FAQs

Deposit Insurance is a system established by government to protect depositors against the loss of their insured deposits placed with insured financial institutions in the event that a member institution is unable to meet its obligations to depositors.

Deposit insurance ensures that the depositor does not lose all his/her money in the event of a bank failure. It also engenders public confidence in, and promotes the stability of, the banking system by assuring savers of the safety of their funds. Deposit insurance makes bank failure an isolated event, hence it eliminates the danger that unfounded rumours will start a contagious bank run.

Deposit-taking financial institutions differ from industrial and commercial enterprises in that they depend mainly on deposits mobilised from the public for their working capital and are highly leveraged. If a financial institution is unable to meet its obligation to depositors due to operational problems or business failure, anxious depositors may cause a run on the bank as well as other healthy institutions. The stability of the financial system and social order in general would also be at risk. Moreover, most depositors have small deposit amounts and therefore cannot cost-effectively collect and analyse information on the financial institutions they do business with.

The government has therefore established a deposit insurance mechanism, under which the NDIC is empowered to provide protection for small depositors and contribute to financial and social order.

Deposit-taking financial institutions play an important role in regulating the supply and demand of capital and promoting economic development. They accept deposits, which are a highly liquid form of debt, yet most of their assets are tied up in long-term illiquid forms. Deposit-taking financial institutions therefore have a hard time realising their assets for cash when their business runs into problems, so depositors may lose confidence, triggering a bank run.

The limited liquidity of deposit-taking financial institutions also encourages a perception among depositors that making an early withdrawal is the only way to get their money back. This fear can exacerbate a bank run and also have a chain reaction that leads to runs on other banks as well.

Hence, the Deposit Insurance System (DIS) is usually established to prevent this by providing assurance of deposit repayment to the great majority of depositors. In doing so, the system also prevents systemic risk and ensures the stability of the financial system.

The NDIC is the agency empowered to administer the DIS in Nigeria, thereby protecting depositors of deposit-taking financial institutions. The NDIC provides incentives for sound risk management in the Nigerian banking system as well as contributes to the stability of the financial system.

The NDIC manages five Insurance Funds:

• Deposit Insurance Fund (DIF) — for DMBs
• Special Insured Institutions Fund (SIIF) — for MFBs and PMBs
• Non-Interest Deposit Insurance Fund (NIDIF) — for Non-Interest Banks
• Non-Interest Special Insured Institutions Fund (NISIF)
• Payment Service Banks Insurance Fund (PSBIF)

No. Deposit insurance is different from conventional insurance in several respects:

• Purpose: Deposit insurance 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. Conventional insurance is designed only to protect the micro-interest of the policyholder.
• Structure: Deposit insurance is a tripartite arrangement involving the deposit insurer, the participating institutions and the depositors. Conventional insurance is a bilateral agreement between the insurance company and the insured (policyholder).
• Premium payment: Under deposit insurance, the participating institution pays the premium while the direct beneficiary is the depositor who pays nothing. In conventional insurance, the beneficiary (the insured) pays the premium.
• Participation: Best practice dictates that participation in deposit insurance should be compulsory. Participation in conventional insurance is generally voluntary.
• Coverage: Best practice prescribes that deposit insurance coverage should be limited. Conventional insurance coverage may be full.

Insured institutions are all deposit-taking financial institutions licensed by the Central Bank of Nigeria (CBN):

• a) Deposit Money Banks (DMBs)
• b) Microfinance Banks (MFBs)
• c) Primary Mortgage Banks (PMBs)
• d) Non-Interest Banks (NIBs)
• e) Payment Service Banks (PSBs)

Membership is compulsory as provided under the NDIC Act No 33 of 2023.

It is an arrangement where the deposit insurer extends deposit insurance coverage to Pool accounts or Trust accounts domiciled in deposit-taking financial institutions and operated by Mobile Money Operators (MMOs).

Pool accounts and Trust accounts have many contributors to the funds. Rather than insure the pool account up to the maximum as provided by law, the balance of each contributor in that pool account is insured. The NDIC will provide deposit insurance coverage to subscribers of MMOs using the pass-through deposit insurance concept.

The conditions for eligibility are as follows:

• i. The relationship between the MMOs and their subscribers shall be based on a Bare Trust arrangement.
• ii. MMOs must take Fidelity Bond Insurance.
• iii. The records of the Trust (pool) account must clearly indicate that the funds belong to individual subscribers and not the agent or custodian.
• iv. The identities of the subscribers must fulfil all KYC requirements specified by the CBN.
• v. The interests of the subscribers must be disclosed properly in records maintained by the insured institutions, MMOs and Agents.

The subscribers of MMOs will be insured up to the maximum coverage level of ₦5,000,000 (Five Million Naira) per subscriber per DMB, or the applicable coverage level for depositors in line with the NDIC Act.

No. MMOs are not covered under the pass-through deposit insurance, but their corporate account in the bank is covered up to the maximum insured amount.

All grievances or queries concerning Pass-Through Deposit Insurance coverage can be channelled through:

• Toll-free line: 0800-6342-4357 (0800-NDIC-HELP)
• Email: helpdesk@ndic.gov.ng
• Email: info@ndic.gov.ng

• Agent: An individual or organisation authorised by a MMO to transact business on its behalf in certain locations.
• Custodian: A MMO with the responsibility for safeguarding, holding and managing subscribers' funds on their behalf. It is usually a bank licensed by the CBN. The MMO exercises legal authority over the funds.

An account opened and operated by a MMO in an insured institution on behalf of its subscribers.

A situation where each beneficiary of an account holds a separate share and is entitled to protection within the parameters of the scheme.

The MMOs shall maintain an account in an insured institution on a trust basis that clearly indicates the interest of all beneficiaries in the Trust (pool) accounts.

To identify insured financial institutions:

• Look out for an NDIC decal (sticker) displayed in the Head Offices and Branches of all insured institutions
• Call the NDIC Help Desk Line: 0800-6342-4357 (0800-NDIC-HELP) or 234-9-4601030
• Visit the website: www.ndic.gov.ng

The following financial institutions are not covered by the NDIC:

• a. Development finance institutions (e.g. Bank of Industry, Federal Mortgage Bank, Bank of Agriculture, Infrastructure Bank)
• b. Discount Houses
• c. Finance Companies
• d. Investment Firms
• e. Unit Trusts / Mutual Funds
• f. Insurance Companies
• g. Pension Fund Administrators (PFAs)
• h. Stockbroking firms
• i. Development Bank of Nigeria

Not all deposits in insured institutions are covered by the NDIC.

Insured deposit types typically include savings, current, domiciliary and term/fixed deposit accounts of individuals and legal entities held in their own right and capacity.

Not insured: insider deposits (directors, officers, related parties), counter-claims by the insured institution against the depositor, deposits used as collateral, and deposits held by other insured institutions in their own name.

Deposit Insurance covers the balance of each eligible account, naira-for-naira, up to the insurance limit, including principal and any accrued interest up to the date of the insured institution's closure.

The NDIC insures bank deposits of natural persons as well as legal entities, whether they are from Nigeria or from any other country but resident in Nigeria.

Insured financial institutions are required to pay an annual premium to the deposit insurance system administered by the NDIC. The premium is assessed based on participating institutions' total assessable deposit liabilities as at 31st December of the preceding year.

The assessable deposit liabilities are total deposits with the exception of some deposits listed in Section 17(6)(a) of the NDIC Act 2023. The NDIC currently adopts the Differential Premium Assessment System (DPAS), which allows premium assessment based on the risk exposure of the individual bank.

The NDIC protects the Insurance Fund by:

• Keeping it with the CBN
• Investing the Fund in safe but liquid financial instruments such as:
  • Treasury Bills
  • Federal Government Bonds
  • Instruments of similar nature

No. The NDIC finances all its overhead and administrative expenses from its investment income. The main source of income is proceeds from investment of the insurance fund in securities issued by the Federal Government.

The insurance fund is used only for:

• Paying insured deposits when an insured institution fails
• Granting financial assistance to deserving participating institutions

The NDIC does not enjoy subvention from the government.

The NDIC protects bank depositors through:

a) Deposit Guarantee

The NDIC guarantees payment of deposits up to:

• ₦5,000,000 per depositor in DMBs and PMBs
• ₦2,000,000 per depositor in MFBs

in the event of failure of a participating financial institution.

b) Bank Supervision

The NDIC supervises banks to protect depositors, ensure monetary stability and an effective payment system, and to promote competition and innovation in the banking system.

c) Failure Resolution

The NDIC is empowered to provide financial and technical assistance to failing or distressed banks. Financial assistance can take the form of loans, loan guarantees, or accommodation bills. Technical assistance may include:

• Take-over of management and control
• Change in management
• Assisted merger with another viable institution

The NDIC relies on deposit account records kept by a failed bank as well as on the proofs presented by depositors.

No. Under the deposit insurance system, eligible deposit accounts in insured institutions are automatically insured at no charge to any depositors.

Insured deposit is payable only when:

• An insured institution has been closed as a result of action taken by the Central Bank of Nigeria, or
• There is a suspension of payment by a bank

The NDIC may pay depositors through any of the following methods:

• Transfer to a financial institution with instructions to effect payments to depositors
• Cheques issued up to the insured limit, collected at NDIC's designated centres (usually the closed bank's offices)
• Direct credit to the depositor's account via e-payment platform
• Purchase and Assumption (P&A) — a healthy bank assumes part or all of the deposit liabilities of the failed insured bank

The NDIC transfers an amount equivalent to the total insured deposits of a failed insured institution to another financial institution, enabling depositors of the failed institution to collect their entitlements from that institution.

Depositors collect insured sums by:

• Filing claims through completion of relevant forms provided by the NDIC
• Furnishing account documents such as unused cheque books, old cheque stubs, passbooks, fixed deposit certificates, etc.
• Providing valid identification such as:
  • National Identity Card
  • Driver's Licence
  • International Passport

After verification of ownership and account balance, the depositor is paid the insured sum by cheque or deposit transfer through an Agent Bank or Acquiring Bank.

The depositor must present:

• A Police report
• A sworn affidavit duly certified by a Court
• A valid identification document (National Identity Card, National Voters Card, Driver's Licence, or International Passport)

Yes. A depositor, if he/she wishes, can open an account with the transferee institution for the full amount or part of his/her deposit.

The primary mandate of the NDIC is to protect depositors. However, through supervision, the interests of creditors and shareholders are also protected. In the event of bank failure, creditors and shareholders could be paid liquidation dividends after depositors have been fully reimbursed.

A payment made to a depositor of a failed insured institution in excess of the insured sum. While insured sums are paid from the DIF, SIIF or NIDIF, liquidation dividends are paid from funds realised from the sale of the failed institution's assets and debt recoveries.

The current insured limits are:

• ₦5,000,000 per depositor in Deposit Money Banks (including Non-Interest Banks) and Primary Mortgage Banks
• ₦2,000,000 per depositor in Microfinance Banks (MFBs)

Coverage is limited to minimise moral hazard through excessive risk-taking by bank management and depositors. Unlimited coverage could constitute a perverse incentive for excessive risk-taking.

No. The main office and all branches are considered one institution. The accounts are added together and covered up to the maximum insured sum.

No. The maximum insurance limit is applicable independently to deposits in each participating bank. Accounts across multiple banks are insured separately up to the maximum insured sum per bank.

No. Deposit insurance is not increased merely by dividing funds among different types of deposits in the same institution. Demand, time and savings accounts held by the same depositor in the same right and capacity are added together and insured up to the maximum insured sum.

The NDIC Act of 2023 provides that, subject to stated conditions, part of the NDIC's surplus can be applied to reduce premium payable by insured institutions. The NDIC would also consider adopting differential premium assessment for MFBs and PMBs based on their risk profile.

No. Special funds such as donor funds or funds for onward disbursement to beneficiaries are excluded from assessable deposits. The onus is on the insured institutions to ensure proper classification of such funds in their books.

Yes. If each co-owner has personally signed a valid mandate card and has a right of withdrawal on the same basis as the other co-owners, the joint account and each individually-owned account are separately insured up to the maximum insured sum.

• If the combination of joint account holders differs, each account is insured separately up to the maximum insured limit.
• If the joint accounts are owned by the same combination of individuals, the accounts are added together and the total insured up to the maximum insured sum.

The depositors of the acquired insured MFB or PMB will continue to be insured up to a maximum of ₦2,000,000 in the aggregate with respect to deposits held in the same right and capacity.

Yes. However, notice is always given to depositors before termination of insurance. Depositors should verify that the MFB or PMB they are dealing with is insured and pays deposit insurance premium annually.

Yes. If the bank records indicate that a person is depositing funds in a fiduciary capacity (as Executor, Administrator, Guardian, Custodian, etc.), such funds are insured separately from the fiduciary's individually-owned account:

• Executor / Administrator accounts — insured as funds of the deceased's estate
• Guardian / Custodian accounts — insured as funds owned by the ward
• Testamentary accounts — insured as a form of individual account
• Revocable Trust accounts — the person who holds the power of revocation is considered the owner

The account is insured as an account of the principal or true owner. The funds are added to any other accounts owned by the true owner and the total is insured up to the maximum sum.

Yes. If the Company or Partnership is engaged in an independent activity, its account is separately insured up to the maximum insured sum. "Independent activity" means any activity other than one directed solely at increasing insurance coverage.

Yes. Owners of accounts exceeding the maximum insured amount will share, on a pro-rata basis, in any proceeds from the liquidation of the bank's assets with other general creditors, including the NDIC.

Yes. When acting as Liquidator, the NDIC is acting on behalf of all creditors of that institution and its obligation is to collect all loans promptly and efficiently along with other assets of the institution.

Purchase and Assumption (P&A) is a failure-resolution mechanism which involves purchasing the assets of a failed bank and assuming its liabilities by another healthy insured bank(s).

Open Bank Assistance (OBA) is a situation where a failing insured institution is assisted to continue operating on a going-concern basis. It may involve:

• Change in ownership and management
• Injection of fresh funds (equity and/or loan capital)
• Re-organisation, overhauling, staff and branch rationalisation

Yes. The following documents must be presented to the NDIC:

• A Letter of Administration
• A Probate from a Court of Law
• All other documents serving as proof of ownership of the account

A bridge bank is a temporary bank established and operated (usually by a deposit insurer) to acquire the assets and assume the liabilities of a failed bank until a final resolution is accomplished. It permits:

• Continuity of banking services to all customers
• Full protection of all depositors and creditors of the failed bank pending final resolution

A bridge bank is set up for a specified period within which the Deposit Insurer finds an interested investor.

The client of the defunct bank should contact the acquiring bank directly. In case of unresolved claims, contact NDIC through any of the channels listed in the Contact NDIC section.

Announcements are made through:

• Television, radio and newspapers
• NDIC posters at the Head Office and branches of the closed banks

The depositor should contact NDIC through any of the channels listed in the Contact NDIC section.

Sustainable banking is a value system which ensures that a bank's commercial activities benefit not only its staff and shareholders, but also its customers and the wider economy, while preventing or minimising undue effects on society and the natural environment. It encompasses:

• Preserving the environment and biodiversity for future generations
• Being cautious with natural resources and climate
• Guaranteeing human rights and a life in dignity for all people

Sustainable banking has many labels: corporate social responsibility, corporate responsibility, corporate citizenship, environmental and social governance.

In Nigeria, the Bankers' Committee (of which the CBN, NDIC and all banks are members) pledged to embrace sustainable banking and developed the Nigeria Sustainable Banking Principles (NSBP).

The NDIC plays two roles in sustainable banking implementation:

1. As a member of the Bankers' Committee, it is duty-bound to implement committee agreements.
2. As a supervisor, it ensures operators comply with the NSBP principles.

Key initiatives include:

• i. Set-up of a sustainability desk in the Managing Director's office
• ii. Set-up of a committee on sustainability to facilitate NSBP implementation
• iii. Implementation of energy-efficiency initiatives in all NDIC locations nationwide
• iv. Investment in ICT to drive work processes (Human Manager, Dispatch Management System, Document Management System, E-learning, etc.)
• v. Constitution of an Inter-Departmental Committee to drive a paperless environment — improving productivity, reducing costs, and reducing environmental impact
• vi. Promotion of Financial Inclusion and Financial Literacy, collaboration with stakeholders, integration of sustainability principles in on-site examination processes, and staff training on environmental and social risks

FinTech represents the intersection of financial services and technology — technology-enabled innovation in financial services. FinTech can refer to technology companies, start-ups, or traditional financial services providers. Examples include the use of smartphones for mobile banking and investing services to make financial services more accessible to the general public.

Open banking refers to an emerging idea in financial services and fintech which stipulates that banks should allow third-party companies to build applications and services using the bank's data. Its benefits include:

• New revenue streams
• Improved customer experience
• Enabling financial inclusion

A cryptocurrency is a medium of exchange (like normal currencies such as Naira and USD) but designed for exchanging digital information through cryptography. Unlike centralised banking (e.g. the CBN), governments have no control over cryptocurrencies as they are fully decentralised. The first cryptocurrency, Bitcoin, was created in 2009.

No. The Central Bank of Nigeria (CBN) does not recognise Bitcoin or any other form of cryptocurrency as legal tender in the country.

Blockchain is a form of Distributed Ledger Technology (DLT). It maintains records of all cryptocurrency transactions on a distributed network of computers with no central ledger. It is the technology that made the first digital currency, Bitcoin, possible.

A Single Customer View is an aggregated, consistent and holistic representation of all data known by an organisation about its customer.

In terms of deposit insurance, it is the collation of all information on a depositor (all bank information across every bank in the country) considered as a single identity. In Nigeria, the Bank Verification Number (BVN) system has created a database where all bank customers are captured and their accounts are linked — aiding the speed of payout of insured sums to depositors after an insured institution is liquidated.

No. There is no duplication — rather, collaboration exists between the two agencies:

• A framework exists for effective collaboration through joint committees on supervision at both executive and technical levels
• Banks are shared for examination purposes on an annual basis and examination reports are exchanged
• Joint supervisory examinations are conducted when the need arises

The involvement of the NDIC in bank supervision has reduced the examination cycle from about once every two years to once a year.

The NDIC supports financial inclusion through:

• Guaranteeing deposits, especially for small savers
• Consumer protection — conducting supervision of insured institutions and prosecuting erring Directors and Management
• Consumer protection desks to promptly respond to complaints received against banks and other financial institutions

• Publishes and distributes books on deposit insurance and banking to enlighten the public
• Distributed a book on basic knowledge of banking and deposit insurance to all secondary schools nationwide
• Undertook a study on financial literacy, published in book form to assist stakeholders address financial literacy challenges

Help Desk Line:

• 0800-6342-4357 (0800-NDIC-HELP)
• 09-460-1030

Mail:

The Managing Director / Chief Executive Officer
Nigeria Deposit Insurance Corporation
Plot 447 / 448 Constitution Avenue, Central Business District
Airport Road, P.M.B. 284, Garki, Abuja

Website: www.ndic.gov.ng