THE CONTRIBUTORY ROLE OF NIGERIAN DEPOSIT INSURANCE CORPORATION IN ECONOMIC GROWTH IN NIGERIA

1.0 Introduction

1.1 Background Of The Study

A bank deposit insurance scheme (DIS) is a financial guarantee to depositor particularly the small ones, in the event of a bank failure bank deposit insurance scheme developed out of the need to protect depositor, especially the uniformed, from the risk of loss and to also protect the banking system from instability occasioned by runs and loss of confidence The banking system has been singled out for this special protection because of the vital role banks play in the economy whether developed or developing. For a DIS to be effective in achieving the above objectives. It must be properly designed, well implemented by the fancy established to execute the scheme and well understood by members of the public {financial stability forum (FSF), 200}. A well designed DIS contributes to the stability of withdraw their insured deposits from banks following rumours about their financial conditions.

The establishment of Nigerian deposit insurance cooperation (NDIC) in 1988 heralded the introduction of an explicit deposit insurance scheme in Nigeria the Nigerian deposit insurance corporation is responsible for insuring the deposits at all banks and other deposit taking financial institutions licensed by the central bank of Nigeria (CBN). It also give financial and technical assistance in the interest of depositors, to banks in difficulties and in case a bank fails, it guarantee the payment of insured deposits

The corporation assists the central bank of Nigeria (CBN) in the formulation and implementation of banking policies, with a view to ensuring sound banking practice among others. The scheme was meant to argument the existing safely not by protecting depositor, thereby boosting confidence of the banking public. It was also considered as an additional frame work to serve as a substitute to the government support policy (implicit insurance) hitherto in place. Prior to the establishment of the corporation, government was unwilling to let any bank fail no matter its financial condition due to fear of the potential adverse government support over the years. However, such direct supports (implicit insurance) could not be sustained under the structural adjustment programmed introduced in 1986 which among others, deregulated the economy towards market orientation, with the establishment of the Nigerian Deposit insurance corporation scheme (NDIC), the pain of bank failure unsuitable in a market environment were reduced to a minimum while moral hazard associated with direct government support was eliminated.

1.2 Statement Of The Problem

Some public opinions, particularly the press has been vociferous in the argument that the rate of proliferation in the banking industry is unmanageable and many new banks were bound to fail. it was like the regulatory authorities like Nigerian deposit insurance corporation (NDIC) were determined to avoid failure with of prudential guideline in additional to existing schedule to banking and which have indeed put the government at alert to avert any crises. All there are to assist the supervising authority in the critical evolution of banks financial position and facilitate the identification of problem in banking industry the problem facing banks also includes.

1. High level of intensified competition due to the liberalization of industry.
2. Increased systematic risk arising from increased off balance sheet transaction.
3. The problems of bank distress which result to loss of bring money by the bank customer.
4. The prevalent of fraud in the banking industry.

This research will address the challenges facing banking industry because of its tremendous impact on the economic growth of the country.

1.3 Objective Of The Country

The financial section has not only become incessant to the growth of the nation’s economy but has also been in the increase in recent years. The objective of the research includes;

1. To highlight some of the problem facing Nigerian deposit insurance corporation (NDIC) in its attempt to achieve economic growth through stability in the banking industry.
2. To examine who checks and solution has been proffered by the Nigerian deposit insurance corporation (NDIC) against the problems.
3. To examine the role of banking industry in economic growth.
4. To examine the prospects of Nigerian deposit insurance corporation (NDIC) in the performance of banking industry.
5. To recommend measures to curb the problem militating against Nigerian deposit insurance corporation (NDIC) in performing their function.

1.4 Research Hypothesis

The study is based on the following hypothesis.

1. Ho: There is no significant relationship between effective performance of Nigerian deposit insurance corporation (NDIC) and economic growth
   Hi: There is significant relationship between effective performance of Nigerian deposit insurance corporation (NDIC) and economic growth
2. Ho: Nigerian deposit insurance corporation (NDIC) has no significant impact on the operation of the banking industry and economic growth.
   Hi: Nigerian deposit insurance corporation (NDIC) has significant impact on the operation of the banking industry and economic growth.
3. Ho: Banking stability has no significant influence on the economic growth in Nigeria.

1.5 Significance Of The Study

The significance of this study cannot be emphasized and can be considered in relation to the scope of study. This research can be visualized from the effects of distress in bank that lead to loss in banking customer’s deposits.

However, banking distress has contributed immensely to the lack of economic growth in the economic of the nation.

The research will be tremdous assistance to policy market and practitioners. It will also provide to the existing literature in the field for researcher, and student in higher institution of learning can devoice various secondary sources from it.

1.6 Scope Of The Study

The scope of the study will cover the following areas. Reason for establishment of Nigerian deposit insurance corporation (NDIC). Its achievement and challenges facing Nigerian deposit insurance corporation (NDIC). The study will also be limited to inter continental bank plc, due to time constraint of the research.

1.7 Limitation Of The Study

There are some limitation of this research though, there limitation do not have significant influence on the reliability of this study, there are:

1. The time factor in thin the researcher’s disposal is inadequate to thoroughly carry out an in − deposit study
2. Restricted access to information and
3. Financial constraints.

1.8 Profile Of Nigerian Deposit Insurance Corporation (NDIC)

The NDIC was established by the federal government through decree No. 22 of June 15, 1988, but it started operation in February 1989. The 60 percent (60) of NDIC’s authorized capital of N 100 million while the federal government holds the remaining 40 percent (40). The NDIC was set up primarily to protect depositor from bank failure there by promoting public confidence in the banking industry.

The affairs of the corporation are controlled by the board of directors of which the governor of the CBN is the chairman. The board also consist of a representation of the federal ministry of finance and economic development (FMEED), the managing director and two executive directors of the corporation.

1.9 Definition Of Terms.

A. Economic Growth:

This is defined as the rate of expansion of the national income or total volume of production of goods and services of a country

b. CBN:

Central bank of Nigeria: this is the Apex bank of the country. it is the bank of all banks of the nation CBN is a financial institution established by the law or constitution of the country. It is the bank of all banks of the nation CBN is a financial institution establish by the law or constitution of the country with the responsible or duty to manage and controlled all money matter of the nation

c. NDIC:

Nigerian deposit Insurance Corporation: this is the corporation that is responsible for insuring the deposit of all banks and other deposit taking financial institution licensed by central bank of Nigerian (CBN). It is the corporations that assist the CBN in the formulation and implementation of the banking policies with a view of ensuring sound banking practices among others.

d. Depositors:

These are the person (s) that keep or save money into the bank. Deposits are also known as bank customers.

e. Deposits:

These are thing or money which the depositions keep in the banks. Deposit are things that are been kept in the bank.

f. Bank Stability:

This defined as a process in which a bank is stable in its operation. This is also a process of bank regulation that is the operation or service of a particular bank is a regular or not having problem.

g. Bank Failure:

This the opposite of bank stability that is the process in which a particular bank is having problem in it operation or the system of a bank been liquidating it is the bank that is no more operating or that has uncounted financial problem.