NDIC introduces different premium payment for banks

Odidison Omankhanlen, Akin Adewakun, Lagos - 10.03.2008

As part of the on-go ing reforms in the nation’s financial sector, the Nigeria Deposit Insurance Corporation (NDIC) has introduced differential premium payment system for banks. A premium is what a bank pays to the NDIC yearly as security for depositors’ money in the event of a bank running into financial mess.

The NDIC’s Managing Director, Alhaji Ganiyu Ogunleye, who disclosed this to newsmen in Lagos at the weekend, noted that the policy took effect from this year and it would see banks paying different premium according to their respective risk profiles.

According to Ogunleye, “the NDIC is working on a number of reforms to ensure there is sanity in the sector. The latest is the introduction of differential premium payment system by individual banks. This is against the old practice of uniform premium. It will essentially be based on their respective risk profiles.”

The NDIC boss explained that the new policy would reduce by 35 per cent, the premium previously paid by banks to the corporation, saying that it could go a long way in enhancing the profitability of banks and thereby making more meaningful contributions to the nation’s economy.

He noted that the Primary Mortgage Institutions (PMIs) and Microfinance Institutions (MFIs) are not part of the new arrangement.

The NDIC has received numerous awards over the way it has brought sanity to the banking industry, with particular reference to the depositors of banks that were unable to meet up with the CBN’s recapitalisation policy.

Its implementation of the Purchase and Assumption (P&A) transaction in resolving the failed banks has been greatly acknowledged.

The policy gave easy access to depositors to their funds without conditions; facilitated the continuity of banking services in the same business premises; and encouraged depositors to establish banker-customer relationship with the acquiring banks.