In September 2023, at least five microfinance banks (MFBs) in Nigeria’s southeastern region were closed due to escalating insecurity, as reported by the Nigeria Deposit Insurance Corporation (NDIC).
Pamela Roberts, Deputy Director of the NDIC at the Enugu Zonal Office, made this announcement during the ongoing NDIC Workshop for Business Editors and Finance Correspondents Association of Nigeria (FICAN) in Lagos.
Roberts highlighted that earlier in May 2023, the Central Bank of Nigeria (CBN) revoked the licenses of 179 MFBs and 4 Primary Mortgage Banks (PMBs). She stated, “The licenses of 179 MFBs and 4 PMBs were revoked on May 23, 2023. The Corporation has since begun reimbursing depositors.”
To facilitate this process, digital remote payment strategies have been implemented, allowing electronic funds transfers to verified depositors’ alternate accounts.
Roberts noted that the ongoing insecurity in certain regions has complicated the official closure of banks with revoked licenses. “The general insecurity in the country has hindered bank closures, as some teams were unable to carry out their assignments effectively,” she explained.
Historical Context: Bank Closures
Since 1994, a total of 651 banks have been closed in Nigeria, encompassing Deposit Money Banks (DMBs), Primary Mortgage Banks (PMBs), and Microfinance Banks (MFBs). Roberts stated, “The Corporation has been involved in eighteen bank closure episodes since its establishment, resulting in the closure of 651 banks, including 50 DMBs, 55 PMBs, and 546 MFBs.”
In addition to insecurity, Roberts pointed out other operational challenges, such as difficulties in locating banks scheduled for closure. Many of these institutions had ceased operations prior to official announcements, complicating the NDIC’s mandate.
The NDIC continues to work on identifying and physically closing some of these banks, a task Roberts described as an ongoing challenge.
Legal Hurdles
The NDIC has also faced legal challenges in its efforts to close banks with revoked licenses. Roberts cited instances where litigation has delayed official closures, such as with Savannah Bank and SGN Bank. The NDIC has been dealing with litigation related to Triumph and Fortune banks for over 14 years, with no clear timeline for resolution.
She also mentioned the case of the African International Bank (AIB), whose license was revoked by the CBN on September 2, 2013. Despite multiple attempts by the bank to contest its liquidation, the Federal High Court eventually issued a winding-up order on March 20, 2015. The NDIC has since paid over N1 billion in refunds to the CBN for insured deposits owed to AIB’s depositors.
Commitment to Financial Stability
In his welcome address, NDIC Managing Director and Chief Executive Officer Bello Hassan reaffirmed the Corporation’s commitment to protecting depositors and ensuring financial stability in Nigeria. He emphasized the critical role of deposit insurance in preventing banking crises and fostering confidence in the nation’s financial system, highlighting that the NDIC’s core mandate remains vital to the country’s economic stability.