Banking in Nigeria

This article is about development of the banking industry. For banks operating in Nigeria, see List of banks in Nigeria.

The banking industry in Nigeria started during the colonial era with the establishment of Colonial Banks, with the primary aim of meeting the commercial needs of the Colonial Government.^[1] The banking system in Nigeria is regulated through the Central Bank of Nigeria. This apex bank started operation on July 1, 1959.^[2]

Background

In 1892, the African Banking Corporation and the Bank of British West Africa, now the First Bank of Nigeria, were established in Nigeria. In 1925, Due to some difficulties the bank folded up its activities and the Bank of British West Africa Limited (BBWA) was established to take over the activities of the African Banking Corporation. The Bank of British West Africa Limited opened its first branch in Lagos in 1894; in the later part of the same year the name of the bank was changed to Standard Bank of Nigeria known as the First Bank of Nigeria Limited [now a public limited company, PLC. The Anglo-Egyptian Bank and the National Bank of South Africa gave birth to Barclays Bank in Nigeria. In 1948, the British and French Bank for Commerce and Industry started operations in Nigeria, which metamorphosed into the United Bank for Africa.^[3] The first domestic bank In Nigeria was established in 1929 and called the Industrial and Commercial Bank. The bank liquidated in 1930 and was replaced by Mercantile Bank in 1931. The African Continental Bank was created in 1949 as the only sustainable indigenous bank after the liquidation of the Industrial and Commercial Bank.^[4] The year 1947 shows the emergence of an agricultural bank called the Nigerian Farmers and Commercial Bank.

The modified universal banking model

In 2010, the Central Bank of Nigeria re-modified the existing universal banking model that permits a commercial banking license holder to operate in other non-core banking activities, either directly or indirectly, through designated subsidiaries.^[5] The introduction of this scheme classifies banking licenses into commercial, merchant, and specialised Development Banking Licenses.^[6][7]

Nigeria banking reform

Nigeria banking reform can be divided into two main phases, 2004 and 2009. Each phase had significant economic effects:

Banking Reform of 2004 and its effect

This reform focused on bank consolidation through the mechanisms of merger and acquisition.^[8] This resulted in the rebasing of commercial banks from ₦2 billion to ₦25 billion, while the 89 existing commercial banks in the country became 25.

The apex bank apart from capitalization also invested in banking automation which enhances banking returns. The reform established a reporting portal for bank customers for the purpose of information sharing. Under this reform, deposits from the public sector and government-owned agencies can be collected by commercial banks in order to enhance their level of liquidity.^[9][10]

Banking Reform of 2009 and its effect

The Asset Management Corporation of Nigeria AMCON was established in 2009 by the National Assembly of Nigeria.^[11] The institution acquires non-performing loans of commercial banks. The financing of AMCON is composed of a ₦50 billion CBN fund and 0.3% of total assets of participating commercial banks. It also supports the implementation of International Financial Reporting Standards (IFRS) for global reporting compliance in terms of reporting. This reform reviewed the universal banking model by restricting commercial banks to banking activities only. The reform also addresses excessive banking interest by the creation of a non-interest bank.^{[12][13][14][15]}

Sarah Alade, Deputy Governor of the Central Bank of Nigeria, announced that five Nigerian bank CEOs were being dismissed in August 2009. Five replacements were named with immediate effect including Funke Osibodu to lead the Union Bank of Nigeria and Suzanne Iroche who took over as CEO of FinBank.^[16][17]

Anele explained that the product has been rolled out in Nigeria before subsequent release in other countries where UBA operates.

On her part, Dupe Olusola, UBA’s group head of marketing, said the bank is committed to empowering its customers to fund their urgent needs. [1]

See also

• Central Bank of Nigeria
• Asset Management Corporation of Nigeria

References

1. Toluwani A. Ajayi. "THE EVOLUTION OF NIGERIAN BANKING SYSTEM, SUPERVISION AND CURRENT CHALLENGES". from the original on 27 February 2024. Retrieved 29 November 2015.
2. "Central Bank of Nigeria:: History of the CBN". www.cbn.gov.ng. from the original on 2020-07-27. Retrieved 2020-05-30.
3. Richard L. Sklar (2004). Nigeria political parties: power in an emergent African nation. Africa World Press. ISBN 9781592212095. from the original on 27 February 2024. Retrieved 29 October 2015.
4. Walter Tessier Newlyn, David Culloden Rowan (1954). Money and banking in British Colonial Africa: a study of the monetary and banking systems of eight British African territories. Clarendon Press. ISBN 9780598983749. from the original on 27 February 2024. Retrieved 29 November 2015.
5. Samule A. Oni. "CIRCULAR ON THE REVIEW OF THE UNIVERSAL BANKING MODEL" (PDF). (PDF) from the original on 8 December 2015. Retrieved 29 November 2015.
6. Omoh Gabriel. "CBN to introduce three types of banks in 2011". from the original on 2015-12-08. Retrieved 2015-11-29.
7. Omoh Gabriel. "CBN releases guidelines for new banking model". Vanguard Newspaper. from the original on 8 December 2015. Retrieved 29 November 2015.
8. Sanusi Lamido Sanusi. "Banking reform and its impact on the Nigerian economy" (PDF). (PDF) from the original on 4 March 2016. Retrieved 29 November 2015.
9. Abel Ezeoha. "Structural effects of banking industry consolidation in Nigeria: A review". Journal of Banking Regulation. Palgrave Macmillan. from the original on 13 April 2012. Retrieved 29 November 2015.
10. Duncan Alfor. "Nigerian banking reform: Recent actions and future prospects". proshare. from the original on 8 December 2015. Retrieved 29 November 2015.
11. Uchechukwu Okoroji. . This Day Live. Archived from the original on 20 May 2013. Retrieved 29 November 2015.
12. Adekunle. "Jaiz Bank spends N100m on IDP". Vanguard. from the original on 8 December 2015. Retrieved 29 November 2015.
13. Mathias Okwe (11 June 2015). "Jaiz Bank enters profit-making territory, declares N158m for shareholders". The Guardian. from the original on 26 November 2015. Retrieved 29 November 2015.
14. BANKING REFORM AND ITS IMPACT ON THE NIGERIAN ECONOMY 2012-10-28 at the Wayback Machine
15. Sanusi, Lamido (2012). BANKING REFORM AND ITS IMPACT ON THE NIGERIAN ECONOMY. Lagos: Research Dept of the Central Bank of Nigeria. pp. 5–10.
16. CBN sacks 5 banks' directors 2016-02-14 at the Wayback Machine, Gabriel Omoh and Babajide Komolafe, 14 August 2009, VanguardNGR, Retrieved 23 February 2016
17. "The history and origin of banking in Nigeria". bestmarket.com.ng. from the original on 27 September 2023. Retrieved 26 February 2024.