Banking System in Nigeria – The banking system is one of the most critical sectors of the economy. Its roots can be traced back to the colonial era when colonial banks were established to meet the Colonial Government’s commercial needs.
A General Overview of Nigeria’s Banking System
In this post, we’ll look at how Nigeria’s banking system operates and the history and structure of the system. Just remember to go to the wecu.com website afterward to see all of their banking options. But first, let’s clarify what a bank is. A bank is a place where money and valuables are kept for safekeeping in their most basic form. Banks are also involved in lending money (known as a loan), paying money out on the customer’s order (known as a change and bank draft), and providing customers with overdrafts.
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The African Banking Corporation and British West Africa, founded in 1892, are responsible for developing Nigeria’s banking system. First Bank of Nigeria is the new name for the bank. In 1925, the Anglo-Egyptian Bank and the National Bank of South Africa formed an alliance that resulted in the establishment of Barclays Bank in Nigeria.
The British and French Bank for Commerce and Industry, which later became the United Bank for Africa, began operations in Nigeria in 1948. The Industrial and Commercial Bank was the country’s first domestic bank, established in 1929, but it was short-lived, as it was liquidated a year later and replaced by the Mercantile Bank in 1931. The Nigerian Farmers and Commercial Bank, an agricultural bank, infiltrated the industry in the 1940s.
The Nigerian banking system is divided into the following sections
1.Nigeria’s Central Bank (CBN)
The country’s banking system is regulated by the Central Bank, which is the country’s apex. This apex bank was founded in March 1958 and began operations on July 1st, 1959.
The CBN oversees and regulates the activities of institutions such as Bureaus de Change (BDCs), Finance Companies (FCs), and Primary Mortgage Institutions (PMIs) (PMIs).
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The CBN’s primary responsibility is to develop policies and monitor the banking system to ensure that operators follow monetary, credit, and foreign exchange regulations.
Overall, the institution manages the cost, volume availability, and flow of money and credit in an economy to achieve the desired economic goals.
2. Banks that deal with commerce
These are the banks you’re familiar with. Guarantee Trust Bank, First Bank, United Bank for Africa, and Stanbic IBTC are just a few. Commercial banks are in the business of accepting deposits, advancing loans, discounting bills, and providing other financial services to the general public.
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Accepting deposits, granting loans, and operating payment and settlement mechanisms are the three main functions of Nigerian commercial banks.
3. Merchant banks are financial institutions that provide services to businesses.
Wholesale banking, medium and long-term financing, equipment leasing, debt factoring, investment management, acceptance bills, and unit trust management are all services provided by this type of bank.
4. Banks for Development
This type of bank provides long-term funds for industrial, agricultural, commercial, and mortgage development. In addition, development banks assist entrepreneurs by providing them with loans and consulting services. The following are some examples of development banks:
Bank for Industrial Development of Nigeria (NIDB)
This was established in 1964 to take the place of Nigeria’s investment corporation. The NIDB assists both public and private sector businesses.
Nigerian Bank For Commerce And Industry (NBCI) is a commercial bank in Nigeria (NBCI)
This organization was founded in 1973 to assist indigenous entrepreneurs by ensuring the financial implementation of the 1973 Enterprise Promotion Decree.
Nigerian Agricultural and Cooperative Bank is a Nigerian agricultural and cooperative bank (NACB)
The NACB is wholly owned by the federal government and assists in agricultural sectors, individual farmers, and cooperative bodies.