ABSTRACT
The study investigates the effect of Nigeria Deposit Insurance Corporation (NDIC) operations on the performance of the banking industry in Nigeria, examined the impact of the total number of depositors insured by NDIC on the financial performance of banks in Nigeria, evaluate the relationship between liquidation dividends paid by NDIC and the performance metrics of Nigerian banks and investigate the influence of total insured premiums collected by NDIC on the banking performance in Nigeria. The study focuses on the years 2018 to 2022, allowing for a detailed analysis of recent trends and developments in NDIC operations and deposit money banks’ performance. The data analysis employs various statistical tools to ensure robust findings. To assess the stationarity of the variables, the Augmented Dickey-Fuller (ADF) test, Phillips-Perron (PP) test, and Levin, Lin & Chu (LLC) test were employed. Furthermore, the study utilizes several panel data estimation approaches, including the Random Effects Model (REM), Fixed Effects Model (FEM), and Pooled Ordinary Least Squares (POLS), to provide model estimates. These approaches allow for a comprehensive analysis of the relationship between NDIC operations and deposit money banks’ performance, considering the panel nature of the data. Additionally, Granger Causality tests are conducted to examine if the values of one variable can predict or influence the values of another variables. The findings reveal that the number of insured depositors (NDI) has a positive and significant impact on bank profitability. This highlights the crucial role of deposit insurance fostering confidence and attracting more depositors, which can translate into improved financial performance for banks. The study also found a negative and significant relationship between liquidation dividends paid by NDIC (LD) and bank profitability. Furthermore, the study’s results indicates a positive and significant relationship between total bank deposits (TBD) and ROA in the REM, implying that higher deposit levels are associated with better financial performance. The following recommendations are put forth in light of the study's findings: Firstly given the positive and significant relationship between the number of insured depositors and bank profitability, it is recommended that NDIC and relevant authorities explore measures to enhance public awareness and confidence in deposit insurance scheme. Secondly, in light of the negative impact of liquidation dividends on bank performance, it is crucial for NDIC and regulatory bodies to carefully assess and refine the resolution processes for failed banks. While the resolution of distressed institutions is necessary to maintain confidence in the financial system, the study’s findings suggest that the current approach may have unintended consequences for the remaining banks. Thirdly, the positive relationship between total bank deposits and profitability underscores the importance of implementing policies and measures that encourage deposit mobilization.
