The Nigerian Deposit Insurance Corporation (NDIC) has announced that payments to depositors of Heritage Bank will start next week. It did not give a specific date.
NDIC Managing Director, Bello Hassan, revealed that Heritage Bank holds N650 billion in deposits and over N700 billion in loans. The NDIC will initially pay insured deposits up to N5 million, with higher balances to be settled after asset liquidation.
Mr. Hassan said the NDIC looks forward to completing the loan repayment within the next six months. He also indicated that depositors are currently being verified for onward payment of insured repayments.
This follows the revocation of the bank’s banking license by the Central Bank of Nigeria (CBN) on Monday, due to financial instability.
Critical Numbers
The NDIC said Heritage has 2.3 million depositors, and only 1% have funds above the insured threshold of N5 million.
There are about 116 branches of heritage banks across the country. It did not specify the number of employees of the bank, now thrown into the unemployment market.
The promised payment of customer’s deposit will assuage rising apprehension and rekindle hope in the financial system and the central bank itself. Only yesterday, Arise TV News anchorman, Rufai Oseni, expressed doubts the insurance corporation will pay depositors going by past records of the company.
Customers will be hoping NDIC will walk its talk.
Moghalu’s Intervention
Former CBN Deputy Governor and professor of economics, Kingsley Moghalu, offering a personal advisory, reassured the public on Wednesday that the recent revocation of Heritage Bank Plc’s license should not cause alarm. Moghalu characterized the license revocation as a “chronicle of a death foretold,” – apparently suggesting as a former apex banker, he was aware of Heritage Bank’s core fundamental weakness.
He said the decision to halt the bank’s operation was made to protect depositors’ funds and maintain financial stability, saying that poorly managed banks should not expect to be guaranteed to operate indefinitely.
“The revocation of the banking license of Heritage Bank by @cenbank is the chronicle of a death foretold. In other words, it’s not surprising,” he said in a statement on X.
According to the former presidential aspirant, the apex bank’s license revocation was to protect depositors’ funds, and maintain confidence in the banking system.
“I don’t think it should worry anyone, nor does it mean the financial system isn’t sound. Banks are businesses, even if very special and thus heavily regulated ones. A bank that is badly run should not have a lifetime guarantee. The important thing is to protect depositors’ funds,” he stated.
“The revocation of the banking license of Heritage Bank by The Central Bank is the chronicle of a death foretold. In other words, it’s not surprising.”
Prof. Kingsley Chiedu Moghalu
To Moghalu, the Asset Management Corporation of Nigeria was established to ensure systemic financial stability and guard against bank failure.
“What we did in 2010 when we created Asset Management Corporation of Nigeria was to ensure SYSTEMIC financial stability. We made sure no bank failed then to ensure systemic stability because of the unique situation of the global financial crisis. But over the long term, I never subscribed to a view that no bank, no matter how badly run, should ever fail. That would be a wrong approach to financial regulation,” he added.
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