By YINKA KOLAWOLE, with agency report

Nigeria Deposit Insurance Corporation has revealed plans to increase the deposit insurance coverage for customers of Primary Mortgage Banks (PMBs) in the country as well as review the premium assessment of the PMBs.

Managing Director/Chief Executive, NDIC, Alh. Umaru Ibrahim, disclosed this at a sensitisation workshop, in Abuja, organised by the Corporation to promote safe and sound banking practices for operators of PMBs. At a similar workshop held earlier in Lagos, Ibrahim tasked mortgage banks to develop and implement effective risk management systems to avoid creation of toxic assets. “NDIC is the sole agency empowered to guarantee depositors’ funds in deposit-taking financial institutions in Nigeria, including PMBs.

NDIC as an insurer, reimburses depositors of all PMBs up to a maximum limit of N200,000 per depositor in the event of failure of a mortgage institution since 2010. The new coverage level represents an increase of 100 percent over the earlier coverage of N100,000, when the insurance package was first extended to the sector in 2006,” he stated.

The NDIC boss said plan to upwardly review the corporation’s insurance coverage of PMB depositors arose from the realisation that mortgage banks seemed to carry more risks than microfinance banks. He, however, did not specify the amount for the new deposit insurance cover being planned by the corporation. “Going forward, we hope to review the insurance coverage that we do provide, you are aware that right now it is N200,000 in case of any failure. We are thinking why not segregate slightly from what is obtained in the micro finance banks, given the huge portfolio and risks you carry. And also in return, given the quantum of premium that you give,” he stated.

Ibrahim further disclosed that the corporation is also reviewing the basis of premium of the PMBs in the country. According to him, instead of using the flat rate which was the initial practice, the corporation would introduce risk-based premium assessing system. This, he said, was obtainable with the deposit money banks. “That way, we will be able to promote safer and best practices and in the process, the best manned and managed institutions will have less premium burden on them,” he added.

Ibrahim said PMBs in Nigeria could create significant impact if they adhere to the recommended corporate governance practices based on effective risk management practices instituted by regulatory authorities.

“Given the recent regulatory efforts and the associated high cost of cleansing the system of toxic assets of deposit money banks (DMBs) through the Asset Management Corporation of Nigeria (AMCON), the supervisory authorities were concerned about build up of toxic assets with micro finance banks (MFBs) which stood at about 45.7 percent as at December 2013 against the prescribed maximum of 5 percent. Our attention is now being focused on both the MFBs and PMBs sub sectors so as to address the emerging challenges. Our efforts can only be successful if the operators can embrace good corporate governance and sound risk management practices. We cannot afford the repeat of 2008/2009 crisis.”

He said NDIC would continue to ensure that all insured institutions were put on the path of sustainable growth and development, and appealed to all PMBs to pay their annual premium promptly.