Reasons why Government Participate in Banking business in Nigeria

Last updated on April 9th, 2023 at 09:56 pm

Government participation in Banking business is not only peculiar to Nigeria,it is a general phenomenal all over the world. For example the Bank of England is the English central bank and owned by the British Government.

The reserve Bank of United States is jointly owned by America Government and other stakeholders[Quasi Public banks which reflect an interest blend of private ownership and public control.

Banking in Nigeria started in 1892 with the commencement of business by Africa Banking Corporation founded by Elder Dampstar.

In 1894 it business operations were take over by the then newly established British Bank of West Africa [Now First Bank of Nigeria Plc] follow by Barcleys Bank [ Now Union Bank of Nigeria Plc] in 1917

The first indigenous bank in Nigeria was the National Bank established in 1933 .The Bank had an authorized paid up capital of N500,00 followed by Africa continental Bank [ACB ] IN 1947 with authorized of N20,000.

You can also read: Factors that determine exchange Rate of a country

According to CBN report, 22 Banks were said to have been registered in Nigeria during the free banking era.

In 1959 Central Bank of Nigeria was established to assist the development of money market in the country .

It could be recalled that one of the set back of the indigenous Banks in Nigeria was fund or capital to compete with the expatiate banks .By implication ,established of central bank was to assist Business men to raise short term funds for their investment ,

Secondly to transfer funds from the surplus economy unit to deficit economy unit. Thirdly, to assist the government of the country to raise short term funds to finance some of its expenditure of budget deficit.

You can also read: Role of banks in country economy development and Growth

Reasons for Government Participation on Banking Business.

The government participated in the banking business because of the following reasons

1. to foster economic development and growth in the country -prior before government involvement, the means of channeling fund from surplus economic unit to deficient economic unit were difficult, and government raising short term fund to finance its deficit budget was difficult. By government involvement it ease the process of fund transfer.

2. To refocus expatriate Banks to work in the interest of the country-Government participation in the ownership of banks and acquiring more equity shares in expatriate banks was to re-organize and re-focus the attention of the expatriate bank towards a new system and assist in nation building ,especially in their policies .

3. The need to speed banking habit. before t government intervention in bank participation, rural banking was not encourage. for even development to take place banks need to have branches in the rural communities with government intervention, rural banking was possible.

4. To encourage mutual understanding between both the expatriate banks and the indigenous bank so as to work together in the same regulated environment without a dominating power for rapid bank expansion in the Nigeria.

5. To discourage one bank from using a superior powers and experience to manipulate government and other government officials.

You can also read: History and origin of Banking in Nigeria

6. To encourage Manpower development for effective management of sub-sector of banking and finance .

7. To encourage state to own bank to assist then for rapid development and to reduce idle fund.

`Hope this content has able to explain reasons why government participate in banking business in Nigeria. i will welcome your comments and contributions.

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