The Impact Of Nigeria Deposit Insurance Cooperation (NDIC) On Nigeria Banking Industry: A Case Study Of NDIC, Ilorin Kwara State

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The Impact Of Nigeria Deposit Insurance Cooperation (NDIC) On Nigeria Banking Industry: A Case Study Of NDIC, Ilorin Kwara State

Table of Content

  • Title Page
  • Certification
  • Dedication
  • Acknowledgement

Chapter One


  • 1.1 Background of the study
  • 1.2 Statement of Research problems
  • 1.3 Objective of the study
  • 1.4 Scope and limitation of the study
  • 1.5 Significance of the study
  • 1.6 Statement of the Study
  • 1.7 Definitions of Terms
  • 1.8 Organization of the Study

Chapter Two

Literature Review

  • 2.1 Historical Background of the study
  • 2.2 Historical Background of Nigeria Deposit Insurance Corporation
  • 2.2 Aims and objectives N.D.I.C
  • 2.3 Effects/Roles of N.D.I.C in the banking industry
  • 2.4 Challenges faced by N.D.I.C
  • 2.5 Management and operation of N.D.I.C

Chapter Three

Research Methodology

  • 3.1 Restatement of the Research Question and Hypothesis
  • 3.2 Research design and data collection techniques
  • 3.3 Characteristics of the study population and sampling
  • 3.4 Administration of the data collection instrument
  • 3.5 Procedure for processing the collection data
  • 3.6 Limitation of methodology

Chapter Four

Data Presentation and Analysis

  • 4.1 Presentation and analysis of data according to research question
  • 4.2 Presentation and analysis of data according to hypothesis
  • 4.3 Discussion of findings

Chapter Five

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendations
  • Bibliography
  • Appendix I
  • Questionnaire

Chapter One


1.1 Background of the Study

Prior to 2006, distress in the Nigerian banking industry had become more great source of concern to the entire financial system, the scale was generally induced until 2008, when the body called Nigerian deposit insurance corporation[NDIC] begun its operation on the safety and soundness of the depositors and system basically in Nigeria.

Consequently, the introduction of the structural adjustment programmed [S.A.P] had not given room for competition in banking industry but rather it had also complicated the financial structural structure of the country. Apart from allocating funds purely on commercial basis, banks also accommodate the handicap of numerous borrowers who have been crippled by the structural adjustment programme [S.A.P]. In the provision of bad and doubtful debt of banks, convention is over rift that in major banking cycle that a financial system with an increasing provision. Bad and doubtful calls for caution from the management because this may serve as disincentive to new entrants into the banking industry.

Proliferations of the new banks have gained ground for speculation of Nigeria maybe heading towards having failure. The reason behind proliferations centered on the fact that Nigeria is under banking service and therefore needs as many banks as possible. This position was perhaps encouraged by an international monetary fund [IMF] report on the healthy numbers of persons per bank branch in Nigeria.

The federal military government formulated decree No. 22 which shortly established the N.D.I.C [Nigeria deposit insurance corporation] is an autonomous regulating body with power among other to examine the books and affairs of the insured bank and other deposit-taking financial institution operating in Nigeria to ensure total deposit liabilities with NDIC with the exception of insider deposits i.e. deposits belonging to the board members and staff of the insured banks e.g. deposits used as collateral. As a matter of fact a depositor in an NDIC insured bank will not pay through annual assessment of its volume of such deposits. It is the premium paid by the insured banks and the investment income that makeup fund of the corporation.

In general, deposit fund in current or fixed time savings and other deposit account are insured in each commercial or merchant bank or other deposit account –taking financial institutions. Not too far, the management of Nigeria deposit insurance corporation (NDIC) proposed to extend their operations which was later granted under the community bank (N.A.C.B) but shortly after the corporation was under to go ahead with the task of the activities of regulating community bank, this is because of the previous activities were carried out on the risk of commercial bank, merchant banks were not adequately fulfilled by the corporation banks under the establishment of failed bank [recovery of debts] and financial malpractices in bank had come into existence as past operation of the s contributed directly or indirectly to the failure of the bank or any financial institutions experiencing distress.

In most recent years even before the establishment of failed bank decree some provisions in the decree establishment N.D.I.C eroded the statutory powers in the corporation to perform its function effectively it requires adequate enforcement powers so that the whole country can believe that the safety and soundness of the banking system is assured.

1.2 Statement of Research Problem

  1. How does Nigeria deposit insurance corporation [NDIC] protect the bank depositor against loss?
  2. Does the Nigeria deposit insurance corporation [NDIC] protect the interest of the creditors or shareholders of a failed bank?
  3. Are financial institution insured by the Nigeria deposit insurance corporation
  4. Can an insured status in Nigeria deposit Insurance Corporation be terminated?
  5. Does an account held by a company or partnership be insured separately from individuals account?

1.3 Objectives of the Study

  1. To check on how to give assistance in the interest of the depositors in the case of financial difficulties of bank especially when suspensions of payment are threatened.
  2. To examine the effectiveness of the Nigeria deposit insurance corporation and how it protect the interest of shareholders and creditors of a failed bank.
  3. To examine how Nigeria deposit insurance corporation [NDIC] insures financial institutions most especially banks.
  4. To find out whether an insured status in Nigeria deposit insurance corporation can be terminated and if yes, how
  5. To find out whether an account held by a company or partnership is insured separately from the individuals account.

1.4 Scope and Limitation of the Study

The Nigeria deposit insurance corporation is a texture of a modern financial system in Nigeria. Nevertheless , the rationale for establishing the Nigeria deposit insurance corporation [NDIC] is well known in spite of the good reason for establishing the NDIC , it was not established without considerable debates.

The scope of the study is to examine critically to what extent the corporation controls the economic development as regards banking system in Nigeria.

1.5 Significance of the Study

It is hoped that this study would provide valuable information on the function of NDIC to the banks and as well the customers’ deposits which is their basic function.

Another important reasons why this study is essential is that it will enable the depositors to know their right on claims in case default arises with any of the banks insured by NDIC.

Furthermore this study would focus on how to improve the standard of banking industry in the country.

1.5 Statement of the Study

Hypothesis are assumptions upon which a researcher bases his or her findings are regards the data collected to a research topic or an investigation about undenying population or variables which may be true or false. Hypothesis maybe seen as an option about population variable or statement Rober [1982].

  • Ho; The Nigeria deposit Insurance Corporation does not have any significant improvement on the banking industry and has not improved the country economically.
  • H1: The Nigeria deposit Insurance Corporation has seriously improved and assisted the country economically on the banking industry.

1.6 Definitions of Terms


The Acronym `NDIC` means the Nigeria deposit Insurance Corporation and is an independent agency of the federal government of Nigeria. The purpose of the deposit insurance system is to protect depositors and guarantee the settlement of insured funds when a deposit taking financial institution can no longer repay their deposits.


The acronym `S.A.P` means the structural adjustment programmers’ and are the economic policies for developing countries that have been promoted by the world bank and international monetary fund (IMF) since the early 1980s by the provisions of loans conditional on the adoption of such policies.


The acronym `IMF` is international monetary fund is an organization of 188 countries working to foster global monetary corporation, secure financial stability, facilitate international trade promote growth and reduce poverty around the world.

Proliferation of New Banks; proliferation of banks is an increase in number of banks.

1.7 Organisation of the Study

For the purpose and nature of this research work, the project is divided into five chapters. Project chapter one consists the introduction of the research topic while chapter two also discusses the literature review which was broken down into subheadings to reflect the research topic, chapter three is the research methodology and how it is being implemented and also chapter four explains data presentation and analysis on research topic, finally the chapter five of this research work deals with summary conclusion and recommendations.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary

In summary the federal government on June 15th 1988 established the Nigeria deposit insurance corporation (NDIC) under decree no 22.

The regulatory body is concerned to insure deposit liability of insured banks and other financial institution and to give assistance to the depositors in case of financial difficulties or imminent or actual suspension of payment by the insured bank and other financial institutions, Nigeria deposit insurance corporation (NDIC) also assist monetary authorities in formulating and implementing banking policies as well as promote safe banking.

The Reasons for Establishing the NDIC
  1. One of the reasons for the establishment of the Nigeria Deposit Insurance Corporation (NDIC) is to protect the banking system against destructive loss.
  2. Another reason for the establishment of the Nigeria deposit insurance corporation (NDIC) is to broaden the depositor’s confidence because this will also allow the corporation to mobilize deposits from the nations divestment need.
  3. The establishment of this Nigeria deposit insurance corporation (NDIC) has cause banks and other financial institution to be efficient and competitive and heading to improve banking services.
  4. The Nigeria deposit insurance corporation (NDIC) encourages savings, protect depositors’ interest and promote monetary stability through its operations.

5.2 Conclusion

The establishment of the Nigeria deposit insurance corporation (NDIC). In Nigeria economy at this crucial period of proliferation of banks as well as ongoing privatization drive under the structural adjustment programme is widely accepted by the consideration for its existence.

In the past, the Nigeria banking system had experience mass failure especially in the mid 50s and 60s which was due mainly to the non existence of any deposit insurance corporation as at that period to give protection to the failed banks and their losers (depositors).

The bank’s failure have more serious repercussion on the society but since the advent of the Nigeria corporation, the prowess to bank failure has been drastically reduced to the maximum level.

The importance of this agency to the natural development of the country cannot be ignored because most of the banks and old banks below operation characterized the industry in the past. Also with the introduction of the failed bank decree in assisting the corporation to work function in the banking system.

In spite of the good reasons for NDIC, the institution was not established without considerable problems and the problems are:

  1. On the level of administrative, the question of independence of NDIC from the CBN of federal ministry of finance and economic development is not guaranteed.
  2. The penalties of NDIC are not still enough to determined possible erring banks from difficulty.
  3. Some of its functions to overlap with those of the Central Bank of Nigeria.
  4. Some of the banks which were bailed out of the of the liquidity crisis may not be able to pay back the loan.
  5. The establishment of NDIC has not reflected in the banking act 1969 and its amendment.
  6. The NDIC can transform the agitation which is between balanced client into two set of litigations between the other hand deposited insurance scheme and bank client.
  7. The need to re-examine the provision of the decree that will compel bank to make special constitution where the corporation funds are not enough.

5.3 Recommendations

The establishment of the Nigeria Deposit Insurance Corporation (NDIC) is seen as a structure change that is conducive to NDIC counterpart; every effort should be made not to allow the corporation learns on external support.

  1. The NDIC should be persuaded to reconsider exempting interbank deposited from premium payment.
  2. Corporate depositor should be entitled to a claim up to 80% at the insured value of their deposit.
  3. The allowable claims for non bank individual deposit should be raised to 100,000.
  4. The penalties of NDIC should still be enough to determine possible erring banks from any difficulties.
  5. The NDIC tribunal should not exhaust in dealing with any person or group of people determined or involved in defrauding a bank leads to the distress of any bank in Nigeria.
  6. New banks should be allowed to operate for about 2years before being compelled to take a deposit insurance policy.
  7. The Central Bank of Nigeria and the federal ministry of finance should be given the necessary attention competent manpower and financial assistance.

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