The Nigeria Deposit Insurance Corporation (NDIC) announced a second liquidation dividend of N24.3 billion for depositors of the failed Heritage Bank Limited whose balances are above the insured limit of N5 million. This distribution, realized from debt recovery, asset sales, and investment liquidation, will address the uninsured portions of deposits. The declaration follows the revocation of Heritage Bank's license by the Central Bank of Nigeria (CBN) in June 2024.

What you should know

The CBN revoked Heritage Bank's license on June 3, 2024, due to the bank's inability to meet its financial obligations. Following the revocation, the NDIC was appointed as the liquidator, responsible for managing the bank's assets and paying depositors. The NDIC Act 2023 empowers the corporation to recover debts, sell assets, and realize investments to maximize returns for depositors.

The initial focus of the NDIC was to pay insured deposits up to N5 million, ensuring that a large segment of depositors had immediate access to their funds. This second liquidation dividend targets those depositors with larger balances that exceeded the insured limit. Section 72 of the NDIC Act 2023 guides the distribution of these recovered funds.

The current payout of 5.2 kobo per N1.00 means that for every N100 owed above the insured limit, depositors will receive N5.20. This brings the total dividend paid out so far to 14.4 kobo per N1.00. While this doesn't fully cover the outstanding balances, it represents a significant return from the liquidation process.

According to the NDIC, the N24.3 billion was generated through a combination of debt recovery efforts, sales of the bank's physical assets, and the realization of investments held by the defunct bank. These funds are being channeled towards settling the outstanding debts owed to depositors beyond the insured amount.

Context and Implications

The declaration of a second liquidation dividend is a positive development for depositors of Heritage Bank, especially those with balances exceeding the insured limit. It demonstrates the NDIC's commitment to maximizing returns for depositors even after a bank failure. This also underscores the importance of the NDIC in protecting depositors and maintaining stability in the financial system.

Investors and depositors should closely monitor the NDIC's updates on the liquidation process. Further dividends may be declared as the NDIC continues to recover assets. The success of the asset recovery process will ultimately determine the final amount distributed to uninsured depositors.