NDIC: Consolidating achievements, projecting brighter future

Umar Ibrahim, MD NDIC
As global economic challenges continue to rage with serious impacts on the world financial system, a stable banking sector must be achieved to be sure of the much desired resolution of the impasse. Consequently, different measures and policies have been adopted by various national governments as well international cooperation to safeguard the system from total collapses.

Furthermore, national and international financial organizations and instruments are activated to initiate, implement, monitor and check possible leakages.

In Nigeria, there are several organs established by the government to create, regulate and ensure the sustenance and growth of a buoyant and vibrant stable financial system in the country. Among these is the Nigeria Deposit Insurance Corporation (NDIC), established as a risk minimizer with broad mandates that includes deposit guarantee, banking supervision, failures resolution and bank liquidation.

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 safeguards both banks and its depositors. For instance, after a successful outing the previous years, the NDIC has commenced the implementation of its second strategic plan, 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 banks.

Additionally, the Economic Confidential magazine gathered that it carried out special assignment for the Federal Ministry of Finance by reviewing the business relationships of the 24 Deposit Money Banks (DMBs) with Global Infrastructure Services Nigeria Limited; Global Steel Holding Limited; Ajaokuta Steel Co. Ltd; Delta Steel Co. Ltd and other related entities/subsidiaries in order to ascertain the extent of exposure of the banks to the companies. 
The Corporation successfully resolved through special investigations of complaints/petitions received from bank customers and other stakeholders in respect of 9 out of the 24 DMBs. It examined 159 MFBs and Primary Mortgage Institutions which revealed that most of them violated the basic principles of corporate governance in several respects and that 22 of the PMIs were technically insolvent while another 16 had closed shop.  Already, the Corporation and CBN have commenced work to resolve these problems.

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 depositors and 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 payment of insured deposits of more previously liquidated banks. 

As part of its contribution to making the Financial Stability Fund, (established in 2010 and to which banks were expected to contribute 0.3% of its Assets over the next 10 years and CBN to contribute N500 billion over a 10-year period) a reality, the NDIC reviewed downward the premium payable by the banks by reducing the assessment base rate for premium computation from 50 to 40 basis points.  The application of the reduced premium took effect in 2011.
 
On the extension of Deposit Insurance System to Non-interest Bearing Banks, the Corporation during the year continued to fine-tune the developed Framework that would enable it to extend DIS to non-interest bearing financial institutions that would be licensed in due course by the CBN.  Meanwhile, the deposit insurance fund (DIF) for DMBs grew by about 17% from about N295.7 billion in 2010 to about N347.19 billion in 2011. The SIIF grew by about 39% from about N2.3 billion in 2011 to about 3.2 billion in 2011.

There was general improvement in the public awareness of activities of the Corporation in 2011 as better relationship with the media. Regular in-house publications were also used to highlight useful public information.  A 24 hour help desk was also established.  Similarly in the area of Corporate Social Responsibility, the Corporation disbursed over N150 million for execution of different educational projects under the third (3rd) phase of its project-based support scheme ranging from Computer Complexes, Lecture Rooms/Office Complexes, Multi-Purpose Halls, Provision of tables & chairs, Upgrading of ICT Facilities, to Laboratory Complexes. It also Supported sports development in six states of the Federation and the Federal Capital Territory to the tune of N42 million.

In the area of enhancement of the human Capacity, Processes and Systems, a total of 1140 staff of the Corporation benefitted from relevant local courses in 2011 as another 152 attended courses overseas. ICT development was also accorded serious attention during the year under review.

Realising the importance of international networking, the Corporation participated actively in the Africa Regional Committee of International Association of Deposit Insurers (IADI) and its world body’s programmes as well as several other international functions. It hosted 2 Regional programmes in May and December 2011.

As a major player in stability of the Nigeria’s financial sector, the NDIC should sustain all it existing activities. Furthermore, in 2012 it should consolidate on the successes recorded so far through the enhancement of the banking processes and systems.  To achieve this, further attention should be given to the staff capacity building especially in the areas of risk-based supervision, consolidated supervision, International financial reporting standards as well as communication and report writing particularly for the examiners.

In concomitant with the on-going expansion in the Corporation, its chief executive office has assured t
hat some physical projects are expected to be carried out at both the corporate headquarters and at the zonal offices. These are the commencement of work on construction of the head office annex in Abuja, Lagos, Port-Harcourt, and Yola zonal Offices.

From the achievements over the years and projections, it is clear that the Corporation is committed to remain an active component of the Nigerian financial safety-net player, particularly in the area of engendering confidence and contributing to financial system stability.

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