In this unit, you will be introduced to the Nigeria Banking Structure and the component there of. This component is made up of Central, commercial, merchant, development/specialized banks and other quasi – financial institutions performing banking activities.
At the end of this unit, you shall be able to:
- Draw the structure of Nigeria Banking System
- Identify the component of the system
3.0 MAIN CONTENT
Nigeria Banking System is as shown in the organizational chart below in figure 1 with brief explanations to highlight the sections and development as the economy expands.
3.1 Commercial banks are very bivalent in any economy because they tee structured to provide working capital loans to the deficit sectors of economy They do hardly lend money on
extensively in module 2 of the course material.
3.2 Merchant banking occupied a very important position in the banking system of many economies of the world. It is a bridge between the traditional financial services rendered by the commercial banks and the development banks. The merchant banking system is designed to provide mainly medium-term funds and if ever, long-term to the economy.
3.3 A development Bank is a financial institution primarily designed to provide medium to long-term credits to the economy. Generally, development banks do not operate chequering accounts of commercial banks nor engage in wholesale activities of the merchant banks. The development
banks are well – structured to offer financial assistance and advice on projects whose gestation period are characteriscally long-term in nature. Infect, development banks cover the gap between the short/medium projects and log-term projects. Development Banks serve too as specialized banks which are established for specified purposes in the economy. Their functions are therefore aimed at developing those sectors which they are established for. However, they perform two broad functions which include the banking functions and the development functions: They raise bilateral and multilateral loans from international aid agencies like the United States Agencies for International Development (USAID), from international donor agencies like the World Bank and from
their own governments.
3.4 Specialized Banks
Specialized banks are established in Nigeria to carter for the financial needs of some segments of the society. On the whole the Nigerian Banking System is dynamic and it evolves as the socio-economic sphere of the Nigeria develops.
Self assessment exercise
List the component of the Nigeria Banking System
The Nigerian Banking System is dynamic and revolves around socio- economic development of the nation.
The Nigerian Banking System has Central Bank of Nigeria as the apex bank as shown in the organogram, the commercial banks, merchant banks, development banks and other specialized banks that are established as per exigency- like microfinance banking institutions.
6.0 TUTOR- MARKED ASSIGNMENT
- List the characteristic a development bank.
- Describe a merchant bank.