Customers of different categories of banks in Nigeria heaved a sigh of relief today, as the Nigeria Deposit Insurance Corporation (NDIC) increased the maximum deposit insurance coverage level for customers of deposit money banks, microfinance banks, primary mortgage banks, payment service banks as well as mobile money operators in the country.
This disclosure was made by Bello Hassan, managing director and chief executive of NDIC at a press conference today.
With the new coverage level, Deposit Money Banks (DMBs) have 98.98 percent of their clients covered by the new provision. Microfinance banks have 99.27 percent of their depositors covered by the new arrangements while 99.34 percent of PMBs and 99.99 percent of PSBs’ clients are covered by the new arrangements respectively.
“The NDIC’s mandate of deposit guarantee is a critical component of depositors’ protection, as it guarantees the payment of deposits up to a maximum set limit in the event of bank failure. The deposit guarantee, covers depositors of all deposit taking financial institutions licensed by the Central Bank of Nigeria, which includes Deposit Money Banks (DMBs), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), Non-Interest Banks (NIBs), Payment Service Banks (PSBs) and subscribers of Mobile Money Operators,’’ Bello Hassan said.
‘’The maximum deposit insurance coverage is determined through periodic research-based studies, to ensure its adequacy and credibility. Various factors considered in setting the coverage level are; deposit distribution, impact of inflation, per capita GDP, exchange rate and other statistical models, among others,’’ he added.
Accordingly, the insurance coverage for DMBs rose from N500,000 to N5 million. This is expected to increase the deposits covered by deposit insurance from 6.31 percent under the past arrangements to 25.37 percent.
For MFBs, their insurance coverage was increased from N200,000 to N2 million, with a view to increasing the deposits covered under the current arrangements to 34.43 percent up from 14.38 percent under the previous coverage.
The current provisions have raised the deposits covered under the PMBs to 21.04 percent compared to 10.77 percent in the past while the deposits covered under PSBs rose to 43.10 percent as against 40.60 percent previously.
Mobile money operators are not left out. The NDIC also announced that the maximum deposit coverage for these types of financial institutions increased from N500,000 to N5 million per mobile money operator.
“I must emphasise that the revised deposit insurance coverage has balanced the NDIC’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. 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.
“The adoption of the revised maximum deposit insurance coverage is 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,” Hassan said.
