Relationship Between Deposit Insurance and Depositor Confidence in Nigerian Banking System

Deposit insurance is a critical component of the financial safety net, designed to protect depositors and prevent bank runs that can destabilise the broader financial system. This study examines the relationship between deposit insurance coverage provided by the Nigeria Deposit Insurance Corporation and depositor confidence among retail bank customers in Ibadan, Oyo State. A descriptive survey design was adopted, and 300 bank customers were randomly selected from six commercial banks in Ibadan North and Ibadan South East Local Government Areas. Depositor confidence was measured across dimensions of willingness to save, concern about bank failure, and awareness of deposit insurance coverage limits. Chi-square tests and binary logistic regression analysis were employed. Results revealed that only 38% of respondents were aware of the current maximum insurance coverage limit of five hundred thousand Naira set by the Nigeria Deposit Insurance Corporation. Among those aware of deposit insurance, 72% reported higher willingness to maintain savings in the formal banking system compared to 41% among unaware respondents. Binary logistic regression confirmed that deposit insurance awareness was a significant positive predictor of depositor confidence (OR = 3.62, p < 0.01). The study concludes that deposit insurance significantly bolsters depositor confidence, but its effectiveness is severely undermined by low public awareness. Nationwide financial awareness campaigns by the Nigeria Deposit Insurance Corporation are urgently recommended, particularly targeting low-income depositor segments in South West Nigeria. Keywords: deposit insurance, depositor confidence, Nigeria Deposit Insurance Corporation, banking system, Oyo State