The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, has commended the Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC) for ensuring the safety of depositors’ funds in the nation’s financial system in the face of global economic disruptions over the past two years.
The minister, in her opening remarks at the International Association of Deposit Insurers (IADI) Africa Regional Committee (ARC) Workshop with the theme ‘Normality in Turbulent Periods: The Stabilizing Role of Deposit Insurance’ hosted by the Nigerian Deposit Insurance Corporation (NDIC) on Tuesday in Abuja, lauded the two key institutions in the banking sector for their continued proactive policy measures to stabilize the financial system.
While noting that the banking sector remained pivotal in supporting the real economy through the provision of innovative products and services to all relevant stakeholders, the minister explained that the fiduciary nature of banking business, coupled with increased social-economic challenges across the globe, had increased the risk of banks’ failure, with significant implications for depositors’ losses and erosion of public confidence in the banking system.
Zainab further noted that the negative impact of these challenges on economic growth and financial sector stability in most economies globally raised a number of questions concerning the role of DIS in contributing to financial system stability.
This is even as the minister recalled that it had equally demonstrated the important role played by the deposit insurance system, as a component of financial safety-net arrangements in most jurisdictions across the globe, given that, depositor protection is a critical element necessary for maintaining and restoring financial stability.
According to her, the Nigerian economy, like others, felt the brunt of the global economic distortion, having to go into recession twice in the space of five years but that given the resilience of the nation’s financial system, the country came out within months.
Zainab also maintained that despite these economic challenges, “no depositors’ fund was lost given the effectiveness of our agencies, most especially the CBN and the NDIC”.
The minister expatiated: “It is well known that DIS, thus provide financial guarantee to protect depositors in the event of bank failure and therefore forms a critical component of the financial safety-net arrangement. This guarantee offered by the DIS plays a major role in strengthening depositor confidence in the financial system during crisis.
“Deposit insurers play an effective role during crisis by way of performing the roles and responsibilities as stipulated in their mandates.
“The NDIC, which was established in 1989, with a mandate of a risk minimizer, has since inception and most especially during critical times been able to allay the fears of depositors through; its wide array of public enlightenment/education programmes, collaboration with the CBN in the efficient supervision of insured institutions to promote sound risk management which reduces likelihood of failure and effective resolution of failing banks.
“All these have helped to improve public confidence, protect depositors and promote the stability of the Nigerian financial system”, Ahmed added.
