Imagine a world without banks or banking services. Just like telecommunication, the banking sector has evolved with modern innovations that have made transaction of business and life easier for the public.
A bank is a financial institution that provides services such as collecting of deposits and issuance of loans to the public. It is also a place where money and valuable items are kept.
Banks usually operate by collecting funds in form of deposits from individuals, businesses and government and on the other hand give out those funds as loans and purchase securities (assets of banks).
The banking industry in Nigeria can be traced to the colonial era with the establishment of the colonial banks. In 1892 precisely, the African Banking Corporation and British West Africa (now First Bank of Nigeria) were established.
The modern day banking in Nigeria has great significance in the economy as shall be later discussed, but first, a brief look at the types of banks will further help to appreciate their role in the economy.
Types of Banks
1. Savings Banks
They are generally the public’s bank. Most People operate with a savings bank. These financial institutions primarily receive savings accounts and pay interest to the depositors. They are customer-oriented especially for low income earners.
2. Commercial Banks
These banks are known for the services they provide which are usually acceptances of deposits, granting business loans and offering basic investment products. The main goal of commercial banks is to assist businessmen.
3. Industrial Banks
These kinds of banks sell certificates that are labeled as investment shares and also accept customer deposits. They further invest the proceeds in installment loans for consumers and small businesses.
Usually, Industrial banks have small scope of business; their main objective is to offer long-term loans for expansion and modernization of industries.
4. Agricultural Banks
Just as the name implies, agricultural banks assist famers with loans, usually a long-term loan and at a low interest rate. They are specially established to facilitate agricultural development.
5. Co-operative Banks
Co-operative banks are similar to agricultural banks in their operation. They normally grant credit facilities to small farmers, salary earners and small-scale industries.
6. Consumers Banks
These are banks that provide services to individual consumers rather than to companies, corporations or other banks. The main purpose of establishing this kind of bank is to give out loans to consumers for purchase of durable products such as cars, household property, etc.
Role of Banking in Nigeria Economy
1. Economic Growth
Banking fosters economic growth in Nigeria. This is done through the availability of both short and long-term loans given to industries, agriculture and individuals.
Some persons who want to venture into agriculture, trade or require financial assistance to establish industries rely on loans from banks to facilitate their projects.
These loans offered to them by banks enable the actualization of such project and in turn boost the economy. Because the more the industries, companies and production in agriculture, all made possible through accessible loans, the economy thrives and grows rapidly. So banking is an agent of economic growth.
2. Promotion of Entrepreneurship
One another major role of banking in the economy is the promotion of entrepreneurship. The role of private sector is crucial in accelerating the pace of economic growth in Nigeria.
Today, many small and large scale entrepreneurial ventures thrive through banking services offered to the public. Some of the banking packages are geared towards boosting entrepreneurship and innovations. This encourages people to go into entrepreneurship and investments thereby boosting the economy
3. Faster Transaction of Business
Through the banking services, transactions of business have been made easier. With the use of mobile apps and other related services to make transfer or deposits is lot easier.
Gone are the days people have to go and queue inside the banking hall just to make withdrawal. With the use of the Automated Teller Machine (ATM), such long frustrating process has been minimized.
Also the online banking services bridges the gap of distance in transaction. Products and services can be paid for instantly with little or no technical challenges whatsoever. All these have increased the pace at which transaction take place in the economy.
4. Regulation of the Economy
Through the banking regulatory policies, financial balance is maintained in the economy. This is one of the duties of the Central Bank of Nigeria which is to control the circulation of money in the economy. This regulatory checks help to control inflation and as well as correct deflation when the need arises.
5. Encourages Revenue
With the assistance that banks offer to industries, agriculture and entrepreneurship through granting of loans and other service, the revenue of the government is boosted.
This is made possible because through the support of the banks the industries or business grow in production and expansion of services.
These industries and entrepreneurial ventures pay taxes to the government. So the more new industries emerge from loans offered by banks, the more the increase in taxes. Banks today offer small scale loans to individuals and these influences production positively.
6. Employment Creation
With the emergence of new generation banks with various branches across the nation, more job opportunities have been created to absorb the teeming graduate population.
Positions such as cashiers, customer service personnel, marketer, cleaners, messengers, security men etc. are constantly advertised for interested applicants.
The banking job is today one of the lucrative jobs in Nigeria especially for young people. Not just for graduates with related degree but any field of study can be employed and trained to become a professional bankers.
Click here to Read Latest School News in Nigeria