Key Takeaways
- The Nigeria Deposit Insurance Corporation (NDIC) has commenced payment of depositors of the 46 microfinance banks whose operating licences were revoked by the Central Bank of Nigeria (CBN) in July.
- Over 700,000 depositors of the defunct Heritage Bank have been reimbursed so far.
- NDIC is working with the Nigeria Inter-Bank Settlement System (NIBSS) to identify alternative accounts linked to depositors' Bank Verification Numbers (BVNs) and make payments automatically.
The NDIC, appointed provisional liquidator following the revocation, has started paying guaranteed deposits to affected customers. According to the Managing Director and Chief Executive Officer of NDIC, Mr Thompson Sunday, the corporation has started paying depositors of those banks and intends to cover all insured depositors gradually.
The affected banks were found to have inadequate assets to meet their liabilities, ceased operations without regulatory approval, stopped financial intermediation, failed to commence operations within 12 months of obtaining their licences, or failed to maintain the required minimum capital base unimpaired by losses.
Payment Process
Sunday explained that NDIC's function as liquidator would involve payment of guaranteed sums, selling the assets that are available, and realizing their investment towards paying the uninsured portion of the deposit. The corporation is now working with NIBSS to identify alternative accounts linked to depositors' BVNs and make payments automatically.
The same process had been used in the payment of verified depositors of the defunct Heritage Bank, with about 700,000 depositors reimbursed so far. Insured deposits were paid in less than four days after the bank's failure, while liquidation dividends were subsequently declared for depositors with balances above the insured limit.
Recovery of Debts and Asset Sales
NDIC is pursuing recovery of debts owed to the failed institutions and selling their assets to raise funds for depositors whose balances exceed the insured amount. Sunday disclosed that more than 98 per cent of depositors, representing over 281 million accounts across insured institutions, were fully covered by the NDIC deposit insurance scheme.
Following the revocation of the licences of Aso Savings and Union Homes Savings and Loans banks, insured depositors were paid within 72 hours, compared with the statutory 30-day requirement and the seven-day international benchmark.
Why This Matters
The prompt payment of guaranteed deposits by NDIC demonstrates the corporation's commitment to protecting depositors' interests and maintaining financial stability in the Nigerian banking system. The use of BVNs to facilitate automatic payments also highlights the importance of financial technology in enhancing the efficiency and effectiveness of deposit insurance schemes.