By Bashir Ibrahim Hassan
Emphasis on innovation and human resource development has been the hallmark of the two and half decades of the founding of the Nigeria Deposit Insurance Corporation (NDIC). Also, remarkably, the diversity of NDIC’s organisational structure has faithfully reflected the federal character. It has worked in harmonious partnership with Central Bank of Nigeria (CBN) and Ministry of Finance since its establishment, a partnership that has become more consolidated in recent years.
The NDIC was established on March 17, 1989. It has withered of the many financial storms that beset not only the country but indeed the world in the last 25 years largely due to the trained and highly motivated staff and innovative services, founded on sound policies and effective leadership in the last decade. Looking back to March 1989 when the NDIC commenced its operations, many of the odd 100 banks or so in the country had gone through one form of distress or the other – indeed, many had gone out of business! The Structural Adjustment Programme (SAP) introduced in the country in 1986 opened a flood gate of new banks. But it soon became clear that the phenomenal increase in the number of banks from 40 in 1986 to 120 within the span of six years was clearly unsustainable as the nation neither had adequate manpower to serve those growing banks nor requisite knowledge of risk management to ensure strict good governance regimes within the banking industry. That was the first challenge of a fledgling corporation.
Luckily NDIC had other country experiences to learn from. Czechoslovakia, for example, which was the first country to establish a nation-wide deposit scheme in 1924, used the scheme to revitalize the country’s banking system after ravages of the First World War. Similarly, the United States of America (USA), which established the Federal Deposit Insurance Corporation (FDIC) in 1933, did so in response to a banking collapse and panic.
Andas was the case with these countries, the deposit insurance option came to the rescue in Nigeria, with the establishment of NDIC, as a risk minimiser with the broad mandate of deposit guarantee, bank supervision, as well as provides mechanism for orderly resolution of failure, including bank liquidation. Its history in the past quarter of a century has been to realise this mandate in the most professional manner. From its humble beginning today the corporation operate from 10 branches across the country with a staff strength of 1141.
Some of the measures taken by our own NDIC back in the 1990s to save many collapsing banks include moral suasion; continuous interaction with bank managers/owners; imposition of Holding Actions on distressed banks to restrict operations and encourage self-restructuring; and rendering of Financial Assistance to banks. In 1989 alone, for example, NDIC in collaboration with the CBN granted facilities to the tune of N2.3 billion to ten banks with serious liquidity problems.
Takeover of Management and Control was another set of measures adopted by NDIC. Between 1991 and 1996 24 distressed banks were taken over by NDIC. By the turn of the century acquisition and restructuring saw seven (7) distressed banks handed over to new investors in 1999 and 2000. These different measures adopted were the manifestation of the innovative grounding of the NDIC. And the most innovative period was the last five years, when its current management team came on board, led by Mr. Umaru Ibrahim, managing director/CEO.
Most of the measures taken from 2009 to date were quite novel measures in banking failure resolution, including bail outs; bridge banking; establishment of asset Management Corporation of Nigeria (AMCON); assisted merger and acquisition and introduction of financial stability fund (FSF).