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Sunday, November 3, 2013


Official deposit insurance originated from the former Czechoslovakia in 1924, but United States popularized it during the great depression's banking crisis of 1933 (Wikipedia);  in Nigeria deposit insurance started in the 1988 following SAP implementation that led to the liberalization of the country's banking system. With about 25 years of existence deposit insurance in Nigeria has not changed much from what it was at its inception. Just like the whole (private) insurance market in the country, deposit insurance as provided by Nigerian Deposit Insurance Corporation (NDIC) has remain underdeveloped. The Nigerian private insurance market is still a shadow of the much bigger banking industry, with no near-future prospect of catching up just like we have seen in more advanced countries.  Its public sector (government) equivalent as provided by NDIC is not much better. Many critics of official deposit insurance schemes blame them for causing moral hazard and encouraging banks to take excessive risk that later cause the next round of banking crisis. 

  Many Nigerian depositors do not know anything about NDIC or her insuring of their little deposits in the banks, the wealthy Nigerians with huge interest in the system that are not supposed to be insured (in most cases) by the corporation are the one who knows of the existence of the institution. Just last Thursday the management of NDIC unveiled a new corporate identity aim at 'deepening trust, improving communication with depositors and providing greater protection'. But, i am surprise that it is now that the management of NDIC under Mr. Umaru Ibrahim is coming to the realization that it needs to communicate more with the people it is insuring. All this while NDIC has been sleeping behind the shadow of mighty CBN and its publicity hungry governor. An institution that is purposely established in order to strengthen openness and transparency on the part of deposit taken banks is locked-Inside behind it own lack of openness and transparency.

   The institution does routine assessment of the soundness of the Nigerian banks, but in most cases as they come out with their ratings, CBN come out with theirs to contradict them and nobody give a damn because most stakeholders in the industry care only about what CBN says. NDIC people just look like they are there to do the bidding of CBN governor and that of the minister of finance, nothing more. They lack independence to do their own things their way, they lack highly effective personalities to steer the institution in revolutionary way just like it happens with the CBN and finance ministry, and they do not move fast with the changes that are taken place in the global banking market place. As  a matter of advice, NDIC has to look at it recruitment process with the view to recruiting the most qualified applicants so as not to be like any other government parastatal and ministry who over the years have become a dumping ground of unqualified applicant with connections at the top.