Prioritise Depositors In Failed Bank Liquidation, Justice Kanyip Charges Judges

The president of Nigeria’s National Industrial Court (NIC), Justice Benedict Kanyip, has charged judges overseeing failed bank liquidation cases to strictly follow the legal order of priority, saying depositors should have precedence over all other claimants, including employees, shareholders and unsecured creditors.

Justice Kanyip gave the charge during the opening section of a sensitisation seminar for NIC judges and members of the Investment and Securities Tribunal, organised by the National Judicial Institute in collaboration with the Nigeria Deposit Insurance Corporation, in Lagos.

The judge also questioned the constitutionality of certain provisions of the Nigeria Deposit Insurance Corporation (NDIC) Act that protect the corporation from garnishee orders and injunctions.

He argued that such protections might conflict with Section 287 of the 1999 Constitution, which requires obedience to court judgments.

Justice Kanyip stressed the crucial role of the judiciary in maintaining financial stability by ensuring fair and prompt resolution of disputes arising from failed banks and liquidation proceedings.

He noted that public confidence in Nigeria’s financial system largely relies on effective judicial actions.

“The financial sector is the backbone of economic growth, offering infrastructure for credit, investment, insurance, and commercial activities,” he stated, cautioning that banking instability could lead to wider economic problems.

Reflecting on Nigeria’s banking crises during the 1980s and 1990s, the judge recalled that these periods were marked by weak corporate governance, insolvency, illiquidity, poor asset quality, and rising non-performing loans, which ultimately prompted comprehensive banking reforms.

He also shared a personal experience from before the 2008 banking crisis, when he was advised to take a loan to buy shares in a commercial bank. He described this episode as a stark warning about the risks of financial instability.

In his welcome address, the managing director/chief executive officer of NDIC, Thompson Sunday, said the bank liquidation process remains complex, as insiders sometimes hide or deplete assets before closure.

Sunday, who was represented at the event by the executive director, Corporate Services, Mrs Chidinma Osuji, also noted that bank liquidation often results in complex legal disputes relating to creditor hierarchy, enforcement of claims, asset realisation and contractual obligations arising from winding-up proceedings.

He expressed optimism that improved understanding between regulators and judges would help reduce delays, minimise conflicting rulings and strengthen public confidence in Nigeria’s banking system.