depositors’ reimbursement : nigeria’s experience

DEPOSITORS’ REIMBURSEMENT : NIGERIA’S EXPERIENCE

BEING A PAPER PRESENTED AT THE INTERNATIONAL ASSOCIATION OF

DEPOSIT INSURERS CONFERENCE HELD AT ARUSHA SPRINGS HOTEL, TANZANIA,

BETWEEN 29TH - 30TH JULY, 2010.

BYA. A. ADENIRAN

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CONTENT

• NDIC – Brief History• Depositors’ Reimbursement• Payment of Insured & Un-Insured Deposits• Payment of General Creditors & Shareholders• Disbursement Methods• Challenges• The Way Forward


ABOUT NIGERIA DEPOSIT INSURANCE CORPORATION {NDIC}

• Nigeria Deposit Insurance Corporation {NDIC} as an Agency of the Federal Government of Nigeria was established by NDIC Act No. 22 of 1988 (now repealed and replaced by NDIC Act No. 16 of 2006).

• VISION : “To become one of the leading Deposit Insurers in the world” • MISSION : “To protect depositors and contribute to the stability of the financial system

through effective supervision of insured institutions, provision of financial and technical assistance to eligible insured institutions, prompt payment of guaranteed sums and orderly resolution of failed insured financial institutions”.

Reasons for Establishing NDIC:• Federal Government ‘s adoption of the Structural Adjustment Programme (SAP) in 1986 which

included the deregulation of the financial sector;• Lessons from other jurisdictions with explicit DIS;• Lessons of History: Experience of prior bank failure;• Change in Government Support Policy from protecting owners of banks to protecting

depositors.• To benchmark with the best practice in the world.


DEPOSITORS’ REIMBURSEMENT• The primary mandate of the NDIC is “Prompt payment of guaranteed

sums of failed insured financial institutions”. NDIC pays the following categories of Claims:• Insured deposits (Paid from the Deposit Insurance Fund – DIF);• Un-insured deposits (Paid from recovery of Assets of Closed Banks);• General Creditors ( -Do-);• Shareholders of Banks in liquidation( -Do-).

Priority of Payment: Insured Depositors; Un-Insured Depositors; Creditors; Shareholders.


DEPOSITORS’ REIMBURSEMENT (Contd)


Payment of Insured & Un-Insured Deposits


Payments to General Creditors & Shareholders


Disbursement Methods

• Direct Payments to Insured Depositors by the Corporation’s staff. This was used during the 1998 mass liquidation of 26 banks.

• Payments of liquidation dividends to un-insured depositors through appointed Agent Banks Agency arrangement with live banks to pay liquidation dividends; 1994 - 2005.

• Purchase & Assumption (P & A) for banks closed in 2006.


Challenges Mitigating Effective Disbursement

• Movement of physical cash to remote locations (especially in Direct pay-off) with the attendant security implications;

• Poor maintenance of depositors’ records by failed banks- missing/non-availability of mandate files, signature cards, ledgers, etc.

• Poor Depositors’ response• Apathy on the part of depositors;• Lack of commitment by Agent Banks;• Poor documentation & returns by Agent Banks;


The Way Forward

The Corporation put in place the following measures to ensure efficient deposit disbursement.

• Extension of claim-filing period beyond 18 months provided by the Act;

• Advertisement, Publicity, Seminars & Conferences for public awareness;

• Introduction of e-Fass (Electronic Financial Analysis Surveillance System) to gather information from banks prior to liquidation to ensure integrity of records;

• Introduction of Depositors’ Tracers.


• Thank you for your attention

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depositors’ reimbursement : nigeria’s experience

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