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The Role Of Nigerian Deposit Insurance Corporation In The Regulation Of Nigeria Banking Sector
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At this period, a motion was sponsored in the federal legislature for the establishment of a central bank but a complain was made that there was no developed capital market. However, there were persistent call for the establishment of a central bank. MR. J.L fisher was appointed to examine the desirability and practicability of establishing a central bank. Although Fisher recognized the contribution of a central bank towards improvement and performance of indigenous banks he however, did not see the need for a central bank. He recommended only a more use of the financial secretary’s power (finance minister). The international bank for reconstruction and development (World bank) in 1953 also raised a motion in favour of the establishment of central bank was finally raised by MR. J.B LOYNES, the formal adviser to the bank of England. The report of Loynes committee, favoured the establishment of central bank. On March, 17th, 1958, the central bank ordinance was made. However, the central bank did not start full operation until 1st July 1959. The ordinance of 1958 has gone through series of amendments in 1962, 1967, 1968, 1969, 1970, 1972, 1976 and 1987 law later repealed and replaced with the 1991 central bank decree. Since it’s establishment, the central bank has laid the foundation for sound financial system. It also stands ad the apex bank in the financial system and helps in the implementation of monetary control. It also acts as the apex regulatory authority in the banking industry, for the supervision and control of banks, sections 1 of BOFID 1991 states the function of central bank. In 1972, the establishment of the banking enterprises promotion decree affected for all sensitive sectors of the Nigerian economy was restructured to 60:40 indigenes and foreigners respectively. This is a view to taking active control of the economy from the lands of foreigners. The banking sector being one of the sensitive sector of the economy was also affected. This gave rise to the establishment of more banks by indigenes entrepreneur.
Another factor that encouraged the establishment of more banks at this period was the oil boom, which sustained an increase in capital flow in the macro economy hence, enhanced the profitability of bank ownership by Nigerian entrepreneur. Therefore, at this period more banks were licensed and established. In 1986, followed the implementation of an economic structural adjustment programme. This led to the deregulation of the financial system in 1987. Entry into banking institutions increased such that the number of a total of 42 banks in 1986, the number of licensed banks increased to 120 at the end of 1992, giving an annual average growth rate of about 31 percent with the removal of control of interest rates, bank deposit jumped from about 20.5 billion in 1986 to N58 billion at the end of 1992, an annual growth rate of 55 percent. Similarly, total assets of banks increased from N68 billion in 1986 to about N232 billion at the end of can safe and sound banking practice be restored in the banking system. Can the competitive and creative ability of banks lead to greater efficiency instead of distress. There is no need for promote bank ethics and conduct despite various reforms and new improved banking practices. Can confidence be restored in the banking sector. Does the adoption of the deposit insurance scheme have any justification in fair compensation of depositors of banks during bank failure and liquidation? The need for this study is also borned out of the fact that there is the need to make further research on the role of Nigeria deposit insurance corporation (NDIC) to increase knowledge on previous researcher made. 1.3 JUSTIFICATION OF THE STUDY The significance of this study is to draw attention of the regulatory authority (Central bank) and NDIC to the effect of continued failure and distress in banking industry.
Further research is needed to this study to know the causes, effects, implication of failed banks on Nigerian economy as well as appraisal of the impact of NDIC on banking sector and its efficiency since inception till date in the management of distressed and failed banks.
1.4 OBJECTIVES OF THE STUDY
This study is carried out for the following 1992; an annual average growth rate of 40 percent.
In spite of these gains, continued to deteriorate in 1989, 7 banks were adjudged technically insolvent. In 1990, the number increased to 9 and in 1991, eights had become distressed while fifteen (15) were in various terms of distress.
Another idea of the structural adjustment programme was the introduction of deposit protection scheme. The need of this was to avoid less of confidence on banks and adverse effect on macro economic resultant in bank failures. The deposit insurance scheme was established by the Nigerian deposit insurance corporation (NDIC) Decree no 22 of 1988. The institution was principally meant to insure all deposits fund so that adequate compensation will be given to depositors on account of bank failures, more so, the reason why the deposit insurance scheme was established, was due to the experience of prior bank failures, more so, the reason why the deposit insurance scheme was established, was due to the experience of prior bank failures, economic reforms and increased competitions among banks, reduction in the risk of systematic crisis involving failed and unsound bank practices that are capable of causing breakdown in payment system, the need to ensure safe competition and creativity as well as fair play amongst financial institutions.
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ABSRACT - [ Total Page(s): 1 ]ABSTRACT The Nigerian banking sector plays a major role in economic development in any country. These they do, through financial intermediation and other banking functions to encourage real sector or innovate productive activities. However, distress in banking sector cannot be totally erased because like other forms of businesses, risks are involved. In combating this, the central bank of Nigeria served as the apex in the banking sector and performs regulatory and supervisory activi ... Continue reading---
