Depositors Loss In Failed Banks amounts to N187.23bn

A total of N187.23 billion was lost by over 2.7 million depositors as a result of poor corporate governance that led to the liquidation of 46 banks by the Nigeria Deposit Insurance Corporation (NDIC) from 1994 to date.

But the amount involved in reported fraud cases dropped by over 48 per cent to N21 billion from N41.3 billion in 2009.

The number of reported cases also dropped from 1,764 to 1,532.

The agency also said it has paid a total of N7.597 billion to insured depositors of the banks-in-liquidation from 1994 up to the end of year 2010.

According to the corporation’s 2010 annual report made available to journalists  at the weekend, out of the amount lost, total insured deposits as at liquidation stood at a mere N17.87 billion or 9.54 per cent of the amount of deposit lost.

That means about N170 billion was excess deposit, outside what was insured by the NDIC.

The corporation however said N7.6 billion was the paid amount of the insured deposit, while N69.9 billion was paid out of the excess deposits.

As at the end of 2010, NDIC said, 526,798 depositors had been paid.

Market operators and analysts say the figures would have been higher had the regulators not intervened at the time.

According to Anne Ochegbe, an economist based in Lagos, “the turmoil from the financial crisis that ravaged economies and individuals would have recorded more calamities in Nigeria had the of CBN not intervened the way it did.”

Official data show that total loans and advances owed the banks during the period amounted to N178.92 billion, out of which only N21.77 billion or  12.2 per cent  was recovered.

The sum of N19.32 billion was also recovered from the disposal of physical assets of the liquidated institutions.

The NDIC said it planned to collect premium worth N59 billion for the 2011 financial year as it seeks to give adequate cover to the banking sector.

Premium is the amount banks are expected to pay to the corporation based on the value of their deposits.

The corporation stated that the total number of depositors in the 24 banks grew by 11 per cent from N30.331 million in 2008 ton 44.439 milion in 2010 out of which about 94 per cent of depositors are currently insured.

About N1.3 trillion of total deposits is fully covered by the N500,000 maximum deposit insurance cover while N9.53 trillion is partially covered.

The NDIC also undertook the payment of depositors of 84 microfinance banks out of the 103 whose licences were revoked by the Central Bank in 2010.

A total of N641.6 million was paid to MFB depositors.

The corporation put the total deposit of MFBs at N8.999 billion, out of which only N4.42 billion was insured.

The NDIC blamed the woes of the MFBs on poor asset quality and declining earnings which had impacted negatively on their capital.

NDIC managing director Umaru Ibrahim stated that the modest achievement of the institution was due to the careful and logical adoption of appropriate strategies.

“In that light, the NDIC will continue to build on the professional rapport and confidence established with the Central Bank of Nigeria and extend same to other safety net participants, especially those whose business impact significantly on the banking industry in the coming years.”

According to the NDIC report, the expected loss components of the reported cases of frauds and forgeries, that is, those whose probability of recovery was low as well as those not fully covered by Fidelity Insurance Bond, amounted to over N11.68 billion  in 2010 as against over N7 billion in 2009.

The 10 banks with the highest number of reported fraud cases were responsible for 51.08 per cent of the total amount involved in 2010 compared to 90.10 per cent in 2009.

The total amount involved, which stood at N10.87 billion in 2010 was considerably lower than the 2009 figure of N37 billion.

An analysis of the types of frauds and forgeries perpetrated during the year under review showed that the commonest types were ATM fraud, fraudulent transfers/withdrawals, lodgment of stolen warrants, presentation of forged cheques, suppression of customer deposit, granting of unauthorised credits, loss of money to armed robbers and outright theft.

The report, however, stated that the corporation had also proposed a reduction in base rate for premium computation from 50 to 40 basis points on the contribution of the financial stability fund of N1.5 trillion.

On this, CBN is expected to provide N500 billion, while banks would commit 0.3 percent of the value of their individual balance sheets to the fund annually.

Leadership