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Banking in Nigeria has changed dramatically during the last decade. The industry has outgrown rosy predictions. During this time, the number of banks more than fivefold rose, banking operations were significantly deregulated, competition intensified, and banks were obliged to be more innovative and service oriented.

Customers and the economy as a whole expect the banking sector to provide effective and efficient services.

It has been observed that a bank with few problems will support and revitalise a reputable and reliable financial system.

Unfortunately, the industry’s uncontrolled rate of growth has resulted in unfavourable side effects such as an increase in fraud and other forms of banking malfeasance, as well as cash shortages, while mismanagement, bankruptcy, and illiguidity have been discovered to cut across the entire banking system through the activities of board members.

These greatly influenced my decision to write about the project topic:


Nigeria’s banking system problems

The first chapter acts as an introduction to the topic, addressing themes such as the following: background of the study, explanation of the problem, goal or objective of the investigation, significance of the study, and limitations of the study.

The second chapter is entirely based on the review of related literature 1 that I used during my research.

The third chapter concerned with research design and technique, specifically sources of my data, secondly source only location of the data, and method employed in data collection, literature work only.

The fourth chapter is solely based on a summary of my observations.

My recommendation and conclusion are in Chapter 5.



The banking industry dates back to the sixteenth century. When Goldsmiths’ receipts issued to depositors were utilised as a method of exchange in commercial transactions. Because these receipts were widely accepted, they became transferrable as well.

A bank is a place where money and valuables are held for safekeeping. Banks also lend money, known as loans, pay out money on customers’ orders via a change and bank draught, and provide consumers with over draughts.

The structure of banks can be classified as follows.

THE CENTRAL BANK This is the apex financial organisation tasked with controlling the cost, volume, availability, and direction of money and credit in an economy in order to achieve some desired economic objectives.

This was created in March 1958 and began full operation on July 1, 1959, after numerous institutions, such as the West African Currency Board (WACB) in 1912 and the International Bank for Reconstruction and Development (IBRD) in 9155, failed to meet their objectives and were eventually closed down.

COMMERCIAL BANK: They are financial institutions that accept deposits, advance loans, discount bills, and other associated services to the general public. This began in Nigeria in 1892 with the founding of the African Banking Corporation, which closed in 1893.

The British Bank of West Africa (BBWA) was founded in 1893, began operations in 1894, and eventually folded. Many additional banks sprang up, but all of them failed. This is divided into three major groups, which are as follows.


INDIGENOUS BANK: These are banks that are entirely owned and operated by Nigerians, including the government. The National Bank of Nigeria (NBN) was Nigeria’s first indigenous bank. Which began operations in 1933, followed in 1947 by African Continental Bank LTD (ACB).

MIXED BANKS: These are bank joint ventures owned and controlled by both foreigners and Nigerians, including the government.

FOREIGN BANKS (EXPATRIATE BANKS): These are banks that are entirely owned and controlled by foreigners.

The Nigerian indiginization Act of 1972 converted the majority of these foreign banks, which were later phased out over a long period of time.

However, the 1995 budget reestablished foreign (expatriate) trade, which includes the banking system.

MERCHANT BANK: This is a bank that specialises in whole-sale banking, medium and long-term financing, equipment leasing debt factoring, investment management, acceptance bills, and unit trust management. This was founded in 1964.


DEVELOPMENT BANK: A bank that provides long-term funds for industrial, agricultural, commercial, and mortgage development.

It also assists enterprises by offering financing and advisory services. This is divided into the following categories.


This was founded in 1964 to replace Nigeria’s investment corporation. This benefits both the public and private sectors.

NBCI (NIGERIAN BANK FOR COMMERCE AND INDUSTRY) This was formed in 1973 to oversee the financial implementation of the 1973 Enterprise Promotion Decree. This benefits indigenous businesspeople.


NACB (NIGERIAN AGRICULTURAL AND CO-OPERATIVE BANK) This benefits the agriculture industry, including individual farmers and cooperatives, and is wholly controlled by the federal government.


This company was founded in 1973 with a capital of 12 million naira (N12 million).


FEDERAL MORTGAGE BANK (FMB) is a government-established bank that provides long-term loans to customers who are building homes. Customers repay the bank by mortgaging their land and residence until they have paid off their debts.

SPECIALISED BANK: This is another sort of bank founded by the government, and it comprises the following.

The Nigerian government established the Peoples Bank of Nigeria in 1989 to assist petty traders. They also offer loans within the group at no interest rate but with an administrative fee of 15% (15%) of the loan amount.

COMMUNITY BANK: A self-sustaining bank that is owned and controlled by a community or a group of communities in order to provide financial services to that community. This was founded in 1990.

The banking system is the framework within which banks function. This is separated into four categories.

UNTIL BANKING: This is a form of banking system in which the banks participating do not have branches. This is frequent in areas where there is a commercial bank.

BRANCH BANKING: This system applies when there are a few banks with a significant number of branches. The readers are then informed that the bank seen here operates through branches.

GROUP BANKING: This system involves the consolidation of three or more independent banks under one control through the exercise of majority share stock ownership.

Despite the government’s founding of all of these banks to promote and foster entrepreneurship. The Nigerian banking sector is still plagued by issues that have hampered its operations in the country.




In a nutshell, the problem comprises fraudulent operations and mismanagement by bank personnel, as well as a lack of liquidity and the provision of suitable credit to eligible clients. The problem known technically as “bank distress” has become a common occurrence in the Nigerian banking system. It denotes the loss of the enterprise’s capital base, which is typically traced to indigenous banks.

Nigerians established these banks, as previously said, for the sole purpose of fulfilling the business demands of Nigeria. When the National Bank was created in 1933, it worked to serve the interests of Nigerians. Which intended to aid indigenous businesses and individuals who had been victims of discriminatory practises by international banks. Since their creation,

these banks have accomplished a great deal in the country, despite significant setbacks caused by uncooperative attitudes of bank directors, strict regulatory policies, and unpatriotic individuals.



The goal of this initiative is to identify and maybe solve problems in the Nigerian banking system.

So, having identified the issues that this study will address, the researchers will conduct a critical analysis of the banking system in Nigeria and assess the consequences and reactions to the situation on the following.

i) The bank’s earnings.

ii) Their reaction to the government’s various initiatives as expressed through


The Nigerian Central Bank and the Nigerian Deposit Insurance Corporation will address the issues.


iii) The overall impact of these two conditions on the existence of the bank and its clients.



It is critical for banks and commercial organisations to understand the root causes of problems in the banking industry and potential solutions.

It would also help most banks and corporate organisations recognise the need of encouraging growth in the Nigerian banking industry. That our banks should not be permitted to expire without having fulfilled their obligations.

The programmes will also make Nigerians realise the importance of honesty, hard effort, and patriotism in order to encourage and instill banking habits not only among the people but also among rural dwellers.

This project will also act as a resource for future study, economists, and the country’s economy.



The terminology used in this work should be clarified to help the reader comprehend. “Before a discussion can be intelligible, there must be a definition of terms,” states Aristotle (348-322BC), one of the greatest Greek philosophers.

Any individual or organisation that performs the bare minimum of banking services and is licenced as a bank by the federal government of Nigeria as a banking institution is referred to as a banker.

The banking system is the framework within which banks function.

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