The Nigeria Deposit Insurance Corporation (NDIC) Thursday announced increase in the maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions with immediate effect.
The managing director/chief executive of the corporation, Mr. Bello Hassan, disclosed this at a media briefing in Abuja.
He said the NDIC’s interim management committee approved the adjustments during its 18th meeting held on April 24 and 25, 2024.
He said the maximum deposit insurance coverage for the commercial banks had been increased from N500, 000 to N5 million, to provide full coverage of 98.98 per cent of total depositors compared to the current 89.20 per cent.
In terms of the value of deposit covered, he said the revised coverage would increase the value of deposits covered by deposit insurance to 25.37 per cent compared to the current 6.31 per cent of total value of deposits.
For Microfinance Banks (MFBs) and Primary Mortgage Banks (PMBs), NDIC increased the maximum coverage from N200 thousand to N2 million. It also extends comprehensive protection to 99.27 per cent and 99.34 per cent of depositors, respectively, further bolstering financial stability.
For Payment Service Banks (PSBs), the NDIC gave similar adjustments elevating the maximum coverage from N500, 000 to N2 million, ensuring full coverage of 99.99percent of the total number of depositors and an increase in 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 for PSBs.
“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,” he said.
Emphasising the potential risk of bank runs associated with a significant volume of uninsured deposits, he highlighted research findings revealing that a substantial majority of depositors, ranging from 89.20 per cent to 99.99 per cent, benefited from full coverage under various bank categories.
Nonetheless, a considerable portion of the total deposit value remains unprotected.
The NDIC chief further said the revised deposit coverage had balanced the corporation’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.
He said 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 destabilising effect of bank runs.
According to him, the adoption of the revised maximum coverage was 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.
“I will like to reaffirm the NDIC’s unwavering commitment to protecting depositors and contributing to the stability of the financial system.
“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,” he added.
Hassan reiterated the NDIC’s steadfast dedication to safeguarding depositors and fostering financial system stability.
