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Banks in Nigeria

Updated on February 1, 2010

Banks in Nigeria

Banks in Nigeria can be classified as big, medium and small based on their capital base and volume of transactions they can handle.

Officially banks are classified as commercial/universal banks, micro finance banks and industrial banks.

The central bank of Nigeria (CBN) is the apex bank taxed with regulating the practice of banking and other activities that banks are required to partake in. It is headed by a governor who is appointed by the president of the country and is expected along with other directors and deputies to serve out a 5 year term or 2 terms depending on how favoured he is.

Following the banking consolidation program of the CBN in 2004 in which commercial banks were required to raise their capital base (shareholders funds) to N25 billion or $200 million and between N20 million and N1 billion for microfinance banks, Nigerian banks have not only grown in size but have become a lot more competitive globally.

Classes of banks

1.       Commercial banks

Currently there are 25 commercial banks in Nigeria down from 89 which they previously were prior to the consolidation of 2004 since many of weaker banks were either acquired by bigger ones or merged to form bigger and stronger ones. At the moment, Nigeria has more than 5 banks on the list of top 20 banks in Africa which for long has been dominated by South African and Egyptian banks. The result of Nigeria’s consolidation has been a massive expansion of operations outside the shores of the country. A number of Nigerian banks have acquired other banks and insurance companies in smaller African countries while some have opened branches in Europe, America and elsewhere. Nigeria’s five biggest banks are First bank, Zenith Bank, United Bank for Africa (UBA), Union Bank plc and GT bank. By the way all of Nigeria’s commercial banks except Equitorial Trust bank and Standard bank are Public limited liability companies meaning they can be owned by any member of the public.

2.       Micro finance banks

There are more than 1000 micro finance banks in Nigeria with the majority of them being classified as small or medium. Most micro finance banks are small with capital base of N20 million to less than N100 million. These banks operate in small areas such as towns and do not cover more than that. Where as the medium microfinance banks own capital base of N100 million and above, they could also operate in a small area although they are licensed to cover larger areas such as major cities or an entire state. The big micro finance banks can cover 2 or more states possibly the entire country provided they have a minimum of N 1 billion as capital base and have sufficient deposits to support their operations.

3.       Other industrial banks

There are other banks which provide a number of services but mostly to specialist areas such as Agriculture, Industry and major projects. In this class we have the bank of industry, Nigerian Agricultural and rural cooperative bank, and the numerous mortgage institutions. These banks serve industrial and other non-consumer economic functions and are mostly privately owned or run by government agencies.


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