NDIC explains deposit payout process for failed banks, pegs coverage at N5m, N2m

By Gift ChapiOdekina,Abuja

The Managing Director of the Nigeria Deposit Insurance Corporation (NDIC), Mr. Thompson Oludare Sunday, has clarified how the corporation compensates depositors when banks fail, stating that insured sums are pegged at N5 million and N2 million depending on the category of financial institution.

He made the clarification on Thursday during the 2026 budget defence session before the House of Representatives Committee on Insurance and Actuarial Matters, while responding to questions from the Commitee who referenced the liquidation of Heritage Bank, said public concerns over failed banks often generate anxiety among depositors.

“The question that I want to ask you all is on something that our constituents and public would like to know. You will recollect when Heritage Bank in liquidation went under. I know that there was a lot of public outcry and concerns which would affect public confidence in our financial institutions.

“And by the legal, the rights of the chairman, this house contributed to assuaging the public, letting them know that they should relax, that NDIC was in control and issues were being addressed. So, Nigerians want to know, can you tell us to avoid speculation, when a bank or a financial institution has issues and goes under.

“How much is each depositor entitled to? In comparison to what it is that they have as their deposit, individual depositors as well as corporate depositors. So, how much are they entitled to or are they going to be able to get their entire deposits?” he asked.

Responding, Sunday explained that deposit guarantee remains one of the NDIC’s core mandates, noting that the corporation collects premiums from banks rather than depositors.

“In other words, we do not collect all the deposits that banks receive. What we take is premium, which is now less than 1%. It used to be 15 over 16 of 1%. So, we guarantee the deposit on that basis. The job we do is different from other deposit-taking companies like insurance companies because for us, the premium is paid by the bank.

“The depositor benefits when there is an event of crisis and the NDIC is there to make sure that the banks are properly run. The guaranteed sum is N5 million for PMBs and MMOs and deposit money banks. For other financial institutions, we refer to microfinance banks as other financial institutions, it’s N2 million. So, that is the guaranteed sum.

“Maybe there will be something more outside that. So, the first thing we do, even without you having to come to the corporation or go to the bank, we use your BVN to locate your account in other banks and we send N5 million or N2 million depending on the class of the institution. Anything N5 million below, we send without you having to come,” he said.

He further explained that once a bank’s licence is revoked, the NDIC steps in as liquidator to recover assets and pay additional dividends to depositors.

“Thereafter, upon the revocation of the licence, since you used Heritage Bank as an example, the licence of Heritage was revoked on the 3rd of June 2024. The institution was thereafter handed over to the NDIC as liquidator. So, we paid the guaranteed sum.

“Then, we will now realise the assets. We sell the buildings, the machineries and everything of the bank. We also go after those who have borrowed and refuse to pay.

“We also realise the investment of the bank and then we start paying what is called liquidation dividends. So, it means that on top of that N5 million, whatever we realise from the sale of assets, from the loans that we are collecting, from the investments that we are realising, we start paying people. On January 6th, for instance, we paid the second liquidation dividend tranche to depositors of Heritage Bank, which was N24.63 billion.

“So, basically, we are still chasing after those who are owing. We are still selling assets to make sure we get more money. But in terms of deposit guarantee, their short sum is the N5 million and the N2 million, while the other parts, we have to depend on the recoveries we are able to make,” he added.

Speaking at the session, Chairman of the Committee, Hon. Ahmed Jaha Babawo, commended the NDIC boss for the clarification, noting that misconceptions persist about the corporation’s responsibilities.

“You know, some people thought NDIC covers every deposit. They have a limit. In fact, it was recently increased from N500 per depositor to N5 million per depositor. Then, I think, a few weeks or a few months after that, Heritage Bank was down.

“And it may interest members to know that more than 90% of the depositors were paid their insured amount in less than four days. Am I right, Mrs. Emily? Yes. In less than four days, in compliance with IRD standards.

“IRD is an international association of deposit insurance. So, the same thing applies to the issue of liquidation dividends, which we are going to discuss extensively in an executive session,” he said.

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