Accounting Project Topics

The Role of Nigeria Deposit Insurance Corporation in the Banking Sector

The Role of Nigeria Deposit Insurance Corporation in the Banking Sector

The Role of Nigeria Deposit Insurance Corporation in the Banking Sector

Chapter One


The objectives of the study are;

  • To evaluate the problems of mismanagement of fund
  •  To x-ray depositor fund insecurity in banks
  • To investigate the reason for failures of banks
  • To know CBN / NDIC roles in saving the depositor fund
  • To find the reason for unit bank abnormal growth in the century
  • To know whether banks is keeping legal reserved improved by CBN for day to day recording
  • To eliminate fraud act among banks managers
  • To wipe out distress among incorporated banks in Nigeria banking sectors.




In Nigeria such a scheme is in form of Nigeria Deposit Insurance Scheme (NDIC) Ogunleye (2004) says that “The Nigeria Deposit Insurance Corporation (NDIC) was established in 1988 as an explicit deposit Insurance scheme under the Nigeria Deposit Insurance Corporation Decree No 22 of 1988 now Cap. 301, Laws of the Federation 1990 as amended. Section 1 (I) of the NDIC Act provides for the establishment of the NDIC as a body corporate with perpetual succession and a common seal. The NDIC commenced operations in March 1989. The primary aim of establishing the NDIC is to maintain stability and public confidence in the banking sector by guaranteeing payments to depositors in the event of failure of insured institutions as well as promoting safe and sound banking practices through effective supervision. It is an autonomous regulatory body with powers to examine the books of insured banks and other deposit-taking financial institutions and to restrict the activities of banks found not to be in compliance with regulations. It can also arrange for other banks to assume the deposit liabilities of a failing bank or take over the management of a bank where such action becomes necessary to protect depositors’ interest. In a nutshell, the functions of the NDIC include:- insuring the deposit liabilities of all licensed banks, supervising the activities of all insured institutions through off-site and on-site examinations alongside the Central Bank of Nigeria (CBN). In conjunction with the CBN, the NDIC also resolves distress in the industry where ever and whenever it occurs and acts as liquidator and receiver of any failed bank. Aguolu (1998) says that “in terms of management and control, the NDIC has the Governor of the Central Bank as chairman. It also has a managing director, two executive directors and three representatives of the Federal Government. The NDIC is owned 60% by the Central Bank and 40% by the Federal Government.” With deposit insurance therefore, the failure of one bank becomes an isolated event since it eliminates the danger that unfounded rumours would trigger off courageous bank runs. The corporation tries to ensure safety of depositors’ funds and to promote stability in the banking system. The depositor in insured financial institutions does not lose all his deposits in case of bank failure.


According to Salmon (2004), “Nigeria Deposit Insurance Corporation (NDIC) has paid a total sum of N8.6 billion to the depositors or failed banks in the country. The amount represents total insured deposits of N3.3 billion and N5.3 billion liquidation dividend paid to depositors of the closed banks as at January 2004″. According to him, a lot of depositors are yet to come forward to collect their deposits in the closed banks despite series of public campaign embarked upon by the corporation in the mass media to educate the public about NDIC activities.




Research design

The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to the role of Nigeria deposit insurance corporate in the banking sector

Sources of data collection

Data were collected from two main sources namely:

(i)Primary source and

(ii)Secondary source

Primary source:

These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.

Secondary source:

These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.

Population of the study

Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information the role of Nigeria deposit insurance corporate in the banking sector. 200 staff of Nigeria deposit Insurance Corporation, Abuja was selected randomly by the researcher as the population of the study.




Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey.  This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.




It is important to ascertain that the objective of this study was the role of Nigeria deposit Insurance Corporation in the Banking sector. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of Nigeria deposit Insurance Corporation in the Banking sector


This study was on the role of Nigeria deposit Insurance Corporation in the Banking sector. Eight objectives were raised which included: v To evaluate the problems of mismanagement of fund, to x-ray depositor fund insecurity in banks, to investigate the reason for failures of banks, to know CBN / NDIC roles in saving the depositor fund, to find the reason for unit bank abnormal growth in the century, to know whether banks is keeping legal reserved improved by CBN for day to day recording, to eliminate fraud act among banks managers, to wipe out distress among incorporated banks in Nigeria banking sectors. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of Nigeria deposits Insurance Corporation. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made supervisors, controllers, senior staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


The Nigeria Deposit Insurance Corporation which was established in 1988 has mean while performed creditably in insurance guarantee payment, in liquidation dividend payment and in supervisory and advisory capacities, but much still needs to be done. The current N50,000 maximum insurance coverage (and even the proposed N100,000 to the National Assembly) is grossly inadequate to satisfy the expectations of depositors mainly because of the problem of inflation. The problem of receiving unreliable returns from banks seriously undermines the offsite supervisory role of NDIC. The site for the payment of both insurance guarantee and liquidation dividends tends to alienate the depositors of failed banks. The official function of NDIC does neither include the coordination of interbank activities nor does it have any provision for debt factoring.


In the light of the above conclusions, it is here recommended that:- The maximum insurance coverage be raised to N200,000.00 (two hundred thousand naira). Special intelligence informant paid by the corporation will be a senior employee of each bank. Payments for insurance guarantee and liquidation dividends will hence forth be at the premises of failed banks in order to stop alienating certain depositors. The official functions of NDIC should be expanded to include coordination of interbank activities and a provision for debt factoring. If the above recommendations are complied with, there will be enhanced productivity and nation building emanating from the stability of the financial sector.


  • Aguolu, P. (2009). Financial institutions in Nigeria, Onitsha: Adson Educational Publishers.
  • Alashi, S. (2013). “Bank failure Resolutions: the main Options” NDIC QUARTERLY. Vol. (No 3) June.
  •  Umoh, P. (2010).”Bank Customer Protection through Deposit Insurance, ND1C Quarterly Vol. (No 4)
  • Ogunleye, G. (2012). “NDIC, the Journey so far” In Business Times. Daily Times Publishers, March I -7 P. 36
  • Saliomon, A. (2004). “NDIC Pays N8.6 billion to failed. Bank depositors” In Business Times. Lagos: Daily Times Publishers Feb. (23- 29).
  • Berlin, M.; Saunders, A. & Udell, F.G. (1991) “Deposit Insurance Reform: What are the issues and What needs to be fixed” Journal of Banking & Finance
  •  De Young, R, Flannery M. J., Lang W. W. & Sorescu, S. M. (1998) “The Informational Advantage of Specialised Monitors: The case of Bank Examiners” a paper presented at the seminar by the Atlantic Economic Society, Atlanta, New York.