NIGERIA DEPOSIT INSURANCE CORPORATION
The Nigeria Deposit Insurance Corporation (NDIC), was established as part of
the reform measures taken to strengthen the safety net for the banking sector
following the introduction in 1986 of a major economic reform programme,
the Structural Adjustment Programme (SAP) by government to correct the
observed imbalances in the economy. The establishment of NDIC became
imperative given the rapid growth in the number of licensed banks in the late
80s’ and early 90s’ and the financial sector reforms that subsequently followed
the Structural Adjustment Programme.
In addition to this, there was also the long-term need to create and sustain an
enabling environment that will engender banking stability by protecting the
banking sector against destructive runs, protecting bank depositors and to
ensure fair play amongst the competing banks. These considerations were
informed by the lessons of history of bank failures in Nigeria in the 50s, the
experience of other countries where deposit insurance schemes are being
operated and the prevailing distressed financial conditions of the banks in
particular and other financial intermediaries in the financial sector in general,
among others. The NDIC was formally established by Decree No. 22 of 1988
and commenced operations in 1989.
Section 5 of the Decree No 22 of 1988 establishing NDIC provides the following
functions for the Corporation:
(a) Insuring all deposit liabilities of licensed banks and such other financial
institutions operating in Nigeria within the meaning of sections 20 and
26 of this Decree so as to engender confidence in the Nigerian Banking
system;
(b) Giving assistance in the interest of depositors, in case of imminent or
actual financial difficulties of banks particularly where suspension of
payments is threatened: and avoiding damage to public confidence in
the banking system;
(c) Guaranteeing payments to depositors, in case of imminent or actual
suspension of payments by insured banks or financial institutions up to
the maximum amount as provided for in section 26 of this Decree;
(d) Assisting monetary authorities in the formulation and implementation
of banking policy so as to ensure sound banking practice and fair
competition among banks in the country;
(e) Pursuing any other measures necessary to achieve the functions of the
Corporation provided such measures and actions are not repugnant to
the functions of the Corporation.
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