The History of Banking in Nigeria

The History of Banking in Nigeria


Before the establishment of central bank of Nigeria, the West Africa currency Board (WACB) which was founded in 1912 had been in existence and has been issuing out legal tender currency. It was however linked automatically to the British system and could not engage in monetary management neither where Nigeria trained to the act of monetary management. In other to eliminate this deficiency and thereby promote the growth of money and capital market, to central bank of Nigeria was established in 1958 and it commence business on 1st July 1959 with an initial capital outlay of #3 million which was subscribed to and wholly paid up for by the federal government of Nigeria.

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  1. The issuance of legal tender currency maintenance of external reserve for the purpose of safeguarding the internal value of the Naira.
  2. Promotion of monetary stability. Soundness in the financial system and saving as the banker and financial adviser to the federal government of Nigeria and its agencies.
  3. It has the responsibilities for management of public debt and providing assistance for discounting and advance payment as at when needed. The bank is represented in the boards of major financial institutions such as Nigeria industrial Development Bank, the Nigeria bank for commerce and industry the federal mortgage bank of Nigeria, the Deposit Insurance corporation and the Nigeria Agricultural and corporative bank

The central bank of Nigeria known as Apex monetary authority through a major role in the management of the economy with monetary policies measure up reasonable design to enhance the achievement of nations economic objective. It facilitate economic management through its domestic and foreign operational activities. A monetary circular issued at the beginning of each year by the central bank of Nigeria to commercial and merchant banks includes the banking system to play a vital development role among other things in the system as the pursue it economic objectives.


The commercial bank precedes central bank and merchant banks in Nigeria hence the awareness of making institutionalized saving was primarily induced by the commercial banks. It form the nucleus of the banking system., there are two broad functions performed by the commercial banks. They include.

  1. The banking function which involves the creation, distribution and transfer of commercial credit as well as deposit.
  2. The savings function which comprises the mobilization of savings from surplus of the economy and channeling of such surplus funds towards the non function unit or economy as to enhances consumers terms and establish more capital project. To execute their retail banking activities the banks have continued to open branch, networking the branches with computers in different part of the country.
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During the period between 1929 to 1952, numerous indigenous were founded all of them failed except national bank of Nigeria limited which was set up in 1933. the Agbonmegbe bank limited in Nigeria currently known as Wema bank limited was set up in 1938 followed by Africa Continental bank which was set up in 1948 but currently restarted after been bankrupt for a while due to bad management.


The merchant bank was set up in 1960, which later merged with the then Nigeria Acceptance limited to became Nal merchant bank limited. The entry of merchant bank into banking system and to bridge the gap in the structure of credit provision by commercial banks, which favor mainly on short term lending. The merchant bank numbered four in banking sector with a total of one hundred forty nine branches all over Nigeria as at the end of 1995 and are mainly wholesale bankers. The merchant bank accept large deposits usually not less than fifty thousand naira. They specialized in provision of long term loan and engages in the business of equipment management and factoring investment including loan syndicate to capital intensive projects. They often provide advisory and other services on managers and acquisitions, capital reconstruction, privatization of public enterprises, and other scheme and programmes.


The introduction of community bank programme was formally announced in 1990 budget speech. It is a unit bank owned and managed by its community or group of community for providing deposit, credit and other financial services to it members on the basis of self recognition and credit worthiness. The reason for setting up community bank are as follows

  1. To enhance rapid development or productive activities especially in the rural area of the country.
  2. to promote rural development through the extension of banking services.
  3. Improving the Nigeria economic status of small scale produce both in the rural and urban centers of the economy.
  4. To improve banking habits among rural dweller and ensuring the development of integrated national financial system.


  1. Acceptance of deposits which include time and target deposits from individual groups and organizations.
  2. Receive money or collect proceeds of banking instruments on behalf of its customers
  3. Maintain and operate various types of account with or for other bank I Nigeria.
  4. Raises funds through the issuance of debentures to interested parties or members of the public
  5. Provide an ancillary banking services such as remittance of funds, safe deposit facilities etc.
  6. It provides credit facilities to its customers and enlighten them on the effective use of credit facilities.
  7. It perform such non banking functions as may promote grass root development within its domains.


To establish community bank, three proprietors are allowed namely

  1. A community development associate including cooperative town union or district associate
  2. Trade associate including cooperative societies farmers groups, market women association, social clubs etc.
  3. Individual with the community. The proprietor would then form which is supplied along with the community banks prospective and fulfil the conditions for the ownership structure of the bank. Two communities can jointly individual shall hold more than 5% percent of its share while the community development associate should have not less than 30% percent of the shares considering the capitalization capacity of donated capital and total fixed assets. The owner are therefore expected to raise the minimum share capital of #250,000 cash while the advisable share sufficient to attract a marching loan rated #500,000,000. other requirement are accessible building, two safes, ultra violet rays for etecting forged notes, two deep boxes and fire proof filling cabinet, insurance cover, reliable and qualified personnel with relevant experience, operating document, required board members and established correspondents banking relationship
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When satisfied with the above requirement along with the memorandum and articles of association, the national board for community bank incorporates the bank at the corporate affairs commission an established mainly for incorporating community banks. After it has been incorporated a formal inspection is carried out on the bank, bearing any other short coming the NBCB issues a provisional license for a commence operation. As at the end of 31st December 1995 the financial performance of reporting sections 1 seb 132 community banks a license showing as declaration measured by their performance indications.


Development bank include Nigeria industrial development bank, Nigeria bank for commerce and industry and long term fund Agricultural Industrial and some other sectors in the economy that deals on roar produces. The activities include the provision of financial advisory service to indigenous entrepreneurs and acting as agent of the government in distributing funds to industrial enterprises. The Nigeria industrial development bank was set up in 1964 to provide credit and other facilities to industrial areas of Nigeria. Although its activities is for cussed on medium and large scale enterprises, some small scale enterprises           also come under its scope of financing.

However, special Nigeria industrial development bank functions include provision of medium and long term financial, identification of investment bottlenecks, supervision of technical and managerial and vice to indigenous enterprises. The major shareholder of Nigeria industrial development bank is the federal government the bank has to mandate to borrow locally and international. An attractive feature of Nigeria industrial development bank financing is its policy of equity participation in some of the project. Nigeria industrial development bank loans are relatively soft with moratorium period usually for two years duration for repayment, though does not exceed five years for it medium terms. The Nigeria industrial development bank borrow from the central bank, federal government and international financial corporations. As at the end of 31st December 1995 loan section of the bank approved increased to #867.8 million


The Nigeria agricultural and cooperative bank was established in 1973 and its major function is the financing of agricultural development projects and allied industries. The bank has fully paid up its capital of #150 million. It extended soft medium terms loan to agro – allied project nation wide in order to coordinate its activities efficiently, it often interact with state ministries of agriculture and cooperatives.

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As at the end of 31st December, the Nigeria agricultural cooperative banks direct lending scheme amounted to #1985.8 million or 62.4 percent of total disbursement. Similarly on lending for production purpose totaled #819.9 million or 25.8 percent of aggregate credit.


Due to the promulgation of the Nigeria enterprises promotion decree of 1972, the federal government through decree No22 of 1973 established the Nigeria bank for commerce and industries to provide among other things financial service to the indigenous business community, particularly small and medium scale enterprises. It commenced operation on the 4th October 1973, it functions include share under – writing through stock exchange and identification of viable projects, preparation of feasibility studies and advice on relevant technical and managerial matters. Nigeria bank for commerce and industry asset and liabilities stood at #2529.7 million at the end of December 1995 due to the injection of #75.9 million new capital funds into the institution in 1994


The urban development banks was incorporated in 1992, it commence business in 1993 for the purpose of financing urban projects such as transportation, urban dwelling and public utilities. It has been experiencing difficulties like other development banks, in raising fund for its activities. It source of fund are mainly from increase in capital level, recall of loans and advances and increase in other liabilities in 1996 the bank suffered an operating deficit for the sum of #133.6 million at the end of 1996 with a total asset value standing at #62.6 million

This article was extracted from a Project Research Work Topic


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