Daily Independent Online.
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Tuesday, June 22, 2004.
Okonjo-Iweala wants hike in NDIC insured deposit
By Sanya Adejokun,
Senior
Correspondent, Abuja
Finance Minister, Ngozi Okonjo-Iweala, has complained
about the maximum N50,000 coverage, which the Nigeria Deposit Insurance
Corporation (NDIC) currently pays to depositors of failed banks and said it
should be increased.
This, according to her, is one of the ways by which
the corporation would further increase the confidence it has already built for
the banking system in the minds of the public.
But Ganiyu Ogunleye, NDIC Managing Director, said the
corporation has commissioned another survey to further determine whether the
current N100,000 recommendation proposed to the National Assembly should be
further increased.
“In spite of the achievements recorded by the
corporation, the implementation of the scheme by the NDIC is however, still
being faced with many challenges, which include poor public awareness about the
scheme, the perceived inadequacy of the maximum coverage, cumbersome judicial
process and weak corporate governance in insured institutions, among
others,” the minister said.
Okonjo-Iweala spoke in Abuja on Monday while
delivering a keynote address to declare open a three-day Africa Regional
Conference on Deposit Insurance held inside the auditorium of the Central Bank
of Nigeria (CBN).
Noting that the corporation is one of the legacies of
the much-despised Structural Adjustment Programme (SAP), the minister declared
that NDIC has contributed to the maintenance of financial stability and
confidence in the banking system, adding that this manifested in the way it
successfully liquidated 34 banks between 1994 and 2003 with minimal disruptions
to the economy.
She also emphasised the importance of public
awareness, which she said is often downplayed in the design of deposit
insurance schemes, saying, “No deposit insurance scheme can be effective
if the public is unaware of the benefits and limitations of the scheme because
unrealistic expectations can undermine a deposit insurance system and
contribute to financial instability.” In a goodwill message, CBN Governor
Professor Charles Soludo, explained that for deposit insurance schemed to
succeed, “it must be properly designed, well implemented, complemented
with other measures and understood by the public.” He described deposit
schemes as consumer protection schemes, which are linked to the presumed inability
of ordinary depositors to monitor the risk of banks where they placed their
deposits and that they are capable of stabilising banks’ deposit base.
Soludo said, however, that the scheme could create
moral hazards on the part of operators unless they are combined with market and
regulatory discipline; and good corporate governance.
