The Impact of the Nigeria Deposit Insurance Corporation (NDIC) on the Operations of the Nigeria Banking Industry
Chapter One
OBJECTIVE OF THE STUDY
The general aim of this research work is to determine the impact of the Nigerian Deposit Insurance operation of Nigerian banks.
The main objective is;
- To examine thoroughly how the inadequate supervisory framework of the regulators (NDIC) impacts Nigerian banks
- To determine how lack of effective risk asset data affects the impacts of NDIC in banking supervision
- To determine the level to which inadequate information has affected the NDIC in banking supervision
- To test the effectiveness of management on consolidation issues as it affects NDIC in banking supervision
- To determine how inadequate governmental support has impacted NDIC in banking supervision
CHAPTER TWO
REVIEW OF RELATED LITERATURE
THE NIGERIA DEPOSIT INSURANCE CORPORATION (NDIC)
The Nigeria Deposit Insurance Corporation (NDIC) was established by Decree No. 22 of 1988 and commenced operation in March, 1989. The NDIC is an autonomous body (i.e. an independent agent of Government) which acts as an additional supervisory authority over licensed banks and other deposit-taking financial institutions. For now, NDIC insures only all banks licensed as universal banks and therefore limits its supervisory activities to them. The NDIC not only provides financial guarantee to depositors in case of failure but also ensures that banks comply with regulations and practices which foster safety and soundness in the market place.
THE ESTABLISHMENT OF NIGERIA DEPOSIT INSURANCE SCHEME (NDIC)
In Nigeria such a scheme is in form of Nigeria Deposit Insurance Scheme (NDIC) Ogunleye (2004) says that “The Nigeria Deposit Insurance Corporation (NDIC) was established in 1988 as an explicit deposit Insurance scheme under the Nigeria Deposit Insurance Corporation Decree No 22 of 1988 now Cap. 301, Laws of the Federation 1990 as amended. Section 1 (I) of the NDIC Act provides for the establishment of the NDIC as a body corporate with perpetual succession and a common seal. The NDIC commenced operations in March 1989. The primary aim of establishing the NDIC is to maintain stability and public confidence in the banking sector by guaranteeing payments to depositors in the event of failure of insured institutions as well as promoting safe and sound banking practices through effective supervision. It is an autonomous regulatory body with powers to examine the books of insured banks and other deposit-taking financial institutions and to restrict the activities of banks found not to be in compliance with regulations. It can also arrange for other banks to assume the deposit liabilities of a failing bank or take over the management of a bank where such action becomes necessary to protect depositors’ interest. In a nutshell, the functions of the NDIC include:- insuring the deposit liabilities of all licensed banks, supervising the activities of all insured institutions through off-site and on-site examinations alongside the Central Bank of Nigeria (CBN). In conjunction with the CBN, the NDIC also resolves distress in the industry where ever and whenever it occurs and acts as liquidator and receiver of any failed bank. Aguolu (1998) says that “in terms of management and control, the NDIC has the Governor of the Central Bank as chairman. It also has a managing director, two executive directors and three representatives of the Federal Government. The NDIC is owned 60% by the Central Bank and 40% by the Federal Government.” With deposit insurance therefore, the failure of one bank becomes an isolated event since it eliminates the danger that unfounded rumours would trigger off courageous bank runs. The corporation tries to ensure safety of depositors’ funds and to promote stability in the banking system. The depositor in insured financial institutions does not lose all his deposits in case of bank failure.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought the impact of the Nigeria deposit corporation (NDIC) on the operations of the Nigerian banking industry
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information the impact of the Nigeria deposit corporation (NDIC) on the operations of the Nigerian banking industry. 200 staff of NDIC was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the impact of the Nigeria deposit corporation (NDIC) on the operations of the Nigeria banking industry. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenge of Nigeria deposit corporation (NDIC) on the operations of the Nigeria banking industry
Summary
This study was on the impact of the Nigeria deposit corporation (NDIC) on the operations of the Nigeria banking industry. Four objectives were raised which included: To examine thoroughly how inadequate supervisory framework of the regulators (NDIC) impacts on Nigerian banks, to determine how lack of effective risk asset data affects the impacts of NDIC in banking supervision, to determine the level to which inadequate information has affected the NDIC in banking supervision, to test the effectiveness of managements on consolidation issues as it affects NDIC in banking supervision, to determine how inadequate governmental support has impacted on NDIC in banking supervision. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of NDIC, Abuja. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made accountants, administrative officers, senior staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The NDIC, an organization charged with the responsibility of managing the scheme, has spent the last 13 years putting in place various measures designed to protect the economy from the risk of deposit runs. While the Corporation has achieved some measures of success in its areas of mandate, it had had to grapple with some daunting problems which have affected the effective running of the DIS. Amongst the main ones are issues of public perception/awareness of the scheme, integrity of prudential returns rendered by market operators, weak or abusive corporate governance in insured banks low debt recovery, and slow judicial process.
Recommendation
Payments for insurance guarantee and liquidation dividends will hence forth be at the premises of failed banks in order to stop alienating certain depositors. The official functions of NDIC should be expanded to include coordination of interbank activities and a provision for debt factoring. If the above recommendations are complied with, there will be enhanced productivity and nation building emanating from the stability of the financial sector.
REFERENCES
- Aguolu, P. (2009). Financial institutions in Nigeria, Onitsha: Adson Educational Publishers.
- Alashi, S. (2013). “Bank failure Resolutions: the main Options” NDIC QUARTERLY. Vol. (No 3) June.
- Umoh, P. (2010).”Bank Customer Protection through Deposit Insurance, ND1C Quarterly Vol. (No 4)
- Ogunleye, G. (2012). “NDIC, the Journey so far” In Business Times. Daily Times Publishers, March I -7 P. 36
- Saliomon, A. (2004). “NDIC Pays N8.6 billion to failed. Bank depositors” In Business Times. Lagos: Daily Times Publishers Feb. (23- 29)
- Alashi, S.O. (2002), “Banking & Regulatory Structure: An International Perspective”. Lagos: MCPE ICAN Publications.
- Alawode, A.A. (1992). “Financial Deregulation and the Effectiveness of Bank Supervision in Nigeria” Lagos: Savings and Development Publication, Vol. 1 (XVI), pp 101-112.