THE NIGERIA DEPOSIT INSURANCE

CORPORATION: THE JOURNEY SO FAR

BY

G. A. OGUNLEYE (OFR)
MANAGING DIRECTOR CHIEF EXECUTIVE OFFICER NDIC

1.0 INTRODUCTION
It is with great delight that I welcome you to this very important
meeting. We at the NDIC realize that the success of a deposit
insurance scheme, depends to a great extent on the level of public
awareness about the scheme. Obviously, the media is best equipped
to correctly and adequately inform the public about NDIC’s activities.
The need for cooperation and collaboration between the NDIC and
the media, with a view to engendering public confidence in Nigeria’s
financial system, cannot be overemphasized. The need to nurture
this relationship, has led us at the NDIC to hold annual workshops
with Business Editors and Finance Correspondents. This meeting
constitutes part of our efforts to foster understanding between the
NDIC and the media.

To refresh your memory, I would like to remind you that a Deposit

Insurance Scheme (DIS) is a financial guarantee to depositors,
particularly the small ones in the event of a bank failure. A DIS is

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one of the components of the financial safety net. Other components
of the safety net are:
a. Effective Supervision; and
b. Lender-of-last-resort facility by a central bank to provide
temporary liquidity support to solvent depository institutions.

It is equally important to indicate at this juncture that a DIS is

different from a conventional insurance in several respects.
Below are some of the differences:
a. A DIS is a regulatory tool aimed at ensuring the safety,
soundness and stability of a nation’s financial system, thereby
protecting the macro-economy at large. A conventional
insurance policy, on the other hand, is designed only to protect
the micro interest of the policyholder.
b. A DIS is usually a tripartite agreement involving the deposit
insurer, the insured institutions and the depositors whereas a
conventional insurance is a mutual agreement between the
insurance company and the insured.
c. Under a DIS, the insured institution pays the premium while the
beneficiary of the protection offered is the depositor who does
not pay any premium. In the case of conventional insurance,
the beneficiary, who is the insured, pays the premium.
d. Under a DIS, the premium paid may or may not reflect the
underlying risks harboured by the institution paying the
premium. This is unlike what obtains in a conventional

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 insurance arrangement where the premium paid necessarily
reflects the perceived level of risk inherent in the insured
person.
e. Best practice indicates participation in a DIS to be compulsory,
whereas under a conventional insurance arrangement,
participation is generally voluntary.

2.0 NDIC AND ITS FUNCTIONS

The Nigeria Deposit Insurance Corporation (NDIC) was established
in 1988 as an explicit deposit insurance scheme under the Nigeria
Deposit Insurance Corporation Decree No 22 of 1988 now Cap. 301
Laws of the Federation 1990 as amended. Section 1(1) of the NDIC
Act provides for the establishment of the NDIC as a body corporate
with perpetual succession and a common seal. The NDIC
commenced operations in March 1989.

The primary goal of the NDIC is to maintain stability and public

confidence in the banking sector by guaranteeing payments to
depositors in the event of failure of insured institutions as well as
promoting safe and sound banking practices through effective
supervision. To achieve this goal, Section 5 of the NDIC Act states
the key functions of the Corporation as follows:
a. Insuring all deposit liabilities of licensed banks and such other
deposit taking financial institutions operating in Nigeria;

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 b. Giving assistance in the interest of depositors, in case of
imminent or actual financial difficulties of banks particularly
where suspension of payments is threatened;
c. Guaranteeing payments to depositors in case of imminent or
actual suspension of payments by insured banks or financial
institutions up to the maximum amount as provided for in
Section 26 of this Act;
d. Assisting monetary authorities in the formulation and
implementation of banking policy so as to ensure sound
banking practice and fair competition among banks in the
country;
e. Pursuing any other measures necessary to achieve the
functions of the Corporation provided such measures and
actions are not repugnant to the functions of the Corporation.

From the foregoing, it can be seen that NDIC was designed as a Risk
- Minimizer with powers and responsibilities to insure deposits,
supervise insured institutions and provide orderly mechanism for
failure resolution and not as a Pay-box. In that regard and in order
to achieve its objectives, the Corporation presently performs four
main roles :
< it insures the deposit liabilities of all licensed banks. Licensed
community banks and primary mortgage institutions would soon
enjoy this service;

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< it supervises the activities of all insured institutions through off-site
and on-site examinations alongside Central Bank of Nigeria (CBN);
< in conjunction with the CBN, the NDIC also resolves distress in the
industry whenever it occurs; and
< it acts as liquidator and receiver of any failed bank.

3.0 ACHIEVEMENTS OF THE NDIC

For ease of comprehension, the achievements of the Corporation has
been broadly divided into operational and other achievements

3.1 OPERATIONAL ACHIEVEMENTS

These achievements can be brought into focus when examined
within the context of the Corporation’s activities in the discharge of
its mandate. These activities include the following:

a. Deposit Guarantee
As a deposit insurer, the Corporation guarantees payment to
depositors in the event of failure of an insured bank. In that regard,
the Corporation had paid about N3.3 billion insured deposits out of
N5.2 billion total insured amount as at the end of December, 2003,
representing about 63% of total insured claims to the depositors of
34 banks in liquidation. This development has no doubt, gone a long
way in engendering depositors’ confidence in the nation’s banking
system.

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 Having operated the scheme for over a decade, and in view of some
developments in the macro-economy in general and the financial
services industry, in particular, the Corporation observed that some
of the design features of the Deposit Insurance Scheme (DIS)
needed a review. Accordingly, a study on the appraisal of our
deposit insurance practice was carried out in 1999. One of the major
findings of the study was the inadequacy of the level of deposit
insurance coverage which was set in 1988 at N50,000.00. The study
found that the maximum insurance limit set in 1988 had become
inadequate as a result of inflation, depreciation of the local currency
and changes in the per capita income level of the country. In that
regard, the Corporation proposed an upward review of the insurance
limit from N50,000.00 to N100,000.00. The proposal is part of the
amendment of the NDIC Act which is before the National Assembly.

b. Depositors’ Protection Through Supervision

The enhancement of supervisory capacity through focussed training
and acquisition of relevant tools is being vigorously pursued by the
Corporation. In that regard, more staff in the on-site and off-site
supervision departments of the Corporation have been exposed to
new techniques of banking supervision. Similarly, the existing tool
for off-site surveillance, Bank Analysis System (BAS), has been
enhanced to mitigate some of the problems associated with off-site
supervision in our system. In particular, staff of various grades have
benefited from training organised by reputable foreign institutions

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 such as the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of Comptroller of the Currency, Financial Stability
Institute, Financial Services Authority of UK, etc. The purpose is to
expose staff on latest techniques and developments in banking
supervision and financial services industry.

Given the key role of information technology in processing product

innovation, service delivery and risk transmission, we engaged the
services of Andersen Consulting to provide IT examination skills for
our Bank Examiners and Internal Auditors. The training focused on
Audit Command Language (ACL) and CAAT. The quality of IT
Examination by NDIC has improved considerably as acknowledged by
the Examined Banks.

Furthermore, the annual Bank Examiners Conference was introduced

in the year 2000 as a forum for NDIC Examiners to brainstorm on
emerging challenges in the financial services industry and to design
strategies for meeting such challenges.

c. Payment of Liquidation Dividend to Depositors

In addition to the payment to insured depositors of the closed banks,
more and more uninsured depositors have continued to be paid
liquidation dividends. As at the end of January, 2004, the
Corporation had declared an aggregate dividend of N9.9 billion for 32
out of 34 banks in liquidation and paid N5.3 billion. The balance

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 which are with the Agent banks are yet to be collected by the
uninsured depositors. Of the 32 banks, a final dividend of 100
percent of total deposits had been declared for 9 banks, indicating
that all their depositors had fully recovered their deposits. The banks
were:
a. ABC Merchant Bank Ltd;
b. Alpha Merchant Bank Plc;
c. Amicable Bank of Nigeria Ltd;
d. ICON Ltd (Merchant Bankers);
e. Kapital Merchant Bank Ltd;
f. Nigeria Merchant Bank Ltd;
g. Pan African Bank Ltd;
h. Premier Commercial Bank Ltd; and
i. Rims Merchant Bank Ltd.

We hope to add the 10th bank very soon.

d. Payment of Liquidation Dividend to General Creditors

Liquidation dividend had also been paid to some general creditors of
some of the banks. For example, the general creditors of Pan African
Bank (in-liquidation) had been paid a total of about N167.25 million
as at January 2004. The amount represented about 67% of the total
amount declared as liquidation dividend to the creditors of the bank.
Similarly, the general creditors of Rims Merchant Bank (in-liquidation)

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 had been paid the sum of N139.77 million as at the end of June,
2003. Likewise, 100% dividend was declared for Amicable Bank’s
Preferred Creditors. Furthermore, the shareholders of Nigeria
Merchant Bank (in-liquidation), i.e Ministry of Finance Incorporated
and United Bank for Africa Plc, were paid liquidation dividends
totalling N620 million. Similarly, the sum of N293 million due to
Rivers and Balyesa State Governments as former owners of Pan
African Bank (in-liquidation) is ready for collection.

It is important to stress at this juncture that the role of the

Corporation as Liquidator is separate and distinct from the other
roles. The Companies & Allied Matters Act of 1990 as amended also
regulates the duties of a Liquidator. To this end, separate accounts
are kept for every bank in liquidation, independent external auditors
are appointed to audit the accounts and regular statutory returns are
sent to the Corporate Affairs Commission (CAC) and the CBN.

e. Debt Recovery
In order to encourage debtors of failed banks to repay their debts,
balances as at the date the banks were closed were frozen. All the
interest accrued after liquidation were reversed while several
requests for interest waivers were favourably considered. In fact, in
2000, post liquidation interest amounting to N5.16 billion were
written off which made aggregate loan balances to reduce from
N35.37 billion to about N30.21 billion. All the above strategies had

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 assisted in the area of debt recovery. As at the end of December
2003, a total of about 4.9 billion had been recovered from the
debtors of the closed banks. In the same vein, 12 NEXIM projects
amounting to N81.4 million and 43 NERFUND projects amounting to
N124.3 million were returned to the funding agencies.

f. Effective Collaboration with Other Regulatory Agencies

i. The Corporation has always recognized that there must exist an
effective collaboration between the deposit insurer and other
regulatory agencies. Hence, it has a cordial relationship with
the apex regulatory organ in the country, i.e. the CBN. This
has been done through the planning and scheduling of bank
examination, joint deliberation at both the technical and
executive levels on how to evolve effective regulation of banks
and other deposit taking financial institutions. Similarly, the
Corporation has been participating very actively in the activities
of the Financial Services Regulation Coordinating Committee
(FSRCC). The end result is improved performance for the
Corporation.

ii. Similarly, the Corporation is collaborating with the Economic

and Financial Crime Commission (EFCC) in its bid at stemming
the tide of economic and financial crimes (most of which are
committed through the banking system) in the country. The
celebrated $242 million Brazilian bank scam currently being

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 prosecuted was reported to the EFCC by the Corporation in
March, 2003. Also, the NDIC investigations had assisted the
Federal Inland Revenues Service (FIRS) to recover, in 2003
over N700 million Value Added Tax and Withholding Tax which
were diverted/converted by some banks.

3.2 OTHER ACHIEVEMENTS

a. International Networking
The International Association of Deposit Insurers (IADI) was formed
in May 2002 in Basle, Switzerland with NDIC as a founding member.
The Managing Director/CEO is a member of the Executive Council.
He is also the Chairman of the Africa Regional Committee of the
Association. The vision of the Association is “sharing deposit
insurance expertise with the world.” The forum provides
opportunity for discussing leading issues in deposit insurance, net-
working and information sharing.

Furthermore, the Corporation has in recent times been hosting visits

by personnel from foreign deposit insurance organisations and it has
also been sending its own staff to advanced countries with Deposit
Insurance Schemes (DISs) to learn from their experiences.

With its membership of the IADI and other efforts at reinforcing

cooperation and exchange between deposit insurance organisations
of different countries, the Corporation is currently well positioned to

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 partake in the sharing and exchange of expertise and information on
deposit insurance issues.

b. Review of Governance Structure

The Corporation recognised that apart from massive macro-economic
instability, no single factor could contribute more to institutional
problems than poor corporate governance which could result from an
ill-conceived governance structure, among others. In order to
address this issue, the Corporation carried out the following:

Organisation Review
In order to evolve a more efficient organisation that will focus more
on its mandate and optimize human resource utilization, some
organisational reviews were carried out. In that regard, Departments
were re-aligned and staff redeployed to enhance efficiency.
Furthermore, a new Department, Special Insured Institutions
Department (SIID), has been established to facilitate the extension of
the deposit insurance coverage to the recently licensed community
banks and primary mortgage institutions (PMIs) as mandated by its
statute.

c. Management Retreat
Having identified the challenges facing the Corporation under a
democratic setting, a management retreat was held to make for
increased productivity, creativity, innovation and sharper focus so

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 that the Corporation could chart its strategic direction. At the end of
the retreat, a number of strategies were evolved, including the
Corporation’s Vision and Mission Statements. The Vision and Mission
statements were primarily articulated to guide the performance of
the Corporation. It should be noted that the Corporation had no
articulated vision and mission statements until Year 2000. The
articulated statements are as follows:

VISION STATEMENT
“Our vision is to run an efficient institution that is responsive to the
needs of its stakeholders whilst promoting stability and public
confidence in insured financial institutions”

MISSION STATEMENT
“Our mission is to protect depositors through effective supervision of
insured institutions, provision of financial/technical assistance to
eligible insured institutions, prompt payment of guaranteed sums and
orderly resolution of failed insured institutions”

d. Establishment Planning Committee

After a decade of existence, it became imperative that a number of
human resource issues needed to be reviewed. Therefore, an
Establishment Planning Committee (EPC) was constituted to
undertake a review of the human resources capabilities, operational
structure and processes. The outcomes of the Committee’s work

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 included the adoption of the new performance appraisal instrument
for the Corporation; a review and institutionalisation of an enduring
corporate culture; a well defined set of departmental functions and
objectives which are now in tandem with the mandate of the
Corporation; a logical derivation of departmental manning levels; and
a well structured promotion policy, among others.

e. Support to Institutions of Higher Learning

The Corporation has approved the sum of N130 million to support
projects in 13 universities (that is 2 universities in each of the 6 geo-
political zones and the University of Abuja. We are in the process of
disbursing the funds for the approved projects.

4.0 CHALLENGES FACING THE NDIC

While the Corporation has recorded reasonable achievements since it
was established in 1989, the implementation of the scheme has not
been without some challenges. Some of these challenges are
discussed below.

4.1 ISSUES CONFRONTING NDIC AS A DEPOSIT INSURER

The challenges faced by the NDIC in its capacity as deposit insurer
include:

a. Public Perception of the Deposit Insurance Scheme (DIS)

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 The concept and operational modalities of the DIS are still being
confused with those of conventional insurance business for protection
against fire, marine losses, motor insurance, life insurance, et cetera.

This confusion constitutes the reason for some of the challenges

facing the scheme, particularly in the areas of coverage, mandatory
nature of the scheme and even the premium rate charged. The
Corporation is not a conventional insurance company but a
supervisory institution offering explicit deposit insurance protection to
less financially sophisticated depositors, especially the small ones,
against the loss of their funds when a bank fails as earlier clarified in
this paper.

b. The Incidence of Distress in Other Deposit-taking

Institutions
Although the incidence of distress among insured banks has, to a
large extent, been contained there is still the need to address
potential distress in the system as well as look beyond these
institutions and extend similar treatment to other distressed deposit-
taking institutions as can be found amongst the Community Banks
(CBs) and the Primary Mortgage Institutions (PMIs). This is because
of the interdependence of these segments of the banking system on
the (mainstream) insured banks.

C. Inadequate Information Disclosure

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 Banking supervision remains an integral part of the mechanism for
ensuring safe and sound banking practices and hence for ensuring
depositors’ protection by a DIS that is designed to serve as a risk-
minimiser. The Corporation has noted with serious concern the
integrity problem with the data supplied by the insured banks and
which serve as input for monitoring their health status. The quality
of disclosure has been undermined by this lack of transparency to the
extent that off-site analysis could not provide reliable diagnosis of
emerging problem thus necessitating more frequent on-site
examination, especially for problem banks.

d Depositor Apathy and Ignorance

Once a bank is closed, insured depositors are expected to file claim
for their insured deposits with the NDIC within eighteen (18) months.
However, in spite of the various public enlightenment measures
adopted by the NDIC, many insured depositors are yet to file their
claims. While the low depositors’ response could be partly attributed
to the fact that some of them had small deposit balances with the
closed banks, ignorance and apathy on the part of many depositors
could have played a significant role. In order to address this
problem, we had to mount an awareness campaign and we solicit
your support in this regard.

e. Prompt Settlement of Guaranteed Deposits

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Deposit insurance guarantee is primarily intended to reimburse
insured depositors promptly when their banks fail. The insured
depositors need to be promptly reimbursed in order to cushion the
adverse effects of bank failure and to minimize the likelihood of
deposit runs on other banks, thus promoting public confidence and
stability of the banking system.

In practice, NDIC had not been able to achieve the desired target
period for settling insured deposit claims in many banks for a number
of reasons. The state of records of many of the closed banks,
especially those that closed their doors to the public for a longer
period of time before their licences were revoked, had made the
compilation of information very difficult and protracted. Some of the
banks were not fully computerised and had wide branch network.
For instance, the 26 banks closed in January 1998 had about 342
branches spread over 32 states and the Federal Capital Territory.

Recently, bank closing and liquidation exercises had also been

adversely affected by legal actions instituted by the owners of closed
banks. Liquidation exercise in Savannah Bank of Nigeria Plc (SBN)
and Peak Merchant Bank Limited could not be undertaken because of
protracted litigations. While insured depositors of Peak Merchant
Bank Limited are being paid, efforts to pay those of Savannah Bank
of Nigeria Plc had been frustrated by multiplicity of legal actions. In

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 fact, in the case of Savannah Bank, the Corporation, after issuing
notice to commence payment to insured depositors, had to suspend
the exercise in deference to court ruling.

f. Level of Deposit Insurance Coverage

The level of insurance coverage provided by most DIS is usually
limited. The coverage limit should be sufficient to protect small
depositors so as to prevent them from precipitating bank runs, but
not so excessive in order to maintain market discipline and minimize
moral hazards. Full coverage as advocated by some members of the
public should be avoided as it will create moral hazard and
undermine market discipline. With full coverage, bankers may be
encouraged to engage in high-risk ventures and mismanagement of
their banks, while the depositors may not have incentives to monitor
the financial conditions of their banks. Against this background, the
NDIC set the limit of the insured deposit at N50,000.00, which in
1988 was the industry average level of deposits held by about 80
percent of the depositors.

Nevertheless, coverage limits should normally be adjusted

periodically because of inflation, depreciation of the local currency
and growth of real income. It is in this regard that the Corporation
had proposed an upward review of the insurance limit from
N50,000.00 to N100,000.00. The review is part of the proposed

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 amendment of the NDIC Act 1988, which is before the National
Assembly for consideration.

4.2 ISSUES CONFRONTING THE NDIC AS A LIQUIDATOR

Some of the challenges faced by the Corporation here include:

a. Daily in Taking Resolution Actions

The success of any liquidation exercise largely depends on the state
of the records and the value of the assets to be realised. Where
resolution actions are not taken promptly by the Regulatory
Authorities and distressed banks are allowed to remain open for a
long period, the value of the assets would rapidly deteriorate while
the state of the records would worsen. In the past, many of the
distressed banks that were closed had no reliable records and most
of their assets were worthless. It had, therefore, made realisation of
assets not only difficult but also protracted.

b. Legal Constraints
The legal challenges faced by the NDIC include:
i. Inadequate Legal Provisions

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 A deposit insurer, while acting as a liquidator of closed bank, is
supposed to be vested with special powers. The special powers
are to expedite the liquidation process in order to maintain
confidence and stability of the banking system as well as
ensure cost effectiveness of the liquidation process. Special
powers help to facilitate higher levels of asset realization, which
could minimize losses to the Deposit Insurance Fund.

Contrary to best practices, NDIC, with effect from 1999, had to

apply to the Federal High Court (FHC) to be appointed as a
liquidator. NDIC is also subject to the general companies
winding-up rules, which, among others, require notice to be
issued and advertised before appointment. The cases of
Savannah Bank of Nigeria and Peak Merchant Bank Limited are
well known. The legal process has been protracted with the
attendant consequences on the liquidation process. Although
efforts are being made to amend the relevant banking
legislation, the procedure for amending laws appears
protracted.

ii. Legal Actions by Owners of Closed Banks

In spite of the forbearance of the Regulatory Authorities, suits
have been brought by owners of banks against CBN/NDIC on
the revocation of their banks’ licences and appointment of
liquidator. The damage that is associated with protracted

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 litigation is incalculable. For instance, the harrowing
experience of depositors of Rims Merchant Bank whose licence
was revoked in December, 2000, but the revocation challenged
in January 2001 only for the court to throw out the suit in
March 2003, after two years of delay, could be best imagined.
However, but for the steps taken by the Corporation in
conserving the assets of Rims Merchant Bank Limited, the
depositors and creditors would have been left with nothing at
the end of the day.

iii. Cumbersome and Protracted Judicial Process

The existing court processes and procedures appear slow and
cumbersome and therefore cannot assist in the prompt
recovery of debts owed to banks and address the financial
malpractices in banks. It is of concern to note that since the
dissolution of the Failed Banks Tribunal and the transfer of the
cases to the FHC, no conviction had been secured in any
criminal case. Series of objections were being raised before the
substantive matters were heard and the fiat granted to private
prosecutors by the Attorney General of the Federation was
being challenged in spite of the Supreme Court ruling that the
Attorney General Of the Federation (AGF), was competent to
issue such fiats.

iv. Uncooperative Attitude of Bank Staff and Management

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 Some members of management and staff of the recently closed
banks deliberately refused to cooperate with the liquidator
during the closing operations. Some issued threats to their
colleagues who were cooperating with NDIC while others
sponsored media publications against the Regulatory
Authorities. These attitudes make the closing operations
difficult and protracted.

v. Recovery of Debts Owed Failed Banks

Despite the tremendous efforts made in recovering the loans
and advances of the closed banks, no appreciable level of
recoveries were achieved. Some of the constraints militating
against recoveries of debts include business failures,
unwillingness to honour obligations and many of the loans were
not only unsecured but also fraudulently granted. Instead of
seeking ways to settle their debts, some debtors have
challenged the jurisdiction of the FHC to adjudicate in matters
between them and the closed banks. The Supreme Court
ruling on that issue is expected on 23rd April, 2004. Unless
debts can be expeditiously recovered, depositors and creditors
cannot be paid their claims in full, which has serious
consequence for the confidence and stability of the banking
industry.

vi. Contribution of Failed Bank Tribunals

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 Under the Failed Banks (Debt Recovery and Financial
Malpractices in Banks) Act 1994, Failed Bank Tribunals were
established. The Tribunals facilitated substantial recovery of
debts owed to banks while some directors/bank officials, who
were found to have been involved in financial malpractices,
were subjected to due process of the law. The activities of the
Tribunals contributed immensely to sanitizing the banking
sector.

It may interest you to note that many of those convicted by the

Tribunals turned round to challenge their convictions with the
advent of democracy. But we are comforted that to date none
of the decisions of the Tribunals had been overturned by the
higher courts. Indeed, we have the case of a person (Nzekwesi
Vs Federal Republic of Nigeria) who challenged his conviction at
the Court of Appeal (Kaduna Judicial Division), but the Court of
Appeal ruled, in December 2002, that the Tribunal ought not to
have given him an option of fine and directed that the person
should be arrested and sent to prison to serve his jail term.

It is our hope that the EFCC would fill the vacuum created by
the scrapping of the Tribunals.

vii. Disposal of Physical Assets

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 NDIC has achieved appreciable success in the disposal of
physical assets of closed banks. Nevertheless, there are few
prime landed properties yet to be sold. The inability to dispose
of these properties is attributable to some problems. The title
documents on some of the assets are subject of litigation while
some of them are located in towns where there is low demand
for such large developed buildings.

4.3 Other Challenges

In addition to the above challenges, the advent of democracy and the
dictates of best practices have added some further dimensions to the
challenges faced by the NDIC. Some of these include:

a. Threat of Political Interference

Some high profile politicians who have significant equity
interest in banks have sought to use political leverage to
reverse supervisory or enforcement actions taken against their
banks. But for the insistence of the national leadership that
due process should be adhered to, the decisions of the
regulatory authorities which were based on objective,
professional and transparent criteria would have been
overturned. Such threats of political interference may affect
the quality of regulatory decisions with its adverse effects on
the safety and soundness of the nation’s banking system and
by extension, on the stability of the financial system.

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b. Threat to Depositors’ Fund Arising from Possible
Political Affiliation by Operators
The threats that depositors’ fund could be used to make
political loans remains real under a democratic regime. Such
loans are not likely to be re-paid, especially, if victory is not
achieved at the end of the election. Such risks could threaten
the safety of depositors’ fund. This phenomenon becomes an
issue of serious concern to the NDIC because of the latter’s role
as deposit insurer.

c. Agitation for Adopting Risk-based Premium Assessment

System
The Corporation is aware of the desire of some operators for
risk-based premium assessment. However, our cost - benefit
analysis favours the flat rate method currently in use. In spite
of the perceived equitable allocation of the funding of the DIS
attributed to the risk-based assessment approach, more
countries still use the flat rate method. However, relevant
amendment to the existing law has been proposed to facilitate

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 the adoption of the risk-based premium assessment approach
in future.

5.0 CONCLUDING REMARKS

From the foregoing, it could be observed that NDIC has been alive to
its responsibilities since its inception. In performing its functions,
however, the Corporation has had to face some daunting challenges
some of which have been highlighted in this paper.

Thank you for your attention and I await your questions and
comments on issues that require further clarification with respect to
the activities of the Corporation.

February 18, 2004.

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