NDIC to fund budget deficit with N28bn reserves

By Chiawo Nwankwo and Ifeanyi Onuba, Abuja

Thursday, 17 Feb 2011

THE Nigerian Deposit Insurance Corporation has said it will fund its 2011 budget deficit with its N28bn reserves.

The corporation has a budget outlay of N9.72bn, while its income for the year is estimated at N28.61bn.

Investigation by our correspondents also revealed that the Deposit Insurance Fund or premium collectible from the 24 banks operating in the country might fall in 2011.

The NDIC had said that only N59.01bn would be collected this year, as against the N63.01bn it collected in 2010, a decrease of N4bn.

A total of N262bn had accrued to the DIF as at the end of December 2010.

These are contained in a document submitted by the NDIC to the National Assembly, on its 2010 budget performance and proposals for 2011.

The corporation had put insured deposit liabilities of the 24 banks at N1.143tn as at December 31, 2007.

Only N124.42bn had then been collected as deposit insurance premiums, leaving a staggering deficit of N1.019tn.

According to the NDIC, the decline will mean more pressure on the corporation’s ability to meet its obligations to customers if a bank collapses or loses its operational licence.

It said, “The fall in premium is the result of our own contribution to the Financial Stability Fund. Instead of contributing directly to the fund, we have reduced the premium rate from 50 basis points to 40 basis points.

“The corporation’s insurance liabilities are on the increase, while there is pressure to lower the premium being collected, thereby, putting more pressure on its ability to discharge its obligations should more bank licences be revoked.”

A total of 48 banks have been liquidated since 1994. Three are still in court, challenging the exercise.

The affected banks are Peak Merchant Bank Limited, Fortune International Bank Limited and Triumph Bank Limited.

But in preparing for distress resolution in 2011, the NDIC has provided N50bn in its budget, using the N200,000 per depositor template.

The document also noted that N25bn had been budgeted for financial assistance to banks in the 2011 fiscal year.

 

Source: Punch

Comments are closed.