Examination of the law relating to protection of bank deposits, liquidation and winding up of banks in Nigeria

Author:Matthew Enya Nwocha
Position:Ebonyi State University, Abakaliki, Nigeria
Examination of the law relating to protection of bank deposits,
liquidation and winding-up of banks in Nigeria
Senior lecturer Matthew Enya NWOCHA
This p aper is written against the background of frequent bank failures, mergers
and winding-up of banks which have caused a great deal of apprehension in the minds of
bank customers, depositors and creditors in Nigeria. The paper therefore is aimed at
interrogating the legislative intervention in this regard and in particular the role that the
Nigeria Deposit Insurance Act has played in mitigating the uncertainty and hardship that
has been occasioned by incessant bank failures i n the country. The method of research here
is the use of the NDIC Act and other related legislation as primary sources of research in
addition to secondary sources such as works authored by legal scholars. The paper has
found that legislative intervention has reduced the incidents of bank failure and also offered
a number of protections to bank customers and their depo sits. The pap er has however,
discovered shortcomings in the law that need to be amended if bank deposits are to be
accorded adequate protection in the event of liquidation or winding up. It has therefore
recommended, among other things, the proportiona te repayment of bank deposits in the
event of liquidation, intensification of the work of bank examiners, and increased penal
sanctions on bank directors and senio r management staff whose actions cause bank failure.
The overall implication of the study is that when its recommendations are imp lemented
there would be greater confidence and stability in th e banking sector which would in turn
boost economic growth in the country.
Keywords: insured institution, liquidation, winding-up, bank deposits, ba nk examiner.
JEL Classification: K22, K34
1. Introduction
A bank is a financial establishment for the deposit, loan, exchange, or issue
of money and for transmission of funds.
The traditional role of banks consists of
financial intermediation, provision of an efficient payment system and an agency
for implementation of government monetary policies.
Banks are today considered
the most regulated institution in any nation. This is owing to the strategic position
that the banking sector occupies in economic development and, secondly, due to
imperfections in the market mechanism that mobilizes and allocates financial
resources to socially desirable economic activities which ultimately commands a
Matthew Enya Nwocha Head of Department of Jurisprudence and International Law, Faculty of
Law, Ebonyi State University, Abakaliki, Nigeria. Email: nwochaenyaeni@gmail.com.
B. A Garner (2009) Black’s Law Dictionary, 9th ed. St. Paul, Minnesota: West Publishers.
A Adebayo (1999) Economics: A Simplified Approach, 2nd ed. Lagos: African International Publishing
Ltd; L. Afolabi (1998) Monetary Economics. Lagos: Perry Barr Ltd.

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