Technology and its application in today’s operations in all sectors have helped mankind to achieve greater results.
Tasks that were considered nearly impossible in the days gone by are being discharged nowadays with ease. Thanks to technology.
Today, the risk-based supervision (RBS) model, supported by off-site surveillance of the Nigerian Deposit Insurance Corporation (NDIC), is made possible through the deployment of technology.
Off-site monitoring offers real-time insights into an institution’s financial health without the logistical burden of constant on-site inspections. Through periodic reports, stress testing, and data analysis, the NDIC can detect signs of trouble before they escalate, enabling timely corrective action.
The off-site surveillance is also a more cost-effective tool, especially in a country like Nigeria, where the scale and diversity of financial institutions vary widely. It ensures that regulatory attention is proportionally distributed, with higher-risk institutions facing more frequent and in-depth assessments, while low-risk players are spared excessive compliance costs.
The benefit of this continuous surveillance is early detection. The NDIC’s capacity to act on financial irregularities or capital inadequacies before they spiral into crises is critical. This proactive oversight promotes institutional discipline, enhances transparency, and contributes to a more resilient banking environment.
Again, before now, bank depositors, creditors, and other stakeholders used to wait endlessly for their deposits to be paid by the NDIC after a bank failure and its liquidation.
The delay was not usually intentional but due to the bureaucratic nature of physical verification of all depositors and creditors. This could take several months.
For instance, following the revocation of Heritage Bank’s license by the Central Bank of Nigeria (CBN) on June 3, 2024, the corporation immediately reimbursed insured deposits up to N5 million.
In April this year, the NDIC announced the commencement of payment of the first tranche of liquidation dividends of about N46.6 billion.
The payment was made possible through the use of depositors’ Bank Verification Numbers (BVN) to locate alternate accounts and automatically credit the insured amounts to ensure a seamless process.
It also used existing records from insured payments to disburse the first tranche of liquidation dividends.
Explaining the transition and the role of technology in settling depositors and other stakeholders, Bello Hassan, managing director and chief executive officer, NDIC, said, “Before now, if there is any failure or liquidation of a banking license where the liquidator needs to come in and reimburse depositors normally, the procedure is to ask all depositors to present themselves physically either at the offices of the NDIC or the offices of the defunct bank so that they are verified. They will bring in means of identification, and they will come with all evidence to show that yes, they actually maintain an account with that deformed bank so that we can now record it and cross-check with the records of the bank to make sure it’s correct before we now begin the process of reimbursement.”
The role of BVN
Bello further said that the advent of the BVN has made the process seamless.
“There has been a lot of technological advancement, and NDIC cannot afford to be left behind. So, what we did during the revocation of the license of Heritage Bank was to actually leverage technology. We know in Nigeria we have a BVN. It is mandatory for any account holder to have a BVN, and this BVN is maintained by the National Identity Management Commission (NIMC). So, what we did was to collaborate with NIMC to say, “These are the lists of depositors in Heritage Bank; please, leverage your database and give us alternate accounts of all the depositors in other banks.” And they ran it through their system, and they were able to give us those alternate accounts. So, depositors don’t need to come anywhere physically for verification. You have your alternate account. It’s only if you don’t see an alert that you now come to our office. So, we leverage that.”
NDIC’s critical mandate
The NDIC was established to administer deposit insurance in Nigeria, and the public policy objective is to protect depositors, engender confidence, and promote financial system stability. It also has the mandate to supervise the banks in collaboration with the CBN to ensure that the banks remain safe and sound at all times. That is very critical for the maintenance of banking system stability. It also has the mandate to collaborate with the Central Bank to administer or to resolve institutions that are failing. When all measures taken fail to yield the desired result, the licensing authority will now revoke the license and hand it over to NDIC, which also has the mandate of liquidation. At this point, the NDIC ensures that the institution, the license of which is revoked, is removed from the system without causing disruption. It ensures that depositors, creditors, and other claimants are paid from the proceeds of what it realises from the liquidation process.
Pain in the neck
One major challenge the corporation is facing that must be urgently overcome is the penchant by borrowers not to repay the loan they take from the bank. It would seem that those who do this kind of thing believe they are taking their share of a national cake, but they forget that the money being lent out by banks is depositors’ and creditors’ money and not the banks’.
Borrowing without paying back put banks in jeopardy. Worse still, in the event that these banks go under as a result of the inability of their borrowers to repay, these same borrowers run to court to restrain the NDIC from taking action against them.
In cahoots with their lawyers and some judicial officers, these debtors continue to influence the court to make unending adjournments, sometimes even restraining the NDIC from arresting them.
We see this bad behaviour in the nation’s political turf, and now it is also fouling the air of the corporate world.
“When people borrow from the bank, they must realise the importance of paying back the loan as and when due. They must understand that banks don’t trade with their money. They trade with depositors’ money. If you borrow and you don’t repay, you put the life of that bank at risk. It is not a national cake,” Hassan said.
The last line
If we want a country where things work the way they work in other climes, it is the duty of one and all to brighten the corner where they are by committing to doing the right things always.
