The Nigerian Insurance Deposit Corporation (NDIC) has announced an increase in the maximum deposit insurance coverage for Deposit Money Banks from N500,000 to N5m.
Deposit insurance is the government’s guarantee that an account holder’s money at an insured bank is safe up to a certain amount.
The Managing Director of NDIC, Bello Hassan, announced this on Thursday, May 2, 2204, in Abuja at a press conference, stating that it takes effect immediately.
He said, “For Deposit Money Banks, the increase of the maximum deposit insurance coverage from N500,000 to N5,000,000, would provide full coverage of 98.98% of the total depositors compared with the current cover of 89.20%. In terms of the value of deposit covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37% compared with the current cover of 6.31% of total value of deposits.
“The increase of the maximum deposit insurance coverage from N200,000 to N2,000,000, would provide full coverage of 99.27% of the total depositors compared with the current level of 98.76% and would increase the value of deposits covered by deposit insurance to 34.43% compared with 14.38% of total value of deposit, currently covered.
“The increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 would provide full coverage of 99.34% of the total depositors compared with the current 97.98% and would increase the value of deposits covered by deposit insurance to 21.04% compared with 10.77% of total value of deposit, currently covered.”
Hassan additionally mentioned that increasing the maximum deposit insurance coverage for primary mortgage banks from N500,000 to N2,000,000 would ensure full coverage for 99.99% of total depositors.
This adjustment would also elevate the value of deposits covered by deposit insurance to 43.10% of the total deposit value, compared to the current 40.60% coverage.
Furthermore, the Corporation has enhanced the maximum pass-through deposit insurance coverage for subscribers of Mobile Money Operators from N500,000 to N5,000,000 per subscriber.
Boosting Confidence and Enhancing Financial Security for Nigerian Bank Customers
The initiative from NDIC to increase the deposit insurance coverage for bank customers from N500,000 to N5,000,000 is a significant move poised to have several compelling benefits from enhancing protection for bank depositors, to facilitating financial inclusion, and mitigating bank runs.
The primary objective of deposit insurance is to safeguard the hard-earned money of depositors. By raising the insured amount, the NDIC ensures that eligible depositors are better protected in case of bank failure. Now, up to N5 million of their deposits are guaranteed, providing peace of mind and bolstering confidence in the banking system.
Financial inclusion remains a critical goal for any economy. With the expanded coverage, more Nigerians fall under the protective umbrella. As individuals become aware of the increased insurance limit, they are encouraged and incentivised to save their money in licensed banks. This contributes to a more inclusive financial landscape, benefiting both depositors and the overall economy.
Bank runs, commonly known as the process in which panicked depositors rush to withdraw funds, can be destabilising to financial institutions. By raising the insurance coverage, the NDIC aims to prevent such scenarios. When depositors know their savings are insured up to N5 million, they are less likely to participate in mass withdrawals during times of uncertainty. This stability is crucial for maintaining trust in the banking sector.
The move is a positive step toward building a resilient financial system. It aims to not only protect depositors but also contributes towards the overall health of Nigeria’s banking industry.
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