In 2023, the Nigerian Deposit Insurance Corporation (NDIC) compensated some customers of the 132 microfinance banks whose licenses were revoked by Nigeria’s Central Bank in May of the same year. The Central Bank revoked these licenses due to the banks’ inactivity, insolvency, failure to render returns, closure, or not providing their licensed banking services for over six months.
According to the NDIC’s notices from May and August 2023, customers of the affected banks were eligible for a maximum payment of ₦200,000, provided they could prove they held deposits in the banks. However, the Central Bank did not offer specific reasons for revoking each individual bank’s license.
Two notable banks affected by this action were Eyowo Microfinance Bank, which is backed by Softcom, a fintech firm, and Purple Microfinance Bank. Some of these affected banks, believing their license revocation was unjust, attempted to restore their licenses, albeit under a different name. An NDIC representative also confirmed that Eyowo was negotiating with the Central Bank to retrieve its license. In June 2023, Eyowo entered a brief partnership with Providus Bank, which enabled some customers to access their funds.
However, customers with deposits exceeding ₦200,000 had to wait, as the situation got more complicated. These banks reassured such customers of the work in progress to ensure access to their deposits. If these assurances were not met, such customers could still revert to the NDIC for help.
The NDIC would perform an assessment on these banks’ assets, recover their loans, and sell their investments. After this liquidation process, the NDIC would compensate depositors with over ₦200,000 part or the entirety of their remaining deposits tagged “liquidation dividend.”
Some banks tried to retrieve their licenses. However, there was a significant risk of failure. If the banks could not convince the Central Bank of their stability, then the NDIC could liquidate their assets as a last resort to compensate their depositors. If other measures like appealing to shareholders to infuse more money into the banks fail, the NDIC could negotiate a takeover by another bank or bring in a third party to run the bank until it stabilized.
