NDIC increases maximum deposit insurance coverage levels

Mariam Abeeb and Joy Baba-Yusuf

The Nigeria Deposit Insurance Corporation NDIC has increased the maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions with immediate effect.

Managing Director, NDIC, Bello Hassan who announced the new development in Abuja, explained that the new policy which was approved by the NDIC’s Interim Management Committee is in line with the Corporation’s commitment to enhancing depositors’ protection, financial inclusion and stability of the nation’s financial system.

The Corporation increased the maximum deposit insurance coverage of Deposit Money Banks(DMBs) from five hundred thousand naira to to five million naira, Microfinance Banks from two hundred thousand naira to two million naira while coverage level for Primary Mortgage Banks is now two million naira from the previous amount of five hundred thousand naira.

According to the MD of the Corporation the newly revised deposit insurance coverage underscores the goal of deposit protection with incentives for depositors to practice market discipline and prevent banks from moral hazard.

The new maximum deposit insurance coverage is expected to enhance supervision that would reduce the likelihood of bank failures and boost effective bank resolution frameworks.

“Based on these considerations, and in line with our commitment to enhancing depositors’ protection, public confidence, financial inclusion, and stability of the financial system, I am pleased to announce that the NDIC’s Interim Management Committee (IMC), during its 18th meeting held on April 24th and 25th, approved an 3 increase in the maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions with immediate effect.

“The adjustments are as follows: Deposit Money Banks (DMBs): The increase of the maximum deposit insurance coverage from N500,000 to N5,000,000, would provide full coverage of 98.98% of the total depositors compared with the current cover of 89.20%. In terms of the value of deposit covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37% compared with the current cover of 6.31% of total value of deposits. ii.

“Microfinance Banks (MFBs): The increase of the maximum deposit insurance coverage from N200,000 to N2,000,000, would provide full coverage of 99.27% of the total depositors compared with the current level of 98.76% and would increase the value of deposits covered by deposit insurance to 34.43% compared with 14.38% of total value of deposit, currently covered. iii.

“Primary Mortgage Banks (PMBs): The increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 would provide full coverage of 99.34% of the total depositors compared with the current 97.98% and would increase the value of deposits covered by deposit insurance to 21.04% compared with 10.77% of total value of deposit, currently covered.

“Payment Service Banks (PSBs): The increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 would provide full coverage of 99.99% of the total number of depositors and would increase the value of deposits covered by deposit insurance to 43.10% of the total value deposits from the current cover of 40.60%.

“ Subscribers of Mobile Money Operators: The increase of the maximum Pass-through deposit insurance coverage from N500,000 to N5,000,000 per subscriber per MMO as the applicable coverage level for depositors of DMBs,” he said.