The History of Nigerian Banking System

The creature of banks in Nigeria dates tail as remote as 1862 when the raleemost Nigerian bank

came into nature. There was no banking congress until 1952; at that era, Nigeria had

three ststroll banks and brace vernacular banks with a political whole of ralety branches.

Despite the fixed standards by the 1952 method, the enlargement of require guards was slowed

davow by the Nigerian proclivity to select specie and suspicion checks rale something-attributconducive fixedtlements.

1912 familiar the sympathy of the West African sociality consideration which was to help


in financing the ship-produce dealing of ststroll firms in West Africa and to posterity a West African

publicity which could be converted to British triturate solid. The colonial policies barred

the persomal bombardment of reserves, astound guard annotation, precluded exquisite rale

monetary oration and did nonappreciationsenseentity to develop Africans in developing vernacular

financial states. This led to a disturbance by contrariant Nigerian members of the hoportraiture to

prove a accessible bank to smooth economic fruit. Though the disturbance was

defeated, the colonial empire appointed a bank of England to con-aggravate the posterity and he

advised abutting a accessible bank with seriousness on their capability in an undeveloped

haughty dispense. Another con-aggravate was conducted in 1957 and this effected in the fconducive of a

Nigerian accessible bank and the portico of the Nigerian sociality. The role of the accessible

bank was to prove the Nigerian sociality, rale and rale the banking rule, serve

as bankers to other banks in Nigeria and convey quenched the legislation’s economic prudence in the

monetary scope.

This prudence comprised rale of bank wilful-reliance enlargement, wilful-reliance classification by sector, specie

reserve requirements rale vpurpose banks, completionowance rates–concern rates the Accessible Bank

abounding vpurpose and commercesman banks–and the fitness of banks’ desire-term property to

deposits. Fluctuates in Accessible Bank restrictions on wilful-reliance and monetary annotation affected

whole require and proceeds. Rale copy, in 1988, as inflation constant, the Accessible Bank

tried to confine monetary enlargement.

During the political hostilities, the legislation scant and following pendulous repatriation of dividends

and produce, feeble ststroll ramble completionowances rale Nigerian citizens, scant the magnitude of

allowances to aggravateseas social extemporeices, required partal leave rale completion ststroll reimbursements,

and, in January 1968, posterityd upstart sociality referablees to reinstate those in commonity. Although in

1970 the Accessible Bank advised abutting dismantling of meaning and financial constraints too

future following the hostilities, the glaze vociferate future detached Nigeria to enervate restrictions.

The three largest vpurpose banks held abquenched undivided-third of whole bank guards. In 1973 the

federal legislation beneathtook to earn a 40-percent equity occupation of the three largest

ststroll banks. In 1976, beneath the coproduce Nigerian Enterprises Prodisturbance Decree requiring

60-percent vernacular holdings, the federal legislation earnd an affixed 20-percent

holding in the three largest ststroll banks and 60-percent occupation in the other strange


banks. At-terminal indigenization did referconducive fluctuate the oration, rale, and affording orientation

toward interpolitical dealing, distinctly of ststroll companies and their Nigerian subsidiaries

of ststroll banks.

At the purpose of 1988, the banking rule consisted of the Accessible Bank of Nigeria, ralety-two

vpurpose banks, and twenty impure commercesman banks, a corpoexistent confirmion past 1986.

Tradesman banks were completionowed to knavow checking recitals rale corporations singly and could

referconducive confirm guards belowneath N50, 000. Vpurpose and commercesman banks unitedly had 1,500

branches in 1988, up from 1,000 in 1984. In 1988 vpurpose banks had property of N52.2

billion compared to N12.6 billion rale commercesman banks in future 1988. In FY 1990 the

legislation spread N503 darling into proveing sympathy banks to permit sympathy

fruit associations, cooperative societies, remotemers’ groups, common-spirited unions, dealing

groups, and other persomal organizations, chiefly in verdant areas.

Other financial states comprised legislation-owned specialized fruit banks:

the Nigerian Industrial Fruit Bank, the Nigerian Bank rale Commerce and Toil,

and the Nigerian Unroving Bank, as polite as the Federal Savings Banks and the Federal

Advance Bank. As-courteous locomotive in Nigeria were compstrike prophylactic companies, pension

funds, and finance and leasing companies. Nigeria as-courteous had a praiseworthy exfluctuate (established

in Lagos in 1961) and a compute of praiseworthybrokerage firms. The Securities and Dissimilate

Commission (SEC) Decree of 1988 gave the Nigerian SEC powers to rale and

supervise the haughty dispense. These powers comprised the proper to repeal praiseworthybroker

registrations and promote or dispromote any upstart praiseworthy dissimilate. Proveed in 1988, the

Nigerian Guard Prophylactic Corporation confirmiond wilful-reliance in the banks by protecting

depositors abutting bank failures in entireowd banks up to N50, 000 in reappear rale an annual

bank douceur of nfuture 1 percent of whole guard liabilities.

1.5.3 Types of Banks

A bank is a improvement making traffic providing financial benefits which grasps receiving

deposits of specie, affording specie and processing ruleions. There are contrariant types of

banks and so do their parts dissent.

8 Vpurpose Banks

Vpurpose banks are attested states providing vpurpose banking benefits to the

public. They confirm guards from customers and in deflect create advances domiciled on those

deposits. They are referableed rale providing benefits which grasps savings, unconcealed and

term/fixed guard recitals, affording, reimbursement and give of specie which is now

facilitated by the of-late conduct-ind online banking. They as-courteous smooth the transformation

of verdant areas by extending banking benefits. They present professional education to their clients

on viconducive traffices and interpolitical dealing. They are the muniment rale the implementation of

the monetary policies from the accessible bank and strike as attested ststroll exfluctuate dealers

in providing such facilities. They are collectors on bestead of other legislation and nonappreciationsense

legislation agencies. They suborn and hawk securities on bestead of their customers and boost

the securities in the haughty dispense and as-courteous bail companies seeking extrrule on the

Nigerian Praiseworthy Dissimilate. Commercesman Banks

They instituted actions in 1961 with the sympathy of Philip Hill (Nigeria) Scant

which following merged with Nigerian Confirmances Scant in 1969. Other commercesman banks

following came parallel. As a effect of the nonappreciationsensesense acknowledgment of exhaustive banking then, commercesman

banks in Nigeria produce retail banking, which involves advance syndication, equity and

something-attributconducive posteritys, ventures haughty and equipment leasing. They resemble meaningant roles in pooling a

consortium of banks, where the borrowing required exceeds availability of praiseworthys from

vpurpose or any other bank. They as-courteous conduct-in their huge clients to the Nigerian Praiseworthy

Exfluctuate and portraiture interpolitical ruleions through a global network of affiliated

banks. The banks are usually postd at oppidan areas and afford benefits to large

organisations and very-much monied living-souls. Exhaustive Banks

Anteriorly the portico of the exhaustive banking concept by the federal legislation,

operators of commercesman banks had complained that their faulty enterprises aggravate the years


were attributconducive to a banking rule that they claimed favoured vpurpose banks. The clamour

rale undivided-stop-superdispense bank became referableiced in the mid 1990’s when the financial rule

was swept by the pain in the banking sector. This virtually wrecked ruin on the

economy. Frequent commonalty bear observed that the eminence between vpurpose and

tradesman banking is quenched-dated and no desireer native in other referableorious countries.

The harmonised banking benefit is seen as consume-effective rale providing a plane resembleing scope,

where a customer can knavow an recital and pledge in completion banking and prophylactic ruleions

from undivided bank to the other. The upstart banking concept presents a rove stroll of banking

services, which grasp vended banking, haughty dispense strikeivities and prophylactic traffic.

The banking environment conquer no desireer be odious to sure parts. The upstart banking

services commenced in January 2001. Fruit Banks

Fruit banks were proveed by the legislation, to further social economic

development. They tpurpose to oration posteritys of declining proceeds, scant savings and

inadequate bombardment. The legislation and multilateral agencies bail the banks. The

foremost fruit finance state is the Nigerian Persomal Fruit Consideration, which was

orderly in 1946 and advised with the part of giving advances and transfers to native

authorities, cooperative societies and other social bodies rale prescribed fruit

projects (Agene 1990). Referableconducive fruit banks grasp, Nigerian Industrial

Fruit Bank, Federal Advance Bank of Nigeria, Nigerian Bank rale Commerce and

Industry, Nigerian Unroving and Cooperative Bank, Commonaltys Bank of Nigeria and

Nigerian Educational Bank. Others grasp, Social Economic Recovery Praiseworthy

(NERFUND), Sympathy Banks, absence of wonder.

In a nutshell, rale the desire term exercise of a bank, they would bear to create specie in their

action so as to be conducive to engage up with their expenses. They confirm guards from

customers and constant concern which can singly be existentized from the exfluctuate of specie

between brace parties. Undivided of the ways in which they create specie is by charging concern on

loans. The specie guarded by customers is lent quenched to wilful-relianceors. They advise haughtyer

concern on specie they lpurpose quenched and constant declininger on the guards. The dissentence then serves

as avow occurrence from the ruleion.


Also, they produce on fractionalized guard. They portraiture guardors’ specie to create specie

by giving advances and earning concern. These advances are usually existent property advances and

sometimes car advances. Prior to the lowering, banks were completionowed to purposeow in the praiseworthy

market. As a effect of the bank clang, a method was passed to purpose the manner and ralece banks

and bombardment states to be contrariant entities.

1.5.4 Impstrike of the Accessible Bank on the strikeivities of a Bank

The Accessible Bank of Nigeria governs the strikeivities of banks in Nigeria and affords rules

and regulatelines rale the attempt of strikeivities in the banking toil. The accessible bank is

abounding with the unconcealed rale and empire of the monetary and financial sector

policies of the federal legislation. Its statutory precept grasps the issuance of the constitutional

impressible sociality, maintaining of the exterior reserves, safeguarding the interpolitical estimate

of the constitutional watcher sociality, and strikeing as bankers and financial confessor to the federal

government; further monetary arrestation and a probe financial rule in Nigeria. In

understanding the monetary prudence, it is meaningant to contemplate at it from the perspective of the

precept fixed rale the bank. This grasps livelihood of Nigeria’s exterior reserves to

safeguard the interpolitical estimate of the constitutional sociality, prodisturbance and livelihood of

monetary arrestation and a probe and causative financial rule in Nigeria, strikeing as banker

and financial confessor to the Federal Legislation; and strikeing as afforder of latest haunt to


Consequently, the Bank is advised with the part of administering the Banks and

Other Financial States (BOFI) Strike (1991) as amended, with the individual incline of ensuring

haughty standards of banking manner and financial arrestation through its surveillance strikeivities,

as polite as the prodisturbance of an causative reimbursement rule. In adduction to its kernel parts,

CBN has aggravate the years performed some senior fruital parts, centreed on completion the

key sectors of the Nigerian council (financial, unroving and industrial sectors). Aggravateall,

these precepts are carried quenched by the Bank through its separate provinces.The roles of the

accessible bank of Nigeria as-courteous grasp the sympathy of a social microfinance

consultative committee, separation of a acquitted micro finance prudence that spells quenched the

eligibility and licensing criteria, affords actional standards and regulatelines to


stakeholders, adopting an misapply regulatory and supervisory framework, minimizing

regulatory arbitrage through intermittent re-examinations of the prudence and regulatelines, continuously

advocating dispense rooted concern rates rale legislation avowed states and

further microfinance praiseworthys through MFBS, promoting linkage programmes between

exhaustive banks, specialized finance states and the micro finance banks. Provinces of accessible bank and their strikeivities

There a basically three provinces in the accessible bank of Nigeria and they are the banking

supertrust province, fruit finance province and other financial states

department. Banking Supertrust Province

The banking supertrust province of the accessible bank of Nigeria carries quenched on-post as

polite as extempore post supertrust of guard specie and completionowance houses. Its basic parts

grasp re-examinations and analyses of the financial stipulations of banks domiciled on CAMEL

parameters using prudential reports, re-examinations and analyses of statutory reappears and other

relevant referableice, warner trends and fruit rale the banking sector, generate

toil reports on a monthly and quarterly account. It as-courteous warners docility with the method,

guidelines and circulars (BOFIA (banks and other financial states strike), CAMA, and

CBN (Accessible Bank of Nigeria) Strike absence of wonder) Fruit Finance Province

The fruit finance province was proveed to govern the unroving wilful-reliance

guarantee device praiseworthy and finance the dispenseing actions of the lost commodity

marketing considerations. In representation of the expected role of the bank in the Nigerian council, the

province was restructured and renamed as the fruit finance province. They are

concerned with identifying fruit finance dispense failures, shrewd strategies and

policies rale orationing them, ralemulating policies, regulatory and supervisory

framework rale micro/verdant finance, identifying fruit priorities, shrewd and

implementing opinion praiseworthying sources, warnering and evaluating the impstrike of


fruit finance initiatives, advising legislation and the CBN Oration on

commodities, SME, and micro/verdant finance posteritys. The Other Financial State Province (OFI)

The other financial states province is saddled with the part of supervising

and regulating the other financial state sub-sector which grasp the sympathy

banks, finance companies, caucus de fluctuate, elementary advance state, the

fruit finance states and the of-late instituted micro finance banks.

The province carries quenched twain on-post and extempore-post supertrust of the other financial

institutions. The extempore-post supertrust involves the appraisal and approbation of the application

rale entireows, nominees intothe considerations and apex oration positions, give of divides and

acception in extrasettled haughty, statutory reappears from other financial states, enactment or

exfluctuate of the exterior auditors. The on-post deportment of the province’s part grasps

pre commencement establishment anteriorly the transfer of a terminal entireow to an OFI (Other

financial states), uniformity establishment which is the symmetrical establishment, target

establishment orationes unfair supervisory concerns arising from unprofessional conduct

of the actions of an OFI and is carried quenched as the insufficiency prepares opportunity spot-checks rale quick

confirmation/ authenticity through dogged on-post toll. This grasps municipal

governance, recitaling rules and event, character of property, reliability of referableice

provided, interior rale rule/anti-specie laundering rales and procedures, rights,

liquidity, financial circumstances and haughty similarity.

1.5.5 Proceeds of the Monetary and Economic policies on the strikeivities of Nigerian


Monetary policies refers to the unfair strikeions taken by the accessible bank to rale the

value, accoutre and consume of specie in the council with a representation t achieving legislations

macroeconomic extrinsics. Rale frequent countries, the extrinsics of the monetary prudence are

explicitly orderly in the methods proveing the accessible bank, opportunity rale others they are referable. The

objectives of the monetary prudence may dissimilate from empire to empire save there are brace main



The raleemost representation seduces rale the monetary prudence to terminate appraisement arrestation, opportunity the coproduce representation

seeks to terminate appraisement arrestation and other macroeconomic extrinsics. The accessible bank of

Nigeria love other accessible banks in developing countries, terminate the monetary prudence goal

through the eproperty of specie replete.

In Nigeria, the Accessible Bank defines specie accoutre as comprising tight and comprehensive specie.

The restriction of tight specie (M1) grasps sociality in commonity with nonappreciationsense-bank social

and require guards or unconcealed recitals in the banks. The comprehensive specie (M2) grasps

tight specie plus savings and era guards, as polite as ststroll determined guards. The

comprehensive specie measures the whole size of specie accoutre in the council. Thus, excess

specie accoutre (or liquidity) may prepare in the council when the eproperty of comprehensive specie is

aggravate and aggravatehead the plane of whole quenchedspread in the council.

The insufficiency to rale specie accoutre is domiciled on the referableice that there is a stable

relationship between the portion of specie accoutre and economic strikeivity and that if its

accoutre is referconducive scant to what is required to exceptingtress fruitful strikeivities; it conquer effect in

undesirconducive proceeds such as haughty appraisements or inflation.

In digest, monetary prudence in the Nigerian tenor refers to the strikeions of the Accessible

Bank of Nigeria to rale the specie accoutre, so as to terminate the remotest macroeconomic

objectives of legislation. Contrariant eventors rule the specie accoutre, some of which are

within the rale of the accessible bank, opportunity others are quenchedside its rale. The unfair

extrinsic and the centre of monetary prudence may fluctuate from era to era, endureing on the

plane of economic fruit and economic raletunes of the empire. The exquisite of

instrument to portraiture to terminate what extrinsic would deppurpose on these and other


1.6. Event of the banks surveyed

1.6.1 Zenith Interpolitical Bank Plc.

Zenith Bank Plc was incorporated on May 30, 1990 as a secret crew scant by divides.

In July 2004, the Bank became a social crew scant by divides and subsequently

instituted what quiescent recrement the most lucky Initial Social Presenting (IPO) in the event


of the Nigerian Haughty Dispense. Its 6,000,000,000 (six billion) settled divides of 50 kobo

each were following listed on the Nigerian Praiseworthy Exfluctuate on October 21, 2004. Zenith Bank

Plc terminated at-terminal another milestundivided when it elated N53.63bn in February 2006 by a Social

Present of 3,000,000,000 (three billion divides), undivided of the largest eproperty in the event of the

Nigerian Haughty Dispense.

Zenith Bank Plc is undivided of the largest and most improvementconducive banks in Nigeria with whole property

plus contingents of aggravate N714.5 billion following confederation.

The Bank has endured to annals remarkconducive enterprise on contrariant parameters.

Zenith Bank’s enlargement and enterprise has earned praiseworthy ratings from twain persomal and

interpolitical rating agencies. Agusto & co. ltd has grateabundantly rates the bank Aaa rale six

consecutive years. As-courteous of species is the fstrike that the bank has the decliningest nonappreciationsensesense performing

loans to whole advances fitness of 1.7% abutting the toil medium of 18% and has gravow its

asfixed ignoble at an medium of aggravate 50% per annum in the latest five years.

Its benefit presenting covers save are referconducive scant to municipal and vpurpose banking

services, praiseworthys and asfixed oration, bombardment banking and financial advisory benefits ,

secret bank, treasury and specie oration benefits.

In delivering their trust, they spread strategies in attribute which has nature their regulate in their

operation. It fixeds quenched to contrariantiate itwilful in the banking toil through the character of

benefit it restore, the caliber of their clients and the expedite rale a uncommon customer experiment.

The bank is easily associated with attributes such as newfangledness, best waste asfixed portfolio,

haughty character personnel, congruous conspicuous financial enterprise and guideship in the portraiture

of referableice and despatch technology.

The bank’s aggravatecompletion trust is to create the stigma a reputconducive interpolitical financial benefits

network orderly rale newfangledness, conspicuous customer benefit and enterprise opportunity

creating douceur estimate rale completion stakeholders.

1.6.2 Guaranty Trust Bank Plc

Guaranty Trust Bank plc was incorporated in July 1990, as a secret scant liability

crew entiretyly avowed by Nigerian living-souls and states. The bank was entireowd as

a Vpurpose Bank in August 1990 and commenced action in February 1991.

In September 1996, Guaranty Trust Bank plc became a socially quoted crew and won

the Nigerian Praiseworthy Exfluctuate President’s Merit determine that wilfulselfselfcorresponding year and anew in the years


2000, 2003,2005 and 2006. The Bank was as-courteous runner-up rale the quoted crew of the

year determine in 2005. In February 2002, it obtained a Exhaustive Banking entireow and was

appointed a fixedtlement bank by the Accessible Bank of Nigeria (CBN) in 2003.

Its inquiry to endure adding estimate to the traffices of its stakeholders has seen it evene as

a pacesetter and toil guide aggravate the years. This is plum in its portico of existent

era online banking in 1990, variable, telephundivided and internet banking in 2002, Slip free

banking in 2006 and the raleemost abundantly interlocomotive wilful benefit ccompletion centre; GT Connect in 2006.

The bank was conducive to engage their financial obligations as they bare attributconducive and this got them the

acknowledgment of three rating agencies. Agusto& Co reaffirmed its triple a waste rating every

year fro the latest impure years, Fitch as-courteous assigned the bank a wrap A minus waste rating in

acknowledgment of its solid private right, good-tempered-tempered character property and probe rights annals

and terminally, Standard & Faulty’s, assigned the Bank a wrap B minus (BB-) waste rating. The

Bank is the singly Nigerian financial state with such a rating, which is the wilfulselfselfcorresponding as the

Agencies Sovereign rating rale Nigeria.

The bank has aggravate the years been a store of contrariant determines rale conspicuous financial

performance, customer benefit grant, praiseworthy sextrasettled enterprise, oration

efficiency some of which are the most respected financial state in Nigeria (2006), the

highly commended bank of the year determine in Africa (2005), Most Customer well-inclined Bank

(2007), Best Bank rale Stigma Fruit 2007.

Despite the challenges which characterized the year beneath re-examination(2006-2007 Financial

year), the bank was conducive to develop its coarse rights by 46% from N34 billion to N49 billion

opportunity its improvement anteriorly assessment rose by 50% from N10.5 billion in the foregoing year to N15.7

billion. In the wilfulselfselfcorresponding end, whole asfixed and contingents confirmiond by 54% from N391billion

a year antecedent to N603 billion.

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