The Managing Director and Chief Executive Officer of the Nigeria Deposit Insurance Corporation (NDIC), Bello Hassan, has revealed that a mere 25% of customers’ deposits are insured by the corporation.
This revelation has sparked concerns about the vulnerability of depositors’ funds and raised questions about the adequacy of regulatory safeguards in Nigeria’s banking sector.
Speaking on the sidelines of the 2024 Sensitisation Seminar for justices of the court of appeal in Lagos, themed ‘Building Strong Depositors Confidence in Banks and Other Financial Institutions through Adjudication,’ Hassan shed light on the limited coverage of deposit insurance for bank customers.
Hassan addressed recent concerns surrounding the hike in deposit insurance coverage and emphasized the need for periodic reviews to ensure adequacy and credibility.
He explained that the decision to increase deposit insurance limits was based on various factors, including the average deposit size, inflation impact, GDP per capita, and exchange rate fluctuations.
Despite the coverage extending to approximately 98% of depositors, Hassan underscored the critical gap between the number of depositors covered and the value of deposits insured.
He stressed that while nearly all depositors are accounted for, only a quarter of the total value of deposits is protected, leaving a significant portion of funds vulnerable to risk.
“The coverage is just 25% of the total value of the deposits,” Hassan affirmed, highlighting the disparity between the number of depositors covered and the actual value of deposits within the banking system.
Moreover, Hassan addressed concerns about moral hazard, emphasizing that the presence of uninsured deposits would incentivize banks to exercise market discipline and mitigate risks associated with reckless behavior.
“The quantum of deposits not covered will enable banks to exercise market discipline and eliminate the issue of moral hazards,” Hassan stated, suggesting that the lack of full coverage serves as a safeguard against irresponsible banking practices.
However, Hassan’s revelations have prompted calls for greater regulatory oversight and transparency within Nigeria’s financial institutions. Critics argue that the current level of deposit insurance falls short of providing adequate protection for depositors, especially in the event of bank failures or financial crises.
The disclosure comes amid ongoing efforts by regulatory authorities to bolster depositor confidence and strengthen the resilience of the banking sector. With concerns mounting over the stability of Nigeria’s financial system, stakeholders are urging for proactive measures to address vulnerabilities and enhance consumer protection.
