Types of Banks in Nigeria

Types of banks in Nigeria

These are the types of banks in Nigeria;

Central banks 

Merchant banks

Commercial banks

Savings bank

Mortgage bank

Development banks

Cooperative or Mutual Banks

Non Interest Banks

let’s explain the different types of banks in Nigeria in detail.

1.Central Banks 

Central banks conducts monetary policy to achieve price stability and to help manage economic fluctuations.

Functions of Central Banks 

  • Issue money
  • Ensure stability of the financial system
  • Target growth and unemployment
  • Operate monetary policy/interest rates
  • Lender of Last Resort to Government
  • Target low inflation
  • Unconventional monetary policy

2.Commercial Banks

Commercial banks are financial institutions that accepts deposits from people and give loans for investment with the aim of earning profit.

Functions Of Commercial Banks

1.Development and Growth of the Economy:

2. Mobilisation of Savings:

3. Creation of ‘Money’:

4.Supply of Finance:

5. Subsidiary Functions:

3.Merchant Banks 

They are financial institutions that engages in catering primarily to the needs of large enterprises, underwriting and business loans and high net worth individuals.

Functions of Merchant Banks:

  • Portfolio management.
  • Money Market Operation.
  • Broker in stock exchange.
  • Raising funds for client.
  • Managing Public Issue of Companies.
  • Services to Public Sector Units.

4.Development Banks

Development Banks provides wholesale funding and risk sharing facilities to Participating Financial Institutions (eligible retail intermediaries such as microfinance banks, commercial banks, existing retail DFIs and leasing companies) for on-lending to MSMEs.

Functions of Development Banks In Nigeria:

They provide funding and risk sharing facilities. It will also incentivise predominantly Deposit-Money, financial institutions and Microfinance Banks, by augmenting their capacity and also by providing them with funding facilities made to meet the needs of smaller clients.

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5.Savings Banks

A savings account works by opening and funding of account. The bank pays you interest on your savings as they use your money to make loans to borrowers. They take money from you and pay with interest then they loan money to other people and charge them interest.

Functions of Savings Banks 

It’s a financial institution that gathers savings, pays interest to savers. It channels the savings of people who wish to spend less than their incomes to borrowers who wish to consume more.

6.Mortgage bank

mortgage is a loan in which real estate or property is used as a collateral. The borrower enters into an agreement with the bank, whereby the borrower receives cash upfront then makes payments over a agreed time until the borrower pays back the lender in full.

Functions of Mortgage Banks 

The functions of the Mortgage Bank is to provide long-term credit facilities to mortgage institutions in Nigeria at such rates and such terms as may be determined by the Board.

7.Cooperative or Mutual Banks

They are institutions established on the cooperative basis and they deal in ordinary banking business. the cooperative banks are founded by collecting funds through shares, grant loans and accept deposits.

Functions Of Cooperative Banks 

The function of the central cooperative banks is to provide loans to the primary cooperative societies. loans are given to individuals also.

8.Non Interest Banks

Non-Interest banking operates on principles such as: interest prohibition in exchange contracts and debts, the prohibition of uncertainty or speculative behavior in business transactions, the prohibition of any form of gambling. The bank deals in tangible assets which are bought, sold or leased.

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they deal in partnership contracts, leasing contracts, trading contracts and other financial services that conform to Islamic commercial jurisprudence.

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