IMPACT OF THE NIGERIAN DEPOSIT INSURANCE CORPORATION (NDIC)
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IMPACT OF THE NIGERIAN DEPOSIT INSURANCE CORPORATION (NDIC)
EVALUATION OF THE IMPACT OF THE NIGERIAN DEPOSIT INSURANCE CORPORATION ABSTRACT
Bank distress has been a persistent feature of Nigeria’s banking system since its inception. This trend became apparent in the industry with the failure of many banks in the early and late 1990s.
The research work the evaluation of the impact of the Nigerian deposit insurance corporation (NDIC) is structured into a five chapter book for easy and comprehensive reading.
The first chapter discusses the background of the industry that necessitated the establishment of the deposit insurance scheme, as well as the various loopholes and bottlenecks of the supervisory authorities, as well as the impact of the regulatory and supervisory bodies (NDIC & CBN) on resolving the prevalent bank distress and failure.
It also illustrates the level and depth of distress, as well as the measurability of distress, and states the numerous crisis resolution options, such as revocation of licences, increased acquisition, and financial support provided by regulatory agencies to impacted institutions.
The resources and strategies used to collect the information needed for the study work were purely secondary data obtained through journal and newspaper reviews, past work by other students, and seminars by well-known academicians.
Based on data analysis, information leading to bank distress was certified, and the majority of the causes were also certified; they were traced to be caused by institutional factors, political and economic factors,
and were drawn from the major finding of the research work, and adequate recommendations were made in line with the finding to enable readers who will find the work germane to the field and subsequently bring about animal or nonexistent of d
INTRODUCTION TO CHAPTER ONE OF THE EVALUATION OF THE IMPACT OF THE NIGERIAN DEPOSIT INSURANCE CORPORATION
1.1 BACKGROUND OF THE STUDY
In July 1988, the federal government of Nigeria established the Nigeria deposit insurance corporation by ride decree No 22. This regulatory institution is set up to insure all deposit liabilities of licenced banks and other financial institutions.
The NDIC act Capt 301 L.F.N 1998 further stresses the federal government’s establishment of the NDIC to protect depositors’ interests and also help in promoting a safe and sound banking system.
The Nigeria Deposit Insurance Corporation is a regulatory body with the authority to examine the books and affairs of insured banks and other deposit taking financial institutions. Every licenced bank and other deposit taking financial institution in Nigeria is required to insure its total deposits.
A depositor at a bank covered by the Nigerian Deposit Insurance Corporation will not be charged for the cost of this deposit insurance. The insured bank pays through an annual assessment based on the volume of such deposits.
The corporation’s authorised capital is N100 million, of which N50 million has already been summoned and paid up by the federal government and the central bank of Nigeria (CBN) in the ratio of 2.3 the federal government of Nigeria’s decision to form the NDIC are.
1. To encourage saving by strengthening the safety of deposits and ensuring the development of banking practises.
2. To reimburse every insured bank depositor up to a limit of N50,000 if this bank is liquidated.
3. To safeguard the clients’ deposits.
In Nigeria today, it is difficult to go a year without hearing about some form of difficulty in the banking industry. The problem of financial distress, including outright bank failure, has been noted in Nigeria since 1930,
when the first bank failure was reported. Between 1930 and 1958, when the CBN was founded, over 21 bank failures were documented.
Today, the number of banks categorised as problem banks is on the rise and has remained a source of concern for depositors, governments, and regulatory authorities.
1.2 A STATEMENT OF PROBLEMS
The problem of financial hardship has absorbed a larger portion of the Nigerian financial services business.
According to NDIC reports, by the end of 1993, 27 banks were officially classified as distressed by 1994; by 1995, the number rose to 47, 63 in 1995, and 89 in 1996;
however, the figure dropped after the establishment of the deposit insurance scheme to 34 banks in liquidation as of December 2000.
Several steps were implemented by regulatory/supervisory authorities during this time period to address the distress issue. The purpose is to determine how efficient these regulating/supervising authorities,
particularly the Nigerian Deposit Insurance Corporation (NDIC), have been in alleviating distress in the Nigerian financial system through various measures.
1. In recent years, the Nigeria banking industry has operated in an environment that has been very conducive on the economic front, as the country has continued to wittiness a high rate of inflation, balance of payment problems, a high debt burden, industrial unrest, and general economic decline.
2. In preventing the banking system from collapsing and, most all, in determining how distressed banks are reacting to policies and other distress resolving formular.
1.3 THE PURPOSE OF THE STUDY
Considering the different barriers and adhere distress resolution solutions had not considerably achieved the distress target in terms of the financial system’s safety, soundness, and stability.
This effort strives to create a more complete framework for the rapid and efficient resolution of the issue. This project’s particular goals include
a. Determine objectively what is causing the current state of hardship in the Nigerian service industry.
b. Determine the scope and depth of the distress situation in Nigeria’s service industry.
c. Conduct a comprehensive study of trends in Nigeria’s financial services business, particularly between 1986 and 2000, to gain necessary insight into the operation of the Nigerian financial system.
d. Determine the implications of existing financial policies in the Nigerian financial services industry based on the research findings.
1.4 THE SIGNIFICANCE OF THE STUDY
This research is being carried out in order to provide an insight review of the issue of distress in the Nigerian banking industry and the impact it has on the nation’s financial system.
The findings will be valuable to the management of these banks, other institutions, and the government in the following ways.
a. This work will assist them in adopting a more realistic approach to managing institutional challenges such as distress crisis frauds and forgeries.
b. The report also evaluates the regulatory bodies in the banking sector, particularly the NDIC and CBN, and examines the gaps in their policies. The Nigerian financial services industry has taken the first step towards reactivating an efficient regulatory framework.
c. It would also serve as a standard for future scholars in this sector of academic activity.
1.5 DEFINITION OF TERMS
i. Collateral/ Securities: These are properties, such as stocks and bonds, pledged as security for loan repayment.
ii. Deregulation: This is the process by which the government does not apply systematic oversight of the financial sector to the core, such as in banks, which are permitted to set interest rates.
iii Cross default: In the infer-bank market, cross default occurs when one bank fails to satisfy its financial obligations to another.
Insolvency: When a bank is unable to meet its obligations to its depositors as a result of a squeeze, that bank is said to be insolvent.
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