Mohammed Shosanya
The Nigeria Deposit Insurance Corporation (NDIC) on Thursday announced the approval of a 3 increase in the maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions.
Mr. Bello Hassan, Managing Director and Chief Executive of NDIC made the announcement at a press conference on the review of the maximum deposit insurance coverage level, in Abuja, saying the policy takes immediate effect.
According to Hassan, details of the adjustments are that: for the ‘Deposit Money Banks (DMBs): The increase of the maximum deposit insurance coverage from N500,000 to N5,000,000, would provide full coverage of 98.98% of the total depositors compared with the current cover of 89.20%. In terms of the value of deposit covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37% compared with the current cover of 6.31% of total value of deposits.
“ii. Microfinance Banks (MFBs): The increase of the maximum deposit insurance coverage from N200,000 to N2,000,000, would provide full coverage of 99.27% of the total depositors compared with the current level of 98.76% and would increase the value of deposits covered by deposit insurance to 34.43% compared with 14.38% of total value of deposit, currently covered.
“Primary Mortgage Banks (PMBs): The increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 would provide full coverage of 99.34% of the total depositors compared with the current 97.98% and would increase the value of deposits covered by deposit insurance to 21.04% compared with 10.77% of total value of 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% of the total number of depositors and would increase the value of deposits covered by deposit insurance to 43.10% of the total value deposits from the current cover of 40.60%.
“Subscribers of Mobile Money Operators: The increase of the maximum Pass-through deposit insurance coverage from N500,000 to N5,000,000 per subscriber per MMO as the applicable coverage level for depositors of DMBs. 4 7.0 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” he said.
He reiterated that the Corporation’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.
According to him,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.
He said the maximum deposit insurance coverage is determined through periodic research based studies, to ensure its adequacy and credibility, adding that 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.
According to him,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.
