In 2010, the Central Bank of Nigeria (CBN) revoked the operating licenses of 224 microfinance banks (MFBs) in the country that were “terminally distressed and technically insolvent.” After receiving fresh tranches of capital, new operating licenses were given to 121 of those outfits, but the remaining 103 institutions are being liquidated by the Nigeria Deposit Insurance Corporation (NDIC) and their depositors are now being repaid in stages.
Depositors will be repaid in stages as NDIC works its way through verifying deposit amounts and making sure that all depositors in the failed institutions are, in fact, repaid. An anonymous source reported to be close to the NDIC said that deposits in the initial 224 banks total “almost NGN 20 billion (USD 13.1 million),” but was unable to say what portion of that figure was owed by the banks that did not receive licenses to re-open. Despite the amount actually deposited in any of the closed banks, each depositor’s repayment will be capped at NGN 200,000 (USD 1,310).
The repayment of depositors in 76 of the 103 failed MFBs has recently been completed, and repayment to depositors in a further seven MFBs has just begun with other stages of repayment to follow [1].
By John Howard-Smith, Research Associate
About Nigeria Deposit Insurance Corporation: The Nigeria Deposit Insurance Corporation (NDIC) is an independent agency of the federal government of Nigeria. Its purpose is to protect depositors and guarantee the settlement of insured funds when a deposit-taking financial institution can no longer repay its deposits, thereby helping to maintain the stability of the financial system.
About Central Bank of Nigeria: Central Bank of Nigeria (CBN), established in 1958, is Nigeria’s central banking authority. As defined by the 1958 Act of Parliament that created CBN, its statutory mandates are as follows: “to issue legal tender currency; to maintain external reserves; to safeguard the international value of the legal tender currency; to promote monetary stability and a sound financial system in Nigeria; and to act as banker and financial adviser to the Federal Government.” As of July 2010, CBN reports total assets of NGN 7.37 trillion (the equivalent of USD 48.6 billion).
[1] Vanguard: “Relief as NDIC pays off closed MFBs’ customers”, http://www.vanguardngr.com/2011/01/relief-as-ndic-pays-off-closed-mfbs%E2%80%99-customers/
MicroCapital.org story, December 16, 2010: “MICROCAPITAL BRIEF: Nigeria Deposit Insurance Corporation (NDIC) to Prosecute Managing Directors of Failed Microfinance Banks”, https://www.microcapital.org/microcapital-brief-nigeria-deposit-insurance-corporation-ndic-to-prosecute-managing-directors-of-failed-microfinance-banks/
MicroCapital.org story, October 1, 2010: “MICROCAPITAL BRIEF: Central Bank of Nigeria Revokes Licenses of 224 Microfinance Banks”, https://www.microcapital.org/microcapital-brief-central-bank-of-nigeria-revokes-licenses-of-224-microfinance-banks/
MicroCapital’s Microfinance Universe profile: Nigeria Deposit Insurance Corporation (NDIC), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Nigeria+Deposit+Insurance+Corporation+(NDIC)
MicroCapital’s Microfinance Universe profile: Central Bank of Nigeria (CBN), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Central+Bank+of+Nigeria+(CBN)
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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