From Uche Usim, Abuja
Umaru Ibrahim, the Managing Director/Chief Executive of the Nigerian Deposit Insurance Corporation (NDIC) is determined to ensure Nigerians do not burn their fingers by succumbing to the temptation of patronising wonder banks that lure them with juicy but ridiculous returns on investment.
Explains that the NDIC, established to protect depositors and guarantee payment of insured funds in the event of failure of insured institutions, will always cooperate with an existing committee comprising security agencies, the Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC) to continuously sensitise the public on the effects of investing hard-earned money in wonder banks that end up bolting with people’s earnings.
At a recent interview with journalists, he revealed that some wonder bank operators were arrested, prosecuted and made to refund depositors’ money.
Umaru, a Fellow of the Nigerian Institute of Management (NIM) and an alumnus of the National Institute for Policy and Strategic Studies (NIPSS), joined NDIC in 1989 as a Director and has since then held numerous positions in the various departments of the Corporation including Administration, Human Resource and Corporate Development Departments. He was appointed the Executive Director, Corporate Services in 2008 and became the Acting Managing Director/Chief Executive Officer in 2009, a post he held for one year before being confirmed the substantive MD/CE in 2010.
In this interview, he speaks more about wonder banks, ponzi schemes, deposit money banks and other issues.
Excerpts:
Tackling proliferation of wonder banks
Well, there has been an existing committee comprising security agencies, CBN, NDIC and SEC that continuously sensitises the public on the dangers of wonder banks that run away with people’s earnings. The wonder banks promise all sorts of mouthwatering impossible returns to people. As we speak, some of the operators of the wonder banks have been arraigned by security agencies and are being prosecuted. Their companies are being put into liquidation and those who lost monies are being reimbursed as much as possible through the proceeds of whatever is realised.
The few bank balances they have, and the few assets they have, are being sold through the court process. The victims are being compensated. The wonder banks are not deposit taking institutions, so they are not licensed by CBN or insured by us. It’s just that in the interest of protecting poor Nigerians, we have to do something about it. So on emergence of wonder banks, we will not relent in calling Nigerians, educating and sensitising them about the dangers of patronising wonder banks. The media should also help us educate Nigerians about the dangers of wonder banks. Let them know that these institutions are not licensed by the CBN, they are not insured by NDIC and therefore, should not be patronised.
I understand Mavrodi Mundial Moneybox (MMM) has closed shop here and moved to Kenya and I’m sure pronouncements have been made that they are not recognised, they are illegal even though they had the audacity to go to the media and insist that they are legal. This is a very serious matter and all hands should be on deck to educate the members of the public BitCon. Another interesting phenomenon in the market is the emergence of what you may know as bitcoin, a technology-based project. I understand many Nigerians have started patronising it. Some of the leading banks in Europe have started adopting their version of bitcoin and the Central Banks in Europe are doing everything to regulate the emergence of this invisible project. They are not even money, they are supposed to be something like virtual money and the subscribers are huge. You don’t need any CBN or fiscal bank to transact with it. If you are a subscriber, you only know yourself and they give you a bit of the bitcoin and in some countries you can convert it to cash, you can make payments with it. This is disruptive innovation and disrupts the right modalities of doing things.
The financial services industry is not spared and on our part, we have constituted a committee together with the CBN to have an in-depth study of this phenomenon; its advantages and disadvantages, safety and security; what it means for money laundering, what it means to corruption or crime or quantum of mere money instruments to the economy, among others. But we need a lot of education. I’m calling on you to educate Nigerians and to even read more about it yourselves.
NDIC’s supervisory roles in banking sector
Well, I should not be assessing myself. Maybe you have to ask the banks and the public. But in sense of modesty, I would say we have been doing our very best to ensure that the banking system, the institutions – microfinance, primary mortgage banks and deposit money banks are protected and continue to be safe and sound. You know the task of ensuring sound, safe banks is a joint task of both the NDIC and CBN. However, this is not to say that they are completely free of challenges and problems. Life itself is full of challenges and problems, which have to be tackled all the time.
Fresh protection for commercial banks
It’s not NDIC creation; it’s a joint creation with other financial agencies and NDIC. This is part of the efforts regulators globally are taking to ensure that some of the important deposit taking banks, specifically the big ones, have what you refer to as living wings. That is, they have a buffer, creating a reserve in such a way that in case they run into trouble; in case of collapse, depositors are protected using the refunds without resorting to public funds or any bailout. It’s like someone who knows that he will die sooner or later, and he says if I die, this man owes me so much; I owe that man so much; this is the way you share my asset, this is the way you share or resolve everything for my children or my wife, so that my relatives don’t suffer.
Benefit of FICAN workshop
I have gone through the papers that were given to me and I’m quite satisfied that in the last one year or two, you have had an array of excellent paper presentations and sessions, which were highlighted by various chairmen. The theme of this year’s workshop is, “Economic Recession and the Nigerian Banking Sector: Opportunities, Challenges and the Way Forward”. Having gone through the papers, I have taken notes of the paper presented by Komolafe, in which he has painted the good, bad and the ugly side of recession in the nation and various opinions on how to tackle recession. As we now know, we are living in what we refer to as vocal world. Vocal stands for Vulnerable, Opportunity, Complex and unpredictable world and we are all experiencing this in one way or the other. As an individual, as a nation and corporate entities, and therefore it is obvious that for any individual that wants to survive, one has to do a lot and one has to be creative and very innovative to survive in this turbulent moments.
Now, for us in the area of supervision and regulation of insured financial institution, it is very necessary that we follow the trends, we follow the dynamics and we will continue to do everything possible that our insured financial institution like DIS (Deposit Insurance Corporation), the primary mortgage banks, microfinance banks, continue to be reasonably creative and innovative in their projects and services so that they will be able to weather the storm. I’m sure going through the papers and listening to the discussions, we will appreciate the daunting challenges we are facing in this very recessionary times. The banks as we know, are facing issues like liquidity, foreign exchange, unemployment, dwindling revenues and profits – high expectation from depositors and quality service of reasonable charges; high expectation from investors of reasonable margins even in difficult times. We have to ensure all banks continue to be creative and innovative to weather the storm.
The banks as we know are facing liquidity issues. Lots of banks need to re-capitalise, and these are challenges that many banks are facing globally. In the United States and everywhere else in the world, there are talks of negative interest rate. All these are important issues that should occupy our minds. There is need for sober reflection during recession.
Given the number of Nigerians that are excluded financially, a major success has been recorded in the last three years or so, particularly in the area of cashless policy and mobile banking to the extent that more and more Nigerians are getting involved. We have the enthusiasm to continue to educate Nigerians on mobile money and cashless policy so that they don’t have to soak their monies in places like soak-away and other places. The banks and the Bankers’ Committee are doing everything possible to make people key into mobile banking because the advantages outweigh the disadvantages.