The Nigeria Deposit Insurance Corporation (NDIC) was established on 15 June 1988 under the NDIC Act No. 22 of 1988 to strengthen the safety net for the newly liberalized banking sector. It operates under the Nigeria Deposit Insurance Corporation Act No. 16 of 2006.
The NDIC complements the regulatory and supervisory role of the Central Bank of Nigeria (CBN), although it reports to the Federal Ministry of Finance. It is the sole agency of government responsible for administering DIS in Nigeria. It contributes to financial system stability by making incidence of bank runs less likely and enhances public confidence by providing a framework for the resolution and orderly exit of failing and failed insured institutions.
The objectives of the NDIC are as follows;
- Deposit Guarantee -This is perhaps the most significant and distinct activity of the corporation. As an insurer, NDIC guarantees the payment of deposits up to the maximum limit of ₦500,000 in 2018 in accordance with its statue in the event of failure of an insured financial institution.
- Banking Supervision- The NDIC supervises banks so as to protect depositors; foster monetary stability; promote an effective and efficient payment system; and promote competition and innovation in the banking system. Banking supervision is an essential element of the Nigeria deposit insurance scheme as it seeks to reduce the potential risk of failure and ensures the unsafe and unsound banking practices do not go unchecked.
- Failure Resolution – The NDIC provides financial and technical assistance to eligible insured financial institutions thereby ensuring that failing and failed insured institutions are resolved in a timely and cost-efficient manner. The responsibility of distress resolution is shared with the CBN. The financial assistance is in the form of loans, guarantees and accommodation bills. The technical assistance, on the other hand, could take the form of change of management or assisted merger/acquisition with another viable institution. The NDIC also decides on the least-cost resolution option to adopt in the event that the license of an insured institution is revoked
- Bank Liquidation- The NDIC is the sole liquidator of closed insured deposit-taking financial institutions in Nigeria. The discharge of that mandate involves orderly and efficient closure of failed institutions with minimum disruption to the payment system, prompt payment of insured sums, cost-effective realization of assets and settlement of claims of depositors, creditors and shareholders. Depositors, however, have priority of claim on a failed bank’s assets over other stakeholders.