History and origin of Banking in Nigeria
Banking activities started in Nigeria in the year 1892 with the opening of the Africa Banking Corporation in Lagos .The aim of the bank at that time was to serve British trading interest in Nigeria, such as the Royal Niger Company .
Due to some difficulties the bank folded up its activities and the Bank of British West Africa Limited BBWA was established to take over the activities of African Banking corporation.
The Bank of British West Africa Limited opened its first branch in Lagos in 1894, in the later part of the same year ,the name of the bank was change to Standard Bank of Nigeria known as the First Bank of Nigeria limited [now a public limited company PLC.
The second bank to be established n Nigeria was Barclays Bank DCO [Dominion colonial and oversea] which opened its first branch in Lagos 1971 Now Union Bank of Nigeria and it has branches in many parts of the country .
In 1949,the British and french Bank was opened [Now United bank for Africa Limited UBA]
In 1933,the first indigenous bank ,National Bank of Nigeria was opened due to discrimination suffered by Nigerians in the hands of foreign banks , businessmen who, being denied credit facilities in these banks, were effectively excluded from the mainstream of the economy.,some patriotic Nigerians came together for the purpose of breaking the foreign monopoly in the banking business .
In 1945, Agbonmagbe Bank [now Wema Bank Plc ] was established. The period between 1892-1952 were regarded by central bank authorities as a period of ” Free of all “banking.This was because at that time there were no regulation to restrict movement and there were no licensing in banking operations in Nigeria which led bank failure as well closure of banks and losses to depositors.
The bank failure prompted and hastened the first banking legislation in Nigeria called the banking landmark between the period of non regulated banking financial system in Nigeria.
The Period of Regulation
This period could be called the era of regulated banking in Nigeria .In 1958 the central bank of Nigeria [CBN ] was set up as the country’s apex bank [or regulatory authority within the period ,several banking and foreign exchange acts were enacted .
The first foreign exchange regulation was promulgated in 1962 known as foreign exchange Act of 1962, the foreign country’s foreign exchange practices. The banking ordinances of 1952 was amended in 1958 and in 1962 replace by the banking Act of 1969.
The 1969 banking act was amended in 1970,1972 and 1974 respectively ; This served as the main banking regulation in the country until 1986 when the structural adjustment programme SAP] was introduced by Ibrahim babagidda led administration
During this period of review ,many economic activities took place [1971-1980] it was characterized by economic reconstruction and development.
Two development bank were opened namely the Nigeria bank of commerce and industry established by Degree in may 1973 and Agricultural and co-operative Bank which was established in March 1973 many indigenous banks were opened especially by various states of the federation.
About 124 commercial bank and merchant Banks with 2076 branches were opened throughout Nigeria as at December 1994. The deregulation helped to remake some administrative control in the system and promote a greater reliance of the market mechanism in the determination of interest rate.
During post structural adjustment period, there were emergence of new institution such as Nigeria deposit insurance corporation which was established as a result of the banks distress and aimed at insuring bank deposit against distress.
The NDIC was set up in 1989 to make sure that banks observe sound and safe banking practices . Also to aid the effective monitoring and supervision of the banks in collaboration with the central bank of Nigeria [CBN].
The financial sector experience bank distress and closure of some banks ,this act called the failed bank[recovery of debts and financial malpractice degree 1994] for proper supervision and monitoring of banks activities.
Mr.J.B. Loynes in 1957 the colonial government passed the central bank of Nigeria ordinance 1958, establishing the central bank with the following functions, Issuance of a legal tender currency in Nigeria.
Maintenance of external reserves to safeguard the international value of the currency.
Promotion of monetary stability and a sound financial system.
Banker and financial adviser to the federal government and
Banker to other banks in Nigeria and Abroad.
Other institutions established were community bank , the People bank of Nigeria now micro-finance bank MFB
A lot of monetary policies were put in order to protect the banking system from the adverse effects of deregulation . The minimum share capital of commercial bank were increase from N10 million to N20 million naira in 1989.
Toward the end of 1990, commercial banks capital base was further increased to N50 Million and merchant bank to N40 millon naira.
In November, 1990 ,the prudential guideline for banks was intoduced ,this required banks to classify their credit portfolio into “performing” and “Non -performing ” credits