NDIC Leans on Estate Surveyors: A Closer Look at Failed Bank Asset Valuation in Nigeria

The Nigeria Deposit Insurance Corporation (NDIC) is reinforcing its alliance with the Nigerian Institution of Estate Surveyors and Valuers (NIESV). This isn’t just another partnership announcement; it highlights a critical, often unseen, aspect of financial stability: how effectively a country deals with the fallout from failed banks. The NDIC, responsible for protecting depositors, recognizes that reliable asset valuation is paramount during bank liquidations. They’re counting on NIESV’s expertise to ensure accurate valuations.

Why does this matter? Consider a failed bank. Its assets, from real estate to loans, need to be sold off to repay depositors. Skewed valuations mean either fire-sale losses or prolonged liquidation processes, both detrimental to depositors and the financial system. The NDIC’s call for “accurate and credible valuation” shows they understand this challenge.

The NDIC MD/CEO, Thompson Oludare Sunday, openly stated the corporation relies heavily on NIESV professionals. He understands that valuations are essential to ensuring efficient liquidation processes and safeguarding timely payment to depositors. He also mentioned that sale of assets goes toward depositors’ balances above the insured amount, underlining accuracy.

It’s worth noting how this emphasis on accurate valuation connects directly to depositor protection. If assets are undervalued, depositors may not receive their due. Conversely, inflated values could delay the entire process, prolonging uncertainty. The NDIC wants fair market value realized quickly. Fair enough.

The MD also emphasized the need for stronger collaboration between both institutions. Joint training and knowledge exchange between NDIC staff and NIESV professionals, particularly in emerging valuation methodologies, asset management, and sustainable valuation practices.

Yet, the story isn’t simply about technical expertise. The NDIC is also rightly concerned about ethical standards. The call to NIESV to “uphold the highest ethical standards and guard against insider abuse” reveals a crucial awareness of potential conflicts of interest. When dealing with distressed assets, the temptation for manipulation exists. The NDIC’s internal strengthening of processes, including a comprehensive Asset Management Policy, demonstrates they aren’t naive to these risks. They’re taking steps to ensure asset identification, documentation, valuation procedures, and disposal strategies and transparency. This is crucial in highly charged situations.

NIESV, for its part, seems aware of the responsibility. President Victor Adekunle Alonge reinforced the Institution’s commitment to professionalism and integrity. He pointed out that NIESV was established by an Act of Parliament and maintains strict disciplinary procedures to sanction any member found to be unethical or unprofessional. He’s touting NIESV’s disciplinary measures, suggesting a willingness to self-regulate. How stringently those measures are applied in practice remains to be seen.

Having observed similar situations in other sectors, I believe this enhanced collaboration could yield tangible benefits. The key lies in implementation. Joint training programs, as proposed by the NDIC, could bridge the gap between regulatory oversight and professional practice. A standardized approach to valuation, incorporating international best practices, would further bolster confidence in the system.

Still, challenges remain. The real estate market in Nigeria can be volatile and opaque. Obtaining accurate market data can be difficult. Moreover, the sheer volume of assets involved in a major bank failure could strain resources and create bottlenecks. The capacity of both the NDIC and NIESV will be tested.

To that end, technology could play a bigger role. Digital platforms for asset valuation and management could improve efficiency and transparency. Blockchain, for example, could provide an immutable record of transactions, reducing the risk of fraud. These are avenues worth exploring.

In any case, this strengthened partnership indicates a proactive approach to managing financial risk. The NDIC understands that dealing effectively with failed banks is crucial for maintaining public trust in the financial system. By focusing on accurate asset valuation and ethical conduct, they’re laying the groundwork for a more resilient banking sector. This challenge requires constant vigilance, and this partnership seems like a step in the right direction.