NDIC Takes Over 224 Insolvent MFBs

By Obinna Chima, This Day -

The Nigeria Deposit Insurance Corporation (NDIC) has taken over the 224 microfinance banks (MFBs) whose operating licences were repealed last week by the Central Bank of Nigeria (CBN).

A statement from the management of NDIC yesterday explained that the corporation took over in the capacity of the provisional liquidator of the affected banks.

A liquidator is a body appointed to protect the assets of a company prior to the winding up of the firm.

The NDIC also disclosed that it had deployed its staff in various branches of the 224 microfinance banks nationwide.

The banking watchdog had revoked the operating licences of 224 out of the 820 microfinance banks found to be “terminally distressed and technically insolvent” across the country last week. It based its decision on Section 12 of the Banking and Other Financial Institutions (BOFIA) Act 1991 (as amended).

The affected MFBs were those with negative shareholders’ funds, negative capital adequacy ratios and negative liquidity ratios.

The CBN had also stated that the directors and management of the affected microfinance institutions found to have abused their positions at the detriments of their institutions would be handed over to law enforcement agencies for investigation and subsequent prosecution.

Consequently, CBN has directed the NDIC – in line with its statutory role to pay up to the maximum insurance coverage of N100,000 per depositor of the affected banks.

The corporation’s statement said: “The NDIC staff are expected to verify deposit liabilities of each bank with a view to expediting payment of insured deposits.”

Already, the Acting Managing Director and Chief Executive of the NDIC, Alhaji Umaru Ibrahim, has visited the Inspector-General of Police (IG) Hafiz Ringim on current development and the latter has “assured that policemen would be deployed to all branches of the affected banks to ensure safety of the banks’ assets”.

The total deposits in the 224 MFBs was put at N18.2 billion, while total loans as reflected in their books amounts to N19.6 billion. Their combined shareholders’ fund is valued at N6.1 billion.

The revocation of the licences has set the stage for the ongoing review of the microfinance policy framework in the country, the CBN had said.

It also cited inability by the MFBs to meet their matured obligations, poor corporate governance, incompetent boards and weak management among others as some of the reasons for revoking their licences.