observed that the Corporation’s deposit insurance coverage limits are not only adequate but robust enough to engender confidence in our banking system.
The Director General noted that it is imperative to discuss the historical and operational perspective in order to enable sensitizing stakeholders with a view to correcting the misconception around the NDIC coverage limits.
He assured that the NDIC under the current management will continue to reposition operations in response to the challenges posed by the COVID-19 pandemic disruptions.
