NDIC
Hassan Bello, NDIC MD

By OBINNA EZUGWU

The Managing Director/Chief Executive and Executive Director of Nigeria Deposit Insurance Corporation (NDIC), Mr. Bello Hassan, has noted that the insurance coverage limit of the corporation is one of the most robust in the world, and covers up to 97 percent of deposits in Nigerian banks.

Mr. Hassan who explained that as today, the NDIC as a deposit insurer, guarantees payment of deposits up to the maximum insured sum of N500,000 to a depositor in Deposit Money Banks (DMBs) and Primary Mortgage Banks PMBs, and N200,000 to a depositor in Microfinance Banks (MFBs) in the event of failure of a participating financial institution, noted that the coverage limit is not static, but subject to periodic reviews, and has been reviewed from N50, 000 up to the current limit.

The NDIC boss explained these while delivering his welcome address on Tuesday at the ongoing 2021 NDIC/ Financial Reporters Council of Nigeria (FICAN) workshop in Gombe, with the theme “Enduring Extreme Disruption: Resilience and Reinvention for Banking System Stability and Deposit Insurance.”

Hassan emphasized that only about 3% of accounts are not completely covered within the coverage limit of the corporation.

“I will like to seize this opportunity to address the seemingly simple but knotty issue of the NDIC’s deposit insurance coverage limits that has always been misunderstood by stakeholders. The issue is so fundamental and needs to be thoroughly interrogated in the interest of all depositors to in order to sustain the Corporation’s rich legacies and the multiple ingenuous operational landmarks it was able to achieve in its over three decades of existence despite daunting challenges. I was made to understand that the issue also provoked strong reactions during some of the presentations at the workshop held in Ibadan,” he said.

“Much of the concerns are predicated on the lack of adequate understanding of the principles, rationale and realities that informed the determination of our coverage limits. It is in that respect that we urge the media through this forum to make Nigerian depositors aware that the NDIC’s maximum coverage limits of N500,000.00 per depositor per commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200,000.00 per depositor per microfinance bank remain the most adequate and robust in the world.”

Hassan noted that while there those who argue that the limit should be increased, the current level of coverage is adequate, but also subject to review from time to time.

He further explained that depositors who have more than N500,000 in their bank accounts are also covered by the corporation, but within the limit of N500,000.

“Participants at the Ibadan workshop had been very critical that the coverage limits are not only small but required an urgent upward review in order to engender stronger public confidence in the banking system. Nonetheless, I need to reiterate that, as it is today, these limits are not only adequate, they are also consistent with the extant provisions and recommendations of the International Association of Deposit Insurers (IADI) in its Core Principle for Effective Deposit Insurance System on the determination of coverage limits.

“The IADI Core Principle No. 8 on coverage limits specifically requires that the thresholds should be limited, credible with the capacity to fully cover substantial majority of bank depositors while the rest remain exposed to ensure market discipline. Deposit insurance coverage should also be consistent with the deposit insurance system’s public policy objective.
In addition, the coverage limits are not designed to be static but subject periodic reviews to ensure that they are consistent with the public policy objectives of the Deposit Insurance System. The Corporation successfully reviewed upward the coverage limits from N50,000 at inception in 1989 to N200,000 in 2006 and N500,000 in 2010.

“In the same vein, the Corporation invites you to note that in 2016, 2017, 2018 and 2019, the total number of accounts in the deposit money banks stood at 83.0 million; 99.1million; 112.0 million and 128.4 million respectively. Out of these numbers, the N500,000 coverage limit fully covered 99.4%; 97.6%; 97.5% and 97.6% of accounts, respectively. What these figures entail is that only less than 3% of accounts/depositors are not fully covered by the prevailing coverage limits. The implication of this is that in the event of failure of a bank, above 97% of depositors would be fully covered by the Corporation.

“From the foregoing statistics, it could be observed that the Corporation’s deposit insurance coverage limits are not only adequate but robust enough to engender confidence in our banking system.”