The aims of this paper is to appraise the
Nigerian Deposit Insurance Corporation (NDIC) liquidation activities in failed
banks, claims settlement; amount and number of depositors so far paid; reason
behind the abandonment of deposits by some depositors; level of liquidation
proceeds realized and how it has been managed fairness of bad debt litigation
disposition and the adequacy of the insurance deposit.
To achieve the above objective I relied on
questionnaire, personal interviews and visit to the site; for primary data;
from past literature, journals and dailies for the secondary data. The
statistical tools used in the analysis are the simple percentages, tables, pie
charts and bar charts.
The study revealed the following”
1. NDIC has been delaying in
settling both the inured and the uninsured depositors, the delay was found to
be attributed to:
a. The inadequate preparation by
the NDIC in both human and material resources.
b. The inability of the
depositors to put forward their claim on time for verification.
2. Rigorous claim filing process
adopted by NDIC, lack of proper awareness on the side of depositor were found
to be chief reason for the abandonment of claims by depositors.
3. A sizeable amount has been
realized from sale of fixed assets, not much from debt recovery.
4. The amount realized has not
been managed to the interest of depositors, as some amount were not accounted
for, while a huge sum was written off as expense.
Table of content
List of tables
Background of the study
Statement of the problem
Objective of the study
Significance of the study
Scope of the study
Limitations of the study
Definition of terms
Overview of bankruptcy and liquidation of firms
Liquidation of firms in bankruptcy
Origin or banking distress in Nigeria
Causes of banking distress in Nigeria
Implication of bank distress in the Nigeria economy
Historical preview of NDIC and its role in the banking industry
Functions of the NDIC
Controversial issues surrounding NDIC operation
Empirical distress resolution options
Comparative analysis of bank distress resolution options
in selected countries of the major continents
The legal frame work of bank liquidation
Liquidation activities in failed banks
Sources of data
Design of questionnaire
Sample procedure and determination of sample size
Techniques of data analysis
Data presentation, analysis and interpretation
Presentation of data
Primary data analysis
Test of hypothesis
Interpretation of results
Discussion of findings
1.1 INTRODUCTION AND BACKGROUND OF THE
The importance of a banking sector in any
economy derives from its role of financial intermediation; provision of an
efficient payment system and facilitating the implementation of monetary
policies. Hence, an efficient and
effective banking sector is essential not only for the promotion of efficient
intermediation but also for the protection of depositors, encouragement of
healthy competition, maintenance and protection against systematic risk.
The banking system as noted by Schempeter
(1934) is regarded as a key agent in the process of development, because all
other industries rely on it for working capital. But, the Nigerian banking system in caught in
systematic turmoil, there has been a rapid increase in the number of bank
failures and the magnitude of the problem has reached an unprecedented level;
the problem has assumed a generalized dimension thereby making it an issue of
concern to the government, the regulatory authorities, the bankers, the general
public and the international financial institutions such as the World Bank and
the International Monetary Fund (IMF).
Distress in the Nigerian banking system dates
back to the 1950’s when about 51 banks were forced out of the system following
the introduction of the very first banking law in Nigeria. The Banking Ordinance of 1952, the above
ordained and the Central Bank of Nigeria Act of 1958 brought some element of
sanity into the system. The second phase
of distress was experienced in the system after the era of Structural
Adjustment Programme (SAP), which deregulated the economy; as a result led to
the influx of the system with both efficient and inefficient banks, owing to
the fact that banks licensing was liberalized.
Thus increasing the number of banks in the country from 42 in December
1991 (Oleyemi 1995:50) when SAP was put to an end following the enactment of
Bank and Other Financial Institutions (BOFI) Decree N0. 25 of 1991. The above represents an increase by about 186
percent in less than a decade.
In order to cushion the effect of further
bank failure, the Nigeria Deposit Insurance Corporation (NDIC) was established
under the NDIC Decree N0. 22 1988.
The major reason for the establishment of the
Nigeria Deposit Insurance Scheme is not only to prevent or minimize the
incidence of bank failure but