You probably would be thinking that the funds in your account are at their all-time low, given the wave of acquisitions and legal cases by and against some banks in Nigeria. As a business owner, the stage is set. What happens when your bank ceases to exist and funds in your accounts begin a sinking journey?
The Managing Director/Chief Executive, Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim, seems to have an answer. The corporation has disclosed that the sum of N258.767 billion has been earmarked in its 2019 fiscal year for reimbursement of depositors in the unlikely event of closure of licenced banks. He made this disclosure while addressing the House of Representatives Committee on Insurance and Actuarial Matters when he appeared before it to defend the corporation’s 2019 budget estimates last Thursday. Of the total amount, a provision of N109.686 billion has been made for depositors of Deposit Money Banks (DMBs), while N149.081 billion has been set aside for depositors of Primary Mortgage Banks (PMBs) and Micro Finance Banks (MFBs).
Is The NDIC Backed By Law To Protect Your Funds In Nigerian Banks?
The Nigeria Deposit Insurance Corporation insures your funds in any banks in Nigeria from suddenly disappearing when the license of any bank is suddenly withdrawn, or to put more bluntly, the bank ceases to exist. To this effect, the Head, Communication and Public Affairs, NDIC, Mr. Mohammed Kudu Ibrahim, further disclosed that a total of N140 billion was provided for Deposit Money Banks while the sum of N300 million was set aside for microfinance and PMBs with respect to the issue of NDIC’s mandate of providing financial assistance to eligible licenced and insured banks.
Can NDIC Insure All Funds In Nigerian Banks?
Section 15 of the NDIC Act, 2006 requires all licensed banks and other financial institutions such as credit and loans companies receiving deposits from the public to insure all such deposits against liabilities. This means that every deposit made in an insured Nigerian bank is an insured deposit. The only funds not insured are the deposits of bank staff and the directors of the concerned banks (possibly to exert them to exercise some care in the management of funds at their disposal); Federal Government Treasury Bills; Bonds and notes; investment in stocks, commercial papers, mutual funds, annuities, debentures. Consequently, individuals engaged in these types of transactions would have to take out different insurance covers to protect these investments.
The recent roles played by the Nigerian Deposit Insurance Corporation, NDIC, when it saved about N949.6 billion depositors’ funds in failed Skye Bank are still fresh in mind.
Funds May Be Lost Forever After All
Your deposits in ailing banks in Nigeria may be lost completely where the bank or the financial institution in question persistently suffers from absolute lack of funds or fails to write off its bad debts, in which case the Corporation may terminate the insurance cover, and after a further period of one year, the funds in the concerned banks would no longer be insured. However, there is no insurance for deposits made in Development Finance Institutions such as Bank of Industry, Federal Mortgage Bank, Nigeria Agricultural, Cooperative and Rural Development Bank and Urban Development Bank; Discount Houses; Finance Companies; Investment Firms; Unit Trusts/Mutual Funds; Insurance Companies; Pension Fund; Administrators (PFAs).
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.