NDIC raises bank depositors  insurance coverage to N5m, MFBs N2m 

Cynthia Ezekwe

The Nigerian Deposit Insurance Corporation (NDIC) has increased the maximum deposit insurance coverage of Deposit Money Banks (DMBs) from N500,000 to N5 million,  which would provide full coverage of 98.98 per cent of the total depositors compared to the current cover of 89.20 per cent.

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.

In a statement by Hassan Bello, the managing director of NDIC, the maximum deposit insurance coverage for For Microfinance bank (MFBs), was increased from N200,000 to N2 million would provide full coverage of 99.27 per cent of the total depositors compared to 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, currently covered.

The MD said in terms of the value of deposit covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37 per cent compared with the current cover of 6.31 per cent of total value of deposits.

According to the NDIC  director, 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.

The corporation also pointed out that  the increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 for Payment Service Banks (PSBs) 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.

“Subscribers of Mobile Money Operators: The increase of the maximum Pass-through deposit insurance coverage from N500,000 to N5 million per subscriber per MMO as the applicable coverage level for depositors of DMBs,”  NDIC boss  stated.

Commenting on the revised insurance coverage, the MD said,  “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 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,” NDIC boss added.