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Banking system and top banks in Nigeria

Banking system and top banks in Nigeria

The banking sector is one of Nigeria’s prestigious and most prominent sectors. The industry is a regular flow tracker to the country’s economy — whether micro or macroeconomy. The banking system also opens our eyes to know which is the top banks in Nigeria and which is not. 

Also, Banks, in general, are creations of commercialisation of businesses and livelihoods. One can hardly give any information about banks, in Nigeria and other parts of the world without explaining the existentialism of how far they have grown over the years and how much effort they are putting in their operations to meet up with technological advancements in the world. Meanwhile, it is also expedient to define what a bank is and to visit the memory lane of the history of the banking system in Nigeria.

What is a bank?

A bank can is a financial institution that has done all due diligence and has received the necessary licensing to receive money or monetary values. It can also provide financial services, such as wealth management, giving loans, and exchanging currencies. Banks are the primary places where people save their money and valuable things, not because of the security factor alone, but due to accessibilities and implementations that banks operate upon in their structure. Meanwhile, we have different kinds of banks. For instance, there are various kinds of banks in Nigeria, starting from the central banks to the microfinance banks. This article will explain these banks and their structures.

History of the Nigerian banking system

The history of Nigeria’s banking system would not be completed unless one digs it from the pre-colonial era, when people used to keep their valuable materials safe, using traditional methods to actualise that. Some of the conventional techniques people were using were keeping money and valuable items by digging the grounds to save their valuables. Some people also used to build a warehouse that would be safeguarded. At the same time, they also used to keep money in piggy banks etc.

The idea of modern banking originated during the colonial era when the colonial masters built banks based on the European style to meet their financial and commercial needs. To be objective, the colonial masters established a bank that showed the connection between themselves and the colonised people; the bank was named the African Banking Corporation and British West Africa in 1892, which is now known as the First Bank of Nigeria.

In 1925, the Barclays Bank was later established in Nigeria through the combination of the National Bank of South Africa and Anglo-Egyptian Bank. To add to the number of banks in Nigeria, the British and French Banks for commerce and industry also started their operation in Nigeria in 1948; the bank is now known as the United Bank of Africa (UBA).

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In 1929, Nigeria had the first indigenous bank called the Industrial and Commercial bank. Unfortunately, the bank liquidated; that is, it was eventually auctioned out to pay some lingering debt in 1930– just a year after it was established. In 1931, the Mercantile Bank was established to replace the liquidated Industrial and Commercial Bank– making it the second indigenous bank in the country.

In 1949, the African Continental Bank was later created to balance the banking system in Nigeria and the continent. Interestingly, it later became the only bank that could be sustained since the Industrial and Commercial Bank liquidation. The Africa Continental Bank went on to become one of the most prominent indigenous banks in the country. Although, the bank eventually met some crises, which made the Central Bank of Nigeria take over to restructure and resell it.

Structure of Nigeria’s banking system

The Nigerian banking system is structured based on the hierarchical order of operation and policymaking and implementation. The mode of operation in different banks differs. The Nigerian banking system is divided into 4 structures.

The Central Bank of Nigeria: the central bank of Nigeria is the apex of all banks in the industry. It was established in 1958, but it did not start its operation till July 1959. The bank has the sole responsibility of regulating all banking activities; it also has the role of sanctioning any erring banks that violate the banking legislation.

The CBN also regulates the operation of the Bureau de Change (BDCs), Primary Mortgage Institutions (PMIs) and Finance Companies (FCs). The Central Bank of Nigeria has a massive role in the economy of a country, supervising the money direction and volume of availability. With the CBN’s role as the topmost bank in Nigeria, the commercial banks are to answer the CBN.

The Commercial bank: the commercial banks are the most common banks in the country. According to the Central Bank of Nigeria, 22 commercial banks operate in Nigeria. These banks are known for collecting deposits, giving advance loans, and offering financial services to their customers. They also have the roles of performing debt settlements and exchanging foreign currency for Naira. The Commercial banks are the regular banks like the First Bank, United Bank of Africa, Zenith Bank, Access Bank etc.

Development Banks: the development banks are not as popular as the commercial banks, but they have a unique role to perform. For instance, it is the role of the development banks to provide long-term funding for the agriculture sector, mortgages development and industrial development. They provide loans for projects on the mentioned projects, and they also provide consultations for those who might need the service.

Merchant Banks: These banks are the banks that specialise in providing long term financing, provision of wholesale banking, giving investment management and leasing debt.

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Top ten banks in Nigeria

Having given you some information about Nigeria’s banking system, According to Nairametrics, as of January 2022, below are the lists of the top six banks in Nigeria and their market valuation.

1. Zenith Bank:

Zenith is rated the top commercial bank in Nigeria; it is even one of the world bank top tiers rated banks in the country. The Zenith Bank is valued at N817.9 billion as its market valuation

2. Guaranty Trust Bank(GTB):

The bank is rated one of the top banks in Nigeria based on its estimated value, closely following Zenith Bank, which is N791.7 billion.

3. Stanbic IBTC:

Stanbic IBTC is rated the third bank in Nigeria. The bank has an estimated capital value of N463.2 billion based on its market valuation.

4. First Bank:

As the oldest bank in the country, first is consistently among the first regardless of all odds. The bank capital valuation is N412.8 billion.

5. Access Bank:

Access Bank is in the fifth position among the top banks in Nigeria, with a capital valuation of N351.9 billion

6. United Bank of Africa:

As one of the oldest banks in Nigeria, UBA is one of the most respected banks in the country. The bank has an estimated capital value of N294.1 billion.

7. Ecobank:

Is also one of the oldest banks in Nigeria. It is a pan-African bank because it operates in almost all African countries.

8. Union Bank:

Union Bank is also one of the top banks in Nigeria, with an estimated capital value of N171.8 billion.

9. Fidelity Bank:

Fidelity bank and its “We always keep our words” slogan is a famous bank in Nigeria. The bank is estimated to be worth N73.9 billion.

10. Polaris Bank:

The old Skye bank is also a top-notch bank. It is one of the most respected banks in Nigeria.

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