By Gambo Dori
MY association with the Nigeria Deposit Insurance Corporation, NDIC, goes a long way, to its birth in 1989, when many of my colleagues across the services were attracted to join the fledgling corporation. Since then, I have watched the corporation grow from its humble beginnings in the rented offices on the 14th floor of the National Bank building, on the ever busy Broad Street in the very heart of the business district of Lagos, to the resplendent building it now occupies in the centre of Abuja’s business district. Some of the foundation staff came from the Central Bank of Nigeria, CBN, including the pioneer Managing Director, the late John U. Ebhodaghe. Others came from sister services in Lagos, then the Federal Capital, and many more were attracted from the states services right across the country.
Umaru Ibrahim, the present Managing Director was a Permanent Secretary in the Kano State Civil Service, a post he gave up to join up as one of the pioneer staff of the NDIC. Last month I watched him superintending over series of activities commemorating the 30th anniversary of the corporation. One of those events that held in the Transcorp Hotel was graced by Vice-President Yomi Osinbajo; Senate President, Ahmad Lawan, including ministers, traditional rulers such as the Ooni of Ife, Oba Adeyeye Ogunwusi and Emir Najib Husseini Adamu of Kazaure, prominent bankers and other prominent citizens. The event was also attended by a galaxy of chief executives of other deposit insurance corporations from Taiwan, Ghana, Angola and Uganda. It is obvious that the attendance at the events and the encomiums splashed on the corporation reflect the deep gratitude of many to its years of service to a grateful nation.
But how has a corporation starting from such humble beginnings attained so much public attention and accolades in just a space of 30 years? NDIC came upon the national space when there was a dire need for its kind of service. By the mid-1980s the Nigerian economy was being visited with a wave of liberalisation by its new leader, General Ibrahim Babangida. The financial sector was being deregulated and liberalisation of bank licensing was a key plank of the exercise. Nigeria had passed through the traumas of bank failures in the past and with the benefit of good practices in other parts of the world it became obvious that there was a need for a good formal mechanism to protect depositors. Thus emerged the NDIC Act no 22 of 1988 (now repealed and replaced with NDIC Act no 16 of 2006).
It is a deposit insurance system enacted to protect the small depositor, all the banks and the economy in general. Perhaps when we look back at the three decades of NDIC and we review the cluster of challenges and successes the corporation chalked up, then we will be able to appreciate the character of NDIC today and why it is still standing tall. In the first decade, the NDIC concentrated on building a world class corporation to meet its responsibility of managing distress in the banking sector which unfortunately was quite a handful in the early 1990s. In that period, it contended with massive bank failures. That situation was managed by adopting multiple distress resolution options, including the final one of liquidation. It was a very hectic period seeing NDIC at a time dealing with the shut-down of 33 banks whose licences were withdrawn by the CBN due to one infraction or the other.
The second decade was the consolidating phase. The corporation had moved its headquarters to Abuja, the national capital, and was revving up to respond to the regulatory challenges to the banks consolidation policy of 2005. Readers might recall that 89 banks were ordered to raise their minimum capital base to the tune of N25 billion. Many failed and mergers were encouraged. The banks that could not meet up and were not purchased, languished, and eventually lost their licences. The NDIC, as you would expect, was involved in many of the steps in those exercises, paying off depositors and disposing the assets of the liquidated banks. In the process, it realised lapses and gaps and had the Act revisited to give it more empowerment to face subsequent challenges. The NDIC also introduced other internal reforms and extended its coverage to micro-finance and mortgage banks.
Perhaps, the third decade would be the golden age of the NDIC. By 2009 when Umaru Ibrahim assumed the mantle of leadership the corporation was more or less on an even keel. It was time to further consolidate and reach out to other strategic partners in the industry to build a robust safety net for banks and other financial institutions. It was time to innovate with new concepts that had shown good results in other parts of the world. Bridge banking was already making waves in the other parts of the world and it was adopted as one of the financial safety nets. This is a situation whereby government sets up a shell company that takes over the assets and liabilities of a troubled bank, nurse it back and sell it to prospective investors. In the process the depositors and the workers in the banks are protected.
This is what happened when Skye Bank tottered. There was not even a run on the bank when it was acquired overnight and was renamed Polaris. Earlier due to a rash of bank failures in 2011, three bridge banks were established to take over the assets and assume the liabilities of Afribank, BankPHB and Spring Bank that were failing. All the three bridge banks were eventually successfully sold out. In a more recent case where Access Bank acquired Diamond bank, the change of ownership was so seamless that there was hardly a window allowing the public to know if the purchased bank was troubled or not.
Today, the banking system in the country can largely be described as stable. Customers, as depositors, no more lose their sleep on account of their money in banks. They have assurance that they would not be running to the banks on rumours of bank failures. Careers in banking which had lost lustre in the past are once more becoming attractive and more stable as jobs are now assured even at the event of bank failure. Definitely working in banks is no more as precarious as it used to be. Besides, new regulations have empowered regulatory authorities to actively prosecute rapacious bank owners in courts and confiscate their assets, sending good signals that insider trading and outright thievery by owners would not be tolerated ever again.
There is still some way to go. NDIC and the other regulatory authorities need to continue to up their acts in their supervisory roles over banks, paying close attention to the quality of their boards and management to ensure good corporate governance and risk management. They should continue to keep sharp eyes over the possibility of insider abuses by owners of banks. Preventing the itchy fingers of owners from the tills and vaults is, in my view, a better option than taking them to court when they are satiated with stolen public funds and are able to buy political patronage and legal representation. I guess the NDIC would receive a boost if the amendments of its 2006 Act now in the works in the National Assembly is finally approved.