1.0 INTRODUCTION
The historical development of Banking in Nigeria is linked with the increase in the intensity of international trade between Nigeria and Britain. It is worthy of note that the establishment of bank assisted in facilitating, trade transactions. This was because Nigeria had a major trade relationship with a country which as her colonial master. This created the enabling environment for the importance and usefulness of banking for many years. Banking in Nigeria started in 1892 with the establishment of a branch of African Banking Corporation in Lagos5.2.0 OBJECTIVES
At the end of this unit, you shall be able to:- Discuss the establishment banks and other Financial Institutions
- Note their importance
3.0 MAIN CONTENT
3.1 Establishment of Commercial Banks
With an increase in the intensity of international trade between Nigeria and Britain, the establishment of a bank to assist and facilitate, trade transactions was imperative. This was because Nigeria had a major trade relationship with a country which had already known the importance and usefulness of banking for many years. Banking in Nigeria started in 1892 with the establishment of a branch of African Banking Corporation in Lagos5.The main function of the bank was that of importing and distributing silver coins from Royal Mint and implicitly regulating their circulation6
. The activities of the bank with respect to import of coins were monopolistic in nature.
This was because other institutions had to pay a premium of 1 per cent for any importation7.
In 1893, barely a year from its establishment, the African Banking Corporation (ABC) was folded up and its interests therein transferred to Elder Detester and Company". The vacuum in banking activities left by African Banking Corporation was filled in 18949 when an office of the British Bank for West Africa (now First Bank) was established in Lagos.
The functions of BBWA were the same as the defunct African Banking Corporation but it recorded greater successes than its predecessor. The bank helped a lot in providing the needed banking services to both the colonial government and the agricultural producers, who were the major exporters. Through the import/export services offered by the bank, the tempo of trade transactions was increased. The establishment of this bank also helped in sending to Nigeria the wealth of experience in banking operations which was already in an advanced stage in Britain and the same time improve the conditions then inherent in the economy for a take-off of a near complete monetary type of economy. This was because, when the West African Currency Board (WACB) was established, the BBWA beanie its main currency agent which took charge of the WACB currency, receiving, storing and issuing of wins tendered in, exchange for drafts on London Another commercial bank of British origin was established in 1925. The Barclays Bank D.C.O. (Dominic, Colonial and Overseas) as it was then called her helped in developing the banking base of the economy. One may be pied to ask whether these banks had interest and confidence in both the Nigerian economy and the indigenous business affairs.
The first of these banks - ABC - did not have much confidence in the Nigerian economy as it had in the South African economy. This was because of a combination of many factors - weather, mosquitoes, social unrest due to resistance by the Nigerian ruling kings, Obas and Chiefs, to the penetration of Europeans into their kingdoms and the seasonal nature of the export crops.
Moreover, the Nigerian indigenous businessmen up to recent periods suffered from lack of financial assistance from the expatriate banks.
There was therefore, the need to establish indigenous banks to stimulate and facilitate indigenous participation in the process of economic development in terms of the diversification of the productive pattern of the economy which was mainly agricultural.
The export-based agricultural production was dominated by large foreign panics which operated on large scale basis - the plantation system. The scale export oriented productions were mainly restricted to export crops palm Oil, palm kernel and rubber. It is on record that as far back as 1917 the BBWA had granted loans to the export crop farmers11
which might have been these foreign companies. The bank however, faced stiff competition with the major trading companies in respect of credit operations to producers since they had a more extensive network of branches than the BBWA.
The first indigenous bank to be established as an attempt to bring indigenous businessmen into the helm of economic activities in Nigeria was the Industrial and Continental Bank (ICB) established in 1929. The bank however failed in 1930 because of inadequate capital base, poor management and stiff competition with the well established and experienced expatriate banks and trading corporations which diversified into financing business. In 1930, a group of other enterprising Nigerians founded the Mercantile Bank which went into liquidation in 1936 barely five years front its establishment because of the same factors that caused the failure of the first indigenous bank. In 1933, a third indigenous bank was established by name the National Bank of Nigeria.
In 1945 and 1947, the Agbonmagbe (now Wema Bank) and the African Continental Bank were established, respectively. These last groups of banks were able to sustain themselves irrespective of competition with the well managed expatriate banks. It may be that they learnt from and overcame the difficulties that befell the earlier ' established indigenous commercial banks. The same banks are in existence today although some exist with other names and some attendant problems. The survival of indigenous banks may not be attributed entirely to their management efficiency but also on patronage by the different regional governments and quasi-government agencies. The popular client/patrons of the African Continental Bank were, for example, the Eastern Region Finance Corporation and Marketing Board; that of the National Bank of Nigeria Was the Nigerian Marketing Board (appointed bankers to the board in September. 1950), and that of the Agbomagbe Bank was the Western Region Marketing Board.
In 1893, barely a year from its establishment, the African Banking Corporation (ABC) was folded up and its interests therein transferred to Elder Detester and Company". The vacuum in banking activities left by African Banking Corporation was filled in 18949 when an office of the British Bank for West Africa (now First Bank) was established in Lagos.
The functions of BBWA were the same as the defunct African Banking Corporation but it recorded greater successes than its predecessor. The bank helped a lot in providing the needed banking services to both the colonial government and the agricultural producers, who were the major exporters. Through the import/export services offered by the bank, the tempo of trade transactions was increased. The establishment of this bank also helped in sending to Nigeria the wealth of experience in banking operations which was already in an advanced stage in Britain and the same time improve the conditions then inherent in the economy for a take-off of a near complete monetary type of economy. This was because, when the West African Currency Board (WACB) was established, the BBWA beanie its main currency agent which took charge of the WACB currency, receiving, storing and issuing of wins tendered in, exchange for drafts on London Another commercial bank of British origin was established in 1925. The Barclays Bank D.C.O. (Dominic, Colonial and Overseas) as it was then called her helped in developing the banking base of the economy. One may be pied to ask whether these banks had interest and confidence in both the Nigerian economy and the indigenous business affairs.
The first of these banks - ABC - did not have much confidence in the Nigerian economy as it had in the South African economy. This was because of a combination of many factors - weather, mosquitoes, social unrest due to resistance by the Nigerian ruling kings, Obas and Chiefs, to the penetration of Europeans into their kingdoms and the seasonal nature of the export crops.
Moreover, the Nigerian indigenous businessmen up to recent periods suffered from lack of financial assistance from the expatriate banks.
There was therefore, the need to establish indigenous banks to stimulate and facilitate indigenous participation in the process of economic development in terms of the diversification of the productive pattern of the economy which was mainly agricultural.
The export-based agricultural production was dominated by large foreign panics which operated on large scale basis - the plantation system. The scale export oriented productions were mainly restricted to export crops palm Oil, palm kernel and rubber. It is on record that as far back as 1917 the BBWA had granted loans to the export crop farmers11
which might have been these foreign companies. The bank however, faced stiff competition with the major trading companies in respect of credit operations to producers since they had a more extensive network of branches than the BBWA.
The first indigenous bank to be established as an attempt to bring indigenous businessmen into the helm of economic activities in Nigeria was the Industrial and Continental Bank (ICB) established in 1929. The bank however failed in 1930 because of inadequate capital base, poor management and stiff competition with the well established and experienced expatriate banks and trading corporations which diversified into financing business. In 1930, a group of other enterprising Nigerians founded the Mercantile Bank which went into liquidation in 1936 barely five years front its establishment because of the same factors that caused the failure of the first indigenous bank. In 1933, a third indigenous bank was established by name the National Bank of Nigeria.
In 1945 and 1947, the Agbonmagbe (now Wema Bank) and the African Continental Bank were established, respectively. These last groups of banks were able to sustain themselves irrespective of competition with the well managed expatriate banks. It may be that they learnt from and overcame the difficulties that befell the earlier ' established indigenous commercial banks. The same banks are in existence today although some exist with other names and some attendant problems. The survival of indigenous banks may not be attributed entirely to their management efficiency but also on patronage by the different regional governments and quasi-government agencies. The popular client/patrons of the African Continental Bank were, for example, the Eastern Region Finance Corporation and Marketing Board; that of the National Bank of Nigeria Was the Nigerian Marketing Board (appointed bankers to the board in September. 1950), and that of the Agbomagbe Bank was the Western Region Marketing Board.
FUNCTIONS OF THE CENTRAL BANK OF NIGERIA (CBN)
CBN Ordinance of 1958 subsequent amendments base the functions of the CBN as follows:- Issuance of legal tender currency notes and coins in Nigeria.
- Maintenance of Nigeria’s external reserves to safeguard the international value of the nation’s currency.
- Promotion and maintenance of monetary stability and a sound and efficient financial system in Nigeria.
- It acts as banker and financial adviser to the Federal Government of Nigeria.
- Acting as a banker and lender of last resort to banks
- Acting as the apex regulator and supervisor of all financial activities in Nigeria
Self assessment exercise
Briefly explain what necessitated the establishment of banks in Nigeria.3.2 Other Financial Institutions
Not only commercial banks were established in 'order to promote economic activities, but also in existence, were other institutions which serve the purpose of financing the economy. One of these institutions has Alit Wei' African Cocoa Control 13ord (WACCB) set up in .1939 'but later on was converted into West African Produce Control Board it 1942. The main function of the board was that of promoting economic security if the producing areas through the maintenance of stable prices. Through this type of stabilization policy, forced savings and vans were made by the producers and these savings were used in financing government project.7.0 CONCLUSION
It was noted that Banks where established because of the influence of British- our colonial masters and the trading that took place then.8.0 SUMMARY
The establishment of banks and other financial Institutions where discussed and their importance.9.0 TUTOR MARKED ASSIGNMENT
- Discuss the establishment banks and other Financial Institutions.
- What is the importance of financial institutions in a developing economy like Nigeria?
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