The plan by the Federal Government to engage the microfinance banks (Mfbs) in the implementation of its N500 billion palliative programme, brings to the fore the need for the Nigeria Deposit Insurance Corporation (NDIC) to step up its statutory mandate over the activities of the Mfbs. This will engender the confidence among the public and the MSME operators to key into the scheme to achieve the objective of this all-important scheme
In his July 31 nation-wide broadcast, President Bola Tinubu outlined some measures by the Federal Government to ameliorate the impact of the fuel subsidy removal on the lives of ordinary Nigerians who are beginning to feel the pinch. At the centre is the implementation of the N500 billion economic plan to serve as palliative to the people through various business initiatives.
He said, “Our plan is to support cultivation of 500,000 hectares of farmland and all-year-round farming practice remains on course. To be specific, N200 billion out of the N500 billion approved by the National Assembly will be disbursed as follows:
“-Our administration will invest N50 billion each to cultivate 150,000 hectares of rice and maize.
“N50 billion each will also be earmarked to cultivate 100,000 hectares of wheat and cassava.
“This expansive agricultural programme will be implemented targeting small-holder farmers and leveraging large-scale private sector players in the agric business with a strong performance record.
“In this regard, the expertise of Development Finance Institutions, commercial banks and microfinance banks will be tapped into to develop a viable and an appropriate transaction structure for all stakeholders.”
The government’s decision to stop subsidising imported fuel products and the unification of the multiple exchange rates into a single channel – the Investors’ and Exporters’ (I and E) window – has sparked off inflation as the exchange rate heightens.
As grassroots financial services institutions, the Mfbs, will definitely play a significant role in the strategic scheme that is expected to reflate the economy and promote productivity. This will happen while Nigerians await the ‘dividends’ of the palliative scheme which experts say the gestation period will be tough and rough, especially as inflation maintains an upward trend.
“We are not expecting a drop in inflation any time soon. The fuel subsidy removal is already putting additional pressure on inflation with severe impact on the economy and that will continue the year round. The devaluation of the naira has its own impact. Nigerians should brace up for the impacts of these reforms which are not going to be easy,” said Ike Chioke, GMD, Afrinvest (West Africa) Limited, in an interview with the media.
This implies that the financial services institutions involved in the implementation of the N500 billion palliative, especially the Mfbs, must go extra mile in playing their role because of the way many of them have acted in the past and had to be beaten into line by NDIC which wielded the big stick.
Deposit Insurance is a system established by the government to protect depositors against the loss of their insured deposits placed with member institutions in the event that a member institution is unable to meet its obligations to depositors. It engenders public confidence in, and promotes the stability of, the banking system by assuring savers of the safety of their funds
The Corporation supervises banks so as to protect depositors, foster monetary stability, promote an effective and efficient payment system and promote competition and innovation in the banking system. This has helped in regulating the activities of the Mfbs.
The microfinance scheme holds a lot of prospects for the Nigerian economy as it is expected to empower the low-income earners, reduce poverty, and generate employment, among others. However, among the problems faced in the microfinance industry are inadequate finance, high risk, heavy transaction cost, mounting loan losses, and low capacity and low technical skills on micro-financing. As a result of these problems, some micro finance institutions in Nigeria have collapsed. This is why the NDIC intervention is very crucial.
The role of NDIC in re-positioning Mfbs has been significant. It is on record that NDIC has been fully supportive of Mfbs since their inception. This is by ensuring that the pronounced policy objectives of the scheme are achieved and that the Mfbs are sustainable and profitable for inclusive growth and development of the economy for the benefit of all.
It is for this reason that the Corporation conducts routine examination on the Mfbs to ensure their soundness and safety, provide deposit guarantee, financial and technical assistance, financial literacy and depositor-friendly failure resolution mechanisms.
In a bid to boost confidence, the NDIC on January 1, 2008 extended deposit insurance cover to microfinance banks. The upward review of the deposit insurance limit from one hundred thousand naira as stipulated by the NDIC Act of 2006 to two hundred thousand naira in 2010 is adjudged a step in the right direction. It was another effort made by the NDIC to enhance the ability of these banks in savings mobilisation for investments, credit creation and economic development and to build public confidence in these banks.
The NDIC, in collaboration with the CBN and Chartered Institute of Bankers of Nigeria (CIBN), in 2009 commenced the Microfinance Certification Programme (MCP) for the Board, Executive and operators of Mfbs to upscale capacity building in the Mfb sub-sector. This was another mechanism of ensuring a mandatory continuing education scheme.
In keeping with its primary mandate of protecting depositors’ funds in registered financial institutions, the NDIC has paid a cumulative sum of N113.2 billion to over 440,000 insured and uninsured depositors of banks in-liquidation as of June 2022, according to the managing director/chief executive of NDIC, Mr Bello Hassan.
Bello disclosed this in his keynote address at the 19th edition of a workshop for business editors and members of the Finance Correspondents Association in Port Harcourt in November 2022.
Giving a breakdown of the payments, Bello explained that NDIC paid N11.83 billion to over 443,949 insured depositors and over N101.37 billion to uninsured depositors of all categories of banks in-liquidation.
Liquidation is the process of permanently closing a bank and its branches, selling off any assets and using the proceeds to settle as many of the bank’s remaining liabilities as possible. Typically, customer accounts are closed and checks are mailed to account holders for the amount of their insured deposits.
Mr Bello specified that the NDIC bank liquidation mandate entails reimbursement of insured and uninsured depositors, creditors, and shareholders of banks in-liquidation and that the liquidation activities, as of June 30, 2022, covered a total of 467 insured financial institutions in-liquidation, comprising of 49 deposit money banks (DMBs), 367 micro-finance banks (Mfbs), and 51 primary mortgage banks (PMBs).
The NDIC boss further stated that the establishment had provided deposit insurance coverage to a total of 981 insured financial institutions as of June 30, 2022.
He said the breakdown includes: 33 DMBs made up of 24 commercial banks, six merchant banks and three non-interest banks (NIBs) plus two non-interest windows; 882 microfinance banks; 34 primary mortgage banks; three payment service banks and 29 mobile money operators.
To ensure a faster and orderly resolution of liquidated banks, Bello said the Corporation had developed an instrument called Single Customer View (SCV) platform for micro and primary mortgage banks in order to strengthen their processes and procedure for data collections.
“In the area of scaling-up the deposit insurance framework and ensuring faster and orderly resolutions of liquidated insured institutions, in May this year, with the active participation of the relevant stakeholders, we had developed and deployed the Single Customer View (SCV) platform for the Microfinance and Primary Mortgage Banks so as to strengthen our processes and procedure for data collection.
“The platform will not only ensure availability of quality, timely and complete data to the NDIC but also eliminate delays often experienced in reimbursing depositors following revocation of institutions’ licenses by the CBN.
“The final phase of the implementation of the SCV for Deposit Money Banks (DMBs) will be achieved through the incorporation of the SCV template as part of the on-going Integrated Regulatory Solution (IRS) jointly being developed with the CBN,” he said.
In the area of consumer protection, Mr Bello said the Corporation had strengthened its complaints resolution platforms, which include the Toll-Free Help Desk, social media handles and Complaints Desks in the Bank Examination, Special Insured Institutions and Claims Resolutions Departments, as well as our Zonal Offices, to receive and process complaints from depositors.
“The role of micro-finance banks in the N500 billion palliative is very crucial. They are closer to the people but many of them have not been professional in running their businesses, that is why it is important that NDIC steps up its mandate by ensuring that the microfinance operators play their part professionally,” said Kenneth Akalonu, a Lagos-based agric processing firm operator.
About the Author
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.
