NDIC AT 30: THE POWER OF STRATEGIC THINKING.
“Lives of great men remind us, that we ourselves can make our lives sublime; and departing leave behind us footprints on the sands of time.”
The Nigerian Deposit Insurance Corporation, NDIC, or something like it will remain a permanent footprint on the sands of our era.
“The Nigeria Deposit Insurance Corporation (NDIC) was established on 25th June, 1988 to strengthen the safety net for the newly liberalised banking sector, following the recommendation of former Central Bank of Nigeria Governor Ola Vincent. The NDIC provides a safety net for depositors….” P 342.
Source: IBRAHIM B BABANGIDA 1985-1992: LETTING A THOUSAND FLOWERS BLOOM. A book recently published by me.
As Nigerians drink to the toast of one of the most enduring and economically beneficial institutions ever created in this country, perhaps it is an occasion for sober reflection on what leadership can achieve if it is strategic in its thinking. There were two major heroes of the success story of the NDIC – late Chief Ola Vincent and President (General) Ibrahim Badamasi Babangida, IBB. The liberalisation of banking when the Structural Adjustment Programme, SAP, was introduced, opened the banking sector to unprecedented and vast possibilities. The opportunities were matched by the problems. Bankers and depositors alike were entering into a new terrain and the old safety nets were no longer adequate. In fact, until NDIC was created, there was no safety net of any kind. Depositors kept their money in banks totally at their own risk. All the banks should have had the warning caveat emptor (buyer beware) posted not only on their front door but in all the corners of the banks.
SAP increased the number of banks operating in Nigeria exponentially in a few years while regulatory capacity lagged behind seriously. Somebody must have seen the danger signs ahead. Depositors needed more protection – otherwise they would be mercilessly fleeced by unscrupulous elements operating in the sector. NDIC was the safety net. And, although it did not guarantee a depositor total recovery of his/her deposit, it at least safeguarded against absolute loss.
The Nigerian banking sector has had turbulent periods in the past. The first indigenous banks established to compete with Barclays Bank D.C.O (now Union Bank Plc) and Bank of British West Africa, BBWA (now First Bank) had collapsed like so many packs of cards. The relic of one of the banks, Agbonmagbe Bank (inexhaustible source of sustenance), can still be seen when approaching Adekunle from Oyingbo in Lagos Mainland. It dried up just as virtually all the others. By 1985, there were very few banks left and the sector was dominated by the BIG THREE – First Bank, Union and UBA. There were some regional banks – New Nigerian Bank, African Continental Bank, National Bank of Nigeria, to mention a few – but they played marginal roles and were all riddled with corruption. Owned by the regional governments of the First Republic, they were shamelessly robbed by party leaders and directors appointed to serve political interests. By 1988, the regional banks were either completely insolvent or were on their last legs. None survived till today. The longest lasting among them – National Bank of Nigeria established by the government of Western Region, under Chief Obafemi Awolowo – could not survive the competition which banking deregulation brought with it.
The main point of this column is not to write a comprehensive history of the Nigerian banking sector, but, to point out that until Decree 25, 1988 was promulgated into law, all depositors were totally at risk. That fact had several repercussions which cannot now be fully discussed. But, one will illustrate the positive impact the NDIC had made on the Nigerian banking sector in particular and the economy in general.
One of my uncles had lost what was his life’s savings to one of the indigenous banks when he started out as a young man working for the Public Works Department, PWD, in Lagos. Later in life, he had removed his deposits in Union Bank, one of the oldest two, and dumped them in SAVANNAH BANK when the new bank opened its office on Broad Street – next to my uncle’s house. According to uncle, “I now sleep on top of my money”. But lightening struck twice. SAVANNAH was closed by the CBN and my Uncle’s deposits apparently went down with it. I got a frantic call from one of our relatives saying “Uncle was about to commit suicide because he had lost all his money once again.”
I raced to his house and assured him that his N17,800 was completely safe because of NDIC. He was sceptical. But, he allowed me to go and collect the forms from the relevant institutions and to process them on his behalf. I became a miracle worker to Uncle when he got back every kobo of his deposits – thanks to the NDIC. Later, he introduced me to several old people like him who had lost all hope of getting their money back.
As the NDIC turned 30 last year, despite the 3oth anniversary being marked this year, it is most gratifying to note that at least one Nigerian institution had endured and is living up to the expectations of its founding fathers till today.
However, the NDIC, like all old institutions faces several new risks and challenges which can only be confronted by dedicated, resourceful and well-educated individuals like the founding fathers of the corporation.
For instance the amount covered, inadequate in 1989, is now a joke. In 1989 when the exchange rate was N6/US$1, N50,000 fetched $8333, today, the same N50,000 will only command $143. All the governments since Babangida’s regime had failed to revisit the NDIC decree and to adjust upwards the amount covered by law. This is vital because the longer time passes without an adjustment, the more valueless the payout will be.
SOME OTHER INTERESTING DECREES PASSED IN 1988/9.
In some respects, 1989 was a vintage year for important decrees. The space remaining makes it impossible to list them all. But, readers need to be reminded about the following:
· National Economic Reconstruction Fund, NERFUND, Decree 2, 1989.
· National Directorate of Employment, Decree 4.
· National Drug Law Enforcement Agency, NDLEA, Decree 48.
Readers wanting more information on the decrees of the IBB regime can consult the book. One thing that will strike every one hard is the fact that most of the Decrees, like NDIC, need major amendments. The Counterfeit and Fake Drug Decree 17, 1989 for instance also suffers from the problem of exchange rate. The penalty in 1989 was considered too lenient; today it virtually encourages the crime and no longer serves as a deterrent. We continue to operate them as they are without alterations at our own peril.
LAST LINE: Books are now available at MM2 and GATT Aviation Airports, Lagos, VANGUARD Office, Abuja. They can also be ordered direct.