By Babajide Komolafe
The Emir of Dutse, Alhaji Mohammed Sanusi gave an unexpected piece of advice to Nigerians last Tuesday. Nigerians, he said, should invest in their future to prepare for  the kind of economic crisis going on in Europe.

Speaking during a courtesy visit by the management of the Nigeria Deposit Insurance Corporation (NDIC) and financial journalists, the royal father said that what is going on in Europe will  also happen in Nigeria and it is only a matter of time. He said that the best Nigerians can do is to prepare by investing before such crisis occurs.

It was  an unexpected comment and piece of advice because the last thing a financial journalist expected during a courtesy visit to an Emir of a remote part of the country is commentary on international economic matters. However, it was a courageous acknowledgement of reality.

The Emir did not stop there. He said the work of the Corporation is critical to the preparation for the crisis. He said people would only save and keep their money in the banks if they are sure their money would be safe, that they can have their money back when they need it.

He then went ahead to advise the corporation to educate Nigerians on its role and functions as a deposit insurer so as to encourage them to save.

A similar sentiment was expressed by the Jigawa State Governor, Alhaji Sule Lamido. He noted that Nigerians have little faith in institutions, and this is because institutions have disappointed them in the past.

He said this is very apt in the Nigerian banking industry, where rounds of banking distress have shaken the confidence of the masses in the banks, such that they are not sure of the safety of their money in banks. He said the work of NDIC would help in restoring confidence of Nigerians in the banking system as a safe haven for people’s money.

These two comments were part of the  highlight of  the NDIC annual workshop for finance correspondents and business editors held in Dutse, capital city of Jigawa last week. Most of the participants expressed concern for their safety upon receiving information that the   workshop would hold in the north, thanks to the insecurity occasioned by the activities of the Boko Haram group. The peaceful environment and the beautiful rocky terrain of the state  however punctured such fears and made the workshop an exciting tourism adventure.

From the presentations and discussions, coupled with the comments by the Emir and the Governor, it was clear that NDIC has become more visible and its role and functions better understood and appreciated. A subtle revelation is that the corporation is becoming mature in performing its role as a deposit insurer.

The corporation was established in 1989 to protect depositors’ money in banks, such that  should a bank fail to function and it closes shop, depositors’ money will not go down with it. In the beginning, the corporation protected up to N100, 000 of the deposit of each customer.

But this was increased to N200, 000 following amendments to its enabling Act. Though the corporation performed this function creditably well, but it was more known as a liquidator of distressed banks hence for many years, it was perceived more as an undertaker than as a deposit insurer.

But this was due to low awareness about the activities of the corporation and the speed with which it took over about 30 distressed banks in those days. Many depositors of distressed banks only knew that a company called NDIC took over their banks; they did not know that the same company offered to repay their money which would have gone down with the bank.

This resulted in huge unclaimed insured deposits by such depositors, which rose to over N3 billion at some point in time.

The corporation, however, learned from this experience. In addition to increased publicity campaign which includes the annual workshop for journalists, it also changed its method of resolving distressed banks. Instead of outright liquidation which can take a long time, leading to huge cost of recovering debt and unclaimed insured deposits, it changed to methods like Purchase and Assumption- used to resolve banks that could not make the consolidation exercise in 2006, and the Bridge Bank option, which was recently used to resolve the three rescued banks that could not meet the September 30th deadline for recapitalisation.

This change in tactics according to Alhaji Umir Ibrahim, Managing Director/Chief Executive, NDIC, “was  to keep worried depositors off the streets.”

These new methods may be costly, said Mr. A. Adeleke,  Director, Asset Management Department, NDIC, they however, “avoid losing the failed bank thus protecting jobs and continuing banking services to the community and  all depositors and creditors  are  covered and this  would engender public confidence in the banking system.”

The corporation’s commitment to these bloodless methods was echoed in the recommendations of Alhaji B.D Umar, Director, Special Insured Institutions (SIID) Department. Speaking on the way forward for the microfinance banking subsector, he recommended that “mergers and acquisitions as opposed to outright liquidation should be encouraged in the subsector as obtains in other jurisdictions like Germany where no Cooperative Bank(equivalent of an MFB) has failed in the past 50 years).” He was speaking on the backdrop of the recent liquidation of 101 distressed microfinance banks whose licenses were revoked by the Central Bank of Nigeria (CBN).