NDIC – Nigeria Deposit Insurance Corporation Revamping Distressed Banks In Nigeria


As part of the reform measures taken to strengthen the supervisory sector the Nigeria deposit insurance corporation (NDIC) was established by degree No. 22 of 1985 the reinforcement because imperative given the up urge in the member of licensed banks following the adoption of the policy of economic deregulation but in addition to this there was also the long-term need to create and sustain in enabling environment that will engender safe and should banking practice against destructive runs, protecting bank deposit (especially those of small savers) and ensuring fair play amongst the comparative banks.

These cardinal consider actions were re-informed by the lesson of history of banks features in Nigeria the experience of others countries where deposit insurance schemes are being operated and there alive of the prevailing distressed financial condition of the banks in particular and other financial intermediaries in the financial sector in general.

A collaborated study of distress in the Nigeria financial sector was conducted by the corporation and the Central Bank of Nigeria (CBN) and its finding corroborated the earlier held view that distress among the Nigeria banks was precipitated by or complex set of interrelated problems that had for long afflicted the industry these include poor management capital inadequacy, poor lending etc.

Ever since its establishment the Nigeria Deposit Insurance Corporation (NDIC) has consistent with its mandate as provided in NDIC degree, continued to ensure and sound banking system the sanitization of the banking sector has remained the primary focus of the corporations activities through the adoption of appropriate failure resolute options and effective implement action of various laws promulgate by the government to stem the hide of distress in the system.



Before the advent of Nigeria Deposit Insurance Corporation many banks in Nigeria has undergo distress or had to beyond owing to regulations and fraud in banking sector, they exist no organize body that is monitoring the activities of the bank hence mismanagement and fraud because the order of the body people without solid capital base come together and form bank and this leads to distress or liquidation in the event of any slight or small shake in this capital base the above and many more bring about the formation of deposit insurance corporation.


The following objectives of this study which the researcher have designed to achieve are:

(i) To suggest possible ways of tracking.

(ii) To know how they have provided fund to the distress bank.

(iii) To described the implication of the bank failure to the economy.

(iv) To know if all the distress banks enjoys this role provided by NDIC since incentive.

(v) To know how they have helped in effect of distressed banks to the economy.



The important of Nigeria deposit Insurance Corporation unrevealing distress bank can be over empharise over distress. The important are enumerated blow NDIC insures bank deposit there by helping to promote stability safety confidence and sound banking system in Nigeria, protect corporation these actions provide by diagnosis for updating the trend in distress as well as indicating the next possible line of action in the sanitization drive. The second set of actions conceptualized and expect corrective as well as preventive of further delineation in the financial condition of the distress banks in Nigeria.



The sensitive nature of the topic made it very difficult for the researcher to obtain some vital information from banks a wind who asked that we direct all questions to bank executives stationed at their head offices as they were not competent to speak on such matters to see their executive necessitated traveling great distance this had a telling effect on financially and talk about the attendant risks involved considering the state of our high ways another constraint was that even the executive of know banks currently under liquidation refuse to admit his and so kept a lot of information from us that is as regards brief from the CBN and NDIC the most telling constraint how ever was the time, the time in our banks was very limited.





It must at out set be acknowledged that the sanitation of the banking system has been collaboratively carried out by a lost of regulatory authorities namely CBN, NDIC and the federal ministry of finance among others. How ever, distress resolution, which is the core of the revamping exercise i.e. legally a primary responsibility of the NDIC going by the amendment to its decrees.

The corporation has therefore taken a number of initiatives in this regard leading to the evolution of a co-ordinated approach for distressed resolution. In this term paper to the role of the NDIC in the revamping efforts, it is noteworthy to distinguish between some nominal or ordinary supervisory actions of the corporations of the corporation that how ever, impact of the sensitization effort and those more or less one of action refers to the normal on site examination and off-set supervisory activities of the corporation.

These actions provide the diagnosis for updating the trend in distress as well as indicating the next possible line of actions in the sanitation drive.

However, these normal supervisory activities will not be elaborated upon here to minimize digression from the focus of the presentation. The second set of action conceptualized and implemented to sanities the banking system are expectedly corrective as well as preventive of further deterioration in the financial condition of the distressed banks.



As a first step in distress management the CBN and the NDIC would hold regular discussions and consultation with the owners and management of the affected banks with a view to making them embrace healthy practices that would enhances their performance as well as take prompt and decisive action to revitalize their banks although his approach had helped in making the owner and management of most problem banks to focus greater attention on certain area of operational problems not much had been achieved in addressing the fundamental problems of under capitalization and debt recovery.



Banks that were identified to be distressed after a special examination were placed under a close supervision and restrictions through the imposition of holding actions. The aims of the holding actions were to allow the troubled banks to under take self-restricting measures as a first line of self-salvaging action and arrest further deterioration in the financial condition. This approach was anchored on the belief that given determined management and board, the declining fortunes of the problem banks guide be reversed.

Holding action imposed on distress banks required them to do the following:

(i) Stop further advertisement for deposits without prior consent of the CBN.

(ii) Take necessary step to ensure adequate internal control measures to safeguard its book record and assets.

(iii) Not grant further loans and advances until the regulatory authorities were satisfied with the banks liquidity position.

(iv) Inject further capital funds.

(v) Engage in aggressive debt recovery derive.

(vi) Embark upon possible rationalization of staff and branches as a measure of cost reduction.

In addition, each distressed bank on which the holding actions were imposed was required to furnish the CBN and the NDIC with in 30 days of being served the holding actions, dative of its strategic plan for the revitalization and effective management of the bank. Such a term around plan was expected to be creditable and to include proposals for debt recover, rationalization of costs and staff injection of additional capital training etcetera.



NDIC collaboration with the CBN extended accommodation facilities to help ten banks out of their liquidity problems in 1989. This measures recorded some success as confidence was restored within a reasonable years, the corporation was received and appraised application for liquidity support from some banks through few application of these were approved. It was later found that the problem of the bank transcended liquidity to include insolvency and hence could not be adequately resolved by the more provision of liquidity support the regulatory authorities therefore decided to directly intervene by taking over the domically distressed banks.



The NDIC ensures deposit in commercial and merchant banks and all other deposit taking financial institutions. Each insured bank must meet high standard of safety and soundness in its banking practices. Adherence of the standard is determined through regular bank examinations by the regulatory supervisory authorities the NDIC and the central bank of Nigeria, if deposit these precautions are insured bank get into financial difficult and must be closed for purpose of liquidation the NDIC is on hand promptly with cash to relieve a depositor up to the maximum of N50,000 deposit in this context means monies lodged by the general public with any insured bank or financial institution whether or not it is for safe keeping or for the purpose or earning interest or earning whether or not such monies are repayable upon demand, upon a period of notice or upon a fixed date. The NDIC protect the interest of creditor or share of a failed bank.



The federal ministry government of 15th June 1998, there is hereby established a body to be known as the Nigeria deposit insurance corporation (here after in this decree referred to as the corporation). This corporation is out to ensure bank deposits, thereby helping to promote safe and sound banking system in Nigeria protect depositor interest and further inculcate banking habit amongst Nigerians.

NDIC in an autonomous supervisory body with powers among other to examine the books and fair of ensured banks and other deposit taking financial institutions operating in Nigeria to ensure their total deposit liabilities with NDIC with the exception of insider deposit, i.e. deposit belonging to the board members and staff of the ensured bank deposits used as collateral and such other deposit board of NDIC may exempt from time to time.


The achievements so far have not been without problems, which range from delay in obtaining the necessary approval to problem associated with the implementation of the failed banks decree. However, with the amendment of the corporations enabling laws, the NDIC now has power to prompt interview and distress institutions in a manner that is objective and transparent. Also the introduction of additional to tribunals under the failed bank’s decree will has the process of prosecution under the decree.