The Nigeria Deposit Insurance Corporation (NDIC) was set up as a risk minimiser in Nigeria’s banking sector. Last year, the NDIC began the implementation of its second strategic plan (2011-2015). Despite the fact that Year 2011 had witnessed series of turbulence which threatened the nation’s entire financial system, the NDIC had continued to showcase its mandates in keeping its place as an active Nigerian financial safety-net player.
By Abdulwahab Isa
Mrs Laraba Atuba (not real name) was paid her husband’s entitlements three years after his death. He had worked in a federal government agency for almost 30 years before a freak domestic accident left him paralyzed from the head to toe. He died a year later because she had no money to treat him. When eventually Laraba received a cheque for N1.5 million of her late husband’s pension benefits, she paid it in an account her late husband had opened in her name in one of the distressed banks branch office in Kaduna. Six months later, the bank went under with Laraba’s savings. Anxiety soon began to take its toll on her health.
Laraba’s bank was however one of the insured banks by NDIC. That was not known to her until the day she heard an announcement by the NDIC. Laraba rushed to the nearest branch of the closed bank for verification of her deposit. Not long after, she received a cheque of N500,000 and a liquidation certificate which indicated that she would be paid the balance in no distant future. Labara smiled back home and began a long walk to happiness. Not being literate, she rechristened her youngest son “NDIC” because she thoughta that was the name of the officer who had paid her back her money.
Protecting bank depositors’ money is one of the broad mandates of NDIC. Not an easy task. Throughout last year, the Corporation gave everything it had and the result was an impressive score-card. In 2011, NDIC provided cover to 24 deposit money banks (DMBs), 882 micro-finance banks (MFBs), and 100 primary mortgage institutions (PMIs). In the same year, the NDIC in collaboration with the Central Bank of Nigeria (CBN) conducted a target examination. Those that failed the test – eight in all – got N620 billion bail outs, to enable them remain afloat. However, according to the NDIC’s target risk examination findings, the eight intervened banks “still owed N600.06 billion of the CBN bail out as at November, 2011 as a result of litigations by their erstwhile shareholder who frustrated potential core investors from bidding. Similarly, the Corporation’s routine examination of 159 microfinance banks (MFBs) and 62 primary mortgage institutions (PMIs) revealed that most of the 159 MFBs violated the basic principles of corporate governance and disregarded recommendations of previous examination reports while 22 of the 62 PMIs examined were technically insolvent and 16 of the rest had eventually closed shop.
The task of stabilising the financial system did not start and end with finding out which banks were distressed. The major task was how to revive those that if given a lifeline, would most certainly bounce back. A lifeline is a process referred to “failure resolution”. Under it, the “bridge option” was considered for three out of the eight intervened banks that failed to get core investors to acquire them. They included Afribank Plc, Bank PHB and Springbank. The financial authorities opted for the bridge option for four reasons: to safeguard total deposit liabilities amounting to N809.4 billion; protect 6,667 jobs, enhance the confidence of depositors and creditors and to prevent systemic repercussions of the failure of the banks on the entire financial system, thereby ensuring financial and macro-economic stability. The bridge option gave birth to three new banks, Mainstreet, taking over Afribank, Keystone replacing Bank PHB and Enterprise for Spring Bank. A new financial sector ‘stabiliser’, Asset Management Corporation of Nigeria (AMCON) acquired the assets and liabilities of the three erstwhile banks with an infusion of N678 billion. The transition from old to the new banks was completed on August 5, 2011.
In another milestone, the NDIC had handed over all the 104 branches of the Savannah Bank and also released the first tranche of N450 million to the bank in 2009. Another $1.029 million and balance of N460 million was also released to the bank last year. On SGBN, the CBN approved a waiver and write-off of N3.7 billion assistance as well as N25 billion, to enable the bank acquire IT equipment and payment of existing depositors subject to injection of fresh capital of not less than N12 billion by its core investors - International Energy Insurance Group. The bank is yet to respond to this offer. However, a joint CBN/NDIC committee had been working together with a team of Societe Generale Bank of Nigeria (SGBN) so that it can recommence banking operations.
A quite tricky case for the CBN and NDIC was presented by Hallmark Bank, which had been in liquidation since 2006. Its subsidiary, Hallmark Homes (Savings and Loans) which though not in liquidation was technically out of operation because it had no relationship with any other bank except the defunct Hallmark bank. With the power bestowed on NDIC as liquidator of the parent company (HHL), the Corporation had no choice than to advertise the HHL for sale. The valuation was done by Akintola Williams Deloitte on December 7, 2011 and the NDIC supervised the sale of Hallmark Homes Limited(HHL) to Centage Savings and Loans at N1.15billion the proceed of the sale were also used to pay public sector depositors. In a similar feat, the NDIC commenced the settlement of depositors of Fortune and Triumph Banks in August, 2011. Their money had been locked up in the two banks since 2006 when their licences were withdrawn.
The NDIC also made steady progress on debt recovery in 2011. The cumulative recovery for the banks in liquidation since 1994 rose from about N21.756 billion in 2010 to about N22.263 billion as at December, 2011. Similarly the sum of N8.33 million had been recovered to date in respect of the closed MFBs. That was not all, in order to fast track the debt recovery and payment of uninsured deposits, the Corporation had also packaged all outstanding but secured non-performing loans of banks in-liquidation, to the tune of N9 billion, for disposal by AMCON”.
NDIC is a brand name. A brand is as good as its packaging, meaning people get attracted to it depending on how it is presented to its various publics. In an effort to project the NDIC brand the Management of the Corporation has engaged the media in the past one year. The package included depositor protection awareness week, radio and TV jingles in Hausa, Igbo and Yoruba, as well as “NDIC Calling” a nationwide public enlightenment television programme. The Corporation also distributed numerous in-house publications and financial literacy manuals which were translated into the three (Hausa, Igbo and Yoruba) languages. New robust and interactive website www.ndic.ng.org, and a 24 – hour Help Desk which leveraged on the Corporation’s information and communication technologies (ICTs) were employed to enhance its public awareness initiatives.
The Corporation did not rest on its oars in the area of capacity building in the year under review. As many as 1,140 of its work force attended local courses in their areas of competence while 152 others were sent on overseas training programmes in areas of risk-based supervision, international financial reporting standards, risk-based audit and enterprise risk management. Similarly, in 2011, the NDIC completed its information technology disaster recovery (ITDR) blueprint. It kick started work on an information technology security system and architecture system (ITSSA) to “address identified IT vulnerabilities”. In addition, a contract had been awarded for a new web-enabled financial institutions liquidation management system, to “facilitate prompt depositor re-imbursement”.
In competitive global financial system, the NDIC cannot afford to be a lone ranger. As part of its international networking, the Corporation is a founding member of the Africa Regional Committee of the International Association of Deposit Insurers (IADI). Last year alone, the NDIC hosted two IADI regional programmes in May and December. In the same year, it participated in the IADI’s research conference held at the Bank for International Settlements, Basel, Switzerland. The three-day conference’s theme was “FINANCIAL CRISIS: THE ROLE OF DEPOSIT INSURANCE”.
To further strengthen its international networking, the Corporation entered into a technical assistance agreement with the Office of Technical Assistance (OTA) of the United States Treasury Department. That initiative gave rise to the deployment of an OTA resident technical adviser, Mr. Phillip Morris, to the NDIC to “facilitate capacity building according to the agreed terms of reference (TOR).”
As a Corporate citizen, NDIC disbursed N150 million under the third phase of its education-based support scheme in selected universities and other tertiary institutions as well as its sponsorship of sport development programmes in six states and the Federal Capital Territory (FCT), Abuja, amounting to N42 million.
Going forward, the NDIC has set out specific measurable goals. The first one is what it called “Enhancement of processes and systems” which involves a early warning system to “ensure safety and soundness of banks”, through a framework for resolving systemically important institutions (SIIF) in order to reduce the chances of bank failure, “improve on resolution regime and to minimize utilization of tax payers’ money”.
In 2012, for instance, the NDIC also expects to develop a framework for integrated deposit insurance system to pave way for an orderly growth of the financial system, reposition the human resource department in line with global best practices”. The Corporation is also making efforts to complete “the upgrading of the Financial Institutions Liquidation Management System (FILMS) to facilitate prompt depositor reimbursement” and fine-tune the differential premium assessment system (DPAS) as an effective tool for promoting sound risk management in banks. In the banking sub sector, the MFBs which recorded a very high and disappointing failure rate, the Corporation is set for the development and deployment of an appropriate resolution framework for microfinance banks (MFBs) and Primary Mortgage Institutions (PMI) so as to continue to engender confidence in the sub-sector, thereby facilitating financial inclusion and poverty eradication. The NDIC also aims to put in place this year “a robust Performance Management System based on the framework of balance score card with a view to up-scaling the productivity and efficiency of the Corporation”.
The year 2011, therefore, had clearly demonstrated to even doubting Thomases that the NDIC’s landmark achievements were for real - not a mission impossible. Its pedigree has also made the Corporation to stand tall in its corporate plans for 2012. Congratulations, NDIC.
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