THE ROLE OF NIGERIA DEPOSIT INSURANCE CORPORATION IN REVAMPING DISTRESSED BANKS IN NIGERIA

CHAPTER ONE

INTRODUCTION

As part of the reform measures taken to strengthen the supervisory framework for the banking sector, the Nigeria deposit Insurance corporation (NDIC) was established by decree N.22 of 1988. This reinforcement became imperative given the up surge in the member of licensed bank following the adoption in addition to this, there  was also the long term need to create and sustain an enabling environment that will engender sate and sound banking practices by protecting the banking system against destruction runs, protecting bank deposit (especially those of small savers) and ensuring fair play amongst the competing banks. These cardinal consider actions were rein formed by the lesson of history of bank features in Nigeria, the experience of other countries where deposit insurance scheme are being operated and there alive of the prevailing distressed financial condition of the bank in particular and other financial intermediaries in the financial sector in general.

A collaborative study of distress in the Nigeria financial sector was conducted by the corporation and the Central Bank of Nigeria (CBN) and its finding corroborated the earlier held view that distress among the Nigeria Banks was precipitated by a complex set of interrelated problems that had for long afflicted the industry. These include poor management, capital inadequacy, poor lending etc.

Ever since its establishment the Nigerian Deposit Insurance Corporation (NDIC) has consistent with its mandate as provided in NDIC decree. Continued to ensure safe and sound banking system. The sanitization of the banking sector has remained the primary focus of the corporation’s activities through the adoption of appropriate failure resolution options and effective implement action of various laws. Promulgate by the government to stem the hide of distress in the system. This understandably, was because might from its inception the corporation has had to contend with insuring insolvent banks.

The corporations effort and out standing challenges in this regard are reviewed in this term paper and organized as follows after this introduction. Chapter 1, 1.1 talks about background of the study, 1.2statement of the problem, 1.3 purpose/objective of the study,1.4 significance of the stubby.1.5 limitation of the study. Chapter2 presents the review of related literature. Chapter 3, 3.0 Research design and methodology 3.1 sources of data (secondary sources only, 3.2 location of data, 3.3 method  of data collection (literature work only) Chapter 4, 4.0 findings.

Conclusively, there are chapter  5, which is the last chapter of the term paper. It talks summary while 5.1 is the recommendations and lastly 5.2 which presents conclusion before the bibliography.

1.1    BACKGROUND OF NIGERIANS DEPOSIT INSURANCE CORPORATION

The Federal Military Government Decree No. 22 the 15th June 1988. “There is hereby established a body to be known as the Nigeria Deposit Insurance Corporation (hereinafter in this Decree referred to as “the corporation”).  This corporation is out to insure bank deposits thereby helping to promote safe and sound banking system in Nigeria, protect depositors interest and further inculcate banking habit amongst Nigerians.

NDIC in an autonomous supervisory body with powers among others, to examine the books and affairs of insured banks and other deposit taking financial institutions operating n Nigeria, to insure their total deposit liabilities with NDIC with the exception of insider deposits, ie deposits belonging to the Board members and staff of the insured bank, deposits used as collateral and such other deposits Borad of NDIC may exempt from time to time.

Deposit insurance is financial guarantee instituted as a measure of safety for the banking system to protect depositors.  Deposit insurance promotes the stability of the banking system.  It assures the saver that his funds are safe, and that the failure of one bank does not mean that all banks are in danger of failing.  The authorized capital of the corporation is N1000M.