Over 97% of depositors fully covered in event of bank failure – NDIC

The Nigeria Deposit Insurance Corporation (NDIC) said on Tuesday that over 97 percent of depositors would be fully covered by the corporation in the event of failure of any bank.

Bello Hassan, managing director/chief executive officer, Nigeria Deposit Insurance Corporation, said this at the opening session on the 2021 Finance Correspondents Association (FICAN) and business editors workshop, themed, ‘enduring extreme disruption: resilience and reinvention for banking system stability and deposit insurance’, in Gombe State.

He said the NDIC’s maximum coverage limits of N500,000.00 per depositor in commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200,000.00 per depositor in microfinance bank remain the most adequate and robust in the world.

“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,” he said.

According to him, 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, he said, successfully reviewed upward the coverage limits from N50,000 at inception in 1989 to N200,000 in 2006 and N500,000 in 2010.

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He noted 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 percent; 97.6 percent; 97.5 percent and 97.6 percent of accounts, respectively.

What these figures entail is that only less than 3 percent 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 percent 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,” Hassan said.

NDIC managing director said 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.

He was concerned that the NDIC’s deposit insurance coverage limits has always been misunderstood by stakeholders, adding that 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.