The Nigerian Deposit Insurance Corporation (NDIC) has announced it will pay a maximum of N5 million to each depositor of Heritage Bank, following the revocation of the bank’s operating license by the Central Bank of Nigeria (CBN).
The CBN revoked the license on Monday due to the bank’s inability to improve its financial performance, which has raised concerns about the stability of the banking sector.
In a notice to depositors, the NDIC explained that the stipulated maximum payment is in line with extant laws in case of license revocation. The NDIC, appointed as the liquidator, will take the necessary steps to wind up the bank’s affairs in accordance with sections 55 (1) (2) and 56 (3) of the Nigeria Deposit Insurance Corporation Act, 2023.
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“Defunct Heritage Bank operated as an insured institution under the provisions of the Nigeria Deposit Insurance Corporation Act, 2023. The Corporation will pay all its depositors their insured deposits up to the statutory maximum of N5,000,000.00 per depositor for Deposit Money Banks (DMBS)/mobile money subscribers,” the NDIC stated.
Compensation and Claims Process
Depositors with funds exceeding the insured amount will be paid as the assets of the closed bank are realized. The NDIC mentioned that depositors would soon be notified via national dailies about the commencement of insured deposit payments. For further clarifications, depositors can contact the NDIC directly.
The NDIC also provided a step-by-step process for depositors and creditors to reclaim their funds.
In-Person Claims: Visit the nearest branch of the bank with proof of account ownership, verifiable means of identification such as a driver’s license, permanent voter’s card, or National Identity Card, together with their alternate account and Bank Verification Number (BVN) for verification and subsequent payment of insured sums.
Online Claims: File claims online by visiting the NDIC website claims page at www.ndic.gov.ng/claims/claims, download and fill the claims forms, and upload the required documentation.
The NDIC reassured the public of its commitment to safeguarding depositors’ funds in all licensed banks.
“The NDIC wishes to assure the entire banking public of its commitment to the continued safety of depositors’ funds in all licensed banks. As such, depositors are urged to continue their banking businesses without fear as banks whose licenses have not been revoked remain safe and sound,” the statement concluded.
Experts, Depositors, Express Concerns
The revocation of Heritage Bank’s license has sparked significant debate among economists and depositors. Economist Evans Osabuohien, head of the Department of Economics at Covenant University, described the revocation as shocking.
He suggested that acquiring the bank by another investor would have been a better option than outright revocation, which might lead to job losses and increased tension among customers.
“CBN says that withdrawing the license was the last option. If not, one would have expected a merger or acquisition, if only for the good of the economy,” Osabuohien said. He urged the CBN to re-strategize and strengthen its regulatory framework to prevent similar crises in the future.
The liquidation of Heritage Bank has raised fresh questions about the safety of depositors’ funds with banks, given the N5 million maximum insurance cover provided by the NDIC. Many have expressed the view that view that a depositor should not have more than N5 million with a bank, to avoid losing the rest if the bank suffers liquidation.
A depositor, whose funds were trapped in the liquidation, expressed frustration over the N5 million insurance cap.
“I am a young lawyer and law-abiding citizen practicing in Nigeria. My N17 million may have gone down the drain in Heritage Bank. NDIC’s insurance is a joke. They say they are offering us N5 million maximum statutory insurance payment. This means that poor Nigerians and small businesses would lose whatever amount they have if they are given N5 million,” he lamented.
Peter Obi, the Labour Party’s presidential candidate from the last election, has urged the federal government and the NDIC to fully reimburse depositors of Heritage Bank immediately.
Obi said on Monday the closure of the bank will have “a far-reaching impact” on the economy, adding that anything short of full and immediate repayment of these funds will only worsen the economic situation of the depositors.
“The latest CBN’s revocation order on Heritage Bank’s operating license and subsequent appointment of NDIC as liquidator of its assets though affirmed by the regulators as necessary at this point to enhance financial stability, has a far-reaching impact on the bank’s depositors,” he said.
“Given the harsh economic realities in the country now, I will urge the federal government via NDIC to ensure immediate payment of all depositors in Heritage Bank in full to help alleviate the prevailing hardship the people are going through in the country.”
Every good system thrives on the confidence that it’s robust enough to protect you, even when the reality is different. It is why bad things should not happen, because when they do, you realise that the very system assuring you of maximum protection is also vulnerable. It is also why it’s possible to have a Police Force of under 800k ‘protecting’ over 200 million. They are there to give you some impressions of protection, not that they are capable of protecting everyone, when push turns to shove.
Here, your almighty insurer is telling you that it can only do N5M, it looks like a decent payout for small guys, but how about corporations and companies that use such bank for salaries and revenues? I also modelled yesterday that, even if you wish to spread the funds below N5M across all the banks in the land, you will still not pull up numbers capable matching what some businesses need weekly to run operations. So, where do we go from here? We can only work hard to ensure that bad things don’t happen, and then keep polishing the impression that we are all covered.
One more miscalculation, we will leave Tier 2 and 3 banks extremely vulnerable, by the time most depositors move to Tier1 banks, even when the latter are also suspects…