The Nigeria Deposit Insurance Corporation (NDIC) announced recently that it has increased the maximum deposit insurance coverage levels across various banks. According to NDIC increase takes effect immediately. The new insurance coverage adjustments were revealed during a press conference held by the NDIC’s MD/CEO, Mr. Bello Hassan, on May 2, 2024.
In Mr Hassan press conference these below are the adjustment:
- Deposit Money Banks (DMBs): The maximum deposit insurance coverage have been raised from N500,000 to N5,000,000. This change will now fully cover 98.98% of depositors, significantly up from the current 89.20%.
- Microfinance Banks (MFBs): Coverage for MFBs has risen from N200,000 to N2,000,000, aiming to protect 99.27% of depositors, compared to 98.76% under the previous limits.
- Primary Mortgage Banks (PMBs): The coverage has been increased from N500,000 to N2,000,000, ensuring 99.34% of depositors are fully covered, up from 97.98%.
- Payment Service Banks (PSBs): Coverage has been adjusted from N500,000 to N2,000,000, covering nearly all depositors at 99.99%.
- Mobile Money Operators (MMOs): The pass-through deposit insurance for MMO subscribers has jumped to N5,000,000 per subscriber.
Below is Mr Hassan’s Address
“Based on these considerations, and in line with our commitment to enhancing depositors’ protection, public confidence, financial inclusion, and stability of the financial system, I am pleased to announce that the NDIC’s Interim Management Committee (IMC), during its 18th meeting held on April 24th and 25th, approved an increase in the maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions with immediate effect.
The adjustments are as follows:
- Deposit Money Banks (DMBs):The maximum deposit insurance coverage has been increased from N500,000 to N5,000,000, providing full coverage to 98.98% of total depositors compared to the current coverage of 89.20%. In terms of the value of deposits covered, the revised coverage would increase to 25.37% compared to the current 6.31% of the total value of deposits.
- Microfinance Banks (MFBs):The maximum deposit insurance coverage has been increased from N200,000 to N2,000,000, providing full coverage to 99.27% of total depositors compared to the current level of 98.76%. This would increase the value of deposits covered by deposit insurance to 34.43% compared to the current 14.38% of the total value of deposits.
- Primary Mortgage Banks (PMBs):The maximum deposit insurance coverage has been increased from N500,000 to N2,000,000, providing full coverage to 99.34% of total depositors compared to the current 97.98%. This would increase the value of deposits covered by deposit insurance to 21.04% compared to the current 10.77% of the total value of deposits.
- Payment Service Banks (PSBs): The maximum deposit insurance coverage has been increased from N500,000 to N2,000,000, providing full coverage to 99.99% of the total number of depositors. This would increase the value of deposits covered by deposit insurance to 43.10% of the total value of deposits from the current coverage of 40.60%.
- Subscribers of Mobile Money Operators: The maximum pass-through deposit insurance coverage has been increased from N500,000 to N5,000,000 per subscriber per MMO as the applicable coverage level for depositors of DMBs.”
Mr. Hassan outlined rationale behind the adjustments in insurance coverage. Initially set at N50,000 in 1989 to cover 85% of depositors, the coverage was progressively increased to N200,000 in 2006, and later to N500,000 in 2011 for Deposit Money Banks (DMBs), with similar adjustments made for other financial institutions over the years. The latest study in 2023 underscored the need for a further increase due to high percentages of depositors being fully insured but still a considerable value of deposits remaining uncovered, which posed risks like potential bank runs.
He noted that the revised coverage is a strategic balance between protecting depositors and ensuring the stability of the financial system. The changes aim to extend protection to a larger percentage of the population, enhance financial inclusion, and mitigate the potentially destabilizing effects of bank runs.
