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 Financial Institutions Liquidation
The liquidation of failed financial institutions is one of the measures undertaken to resolve distress in the financial sector and protect depositors when other resolution options have failed.It is the orderly and painless winding up of the affairs of a financial institution, realisation of its assets and settlements of claims against the financial institution. Liquidation has historically been an instrument of last resort.The exercise of this failure resolution option in Nigeria involves the revocation of the financial institution's licence by the Central Bank of Nigeria(CBN).
(a) Payment of insured deposit
The next step is the verification of claims made by depositors who had filed their claims and the payment to such depositors of the insured deposit, the maximum of which is currently -N-50,000.As at May 31, 2005, the Corporation had paid a total insured deposit of -N-3.29 billion for the banks in liquidation.
(b) Payment Of Liquidation Dividend to Depositors
In addition to the payment of insured deposits of the closed banks, depositors with credit balances in excess of the insured limit were paid liquidation dividends based on the volume of proceeds of the closed banks’ assets realised by the Corporation. As at May 31, 2005, the Corporation had declared an aggregate dividend of -N- 10.75 billion for 33 out of the 34 banks in liquidation. Of the 33 banks, ten banks had declared a final dividend of 100 percent of total deposits indicating that all their depositors had fully recovered their deposits.
(c) Payment of Liquidation Dividend to General Creditors and Shareholders
Liquidation dividend had also been paid to general creditors of some of the banks. For example, the general creditors of Alpha Merchant Bank ltd., Amicable Bank of Nig Ltd., Nigeria Merchant Bank Ltd., Pan African Bank Ltd., and Rims Merchant Bank Ltd (in-liquidation) had been paid a total of -N- 681.43 million. Furthermore, the shareholders of Nigeria Merchant Bank, Alpha Merchant Bank Ltd. and Pan African Bank Ltd. (in-liquidation) had been paid -N- 1,133.66 million, representing a 100 percent payment in each.
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