Evaluation of the Effectiveness of the Nigerian Deposit Insurance Corporation in Protecting Small Depositors

The Nigeria Deposit Insurance Corporation is mandated to protect small depositors, enhance public confidence in the financial system, and facilitate orderly bank resolution, and the professional evaluation of its effectiveness in fulfilling these mandates is important for policy assessment. This study evaluates the effectiveness of the Nigeria Deposit Insurance Corporation in protecting small depositors and contributing to financial system stability for the period 2015 to 2022. A professional evaluation methodology was employed, using secondary data from Nigeria Deposit Insurance Corporation annual reports, bank failure records, and depositor compensation data. Effectiveness was assessed by depositor compensation speed, coverage adequacy relative to deposit size distribution, and public awareness of insurance coverage. A survey of 150 retail bank customers across Abuja, Enugu, and Kano was also conducted to assess depositor awareness and confidence. Descriptive statistics and stakeholder perception analysis were applied. Results showed that the Nigeria Deposit Insurance Corporation resolved depositor compensation claims within an average of 37 business days following bank closure, which exceeds the international standard of 20 business days recommended by the International Association of Deposit Insurers. Maximum coverage of 500,000 Naira covered 100% of depositors in 84% of failed banks but was inadequate for small business depositors. Public awareness of insurance coverage was low at 32%. The study recommends increasing maximum coverage limits to 2 million Naira and implementing a national financial literacy programme to improve depositor awareness.

Keywords: deposit insurance, Nigeria Deposit Insurance Corporation, small depositors, bank resolution, financial system stability