Nigeria Deposit Insurance Corporation (NDIC)

The CBN notably increased the Monetary Policy Rate (MPR) by 150 basis points to 26.25% in Q2 2024 as a direct measure to counter persistent inflationary pressures in Nigeria. Concurrently, the CBN revised key lending policies, reducing the Loan-to-Deposit Ratio (LDR) by 15 percentage points to 50% and prohibiting most foreign-currency-denominated collaterals for Naira loans, mandating existing non-compliant loans to be resolved within 90 days. Furthermore, the Central Bank extended the suspension of cash deposit processing fees until September 30, 2024, requiring all financial institutions to accept cash deposits without charges, and introduced a Risk-Based Cybersecurity Framework for DMBs and PSBs with a compliance deadline of July 31, 2024.

The NDIC in Q1 2024 advanced its corporate strategy by finalizing the Integrated Management System Framework, submitting comprehensive reform reports to the Bureau of Public Service Reforms, and automating its 24-Hour Toll-Free Help Desk for enhanced public service. Operationally, the Corporation paid N936.05 million to insured depositors and N40.79 million to uninsured depositors of DMBs, in addition to N89.87 million and N37.86 million respectively for Microfinance Banks, while achieving N294.63 million in risk asset recoveries and collecting N2.20 billion in premiums, significantly boosted by Moniepoint MFB. Despite these achievements, the NDIC continues to grapple with persistent challenges related to debt recovery, the execution of judgments, and lengthy legal proceedings.

The Nigerian Deposit Money Banks (DMBs) experienced a slight overall improvement in the fourth quarter of 2024, with total assets growing by 1.81% to N160,596.96 billion and Profit Before Tax (PBT) surging by 42.20% to N1,534.48 billion, primarily due to increased operating income and a substantial rise in recoveries. The industry's capital position strengthened as the Capital Adequacy Ratio (CAR) improved by 124 basis points to 15.25%, and asset quality positively shifted with the Impaired Credit to Total Credit ratio declining to 4.50%, below the prudential limit. However, the Average Liquidity Ratio (ALR) decreased by 613 basis points to 49.96%, indicating reduced liquidity, even as the Capital Market sector saw a significant 61.38% increase in credit exposure.

The Central Bank of Nigeria significantly tightened monetary policy in Q3 2024 by raising the Monetary Policy Rate (MPR) twice to 27.25%, adjusting the asymmetric corridor, and increasing the Cash Reserve Ratio (CRR) for Deposit Money Banks to 50% to combat elevated inflation. Concurrently, the CBN issued new circulars mandating financial institutions to transfer unclaimed balances after 10 years of dormancy to a CBN-managed trust fund and operationalized an adjusted Standing Deposit Facility (SDF) rate. Nigeria's economy grew by 3.46% in Q3 2024, boosted by the oil and service sectors, even as the Naira depreciated, public debt rose to N142.31 trillion, and inflation, though still high, showed marginal moderation.

Nigeria's economy expanded by 3.84% in Q4 2024, led by the non-oil and service sectors, amidst a rise in total public debt to N144.67 trillion and continued inflationary pressures. To address these conditions and stabilize the financial landscape, the Monetary Policy Committee increased the Monetary Policy Rate to 27.50% and maintained Cash Reserve Ratios for banks. Furthermore, new CBN circulars were issued to facilitate the voluntary disclosure and repatriation of foreign currencies, while also removing the Standing Deposit Facility from direct MPC oversight, remunerating it at MPR minus 100 basis points.

Nigeria's e-Naira, intended to enhance financial inclusion and modernize payments, faces significant adoption hurdles due to low public awareness, merchant apathy, and robust competition from existing digital payment services, as revealed by a recent survey. The digital currency's non-interest-bearing design critically constrains monetary policy flexibility and introduces risks of financial instability, including bank disintermediation and systemic runs, exacerbated by privacy concerns and transaction limits. To overcome these challenges and foster widespread adoption, the Central Bank of Nigeria must urgently re-evaluate the e-Naira's design, implement strong merchant incentives, enhance public trust through transparent communication and balanced privacy features, and strategically partner with private fintech firms.

The NDIC achieved significant operational milestones in the third quarter of 2024, disbursing over N37.7 billion to insured depositors of Heritage Bank and recovering N880.51 million from risk assets, substantially exceeding prior quarter recoveries and progressing towards its annual target. Furthermore, the Corporation enhanced its supervisory oversight by conducting risk-based examinations on 22 Payment Service Banks and 17 high-risk banks for cybersecurity, while also resolving 84.46% of customer complaints and collecting 262% of its premium target for PMB-MFB sub-sectors. Key strategic actions included initiating an ISO Surveillance Audit, commencing a review of the 2021-2025 Strategic Plan, and securing 22 additional winding-up orders for distressed financial institutions.

The NDIC report for Q4 2024 highlights significant financial recoveries and strategic implementations, including N1,292.95 million from risk assets and N4,769.52 million from physical asset sales, along with cumulative payments of N3.10 billion to insured depositors. The Corporation enhanced its operational efficiency by reviewing its 2021-2025 strategic plan, conducting IT service reviews, and implementing a new Electronic Document Management System, while also conducting extensive bank supervision and risk assessments of 22 banks. Despite progress, challenges in debt recovery, protracted legal processes, and poor documentation from failed banks persist, requiring continued enforcement of regulations and improved information management.

The Nigeria Deposit Insurance Corporation (NDIC) Quarterly Journal for SEP/DEC 2024 is dedicated to advancing knowledge in economics, finance, banking, and deposit insurance, reflecting the NDIC's mission to protect depositors and ensure financial system stability. This edition includes detailed analyses of macroeconomic developments and the financial performance of Deposit Money Banks during the third and fourth quarters of 2024, along with reports on NDIC's operational activities. Additionally, it features an in-depth article exploring the critical challenges that Central Banks' Digital Currency presents for monetary policy within Nigeria.

The NDIC Quarterly Journal, covering March-June 2024, provides a comprehensive overview of macroeconomic developments and the financial performance of deposit money banks during the first two quarters of the year. It outlines the Nigeria Deposit Insurance Corporation's mission to protect depositors and maintain financial stability through effective supervision and prompt payment, supported by core values like integrity and professionalism. Electronic submissions for future articles are encouraged via editor.quarterly@ndic.gov.ng, marking a clear channel for contributions to this finance-focused publication.

The NDIC implemented increased deposit insurance coverage for all bank categories, successfully disbursing N5 million to Heritage Bank depositors within four days of its license revocation, demonstrating enhanced depositor protection. The corporation expanded its on-site risk-based examinations for Microfinance and Primary Mortgage Banks, with a 50.94% increase in allocated banks for 2024, alongside continuous review of internal strategic plans and operating procedures to boost efficiency. While achieving substantial asset recoveries and resolving numerous customer complaints, the NDIC still faces significant operational hurdles in debt collection, judgment enforcement, and poor documentation from failed financial institutions.

In the first half of 2024, Nigerian Deposit Money Banks (DMBs) fortified their financial position, with total assets rising 8.62% to N143,324.67 billion and customer deposits growing by 10.48%, demonstrating increased funding and balance sheet expansion. The industry's asset quality improved markedly as the impaired credit ratio dropped to 3.90% (below the 5.0% prudential limit), alongside a significant 147 basis point increase in the average Capital Adequacy Ratio to 12.52%, reflecting enhanced resilience. Profitability also saw a substantial boost, with Profit Before Tax soaring by 43.71% to N1,514.90 billion, despite a 3.5% decrease in the Net Credit to Deposit ratio, indicating a shift towards greater liquidity and possibly reduced direct lending relative to deposits.

In the second quarter of 2024, the global economy demonstrated mixed performance with notable growth in emerging markets, particularly Asia, alongside slowing global disinflation, rising inflation risks, and cautious central bank approaches leading to depreciating emerging market currencies. Nigeria experienced GDP growth but confronted persistent inflation, Naira depreciation, and a recovery in external reserves. The CBN's Monetary Policy Committee responded by raising the Monetary Policy Rate to 26.25% and introduced several key regulatory changes, including restricting the use of foreign-currency denominated collaterals for Naira loans, reducing the Loan-to-Deposit Ratio to 50%, extending the suspension of cash deposit processing fees, and mandating a new Risk-Based Cybersecurity Framework for banks by July 31, 2024.

This study conclusively demonstrates that monetary policy significantly influences financial openness in Nigeria, with causality flowing unidirectionally from policy actions to market integration. The Central Bank of Nigeria is urged to balance liquidity growth with inflation control, ensuring money supply supports productive investment rather than speculative inflows, by strengthening monetary transmission and coordinating fiscal policies. Furthermore, effective management of interest rates, exchange rate stability, and initiatives to boost domestic production are crucial to maximize the benefits of financial openness while minimizing associated risks.

The Nigeria Deposit Insurance Corporation (NDIC) has released a revised framework for the Differential Premium Assessment System (DPAS) to be implemented in 2025. This framework aims to more accurately reflect the risk profiles of insured financial institutions, ensuring fairer premium assessments and encouraging effective risk management. The revised DPAS aligns with international best practices and incorporates feedback from the International Association of Deposit Insurers (IADI), enhancing the sustainability and operational effectiveness of the deposit insurance system in Nigeria.

The Nigeria Deposit Insurance Corporation (NDIC) has released its Integrated Management Systems Policy Statement, outlining its commitment to safety, depositor protection, and continuous improvement. The policy emphasizes robust Business Continuity Management (BCMS), Information Security Management System (ISMS), and Service Management System (SMS) to ensure operational resilience, information security, and exceptional service delivery. NDIC adheres to international standards like ISO 22301:2019, ISO 27001:2022, and ISO 20000:2018, focusing on risk assessment, security controls, and high-quality IT services to meet customer needs and regulatory requirements.

The Nigeria Deposit Insurance Corporation (NDIC) has implemented a Whistleblowing Policy and Procedure to provide a confidential channel for employees and stakeholders to report workplace malpractices. This policy aims to encourage the reporting of unethical or illegal conduct within the Corporation without fear of harassment or victimization. The policy outlines the procedures for reporting, investigating, and addressing reported cases, while also ensuring the protection of whistleblowers and the integrity of the process. The policy covers financial malpractices, failure to comply with regulations, health and safety concerns, unethical behavior, and other misconducts that affect the corporation and its stakeholders.

The Risk Analyst is a bi-annual newsletter from the Enterprise Risk Management Department (ERMD) of the Nigeria Deposit Insurance Corporation (NDIC). It aims to increase awareness of risk management within the corporation and provide insights to stakeholders on ERMD's activities. This edition includes an interview with Mrs. Amal L. Haruna, the Director of ERMD/CRO, and feature stories on various risk-related topics affecting the corporation such as Japa Syndrome and top risks. The newsletter also highlights the corporation's Business Continuity Management System and its recent ISO recertification.

The Nigeria Deposit Insurance Corporation (NDIC) has released its Service Charter, outlining its commitment to protecting depositors and ensuring financial stability. The charter details the NDIC's mandate, which includes deposit guarantee, bank supervision, failure resolution, and bank liquidation. It also specifies the core values and beliefs that guide NDIC employees and lists the services provided to customers, performance targets, and grievance mechanisms.

The Nigeria Deposit Insurance Corporation Act of 2023 has been enacted to replace the previous act from 2006. The new act aims to provide a framework for the Nigeria Deposit Insurance Corporation (NDIC) to protect depositors and ensure financial system stability. The act outlines the functions, powers, and governance structure of the NDIC, as well as the regulations for deposit insurance schemes and failure resolution of insured institutions. The Act establishes the NDIC as the insurer of all insurable deposit liabilities of insured institutions. The NDIC is tasked with providing orderly compensation to depositors in the event of bank failures and contributing to financial system stability. One notable aspect of the Act is the framework it provides for managing and resolving failing financial institutions. This includes measures for financial assistance, mergers and acquisitions, and the liquidation of insured institutions. It also addresses issues of criminal prosecution and outlines offenses and penalties related to financial malpractice.

The Nigeria Deposit Insurance Corporation (NDIC) has reaffirmed its commitment to the safety and wellbeing of its employees and stakeholders through its Business Continuity Management (BCM) policy. This policy ensures the resilience of critical operations against disruptions, with the aim of protecting depositors and resolving issues related to failing insured institutions. The NDIC's BCM system adheres to the ISO 22301:2019 standard, reflecting the corporation's dedication to continuous improvement and organizational requirements.

The Nigeria Deposit Insurance Corporation (NDIC) is introducing a revised framework for Differential Premium Assessment System (DPAS) in 2023. This system aims to differentiate premiums payable by insured financial institutions based on their risk profile, promoting fairness and effective risk management. The framework applies to all insured banks in Nigeria, including commercial, merchant, non-interest, microfinance, primary mortgage, and payment service banks. The revised framework seeks to incorporate changes in the Nigerian banking system and align with international best practices.

The "Thirty Years of Deposit Insurance System in Nigeria" publication celebrates the 30th anniversary of the Nigeria Deposit Insurance Corporation (NDIC) and its impact on the Nigerian financial system since 1989. The book details the evolution of deposit insurance practices, including extending coverage to non-interest banks and mobile money operators, as well as adapting risk-based and consolidated bank supervision. It emphasizes the NDIC's role in protecting depositors, contributing to financial system stability, and guiding Nigeria's bank supervisory framework to global standards. It offers insights into the NDIC's mandates, governance, legal framework, deposit insurance coverage, funding, and international collaborations. The book also aims to enhance public awareness and build trust among depositors, banks, government bodies, and other stakeholders. This work serves as a valuable reference for depositors, creditors, bankers, academics, and practitioners, addressing a gap in deposit insurance literature in Nigeria.

This paper delves into the crucial aspects of funding deposit insurance systems (DIS), drawing lessons for Nigeria from international best practices and the experiences of countries like the United States, Malaysia, the Philippines, and Japan. It highlights the significance of funding for the successful implementation of DIS and explores various issues related to funding mechanisms, sources, premium assessment, and fund management. The paper aims to provide valuable insights for policymakers and stakeholders in Nigeria's deposit insurance system, particularly in areas such as target fund ratio, premium assessment, treatment of operating surplus, funding arrangements, and investment policy. Ultimately, the goal is to enhance the effectiveness and stability of Nigeria's DIS by incorporating lessons from global practices.

This paper analyzes the funding of deposit insurance systems, focusing on lessons for Nigeria. The research reviews funding arrangements and fund management practices in other countries, such as the USA, Malaysia, the Philippines, and Japan, highlighting that most explicit deposit insurance systems use an ex-ante funding arrangement, where funds are invested in government debt. The study suggests that Nigeria can benefit from implementing a target funding ratio framework, assessing premiums more frequently, grouping insured institutions into risk buckets, and retaining operating surpluses within the deposit insurance fund. Furthermore, the paper emphasizes the importance of a well-defined investment policy for the deposit insurance fund, aligning with principles of safety, liquidity, and high returns.

The Nigeria Deposit Insurance Corporation (NDIC) has released a framework for pass-through deposit insurance for subscribers of mobile money operators (MMOs) in Nigeria. This framework aims to engender confidence in mobile payment services and promote financial inclusion, reducing the number of unbanked individuals. Key elements include deposit insurance coverage up to N500,000 per subscriber, eligibility criteria for coverage, and regulatory guidelines for MMOs to ensure the safety and security of subscribers' funds.

The NDIC (Nigeria Deposit Insurance Corporation) has developed a new Early Warning System (EWS) to better predict bank failures in Nigeria. This system aims to overcome the shortcomings of the existing eFASS EWS, which relies on financial ratios and peer group analysis. The new EWS uses statistical, econometric, and artificial intelligence techniques, incorporating both regulatory information and market data. It is forward-looking, enables stress testing, and considers the dynamic nature of the industry and the economy, aiming to provide more accurate and timely warnings of potential bank failures.

The Nigeria Deposit Insurance Corporation (NDIC) Service Charter outlines the corporation's commitment to ensuring efficiency and stability in the Nigerian banking system. It emphasizes deposit guarantee, bank supervision, distress resolution, and bank liquidation as key mandates. The charter also details the NDIC's vision, mission, core values, and services rendered to various stakeholders, including depositors, financial institutions, and the general public. The document further provides information on performance targets, grievance mechanisms, stakeholder obligations, and the NDIC's collaborative efforts with other regulatory bodies, aiming to enhance public trust and maintain a robust financial environment.

The Nigeria Deposit Insurance Corporation has released an updated Code of Conduct for Examiners to reinforce discipline and professionalism in bank examinations. This code aims to enhance ethical practices, safeguard the corporation's integrity, and promote transparency during examinations of insured financial institutions. The code provides guidelines for examiners' conduct both on-site and off-site, covering aspects like dressing, integrity, conflict of interest, and confidentiality. It also outlines disciplinary measures for any breaches of the outlined rules, ensuring adherence to international best practices.

The Nigeria Deposit Insurance Corporation (NDIC) has released guidelines for providing financial and technical assistance to insured banks and deposit-taking financial institutions in Nigeria. These guidelines aim to broaden the NDIC's statutory responsibilities and ensure consistent and equitable assistance to eligible institutions. The assistance is intended to protect depositors in cases of financial difficulties, particularly where suspension of payments threatens public confidence in the banking system. Banks seeking financial assistance should show evidence of substantial debt repayment by shareholders and a commitment to non-interbank deposit drives, among other requirements.

The Nigeria Deposit Insurance Corporation (NDIC) is celebrating 25 years of operation. Established in 1988, it has played a crucial role in protecting depositors and strengthening the financial system in Nigeria, especially after the Structural Adjustment Programme. The NDIC has increased deposit insurance coverage over the years and extended it to microfinance and mortgage banks. It has also adopted innovative resolution methods for failed banks, contributing to financial inclusion and stability, and plans to continue improving its services and public awareness.

This document, "Perspectives on the Nigerian Financial Safety-Net," is a collection of articles and papers inspired by the author Ganiyu Adewale Ogunleye's experience in practical banking operations and policy design in Nigeria. Ogunleye, a former Managing Director/Chief Executive Officer of the Nigeria Deposit Insurance Corporation (NDIC), offers insights into the Nigerian financial sector, covering topics such as bank regulation, supervision, and deposit insurance. The book addresses major developments in the Nigerian financial sector, including banking reforms, universal banking, banking consolidation, and the establishment of a deposit insurance scheme, and explores the causes of bank failures, ethics in banking, bank frauds, and regulatory challenges. The book is intended to serve as a reference for banking practitioners, students, and lecturers of banking and finance, and provide policymakers with information on developments in the banking industry.