THE CHALLENGES AT NDIC

Ibrahim’s reappointment offers a chance to further improve on his performance, writes Bashir I. Hassan

The re-appointment of Mr. Umaru Ibrahim as the Managing Director of the Nigeria Deposit Insurance Corporation (NDIC) for a second consecutive five-year term could hardly have come to many keen observers of the financial sector of the Nigeria’s economy as a surprise. Rather it is a welcome development and true to the antecedents of the Buhari administration’s series of appointments based only on merits. The stringent risk management regimes rolled out by the NDIC under his watch were instrumental to the healthy state of the Deposit Money Banks (DMBs) in the country. These were measures that engendered the industry’s significant improvement on return on assets (ROA), return on equity (ROE) as well as yield on earning assets translating into profitability.

The vigilance that NDIC maintained over the last four to five years led to what we are witnessing today of the improvements in terms of the Capital Adequacy Ratio (CAR) of the Deposit Money Banks (DMBs) as well as their Asset Quality. For example the total loan in 2012 is N8,150 billion as against N7, 273 billion in 2011. Similarly, non-performing loans dropped significantly in 2012 from N360 billion in 2011 to N286 billion in 2012.

A more recent example as contained in the NDIC 2014 Annual Report is that total loans and advances granted by banks across the country climbed from N10.04 trillion in 2013 to N12.63 trillion in 2014. The report was, however, quick to point that despite significant improvement in banking industry’s asset quality, the volume of non-performing loans rose from N321.66 billion in 2013 to N354.84bn in 2014. But it allays any fears that the ratio of the bad debts to total loans is within the regulatory threshold of five per cent. Thanks to the constant vigilance of the corporation in recent times “all the DMBs in the industry had liquidity ratios in excess of the minimum prudential requirement of 30 per cent, as at 31st December 2014, indicating that all DMBs were sufficiently liquid,” the report discloses.

In successfully steering the ship of the NDIC to safety during the recent global financial turbulence, Ibrahim displayed rare acumen and established himself as a thoroughbred professional. The harmonious working relationship between the NDIC and other regulatory bodies like the CBN, Federal Ministry of Finance, the SEC and NSE under his leadership put him in good stead ahead of any other candidates who might have eyed the coveted seat. Add this to his effective management of the human resources at the corporation, his humble disposition towards his staff, which always surprises them when he calls them by their first names at informal events, endears him to many. Today, the morale of the 1,000-plus strong staff at the NDIC is at its peak. He has ensured constant training and retraining to enable them meet the challenges of modern deposit insurance.

Another factor that might have worked for Ibrahim’s advantage was the fact that he has been an insider, a long-standing family member of the NDIC, having been with the institution from its humble beginning and grown through the ranks to the pinnacle of its management position.

NDIC was established as a risk minimiser with the broad mandate of deposit guarantee, bank supervision, as well as provision of mechanism for orderly resolution of failures, including bank liquidation. In its 25 years of existence, the corporation has been striving to achieve this mandate. Ibrahim proved he knows how to achieve this mandate through innovative approaches. If one juxtaposes some of the measures taken to achieve the mandate of the NDIC in the yesteryears and those taken recently under the watch of Umaru, his incredible mastery of the game is unmistakable.

Some of the measures taken by the NDIC back in the 1990s to save many collapsing banks, for example, included moral suasion; continuous interaction with bank managers/owners; imposition of Holding Actions on distressed banks to restrict operations and encourage self-restructuring; and rendering of financial assistance to banks.

But the most recent measures taken from 2009 to the years Ibrahim held sway were quite novel in banking failure resolution. So far we have seen these innovative approaches in the forms of bail outs; bridge banking; establishment of asset Management Corporation of Nigeria (AMCON); assisted merger and acquisition and introduction of financial stability fund (FSF).

The idea of establishing AMCON started in 2010 for the purpose of efficiently resolving the non-performing loans assets of banks in Nigeria. The strategy included recapitalisation of the technically insolvent ones and enhancing the availability of credit to the critical sectors of the economy. Consequently, AMCON acquired the three bridge banks from NDIC and injected the sum of N1.012 trillion (U$6.98 billion) into them as capital injection. AMCON also injected the sum of N1.379 trillion into five of the intervened banks (Intercontinental, Oceanic, Finbank, ETB, Union) with a view to facilitating their merger and/or acquisition.

The amount injected by AMCON had another positive impact. It shored up the affected banks shareholders’ funds that were negative and made investment in the banks attractive to investors. Access Bank acquired Intercontinental; Ecobank, Oceanic; FCMB, Finbank and Sterling Bank Equitorial Trust respectively.

The reappointment of Umaru Ibrahim is a big challenge to his career as well as the future of NDIC. For one, Ibrahim needs to rise to the occasion and prove to the world that President Buhari has not made a mistake in entrusting him with the leadership of the NDIC for the second time. The more reason for this is Mr. Ibrahim is not the first to enjoy this confidence from the Presidency; before him were Mr. John U. Ebhodaghe (19891998) and Mr. Ganiyu A. Ogunleye (1999-2009): both led the NDIC for two consecutive terms.

Secondly, he needs to know all eyes are on him to take NDIC to even greater heights. And achieving that is no easy game. As ever, he will need the maximum corporation of his management team and staff generally. Equally important, he must stick to his persuasive and cooperative posture that has so firmly endeared him to the leadership of the other critical stakeholders in the industry- the CBN most importantly and the SEC - not the least.

The NDIC needs to deepen the confidence the financial institutions, financial media as well as the investing public have in the corporation. It needs to retain priority in protecting the depositors, which is the centre piece of its operations. But at the same time it needs to be more circumspect about the much needed changes that need to be introduced within the operations of the corporation to ensure that these strengthen its role within the purview of the law. A delicate balancing act will come to bear here. Based on his deeper experience of the industry’s nuances and politics, the re-appointed MD/CEO has the wherewithal to save the day.

The NDIC has developed a good rapport with the international community of DIS in past few years. Leveraging on this will further strengthen regional and international co-operation as well as promote sharing of experiences and compliance with best practices. Hassan, a financial analyst, wrote from Abuja