The Nigeria Deposit Insurance Corporation (NDIC) has announced a significant increase in maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions in Nigeria. Managing Director/Chief Executive of NDIC, Mr. Bello Hassan, made this announcement, emphasizing the need to address the risk posed by high levels of uninsured deposits in the financial system.
Hassan highlighted the importance of the increase in coverage, citing the potential impact on financial stability and the likelihood of bank runs. He referred to international studies on recent bank failures, which underscored the importance of adequate deposit insurance coverage.
Under the new template, coverage for Deposit Money Banks (DMBs) has been raised to N5 million from N500,000, providing full coverage for 98.98% of total depositors. Similar increases have been implemented for Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), Payment Service Banks (PSBs), and Mobile Money Operators (MMOs).
Analysts have commended the move, noting its potential to boost confidence in the banking sector and deepen financial inclusion. Prof. Uche Uwaleke, President of the Association of Capital Market Academics of Nigeria, lauded the increase, particularly amidst inflation and currency depreciation concerns.
Hassan emphasized that the adjustments strike a balance between deposit protection, financial system stability, and market discipline. He reaffirmed NDIC’s commitment to protecting depositors and ensuring the resilience of the banking environment.
The decision to revise maximum deposit insurance coverage levels was based on research-based studies and international best practices. NDIC’s ongoing commitment to enhancing depositors’ protection, public confidence, and financial stability drove the approval of the new templates.
The history of deposit insurance coverage adjustments in Nigeria was outlined, highlighting previous increases in coverage limits for different categories of depositors over the years. The periodic evaluation of deposit insurance effectiveness led to the recent study in 2023, which informed the decision to enhance coverage levels.
Overall, the increase in deposit insurance coverage reflects NDIC’s responsiveness to evolving financial landscapes and its dedication to safeguarding depositors’ interests while promoting a stable banking environment.