Recall that some weeks ago, Investors Forum published an article titled, CBN, SEC, where is investors money in Allstate Trust and Trade Bank. The article was in response to complaint by some investors who participated in the failed public offers, but have not been repaid, as directed by SEC.

Last week, at the annual workshop organised by NDIC for Business Editors and Financial Journalists, Investors Forum tabled these complaints before the Managing Director/Chief Executive of NDIC, Alhaji Umaru Ibrahim. Below is his response.  “We have received  enquiries and  in fact we were taken to court by an insurance company that placed money with Allstates Trust Bank at one point in time or the other, with the hope that they will partake in that aborted IPO.

Ordinarily, the banks are expected to set up an escrow account with the Central Bank, so that in the event of failure or over-subscription the funds will be returned. Unfortunately, from all indications those funds were mismanaged, by those banks that happened to be in liquidation.

So we came on board after the event had taken place, and as liquidators, and we have priority of claims.

We were even taken to the National Assembly by this same insurance company, and after all the explanation, the National Assembly committee could not do anything because it is a legal issue. They are ordinary claimants, they are not depositors.

They are creditors therefore they have to wait until we have funds either from recoveries of debts or sale of assets of Allstates Trust Bank. Our main priorities is to pay insured depositors, and later uninsured depositors, and then creditors, service providers, like PHCN or Water Board or landlord to Allstate Bank.

That is what we told the insurance company. They went to court but I am sure there is no way they can succeed. They have sent series of complaints to the central bank on the same issue. The same applies to Trade Bank. This is the reality”.

For the purpose of those who may not be too familiar with NDIC, the corporation was established to provide insurance for bank deposits. But the insurance covers only the prescribed maximum insured deposit, which used to be N50,000 per deposit, and now N200,000.

When the license of a bank is withdrawn by the CBN, the bank is handed over to NDIC to liquidate whatever assets the bank had. But the Corporation by law is mandated to first pay the insured deposits to depositors. So if you have N300,000 in such a bank, the corporation immediately pays you N200,000.

The remaining N100,000, referred to as the uninsured deposit, is paid from money gotten from sale of the assets of the bank, or recovery of its debt. After paying depositors of uninsured deposits, the corporation pays creditors etc as it gets more money from the sale of the bank’s assets.

The response of the NDIC boss has two major implications from investors in the botched Allstate Trust and Trade Bank offers. First, it implies there is hope of recovering what they invested in the failed offer. The second implication is unpalatable. They would have to wait long very long before they get back their money.