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NDIC raises deposit insurance coverage for banks depositors to N5m, MFBs N2m 

NDIC Head Office Building Abuja

The Nigeria Deposit Insurance Corporation (NDIC) on Thursday raised the maximum deposit Insurance coverage for depositors of banks by 900 per cent to N5 million.

The increase of the maximum deposit insurance coverage from N500,000 to N5,000,000 would provide full coverage of 98.98 per cent of the total depositors compared with the current cover of 89.20 per cent.

“In terms of the value of deposit covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37 percent compared with the current cover of 6.31 percent of total value of deposits,” Bello Hassan, managing director/CEO, NDIC said in the statement.

For Microfinance Banks (MFBs), the NDIC said the increase of the maximum deposit insurance coverage from N200,000 to N2,000,000, would provide full coverage of 99.27 per cent of the total depositors compared with the current level of 98.76 per cent and would increase the value of deposits covered by deposit insurance to 34.43 per cent compared with 14.38 per cent of total value of deposit.

According to the NDIC increase of the maximum deposit insurance coverage for Primary Mortgage Banks (PMBs) from N500,000 to N2,000,000 would provide full coverage of 99.34 per cent of the total depositors compared with the current 97.98 per cent and would increase the value of deposits covered by deposit insurance to 21.04 per cent compared with 10.77 per cent of total value of the deposit, currently covered.

Payment Service Banks (PSBs): The increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 would provide full coverage of 99.99 per cent of the total number of depositors and would increase the value of deposits covered by deposit insurance to 43.10 per cent of the total value deposits from the current cover of 40.60 per cent.

The NDIC also increased the maximum deposit insurance coverage for subscribers of Mobile Money Operators by 900 per cent. The increase of the maximum Pass-through deposit insurance coverage from N500,000 to N5,000,000 per subscriber per MMO is the applicable coverage level for depositors of DMBs.

“I must emphasise that, the revised deposit insurance coverage has balanced the NDIC’s goals of deposit protection and financial system stability with incentives for depositors to practice market discipline and prevent banks from unnecessary risk-taking and moral hazard. Consideration was given to ensure that the coverage was limited but adequate enough to protect a large number of depositors and credible  enough to prevent the destabilizing effect of bank runs,” Hassan said.

He explained that the adoption of the revised maximum deposit insurance coverage is supported by the Corporation’s current funding, represented by the balances in the various Deposit Insurance Funds (DIFs), expected annual premium collection, enhanced supervision that would reduce the likelihood of bank failures, effective bank resolution frameworks and other funding arrangements provided by the NDIC Act No. 33 of 2023.

“These adjustments to the maximum deposit insurance coverage reflect our dedication to adapt and evolve in response to the changing landscape of the financial industry, and we remain steadfast in our pursuit of a secure and resilient banking environment for all,” he said.

The NDIC’s mandate of deposit guarantee is a critical component of depositors’ protection, as it guarantees the payment of deposits up to a maximum set limit in the event of bank failure. The deposit guarantee covers depositors of all deposit-taking financial institutions licensed by the Central Bank of Nigeria, which includes Deposit Money Banks (DMBs), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), Non-Interest Banks (NIBs), Payment Service Banks (PSBs) and subscribers of Mobile Money Operators. The maximum deposit insurance coverage is determined through periodic research-based studies, to ensure its adequacy and credibility. Various factors considered in setting the coverage level are; deposit distribution, impact of inflation, per capita GDP, exchange rate and other statistical models, among others.