As it has become customary, the Nigeria Deposit Insurance Corporation (NDIC) held its end-of-year Editors Forum in Ikeja on the penultimate Saturday at the splendid Providence by Mantis Hotel in Ikeja GRA. The theme of the year’s event was appropriately, Strengthening Nigeria’s Financial Safety-Net: The Role of Deposit Insurance. It was an all-day event that allowed the top management of the NDIC and the high-ranking executives of the Nigerian media, comprising print, radio, and TV to interact to reflect on an impactful year. The occasion had an all-round benefit to all.
The NDIC had the opportunity to speak on its mandate, its contributions to the nation’s financial stability, and the challenges it is confronting. The NDIC would speak on topical issues in the financial services industry and highlight what successes they have chalked up within the period under review. The media executives would then ask searching questions and make commentaries where possible. In the end, everyone invited would be better informed on happenings in the NDIC.
For the NDIC, this year would be one that some defining events would characterise. The fall of the Heritage Bank from grace following the revocation of its license by the Central Bank of Nigeria (CBN) in early June brought to the fore the corporation’s critical role in safeguarding depositors’ funds and how they made a success of it. This issue became central to the day’s overall engagement with even one of the two presentations entirely based on the experience from the collapse of the Heritage Bank.
For starters, we were welcomed by the Executive Director (Operations), Mustapha M. Ibrahim, who delivered the managing director’s message giving assurances to depositors that the tragedy of a bank closing its doors is not the end of the road for their money. He assured that the NDIC would always be there to do the needful to refund what they deposited up to what the laws of the land stipulate. He dwelt a lot on what happened when Heritage Bank had to close its doors recently. He affirmed that within a few days, NDIC had put on mechanisms to pay off depositors and by the time the exercise rounded up over 98 per cent had been paid off.
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He said: “It is instructive that in the discharge of this critical role of depositor reimbursement, the corporation began the payment of the insured deposits of N5 million per depositor within a record time of four days of the bank’s closure. This was achieved using the Bank Verification Numbers (BVN) as a unique identifier to locate depositors’ alternate accounts in other banks without the need to fill out forms or visit the NDIC offices.”
We further learnt that the small percentage of the unpaid deposits are those above the N5 million threshold. The MD made more reassurances that they are taking speedy action to dispose of the assets of Heritage Bank and collect unpaid debts owed to the bank to settle what is outstanding to the depositors. To buttress that point mention was made of the adverts put up by the NDIC in prominent national dailies to sell off the assets of the Heritage Bank.
Dr Kabir Katata, the Director of Research, Policy and International Relations in his paper titled, The Path of Deposit Insurance Coverage: The Past, Present and Future, gave an overview of the path taken by the deposit insurance coverage over the three decades of NDIC’s existence. He said that as of the present over 98% of depositors in both commercial and microfinance banks are now fully insured. Depositors in commercial banks are insured under the revised coverage within the limit of N5 million, while those of the microfinance banks are up to N2 million.
The challenge faced by NDIC has never been with the larger number of depositors who have a smaller percentage of the total deposits but how to raise the funds to clear off the smaller percentage of depositors who own the larger deposits. In the long run, this is sorted out through the sale of assets and collection of debts of the defunct bank.
The second presentation of the day was by Mrs Pamela Roberts the Deputy Director of Enugu Zone, who chaperoned the Heritage Bank closure. She took us through the various stages that mammoth undertaking was successfully accomplished. What was unique about the exercise was that the claims verification and deposit payoff were carried out simultaneously with the bank’s closing activity. NDIC was said to have used the centralised information technology (IT) configuration of the bank to spool most of the data. Payment to depositors was expeditiously done online using BVN and other current technological tools. Communication between the depositors and NDIC was largely through social media where most of their concerns were addressed.
As the forum wound down questions still arose on outstanding matters relating to banks closed long ago. Readers might recall that Savannah Bank was closed in 2002 but its licence was reverted to it by the court in 2009 but is yet to open its doors to the public, thus detaining depositors’ funds within its vault. On a happier note, we learnt that the issue of Fortune Bank whose licence was withdrawn in 2006 and has been in court since then also trapping depositors’ funds has at last been resolved. The court order has been vacated and NDIC has started the process of settling the depositors.
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