The Nigerian Banking Sector and Its Development in Recent Times

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THE NIGERIAN BANKING SECTOR AND ITS DEVELOPMENT IN RECENT TIMES

JOYCE AKPATA

TABLE OF CONTENTS

1.INTRODUCTION
2.CHARCTERISTICS OF THE NIGERIAN BANKING SECTOR
2.1.Size
2.2.Supervision and Regulation
2.3.Corporate Governance
3.RECENT DEVELOPMENTS IN THE NIGERIAN BANKING INDUSTRY
4.GLOBAL INFLUENCES ON THE NIGERIAN BANKING SECTOR
4.1.Global Recession
4.2.ICT and electronic banking
4.3.Globalisation
4.3.The perceived role of IMF/ World Bank
5.THE EFFECT OF THE BANKING SECTOR ON THE NIGERIAN ECONOMY
6.CONCLUSION/RECOMMENDATIONS
BIBLIOGRAPHY

APPENDICES

1. INTRODUCTION
Banks have and will continue to play a key role in the financial systems worldwide. The development of a robust financial system is crucial for economic growth and development. The banking sector is an important and dominant part of the financial system for many countries especially developing countries. Banks have the special nature of being financial intermediaries, channels for monetary policy and also concurrently extend credit and administer payments system. They are key actors in causing and averting financial and economic losses. However, their power to fuel economic growth and development will depend on the strength, reliability and stability of the system. One cannot over-emphasis the need for a workable, sound and reliable banking system and that is why the banking industry is one of the most regulated sectors in any economy. The aim of this study is to identify key economic characteristics of the Nigerian Banking industry and explore how these characteristics have influenced the growth and development of the industry over the last five years, paying particular attention to the impact of globalisation on the Nigerian banking industry.

2. CHARACTERISICS
Banks in Nigeria provide numerous financial intermediation services to customers which can be classified into financial intermediation, financial advisory services transactional services, investment management, foreign exchange services, trade services and custodian services. 3.1. Size

The Nigerian banking sector is currently made up of 22 commercial banks, as against the figure 90 commercial banks in 2002. There are 5 development banks and 801 microfinance banks. All these institutions, except the development banks, take deposits from members of the public and provide a wider range of services. The microfinance banks are expected to focus on small savers in their host community and to promote small and medium enterprise and community development. Prior to the reforms of the banking sector in 2004, discussed in the next section, Nigerian banks had a weak capital base; most of them having a capital base that was less than N2billion (US$12million) with the largest bank in the country having a capital base of about N40billion (US$240 million). This was very low compared to other developing countries and prevented them from participating in big-ticket deals, especially those within framework of the single obligor limit. It also allowed for easy entry to the sector. The present day the new N25billon ($155million) has become an entry barrier to the system. Post-consolidation, the asset base of the banks doubled from N3.209trillion in June 2004 to N6.555 trillion at the end of September, 2006. (Arua 2007).

2.2.Supervision/Regulation
To ensure sound banking practices, the activities of the banks are regulated and supervised by Central Bank of Nigeria (CBN). The Nigerian Deposit Insurance Company (NDIC) exercises shared responsibility with the CBN for the supervision of insured banks. There is a need to for considerable improvement in the regulatory and surveillance framework in order to foster healthy competition in banking operations and to guarantee an efficient framework for monetary management.

2.3.Corporate Governance
The Nigerian banking sector has been characterised by poor corporate governance practices which also fuelled the financial...
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