The Nigeria Deposit Insurance Corporation (NDIC) has clarified that the deposits of directors and staff of defunct banks are not covered by its Deposit Insurance Scheme (DIS). This announcement was made during the Financial Literacy Day Programme held in Abuja on Monday.
Tanko Yahaya, the Manager of the Communications and Public Unit at NDIC, emphasized that insider deposits, among others, are excluded from the DIS. He explained that the NDIC serves as a deposit insurer and guarantees the payment of deposits up to the maximum limit stipulated by law in the event of a failure of an insured financial institution, such as a bank.
Currently, the DIS in Nigeria covers all deposit-taking financial institutions licensed by the Central Bank of Nigeria (CBN), including Deposit Money Banks (DMBs), Non-Interest Banks (NIBs), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), Payment Service Banks (PSBs), and Mobile Money Operators (MMOs). While all types of deposits are generally covered, insider deposits, interbank placements (exempted since 2007), and deposits held as collateral for loans are excluded. The Board of NDIC may also specify additional excluded deposits from time to time.
Yahaya further addressed the issue of insider deposits, stating, "There are deposits that are not covered by the NDIC. One of them is insider deposit. If a bank folds up, why should we pay the directors of the banks? Are they not the ones that fold up the bank?"
During his presentation, Yahaya shared statistics on the financial landscape, revealing that as of June 30, 2022, Nigeria had 33 Deposit Money Banks, 882 Microfinance Banks, 34 Primary Mortgage Banks, three Payment Service Banks, and 29 Mobile Money Operators. He also highlighted the NDIC's liquidation activities, which encompassed the closure of 467 banks, including 49 DMBs, 367 MFBs, and 51 PMBs, from 1994 to June 30, 2022.
In related news, Bello Hassan, the Managing Director/Chief Executive of NDIC, disclosed that the corporation had initiated the process of selling the assets of defunct banks whose licenses were revoked by the Central Bank of Nigeria. The move aims to facilitate the recovery of funds and assets tied up in these defunct institutions.
With the clarification provided by the NDIC regarding the exclusion of insider deposits from its Deposit Insurance Scheme, it becomes essential for directors and staff of financial institutions to be aware of the limitations and regulations governing deposit protection.
