Rising Bad Loans In Banks Worries NDIC – Umaru Ibrahim

In this second edition of our Executive Platform interview series we present the positions of the Managing Director of Nigerian Deposit Insurance Corporation, NDIC, Alh. Umaru Ibrahim, on threats to depositors funds, wonder banks, depositors’ funds trapped in failed banks, among other issues.

Excerpts:

By Babajide Komolafe

THE NDIC in recent times have been engaged in series of awareness campaigns. What is the rationale for these activities?

We are engaged in many things that will facilitate financial literacy and create awareness about deposit insurance and what we do especially calling on depositors whose monies are still unclaimed in the 14 banks in liquidation to come and file their claims in our offices that are nationwide and through agent banks.

This is part of our general strategies on enhancement of financial inclusion. As you know we are part of the Bankers Committee and there is a roadmap, there is a plan for achievement of financial literacy into which all of us have keyed into, CBN and all the members of the financial sector services regulatory committee, all the banks, every individual organisation has its own bit to do.

SEC has been in the market, sensitising investors, particularly retail investors. They have introduced this e-dividend payment and so forth. So it is part of the general push to ensure that the generality of Nigerians have access to financial services.

Virile financial sector

Whether it is money spent on insurance or investment in stock or in custody of banks, so that we ensure we have a virile financial sector that will continuously support the growth of the economy.

You want CBN to address the public on the state of Savannah Bank. Given that the deposits trapped in the bank is NDIC’s responsibility what is the Corporation’s position on the state of the bank?

We are still anxious and desirous of either the bank reopen its door or be liquidated so that we end the suffering of depositors. We have been pushing this; the CBN has been concerned over the years since the restoration of the license. Series of meetings and efforts have been made to achieve the restoration of business of Savannah Bank but they have failed. But unfortunately as we speak, they (the owners) have gone back to court, they have sued the CBN and therefore effort to either bring them back on board or to liquidate them has been stalled.

The industry has again been impacted by the economic recession, and non performing loans have risen to frightening levels. What is the Corporation’s position on this to make sure it does not crystalise into loss of depositors’ funds?

All of us are concerned. Even the banks are concerned. There are a lot of factors that culminated into this. Some of them have to do with the state of the affairs of the economy, falling oil prices, FX issues, issues relating to energy, the prevailing economic conditions that have made it difficult for borrowers, big and small, to meet their obligations to the banks.

There are some internal factors that have to do with the quality of the loans. The way and manner they were granted and so on and so forth. Our main concern has always been the non performing loans that are attributable to insiders.

We have seen resurgence of wonder banks in recent times. You sounded a note of warning that anybody that patronise them does so at his/her own risk. Is there anything the authorities  can do to check the resurgence of such schemes?

I don’t think there is a resurgence of wonder banks. Yes they were here and there, in Enugu, one or two in Jos and so on, here and there we get to know about them, and we move in quickly with security agencies to clamp down on them, we do investigate, how come they exist, under what license they operate, who are the victims and so on and so forth. Nobody can guarantee that you will stamp out wonder banks once and for all forever.

We are in a dynamic world, it is like armed robbery or burglary or any kind of crime. Nobody can stamp it out but the best thing we can do is to keep our ears to the ground and continue to sensitise the general public,  that they should be aware of people who come and tell you cock and bull story or that give you mouth watering returns.

Mouth wateringreturns

Beware of them, don’t patronise such banks. If you are in doubt ask, ask regular banks, ask microfinance banks, you can ask CBN, or ask NDIC, and keep your money in the licensed institutions only. So it is a continuous fact of life. The few crooks around will not stop, so we will not stop either.

There are some closed banks like Fortune Bank that have gone to court to challenge revocation of their licenses and as a result the depositors can’t access their funds. How soon will the issue of these banks be resolved?

Yes we are in court with Fortune Bank and Triumph Bank and to the extent that we are in court there is little or nothing we can do to help the depositors. That is why we are proposing in the review of our Act, that regardless of whether we are in court with any bank, depositor or anybody, the law should allow us to pay depositors, and then the issue of court can be sorted out.

If we are in default or in fault, we can pay penalty but because of that we should not allow people to suffer for nothing.

How far with efforts to amend the NDIC Act?

During the 6th Assembly, the House of Representatives passed the law. The Senate was about to do that but it was stopped. Happily, we have sorted out all our differences with the CBN.

As soon as the 7th Assembly settles down, they will have a look, we are engaging them through some kind of sensitisation for some of them, and we would continue. We hope that next year definitely we should be able to get the amended Act passed.

During the sensitisation seminar organised for judges did you discuss the challenges the Corporation encounters in respect of ligation by some of the closed banks?

No you don’t discuss cases that are before courts but you discuss issues generally so that the judges and even private lawyers can appreciate the dynamics of the law especially deposit insurance law, and also understand the difference between NDIC corporate and NDIC as a liquidator, and also understand the relationship between banks and their customers, and the various laws that regulate that relationship so that when cases come before them they are much more informed, and in a better position to dispense justice in a fair, equitable and speedy manner.

But off course you don’t expect us to discuss cases before the courts. It does not happen that way. And the response has been very good. We have been doing the programme for seven years, and been very successful. The turnout of judges from the Federal High Court, State High Courts, Court of Appeal, even at the apex court, the Supreme Court, very commendable.

And we engage lawyers that are well known, well versed in various aspects of banking and finance and deposit insurance law. It is part of awareness and self development for the judges which they do appreciate. We sometimes also do that for some key agencies of government like ICPC, EFCC, Nigeria Police, particularly those who are engaged in investigating and prosecution. As I speak to you, we have two days programme for members of the Nigeria Police, ICPC and EFCC on various issues.

You have just been re-elected for another term into the Council of the IADI. What would you consider major highlights or achievements of your first tenure in the Council?

As a Council member, you are expected to participate actively in all Council discussions and deliberations and policies so as to enhance education and awareness about deposit insurance globally. One of our main tasks in Africa is to advocate the establishment of deposit insurance schemes in Africa. As we speak, in the whole of West Africa, Nigeria is the only country that has established a deposit insurance scheme.

South Africa as big as it is, is just about to start. In East Africa, we have in Kenya, we have in Tanzania, Uganda, Zimbabwe and Mozambique and so on. So they are more in Eastern Africa than in Central and Western Africa. And we have a group, Africa Middle East Group, and that is what we are trying to propagate, the establishment of deposit insurance as a veritable tool for enhancing financial system stability in Africa.

VANGUARD

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