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Published On: Tue, Dec 31st, 2019

The pains and gains of a deposit insurer at 30

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By Joseph Olanrewaju

The story of the banking industry in Nigeria cannot be told without dedicating a strategic chapter to the role of the Nigeria Deposit Insurance Corporation (NDIC), whose regulatory sagacity has ensured the growth and sustainability of the nation’s financial system stability in the last 30 years. Through careful planning and diligent execution of its mandate, the agency has become a primus inter pares and a reference point on the implementation of the Deposit Insurance System (DIS) in the West African subregion and indeed the whole of Africa.
This is because the attainment of financial stability in any country is not a mean feat. That is why nations often pull their best resources together not only to generate but also safeguard the savings of their citizenry. Since no economy can thrive without the crucial role of banks, the NDIC has never spared any effort in ensuring that Nigerian banks are healthy enough to reciprocate the trust of depositors who daily entrust them with their hard-earned monetary resources.
As the corporation prepares to celebrate its 30th anniversary, one cannot but recognize the contributions of the pioneer Chairman of the Board of Directors of the Corporation and then Governor of the Central Bank of Nigeria (CBN), Alh. Abdulkadir Ahmed as well as the pioneer Managing Director/CEO, Mr. J. U. Ebhodaghe to the success story.
As a result of the great work they did, Nigeria is today privileged, not only to have a functional deposit insurance system, but one which is the numero-uno in Africa and model to many other countries around the world. Now doubt the legacy they left has been tremendously improved upon by its successive chief executives and staff.
Attaining 30 years as an organization is not a tea party and celebrating monumental achievements like the ones the corporation has attained is a direct testimony to NDIC’s doggedness, resilience, focus, integrity, courage, and its penchant for thinking out of the box. Even though there have been liquidations, mergers and acquisitions by banks since 1989, Nigerians have the NDIC to thank for the smoothness of the exercises which did not encumbered depositors’ funds, or lead to intractable meltdown and attendant consequences in the banking sector.
Following the financial gloom that pervaded the system before it was set up, the NDIC immediately took control and ensured that the trend was reversed by focusing on its primary policy objectives which are to contribute to financial system stability as well as protect small, un-informed and less financially sophisticated depositors by providing an orderly means of resolution and compensation in the event of failure of their insured financial institutions. Depositors whose funds were trapped in the distressed banks later received some percentages of their balances after a thorough audit of the banks by the NDIC.
It must be said that this sad episode has since been turned to strength by the NDIC through proactiveness and discovering and redressing potential incidence of failures in banks. Guided by is vision: “To be one of the leading deposit insurers in the world”; and a clear Mission: “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”, the corporation has continue to move from one level of success to another in uplifting Nigerian Banks and instilling the needed confidence in the financial system of the country.
The NDIC was established in 1989 as a risk-minimizer with the core mandate of deposit guarantee, banking supervision, distress resolution and bank liquidation. Added to its are its core values of honesty, respect and fairness, discipline, professionalism and teamwork, it has proved its mettle through the many knotty financial webs it has had to untangle.
On Deposit Guarantee, the NDIC provided unparalleled coverage to all deposit taking financial institutions approved by the Central Bank of Nigeria (CBN). These include Deposit Money Banks (DMBs), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), Non-Interest Banks (NIBs) and Mobile Money Operators (MMOs). At the moment, corporation extends deposit insurance cover to the 27 DMBs, 888 MFBs, 38 PMBs and one (1) NIB.
Another key achievement of the NDIC relates to the critical matter of financial inclusion. The corporation is a key stakeholder in the nation’s financial inclusion strategy as regulator of the deposit insurance system and supervisor of the nation’s banking system. The National Financial Inclusion Strategy (NFIS) which was initiated in 2012 was revised in 2018.
The major aim of the revised strategy is to reduce the proportion of financially excluded adult Nigerians from its baseline figure of 46.3% in 2010 to 20% by 2020. Consequently, the NDIC adopted various electronic and print media channels to educate the public on its activities and improve financial literacy.
Some of the channels employed in 2018 included: continued implementation of the pass-through deposit insurance; provision of financial and technical support for the introduction of deposit insurance courses in tertiary institutions and participation at major trade fairs to promote DIS and financial inclusion.
Other initiatives included: targeted financial inclusion activities for the youths such as sensitization of NYSC members; collaboration with the Chartered Institute of Bankers (CIBN) for the introduction of Deposit Insurance System (DIS), participation in World Savings Day for secondary schools nationwide and the development and critique of curriculum on financial education for primary and secondary schools nationwide.
In recognition of the fact that understanding of stakeholders and success of DIS depends on the effectiveness of the public awareness strategy, the NDIC promptly employed needed strategies in 2018 to enhance public understanding of its activities and these were: radio and television depositors awareness jingles in local languages; press conferences and briefings; monitoring and engagement through social media; and several in-house publications.
Other strategies adopted included: sponsorship of sensitization seminars and workshops such as the Annual Workshop for Business Editors and Finance Correspondents Association of Nigeria (FICAN) and sensitization seminar for the Bar and Bench, as well as 24-hour toll-free help desk to guide the depositors and address their concerns.
The NDIC has continued to spread tentacles of expertise and experience through direct involvement in several international exchange and cooperation programmes geared towards effective experience-sharing and capacity building with both local and international partners. he NDIC hosted the 2018 IADI-Africa Regional Committee Annual General Meeting (AGM) and Technical Assistance Workshop, with the theme: “Financial Stability, System Wide Crises Preparedness and Effective Bank Resolution”, in Lagos, with both local and international delegates in attendance.

Olanrewaju wrote from Lagos.

At that event, the NDIC’s Managing Director/Chief Executive, Umaru Ibrahim, FCIB, mni, was elected as the Chairman of ARC, Mohamud A. Mohamud, the Chief Executive Officer of Kenya Deposit Insurance Corporation (KDIC), was elected as the Vice Chairman. The election of the MD was in recognition of the leadership role of the agency in Africa. The NDIC also participated at several IADI Executive Council meetings and conferences held in 2018 as well as provided technical assistance to other African deposit insurance agencies. Also in 2018, the NDIC obtained full membership of the Islamic Financial Services Board (IFSB).
One feature that has remained prominent in the management style of the NDIC over the years is the corporation’s readiness to give back to society. The agency had sponsored a number of projects in educational institutions nationwide as part of its Corporate Social Responsibility (CSR) towards enhancing public awareness as well as making academic environments conducive for learning.
Last year alone, the NDIC expended the sum of ₦162.15 million on seven projects in various locations of the country. Its lofty achievements in the last 30 years notwithstanding, the NDIC has continue to project into the future by being an active financial safety net participant in the country and ensuring the effective discharge of its mandate.
Besides, it has pledged its commitment to strengthen all aspects of its supervisory functions, adopt the least cost-effective method of failure resolution and ensure prompt depositor reimbursement in the event of bank failure. To sharpen its supervisory activities, the NDIC said it would focus on enhancing its skills in the following areas: Basel III and IV, recovery and resolution plan, stress testing, fintech, among others.
The NDIC had in the last three decades recorded notable achievements in the protection of depositors and promotion of safe, sound and stable banking system in the country. There is also ample evidence that with careful formulation and adoption of appropriate policies and strategies, the Board, Management and staff are committed to ensuring that the NDIC fulfills its statutory mandate. The NDIC has equally pledged its long-term commitment to safeguard the Nigerian financial system, particularly in the area of engendering public confidence and contributing to financial system stability. Therefore, it is only fitting that an agency that has given so much to the fatherland takes time off to count its successes and taking stock of its tortuous journey by marking its 30th anniversary

Olanrewaju wrote from Lagos.

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