March 04, (THEWILL) – The revelation by the Nigerian Deposit Insurance Corporation (NDIC) that it recently reimbursed depositors of 179 rested microfinance and four mortgage banks across the country was timely.
Coming after the Corporation said it made cumulative payments of liquidation dividends of N45.45 billion as of July 2023, which represented amounts exceeding the guaranteed sums to depositors of 20 liquidated banks, the development was reassuring.
It will address the concern hovering around the financial services industry since the naira redesign crisis which pushed bank customers’ confidence into the negative horizon, heightening fears that events of the 2008/2009 financia0l crisis were about reinventing themselves.
Obviously, the frustration that bank customers experienced in simple transactions like cash withdrawals, payments and transfers was enough to justify the doubts over the nation’s financial system stability as the quality of the bank services continued to deteriorate.
A survey by THEWILL showed that many Nigerians would prefer to keep their money at home than putting them in banks because of difficulty in making withdrawals and fear that the financial services institutions might collapse and throw depositors into losses and penury.
“Does it make any sense that you have your money in the bank, yet you cannot have access to it. The banks claim they do not have cash, the ATM facilities are down and not dispensing cash most of the time and poor network connectivity adds to the frustration. Does that not point to the coming of another era of bank collapse?” asked Edward Edigin, a customer of a new generation bank on Simbiat Abiola Street, Ikeja, Lagos. But a recent NDIC statement addressed the fears.
At the just concluded 45th Kaduna International Trade Fair where the Managing Director/CEO of NDIC, Mr Bello Hassan, announced the payment to 179 community financial service institutions, he reiterated that the corporation’s priority was the protection of depositors’ funds of licensed banks in distress.
According to Hassan, who spoke through the Deputy Director, Communications and Public Affairs, Hajiya Hawwa’u Gambo, in carrying out its statutory functions, the NDIC has introduced the Single Customer View framework to expedite payment to depositors of liquidated banks.
He added that the NDIC has enhanced its collaboration with the judiciary for speedy prosecution of failed insured banks which has resulted in resolving long-drawn cases of closed banks such as Fortune and Triumph Banks liquidation.
According to Hassan, the efforts have significantly improved the debt recovery rate, which enabled the corporation to declare 100 percent liquidation dividends to uninsured depositors of more than 20 deposit money banks.
The attention paid to the microfinance and primary mortgage banks demonstrates the Corporation’s commitment to financial inclusion which is ascertained to be a facilitator of the rural development initiative of the Nigerian government. Stepping up the supervision of these grassroots financial service institutions will boost depositors’ confidence.
This resonates in the move by the NDIC to partner with the CBN to tackle potential risks in the banking sector as disclosed by Hassan at a retreat for the national lawmakers, with the theme, ‘Deepening Deposit Insurance Knowledge for Effective Legislative Functions’.
While noting that the Nigerian banking sector had exhibited resilience despite facing economic difficulties, Hassan said that addressing such risks would be through collaboration and enhanced supervision, aiming to maintain a safe and sound banking system in Nigeria.
“NDIC is collaborating with the central bank to supervise these banks and there are a lot of measures that are being put in place to ensure that we heighten our surveillance during this period to ensure that the quality of the risk assets remains very robust.”
A major outcome is that the non-performing loan ratio of the banks is now below the maximum threshold set by the CBN which points to the role of the NDIC in ensuring financial system stability even in the midst of the economic crisis that has put pressure on bank facilities.
Alluding to the public concern over the impact of the current economic crisis on financial system stability, the chairman, Senate Committee on Banking, Insurance and other Financial Institutions, Mr Mukhial Abiru, lamented that the depreciation of the naira has had an impact on the balance sheets of banks.
He said, “We are very mindful locally here as there has been serious depreciation in the value of our currency. And of course, you know, that has an impact on the balance sheet of the banks as some of them would have grown without the kind of depreciation we have seen. To that extent, the role of the NDIC is very important”.
NDIC mandate is to protect depositors and contribute to the stability of the financial system 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.
Effective communication of achievements on this mandate to the general public is important in staving off possible sag in depositors’ confidence in the banking system.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
