Enhancing Bank Liquidation and Depositor Protection in Nigeria
President of the National Industrial Court of Nigeria, Justice Benedict Kanyip, has highlighted the importance of prioritizing the settlement of depositors in failed banks. His remarks were made during a keynote address at a sensitization seminar organized by the National Judicial Institute in collaboration with the Nigeria Deposit Insurance Corporation (NDIC). The seminar focused on the theme “Enhancing the Efficiency of Bank Liquidation and Depositor Protection.”
Kanyip called for a faster judicial resolution of failed bank cases, emphasizing that efficient liquidation processes and strict enforcement of depositor protection laws are essential to maintaining public confidence in Nigeria’s banking sector.
The legal framework established under the NDIC Act 2023 and the Banks and Other Financial Institutions Act 2020 places deposit liabilities above every other financial obligation of failed banks, overriding the general provisions of the Companies and Allied Matters Act (CAMA).
According to Kanyip, while Section 654 of CAMA prioritizes taxes, pension deductions, employee salaries, and accrued entitlements during winding-up proceedings, the NDIC Act specifically elevates deposit liabilities above all other claims.
“Section 72 of the NDIC Act 2023 and Section 55 of BOFIA are explicit that deposit liabilities shall have priority over all other liabilities of the insured institution,” he said.
Kanyip explained that this special legal protection reflects the strategic importance of maintaining depositor confidence and preserving financial stability. He noted that under Section 76 of the NDIC Act, directors, shareholders, employees, and other stakeholders may be held personally liable where their actions or inactions contributed to the collapse of an insured institution.
Kanyip stated that the primary objective of Nigeria’s bank resolution framework was to ensure financial stability and protect depositors. He noted that the law provides wide-ranging intervention powers to regulators in cases of distressed financial institutions.
He explained that under Section 4B of the NDIC Act 2023, the NDIC is empowered to provide financial and technical assistance to insured institutions facing imminent or actual financial or technical distress, particularly where such challenges threaten payment systems and public confidence in the banking sector.
Regulatory responses may include bank rescue measures, such as mergers, acquisitions, bail-ins, where liabilities are converted into equity to recapitalize a failing institution, as well as the use of bridge institutions to temporarily maintain banking operations and ensure continuity of services before resolution or liquidation.
Kanyip cited Section 47 of the NDIC Act, which bars any staff dismissed, terminated, or advised to resign on grounds of fraud, forgery, or financial malpractice from future employment in insured institutions. He also noted that Section 49 of the NDIC Act provides that such financial assistance must be exercised with the concurrence of the Central Bank of Nigeria, while Sections 50 to 53 set out additional resolution tools, including assumption of control of distressed banks, facilitation of mergers or acquisitions, purchase of assets and assumption of liabilities, and the acquisition of failed institutions for nominal consideration where necessary.
He highlighted Section 5 of the NDIC Act, which bars any entity other than the NDIC from operating deposit insurance schemes, thereby centralizing deposit protection and ensuring coverage uniformity. Insured depositors are entitled to guaranteed reimbursement up to N500,000 for deposit money banks and N200,000 for microfinance banks under Section 25(1) of the Act, subject to regulatory concurrence in cases of suspension of payments.
Kanyip added that insured payouts do not prejudice additional liquidation dividends that might be paid to depositors once the assets of failed institutions are recovered and realized. He explained that once a bank is liquidated, its assets are realized and distributed in accordance with a statutory order of priority, with depositors protected under Nigeria’s deposit insurance framework.
Kanyip referenced the Court of Appeal’s decision in CBN v. Aribu, where the appellate court upheld the Central Bank of Nigeria’s refusal to clear a former bank executive for re-employment after he was implicated in illegal foreign exchange transactions at the defunct Equity Bank of Nigeria. According to Kanyip, the judgment affirmed the duty of regulators to keep “shady characters” out of sensitive banking institutions.
“The CBN has a duty to keep questionable characters from holding appointments in commercial banks. It would amount to dereliction of duty to ignore proven misconduct,” he said.
The NICN president praised recent reforms under the NDIC Act 2023, noting that they have already produced measurable outcomes. He cited the NDIC’s liquidation dividend payments to uninsured depositors of the defunct Heritage Bank following the revocation of its license. According to him, the NDIC declared a second liquidation dividend of N24.3bn in January 2026, following an earlier payment of N46.6bn in April 2025, bringing total payouts to N70.9bn.
He also reminded judges of their central role in failed bank scenarios, noting that the judiciary is responsible for adjudicating claims disputes, validating liquidation processes, overseeing asset recovery, and prosecuting financial malpractice. “We must ensure that the process of closing a bank and paying depositors is handled fairly, transparently and in accordance with the law,” he said.
In his welcome address, the Administrator of the NJI, Justice Babatunde Adejumo, said the theme of the seminar reflected the growing importance of coordinated legal and institutional responses to financial sector challenges. Describing the seminar as a joint initiative between the NJI, NDIC, and the Investment and Securities Tribunal, he noted that it was designed to deepen judicial engagement with evolving financial regulation, insolvency frameworks, and investor protection mechanisms.
He said effective bank liquidation processes depend not only on regulatory frameworks but also on clear, consistent, and timely judicial decisions. “Where disputes are resolved efficiently and fairly, confidence in legal and financial institutions is strengthened. Conversely, prolonged uncertainty may undermine the objectives of liquidation and deposit protection frameworks,” he said.
Adejumo added that the impact of failed financial institutions extends beyond the banking sector, affecting employment relationships, pension obligations, investment interests, contractual rights, and broader commercial expectations. According to him, this makes the roles of the National Industrial Court and the Investment and Securities Tribunal critical within Nigeria’s financial governance structure.
He explained that the seminar was intended to enhance understanding of the legal and regulatory framework governing bank liquidation, promote interaction among participants, and strengthen the capacity of judicial officers and tribunal members to resolve complex financial disputes.
Also in his remarks, the Managing Director and Chief Executive Officer of the NDIC, Mr Thompson Sunday, called for deeper collaboration with the judiciary and specialized tribunals to strengthen the efficiency of bank liquidation processes and enhance depositor protection in the country. Sunday, who was represented by the Executive Director, Corporate Services, Mrs Emily Osuji, said the seminar formed part of NDIC’s strategic efforts to strengthen engagement with adjudicatory institutions whose decisions significantly impact bank resolution, liquidation, labor relations, and investment dispute outcomes.
He said the theme of the seminar was timely and critical, noting that it reflects the central role of the judiciary in safeguarding financial system integrity through fairness, transparency, and timely adjudication.
According to him, NDIC, as a statutory financial safety net institution, is mandated to provide deposit insurance, supervise insured institutions, manage distress resolution, and liquidate failed banks whose licenses have been revoked by the Central Bank of Nigeria. He explained that effective discharge of these responsibilities depends heavily on timely, consistent, and well-reasoned judicial and tribunal decisions, particularly in matters involving creditor rights, labor claims, contractual disputes, and investment-related issues arising from bank failures.
“The successful discharge of these mandates cannot occur in isolation. It is deeply dependent on the clarity, consistency and timeliness of judicial and tribunal pronouncements,” he said.
The NDIC chief noted that bank liquidation processes are often complex, involving concealed or dissipated assets, weak collateral structures, and competing claims from depositors, creditors, shareholders, investors, and former employees. He added that such challenges frequently give rise to litigation over creditor hierarchy, enforcement of claims, asset recovery, and contractual obligations, requiring specialized judicial attention.
In his goodwill message, the Chairman of the Investment and Securities Tribunal, Mr Aminu Junaidu, emphasized the importance of sustained judicial collaboration and specialized capacity building in strengthening Nigeria’s financial dispute resolution framework and promoting investor confidence. Junaidu, who was represented by Mr Felix Onwumene, described the seminar as a critical platform for enhancing judicial engagement and strengthening the administration of justice in specialized areas of labor, employment, investment, and securities regulation.
“With a profound sense of responsibility, I welcome you all to this 2026 sensitization seminar. This seminar represents yet another important step in our collective commitment to strengthening the administration of justice in Nigeria,” he said.
