NDIC Decries Over-valuation of Failed Banks’ Assets

•Moves to tighten recovery, disposal procedures, eliminate delay in depositors’ repayment

•Seeks transparency, stronger collaboration with valuers, auctioneers, estate surveyors

James Emejo in Abuja

The Nigeria Deposit Insurance Corporation (NDIC), yesterday identified inflated valuations of assets belonging to failed banks, alongside unethical disposal practices and possible collusion among service providers, as major obstacles to the recovery of funds for uninsured depositors.

The corporation said unrealistic valuations were making it difficult to attract buyers and convert properties and other assets into cash, thereby prolonging the liquidation process and delaying the settlement of outstanding claims. Director, Asset Management Department, NDIC, Mr. Ogungbemi Theophilus, disclosed this at a stakeholders’ seminar and public relations workshop organised by the department.

Theophilus said NDIC was seeking stronger collaboration with estate surveyors, valuers, auctioneers and sales agents to address operational weaknesses undermining the recovery of assets from failed financial institutions.

According to him, one of the major challenges confronting the NDIC is the tendency by some professionals to place valuations on failed banks’ properties above their actual market worth, making such assets difficult to dispose of when exposed to market realities.

He said the corporation was also concerned about undervaluation and possible collusion in the disposal process, where some stakeholders might seek to manipulate transactions for personal benefit.

He said, “The environment is dynamic. We need to be on the same page as to what we intend to achieve with asset realisation. A major challenge that we have is overvaluation of failed bank assets.”

Theophilus explained that when valuations were excessively high, prospective buyers were discouraged, making asset recovery more difficult.

He added that although undervaluation might be less prevalent, the possibility of collusion among those engaged to facilitate asset sales remained a concern.

The NDIC director said the engagement was designed to improve coordination with professionals responsible for identifying, valuing, marketing, and disposing assets belonging to closed banks.

He stressed that the ultimate objective was to accelerate recoveries and ensure that depositors whose balances exceeded the insured limits could receive their outstanding funds.

The corporation, he explained, paid insured deposits without waiting for the recovery of assets from failed banks.

However, balances above the applicable insurance limits can only be settled through liquidation dividends generated from loan recoveries and the sale of assets.

Under the current deposit insurance framework, depositors of deposit money banks, non-interest banks, and mobile money operators enjoy coverage of up to N5 million per depositor per bank, while those of microfinance banks, primary mortgage banks and payment service banks are covered up to N2 million.

Theophilus said about 99 per cent of depositors were fully covered under the existing limits, but the remaining uninsured balances depended substantially on the corporation’s ability to recover assets and outstanding loans.

He described the Asset Management Department as responsible for managing the asset side of failed banks’ balance sheets, while the Deposit Insurance and Claims Department handled verification and payment of depositors.

The department oversees three broad categories of assets: risk assets comprising loans and advances granted by failed institutions; physical assets, including land, buildings, vehicles, machinery and office equipment; and investments such as stocks, treasury bills, fixed deposits, joint ventures and subsidiaries.

He stated that recovering loans previously granted by failed banks remained particularly difficult, as obligations that were not honoured when the institutions were operational did not automatically become easier to recover after their closure.

Theophilus said the corporation could not effectively manage and realise assets across the country without the support of professionals with knowledge of local markets and the capacity to provide services in different locations.

He urged stakeholders to prioritise credible market valuations, timely reporting, and transparent disposal procedures, warning that NDIC would not tolerate insider dealings, collusion with prospective buyers, diversion of proceeds, or other practices capable of short-changing depositors.

He said, “The money we realise is not NDIC’s money. It is depositors’ money. It is somebody’s school fees, somebody’s retirement, somebody’s business capital. We must handle it as such.”

Policy, Accountability

To strengthen the process, the director disclosed that the corporation was developing a comprehensive Asset Management Policy to guide asset identification and documentation, valuation procedures, disposal strategies, and accountability in recoveries.

He said the policy would provide a more structured framework for managing the assets of failed institutions and improve transparency in the conversion of such assets into funds for settling depositors’ claims.

NDIC also plans to deepen joint training and knowledge exchange with professional bodies, particularly in emerging valuation methodologies, asset management, and sustainable valuation practices.

Theophilus said NDIC would, in return, provide stakeholders with clearer written mandates, defined scopes of work, timelines and transparent feedback on the assessment of their assignments.

He explained that the workshop was part of a wider strategic initiative involving similar engagements in Abuja, Enugu, and Lagos to strengthen relationships with existing partners, address operational challenges, and onboard new professionals.

He insisted that stakeholders should regard their assignments as a public trust rather than ordinary commercial contracts, given the implications of their work for financial stability and depositor protection.

The director also called for greater professionalism in the discharge of assignments, stating that the corporation would work with relevant professional bodies to uphold ethical standards and discipline.

He said improved collaboration would not only enhance asset recovery and reduce the cost and duration of bank liquidation but also strengthen public confidence in the financial system.

Theophilus maintained that the ultimate beneficiaries of improved asset realisation should be depositors awaiting the recovery of their uninsured funds.