Depositors must come first in failed bank liquidation

By Lukman Olabiyi

President of the National Industrial Court of Nigeria, Benedict Kanyip, has directed judges handling failed bank liquidation cases to strictly uphold the statutory order of priority, insisting that depositors must take precedence over all other claimants, including employees, shareholders and unsecured creditors.

Justice Kanyip also questioned the constitutionality of provisions in the Nigeria Deposit Insurance Corporation (NDIC) Act that shield the corporation from garnishee orders and injunctions, arguing that such protections may conflict with Section 287 of the 1999 Constitution, which mandates obedience to court judgments.

The jurist made the remarks in Lagos while delivering the keynote at the 2026 Sensitisation Seminar for Judges of the Federal High Court, organised by the National Judicial Institute in collaboration with the Nigeria Deposit Insurance Corporation.

The seminar, which also involved the Investment and Securities Tribunal, focused on improving efficiency in bank liquidation processes and strengthening depositor protection.

Kanyip said the judiciary plays a pivotal role in sustaining financial stability through the fair and timely resolution of disputes arising from failed banks and liquidation proceedings.

According to him, confidence in the nation’s financial system depends largely on the effectiveness of judicial interventions.

“The financial sector remains the backbone of economic development, providing the infrastructure for credit, investment, insurance and commercial activities,” he said, warning that instability in the banking system could trigger broader economic crises.

Reflecting on Nigeria’s banking crises of the 1980s and 1990s, the judge recalled that the era was characterised by weak corporate governance, insolvency, illiquidity, poor asset quality and rising non-performing loans, conditions that eventually led to sweeping banking reforms.

He also recounted a personal experience before the 2008 banking collapse when he was advised to obtain a loan to purchase shares in a commercial bank, describing the episode as a stark reminder of the dangers of financial instability.