History Of Banking In Nigeria
The History of banking in Nigeria in 1892 began during the colonial era with the establishment of Colonial Banks, with the main aim of meeting the commercial needs of the Colonial Government/masters.
The banking system in Nigeria is controlled and regulated through the Central Bank of Nigeria. This apex banking system started operation on July 1st, 1959.
The History of banking in Nigeria started back in the year 1882 when the African banking corporation was established, followed in 1884 by the establishment of the British bank of west Africa which name is now called First Bank of Nigeria.
The first domestic bank In Nigeria was established in the year 1929. It was called Industrial and Commercial Bank, respectively, And it was liquidated in the year 1930 and was later replaced by Mercantile Bank in 1931.
And also, the African Continental Bank was created in the year 1949 as the only sustainable indigenous bank after the liquidation of the Industrial and Commercial Bank.
The central bank of Nigeria
In the year 1958, the central bank of Nigeria decree came into force on the 1st of July 1959; they commenced their operations.
The primary regulatory objectives of the CBN Act are to:
Maintain the external reserves of the country,
Promote monetary stability and a sound financial environment,
and also to act as a banker of last resort and financial adviser to the federal government.
After the end of imperial rule, the wish of the government to become pro-active in the development of the economic sector became more visible, especially after the end of the Nigerian civil war(6 July 1967 – 15 January 1970).
Nigeria banking reform
Nigeria’s banking reform can be separated into two main phases, which are in 2004 and 2009. Each period had significant economic effects:
Banking Reform of 2004 and its impact (s)
This reform of 2004 was focused on bank consolidation through the system of merging of two or more banks and acquisition.
This resulted in the rebasing of commercial banks and an increase from ₦2 billion to ₦25 billion, and also, the 89 existing commercial banks in the country reduced to 25.
Apart from capitalization, the Central Bank of Nigeria also invested in banking automation intending to improve banking returns.
Apart from capitalization, the Central Bank of Nigeria also invested in banking automation to enhance banking returns.
Under this reform, deposits from public sectors and government-owned agencies can be collected by the commercial banks to enhance their level of liquidity.
Banking Reform of 2009 and its effect(s)
In early 2009, the second phase of Nigerian banking reforms began.
This institution was made to establish to acquire non-performing loans that belong to commercial banks.
A non-performing loan (NPL) is a loan that is in default, which is the payment of interest and principal due by 90 days or more.
The Asset Management Corporation of Nigeria AMCON was established in 2009 by the National Assembly of Nigeria.
The financing of AMCON is composed of a ₦50 billion CBN fund and 0.3% of the total assets of participating commercial banks.
This also supports the implementation of International Financial Reporting Standards, Also known as (IFRS) for global compliance in terms of standard reporting.
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This reform was also made to evaluate the universal banking model by limiting all commercial banks to banking activities only. The change also addressed high banking interest rates by creating non-interest banks.
The Deputy Governor of the Central Bank of Nigeria, Sarah Alade, also announced that five(5) Nigerian bank CEOs were to be removed from their positions in August 2009.
It was also announced that the Union Bank of Nigeria was to be headed by Funke Osibodu while First Inland Bank(Fin) Bank was to be led by Suzanne Iroche.
Banking reforms were made to achieve goals of high economic growth, balance, and stability. Banking reforms will continue to be made in response to the global financial crisis and mismanagements of Nigerian banks to boost confidence in the Nigerian banking system.