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Depositors in failed banks closed down in 2006 can be rest assured that their deposits are redeemable. The Nigerian Deposit Insurance Corporation has started the payment of some depositors of failed Fortune and Triumph banks

The Nigerian Deposit Insurance Corporation, NDIC, has put a smile on the faces of some depositors of commercial banks closed in 2006 and microfinance banks, MFB, whose banks were liquidated by the Central Bank of Nigeria, CBN, recently. The corporation has also dried the tears of some victims of illegal fund managers also known as wonder banks.

The NDIC has started paying insured deposits to the depositors of Triumph and Fortune Banks closed in 2006. The delay in payment, according to NDIC, was due to court proceedings. As at September 2011, the Corporation had paid about N20 million out of N804.35 million to depositors of Fortune while about N1 million out of N45.36 million had been paid to depositors of Triumph.

Dividend payment to uninsured depositors in respect of 11 banks closed in 2006 under the Purchase and Assumption, P&A, arrangement as at the end of July 2011 was N66.757 out of N152.5 billion, representing 44 percent. According to the Umaru Ibrahim, managing director of NDIC, some insured and uninsured depositors had been paid for banks closed before 2006.

As at July 11, the cumulative insured deposits paid in the 35 banks in-liquidation stood at N3.304 billion out of N5.24 billion, representing about 63 percent. Also the cumulative liquidation of dividend paid to the depositors and other claimants of the affected banks was N6.162 billion out of N16.86 billion, representing about 37 percent. Twelve of the banks had declared a final dividend of 100 percent of total deposits, Ibrahim said.

The NDIC also paid liquidation dividend to shareholders of three banks which were closed before 2006. The amount of liquidation dividends paid to shareholders of three of the 35 banks in-liquidation stood at N1.28 billion as at July 2011. The three banks are Alpha Merchant Bank Ltd, Nigeria Merchant Bank Ltd and Pan African Bank Ltd.

On insured deposits paid for banks closed in 2006, Ibrahim said that given the guarantee of full coverage to the private sector depositors, the NDIC adopted the Purchase and Assumption failure resolution mechanism. The choice of the purchase and assumption arrangement was based on the need to give depositors easy access to their funds without conditions; facilitating continuity of banking services in the same premises used by failed banks; encourage depositors to establish banker-customer relationships with the acquiring banks; and promote a banking culture which is critical to savings mobilisation for economic development. The cumulative insured deposit paid to the depositors of the banks as at July 2011 amounted to N3.289 billion out of N12.63 billion, representing about 26 percent.

During the period, the Corporation had paid an aggregate sum of N2.024 billion to about 69,000 depositors of the closed MFBs. The amount paid represents about 41 percent of total insured amount of about N4.94 billion. The NDIC also reviewed the deposit insurance scheme coverage levels for deposit money banks from N200,000  to N500,000 while that of microfinance banks and primary mortgage institutions moved from N100,000 to N200,000. The new coverage level was used to settle depositors of the micro finance banks closed in 2010.

The NDIC boss said the corporation has made efforts to eradicate the activities of illegal fund managers/wonder banks. The measures taken by the NDIC were in collaboration with the Central Bank of Nigeria, CBN, Securities and Exchange Commission, SEC, Corporate Affairs Commission, CAC, and the Economic and Financial Crimes Commission, EFCC. The measure include setting up an inter agency committee with members drawn from the CBN, SEC, CAC, EFCC and NDIC. The committee had established that there were a total of 560,882 claims by members of the public against 440 illegal fund managers/wonder banks amounting for a whopping sum of N106.94 billion and noted that the situation had implications for financial stability.

The committee also observed that 36 companies accounted for N104 billion or 98 percent while Nospetco Oil and Gas Ltd alone accounted for 48 percent. “With the efforts of the committee, the court had appointed a liquidator to wind up Sefteg Company Nigeria Limited, one of the illegal fund managers.

The Liquidator had realised about N500 million from assets of the company and had commenced payment to verified investors of the company. Ibrahim said that efforts were on to get the court to appoint liquidators for other illegal fund management companies to accelerate payment to their respective affected investors based on the realised assets of the companies.