The Nigeria Deposit Insurance Corporation (NDIC) has effected upward review of maximum deposit insurance coverage for various categories of deposit-taking financial institutions licensed by the Central Bank of Nigeria (CBN) with immediate effect.
Accordingly, the maximum deposit insurance coverage for depositors of Deposit Money Banks (DMBs) has increased from N500,000 to N5,000,000; Microfinance Banks (MFBs) from N200,000 to N2,000,000; Primary Mortgage Banks (PMBs) from N500,000 to N2,000,000; Payment Service Banks (PSBs) from N500,000 to N2,000,000 and subscribers of Mobile Money Operators (MMOs) from N500, 000 to N5,000,000 per subscriber, aligned with DMBs’ coverage level.
The MD/CEO of NDIC, Mr. Bello Hassan, disclosed this at a press conference in Abuja.
He said the Interim Management Committee (IMC) of the Corporation approved the revised maximum deposit insurance coverage during its 18th meeting held on April 24th and 25th, 2024.
He said the decision is in line with the Corporation’s commitment to enhancing depositors’ protection, bolster public confidence, financial inclusion, and stability of the financial system.
Mr. Hassan highlighted that the last review was conducted in 2016, and had therefore become imperative to review the coverage level in line with the Principle 8 of the International Association of Deposit Insurers (IADI) Core Principles for Effective Deposit Insurance, which advised jurisdictions, to periodically review their deposit insurance coverage, to ensure that, it is credible and cover large majority of depositors to prevent risk of bank runs, but leave a substantial amount of deposits exposed to market discipline.
Consequently, the Corporation conducted a Study in 2023, to determine the adequacy of its Maximum Deposit Insurance Coverage.
In arriving at the new coverage levels, Hassan said the study, considered factors such as deposit distribution, impact of inflation, per capita GDP, and exchange rate among others, using statistical models.
He explained that the new coverage for DMBs now covers 98.98% of total depositors and 25.37% of total deposits while that of MFBs covers 99.27% of total depositors and 34.43% of total deposits.
For the PMBs, the coverage covers 99.34% of total depositors and 21.04% of total deposits while for Payment Service Banks (PSBs) 99.99% of total depositors would be covered which makes up 43.10% of total deposits.
Hassan stressed 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 stated.
On funding, the NDIC Boss disclosed 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.
While shedding light on the powers of Corporation to review the coverage level, Hassan said the revision is backed by Section 25(2) of the NDIC Act 2023, which empowers the Corporation to vary upwards the maximum amounts a depositor shall receive from the Corporation in respect of deposits of failed insured institutions.
