NDIC:.it's operations and Appraisal

1. An essential feature of a good financial system in the banking industry is the existence and
implementation of a well-developed and cleared defined set of rules, regulations, enforcement of
sanction in case of contravention. Since several developments in the Nigeria economy had
necessitated major review of the existing rules, regulations and laws. Consequently, the CBN No. 25
of 1991 (as amended) was promulgated to give CBN wider powers to handle all issues relating to
banks from licensing to liquidation.
Further development and needs to sanitize the system broughtaboutthe promulgation of CBN
1997 decree to amend the existing ones. The 1997 decree was to regulate other areas of Nigeria
financial system with CBN assuming control of banks, thus a comprehensive framework for more
effective supervision and optimal resolution of problems of distressed finance commenced in 1995. In
this regard, the CBN has been taken over the operations of some banks, revoked the licenses of
others and appointed the NDIC as a receiver and liquidator of some of these banks.
But over the years, the regulatory authorities have not performed their role creditably. They
are noteven functioning effectivelybecause enabling environmentis notprevalent.Prior to 1988 there
was no institution to insure the depositors’fund and as a resultof the accelerated expansion ofbanking
sector the need to insure depositors’ fund became more obvious. The Nigeria Deposit Insurance
Corporation was thus established by Decree 22 of June 1988 to provide insurance cover for
depositors’ fund and complement the supervisory role of CBN. Currently all institutions licensed as
banks by the CBN are covered by depositors’ protection scheme.
A committee comprising representative of banking supervisions and bank examination
department of CBN and NDIC was thereafter set up to draw up guidelines to assist banks examining
in managing financial institutions.
Deposit Insurance is a system established by the Government to protect depositors against
the loss of their insured depositsplaced with member institutionsin the event thata member institution
is unable to meet its obligations to depositors. Deposit insurance ensures that the depositor does not
lose all his/her money in the event of a bank failure. It also engenders public confidence in, and
promotes the stability of, the banking system by assuring savers of the safety of their funds. Deposit
insurance makes a bank failure an isolated event, hence it eliminates the danger that unfounded
rumours will start a contagious bank run
The NDIC -Nigeria Deposit Insurance Corporation, the independent agency of the Federal
Government of Nigeria. The purpose of the deposit insurance system (DIS) is to protect depositors
and guarantee the settlement of insured funds when a deposittaking financial institution can no longer
repay its deposits, thereby helping to maintain financial system stability. The NDIC Act No 16, 2006
(which replaced NDIC Act No 22 of 1988), established the Corporation as a body corporate with
perpetual succession and a common seal. As part of the NDIC's continuous effort to enlighten the
public

2. FUNCTIONS OF NDIC
1. Deposit guarantee
2. Bank supervision
 On-site supervisory activities of deposit money banks
 Off-site surveillance of deposit money banks (dmbs)
3. Distress resolution
4. Bank liquidation
5. Supervision of special insured institutions
INSURED INSTITUTIONS ARE ALL DEPOSIT-TAKING FINANCIAL INSTITUTIONS LICENSED BY
THE CENTRAL BANK OF NIGERIA (CBN) SUCH AS:-
1. Deposit Money Banks (DMBs);
2. Micro-finance Banks (MFBs); and
3. Primary Mortgage Banks (PMBs).
Membership is compulsory as provided under the NDIC Act No 16 of 2006.
Financial institutions not covered by the NDIC include:
Development Finance Institutions such as Bank of Industry, Federal Mortgage Bank, Nigeria
Agricultural, Cooperative and Rural Development Bank and the Infrastructure Bank Plc ,Discount
Houses, Finance Companies, Investment Firms
Current Insured Limit and Why Is It Limited to a Fixed Sum
The insured limit is currently a maximum of 500,000 for each depositor in respect of deposits held in
each insured deposit money bank and 200,000 for each depositor in Microfinance Bank (MFB) and
Primary Mortgage Institution (PMI) in same right and capacity. The amount to be reimbursed has to
be definite. Limited coverage is to minimize moral hazard through excessive risk taking by bank
management and depositors. Unlimited coverage could constitute a perverse incentive for excessive
risk-taking
NDIC APPRAISAL
Accordingly, the Corporation evolved various strategies and initiatives in achieving tremendous
success in its given mandates. In addition to the periodic targets often set in appraisal of the desired
stability in the financial sector, it usually also set out proactively through the implementation of sound
financial policies that safeguardsboth banksand its depositors.For instance,after a successful outing
the previous years, the NDIC has commenced the implementation of its second strategic plan,

3. spanning 2011 to 2015 which are carefully anchored on four strategic thrusts, namely: Operational
Readiness; Culture of Continuous Performance Management; Strategic Partnering and Collaboration,
and Promoting Public Confidence on Deposit Insurance System (DIS).
In 2011, the corporation provided deposit insurance cover to twenty-four (24) Deposit Money Banks
(DMBs), 882 Micro-Finance Banks (MFBs) and 100 Primary Mortgage Institutions (PMIs). It sustained
the coverage level set in 2010 at N500, 000 and N200, 000 for DMBs and MFBs/PMIs respectively.
With the closure of some troubled MFBs, all the insured depositors were fully reimbursed using the
new coverage level of N200, 000.00.
The Corporation Jointly with the Central Bank of Nigeria (CBN) carried out both routine Risk-Based
and risk assessment (target) examination of the 16 non-intervened banks and all the deposit money
banks respectively. Interestingly, findings of target examination revealed that as at November, eight
(8) of the banks that were bailed out in 2009 still owed N600.06 billion of the CBN intervention fund
injected into them as Tier II Capital as a result of numerous litigations by the erstwhile shareholders
which had prevented many prospective core investors from recapitalizing the bank
A major tremor in the banking industry was also averted within the year as the Corporation together
with the CBN and the Asset Management Corporation facilitated the established three bridge banks,
namely Mainstreet, Enterprise and Keystone to starve off the imminent collapses of Afri, Spring and
Platinum Habib banks respectively thus saving a total of their 577 branches, N809.4 billion deposit
liabilities 6,667 jobs and confidence of both the depositorsand creditors.Moreover, some of the banks
that were previously examined to be in bad shapes were successfully traded off through acquisition
by new core investors or merged.
The Corporation returned the seized operating licenses of Savannah and Societe Generale banks as
ordered by the courts of law, liquidated a number of solvent MFBs, traded of some liquidated PMIs,
recovered more indebted funds and commenced more paymentof insured depositsof more previously
liquidated banks
CONCLUSION: The NDIC has acted effectively and efficiently as statutory body and a key building
block in the Nigerian financial safety-net. The body has administered the deposit insurance scheme in
Nigeria, with a view to protecting depositors, promoting public confidence thereby contributing to
financial system stability in the country.
OLAYINKA FAJEMIROKUN