1.0 Introduction
The Nigeria Deposit Insurance Corporation (NDIC) twentieth Annual Report and Statement of Accounts for the year ended December 31, 2009 is structured into three parts. Part one reviews NDIC Operations and Performance. In part two, highlights of developments in the Banking System as well as the Performance of Insured Institutions are provided. The Report ends in part three, which focuses on Consumer Education.

2.0 NDIC Operations and Performance
As an integral part of the mechanism for ensuring safe and sound banking practices, the Corporation continued with both its On-site and Off-site supervision of banks during the reporting period. During the year, these activities exposed the major weaknesses of poor corporate governance, inadequate risk management practices, huge non-performing loans, drastic capital erosion, and severe liquidity challenges in the deposit money banks.

A joint Special examination of all the 24 deposit money banks was carried out by CBN and NDIC examiners, while 28 Special Investigations were conducted, bringing the number of on-site examinations and investigations in 2009 to 52. The Insurance and Surveillance Department (ISD) continued to perform its off-site monitoring activities over the 24 Universal banks in the industry. Specifically, the NDIC assessed the financial conditions and performance of the insured banks on monthly basis by analyzing Call Reports rendered through the Electronic Financial Analysis Surveillance System (e-FASS). The evaluation of the financial conditions culminated in production of the Quarterly Bank and Industry Report with performance rating of each bank which formed the basis for remedial supervisory action and other recommendations that could influence banking policy.

The intervention of CBN in eight (8) banks, led to the removal of their Executive Managements and injection of N620 billion liquidity support fund. The CBN also directed two (2) other banks to recapitalize by June 2010. Those measures prompted closer off-site supervision of the affected banks by NDIC to ensure effective protection for the depositors of the affected banks as well as contribute to the stability of the financial system and to enhance transparency in financial reporting.

In respect of the liquidation activities of the Corporation, a total of 45 banks were in liquidation as at the end of 2009. This figure did not however include three (3) banks whose shareholders were still in Court challenging the revocation of their banking licence. Some of the major liquidation activities undertaken by the Corporation were the payment of insured deposit claims by bonafide depositors (through appointed agent banks); realization of fixed assets; recovery of debts; and payment of liquidation dividend to depositors who had more than the statutorily insured amount of N200,000 as well as the creditors in closed  banks. As at the end of 2009, the Corporation declared an aggregate dividend of N77,102.46 million for 43 out of 45 banks in liquidation. The Corporation also paid the sum of N727.4million to 740 creditors who filed their claims out of the sum of N1,182.68 million declared as liquidation dividends to general creditors as at December 31, 2009. Similarly, a cumulative sum of N1,285.6 5 million had  been paid to 444 shareholders who filed their claims as liquidation dividends out of the sum of N1,513 million declared as at December 31, 2009.

The Corporation realized the sum of N19.24 billion from the disposal of the physical assets of the banks-in-liquidation and recovered N20.79 billion as at December 31, 2009. The recovery of debts of the banks in liquidation had proved to be a herculean task largely because of the protracted legal process and the fact that many of the loans were improperly granted and secured.

3.0 Insured Institutions’ Performance and Profile in 2009
The environment in which insured banks and other insured financial institutions operated in 2009 was shaped largely by developments in the international economy as well as the economic policies/reform programmes of the CBN aimed at sustaining the momentum of macroeconomic growth and stability. During the year, the implementation of those reform programmes continued to exert significant influence on the banking as well as other sectors of the economy. The consequence was a mixed grill in terms of performance of the basic macroeconomic indicators. Provisional data from the National Bureau of Statistics (NBS) indicated that overall GDP growth for 2009 was put at 6.90 per cent which was significantly higher than the 5.98 percent recorded in 2008. Inflationary pressure moderated in 2009, as the inflation rate assumed a downward trend. The headline inflation rate, as measured by the year-on-year increase in the all item consumer price index, which stood at 15.1 per cent at the end of December 2008, declined from 14.4 per cent at the end of the first quarter to 12 per cent by the end of December 2009, reflecting increase in demand pressure due to festivities and the spate of fuel shortages linked to supply bottleneck and the speculation that petroleum product prices would be fully deregulated. Interest and exchange rates were, however, fairly stable for most of the year. The relative stability of the Naira exchange rate at WDAS was largely attributable to the efficacy of the various policies implemented by the monetary authorities.

In 2009, despite the adverse effects of the global financial crisis, some improvements were recorded in the performance of the economy. The reform measures initiated in the banking sector by the CBN with the active involvement of the Corporation continued to gather momentum with moves by the government to establish the Assets Management Corporation of Nigeria (AMCON). The reforms were aimed at impacting positively on the overall efficiency and stability of the system in a manner that would ensure that banks played appropriate roles as channels for allocating resources to the real sector. This was also expected to increase credit to the growth enhancing sectors of the economy and therefore, engender an all inclusive growth, as well as avoid a recurrence of the crisis provoked by over exposure to speculative and non-value adding ventures.

However, despite the CBN reform efforts, bank lending remained sluggish given the need to re-build capital, maintain liquidity and the possibility of further credit write-downs, mostly related to non-performing exposures to commercial real estates and stock markets. During the period, greater emphasis was placed on strengthening the supervisory, risk management, disclosure and corporate governance frameworks in insured institutions.

During the period insured institutions continued to grapple with the negative fallout of the global financial crises, which adversely affected most performance indicators. For example, total deposits of insured banks, which accounted for 67.53 per cent of the industry’s liabilities, grew by 14.83 percent from N8.70 trillion in 2008 to N9.99 trillion as at December 31, 2009. However, insured banks aggregate assets declined by 9.06 per cent from N19,261.02 billion in 2008 to N17,522.86 billion in 2009. Similarly, total adjusted shareholders’ funds for all the insured banks significantly declined from N2,379.23 billion recorded in 2008 to N448.99billion as at December 31, 2009.

The over N1,930 billion or over 81 per cent decrease recorded in the adjusted shareholders’ funds of insured banks was a direct consequence of the losses  many of the banks recorded due to huge amounts of non-performing loans. Under the recent banking reforms, banks were required to make full provision for their non-performing loans. Consequently, some of them declared huge losses, which impacted negatively on their adjusted shareholders’ funds.

The banking industry recorded a net loss position of N1.37 trillion as at 31st December 2009 which compared unfavourably with the net profit before tax of N658.10 billion recorded as at 31st December 2008. That position adversely impacted on return on assets which declined from 4.29 per cent in 2008 to negative 64.72 per cent in 2009. In the same vein, return on equity also decreased from 24.11 per cent to negative 9.28 per cent on the comparable dates.

4.0 Bank Information/Data
The information/data on banks as contained in the 2009 Report relates to insured banks’ addresses, nationwide distribution of their offices/branches, head office addresses, directors and approved auditors. Statistics on the distribution of insured banks’ offices show that Lagos State maintained its dominance, as it accounted for 1,569 (28.8  percent) of total banks branches/offices out of  a total of 5,565 branches spread across the country and overseas as at December 2009. The Federal Capital Territory, Rivers State, Anambra State, Oyo State followed with 363 (6.7 percent), 281 (5.2 per cent), 222 (4.1 percent) and 212 (3.9 per cent) respectively. 
There was an increase of 431 in the number of new branches opened across the country from 5,134 bank branches in 2008 to 5,565 branches as at the end of 2009. The increase in the number of branches could be attributed mainly to the enhanced capital base of banks as a result of the banking consolidation programme and the need to bring a large segment of the unbanked populace into the formal banking system.

5.0 Conclusion
Going forward the Board and Management of the Corporation is poised to continuously pursue our core mandate of depositor protection in all its ramifications with the use of relevant information technology and devices. We will also leverage on our core values of professionalism, transparency, team work as well as respect and fairness to enhance organizational efficiency. This we believe will go a long way in ensuring that we contribute to maintaining public confidence in the banking system and realize our vision to remain a global player as one of the leaders in depositor protection.

Nigeria Deposit Insurance Corporation (NDIC)
Abuja, Nigeria

December, 2010