As Nigeria navigates the waters of economic uncertainty, the specter of distressed banks looms large, threatening to engulf the financial system and leave depositors in its wake.
The recent struggles of some banks have sent shockwaves through the economy, and it is imperative for relevant authorities, regulatory agencies and other stakeholders to take immediate action to safeguard the interests of depositors.
The consequences of distressed banks are far-reaching and devastating.
Depositors, who are the lifeblood of any banking system, stand to lose their hard-earned savings, leaving them vulnerable to financial ruin.
The ripple effects will be felt throughout the economy, as businesses and individuals alike struggle to access credit and conduct transactions.
The very fabric of the financial system is at risk of unraveling because of its multiplier effects which often adversely affect depositors confidence in the banking sector, weakens .lending capacity of banks and slows growth in other sectors. This becomes more critical in a country like Nigeria with heavy debt burden and high unemployment rate.
With inflation soaring and the value of the naira plummeting, depositors are already facing unprecedented challenges, including steady increase in commodity prices.
The last thing they need is the added burden of worrying about the safety of their deposits.
Just a short while ago, the country was still reeling from the controversial currency redesign policy initiated by former Central Bank Governor, Godwin Emefiele, which led to untold hardship for many citizens.
The policy, intended to curb inflation and corruption, ended up causing widespread economic pain, with many individuals and businesses struggling to access their funds. Long lines at Automated Teller Machines, ATMs and banking halls became a common sight.
It is the responsibility of the regulatory authorities and the government to ensure that depositors are protected from the consequences of distressed banks. This can be achieved through a combination of measures, including strengthening regulatory oversight to identify and address potential issues before they escalate.
Regulatory bodies should implement robust risk management frameworks to prevent banks from taking excessive risks and review the deposit insurance scheme to guarantee all depositors’ funds not just five million naira in the event of bank failure.
There is also need to provide support to struggling banks to prevent their collapse and minimize the impact on depositors. Depositors should not be made to suffer for the mistakes of others. It is the collective responsibility of government and relevant regulatory bodies to ensure that the financial system works for all, and that depositors’ hard-earned savings are protected.
The time to act is now as the country cannot afford to wait until it is too late. There is need for collective efforts to safeguard the future of the financial system and protect the interests of depositors.
Written by TONY OKAFOR
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