CRITICAL ANALYSIS OF THE VIABILITY OF COMMERCIAL BANK ACTIVITIES IN NIGERIA

BACK GROUND TO THE STUDY

Bank was first introduced by early goldsmith in the olden days, the goldsmith kept the valuable asset of people. They has fortified places where they kept valuable items received from people. Those who deposited their valuable properties with the goldsmith were made to pay some amount to the goldsmith before they could claim their valuable properties.                                                                

With time the goldsmith discovered that not every body who deposited the property came at the same time to claim them. He discovered that only a few people came at a time to claim their assets. Because of this, he started to lend out to needy people some of the assets kept in his custody. He charged interest on those valuable goods borrowed by people. He started to make a lot of wealth from such deals.

       To attract more people to deposit their precious goods, he started to pay interest to those who deposited their property with them.

       But he charged higher interest on those who came to borrow these goods from him.

       The goldsmith issue paper to those that deposit their property with him. As time went on, that paper issued by the goldsmith to the people, was converted to what we know today as paper money.

       Because the paper issued, was used to settle debts or services rendered, the need for money then over shadowed the barter system - the great wheel of circulation, the instrument of commerce. Note that the establishment of the banking institution in Nigeria was in Lagos in 1892, when the African banking corporation (ABC) opened its first branch in Lagos. Messrs elder dempster and co. a shipping firm based in Liverpool was instrumental in its formation.

       Because of problem encountered by the institution, the bank transferred its interest to elder dempster and co. this led to the formation of a new bank known as the British bank of west Africa(BBWA) In 1893. It was registered in London as a limited liability company in March 1894 and opened its Lagos branch that same year. The second branch was opened in calabar in 1900.

       Seeing the benefits of banking institution in the country, another banked called the Anglo African bank was established in 1899 in Calabar by Royal Niger Company, now (U.B.A) to compete with BBWA.

       The banks later changed its name to bank of Nigeria and establish its branches in Burutu, Lokoja and Jebba. But due to fierce competition and monopoly of importation of silver from the Royal mint, the bank was sold to BBW in 1912.

       This started the era of Commercial Banks in Nigeria by the opening of various Banks in the country. This was a period of free – for all Banking system which culminated in several Banks failure and losses to deposition. Prior to this, the first banking legislation in Nigeria was enacted in 1952.

       Nigeria Banks are operating the branch banking system which a small Banking company can conduct operations of two or more places. Usually, the branches are controlled from their Head office. The branches are controlled from their Head office. The branch office may be located in the same city, state or in another state depending on the banking laws and regulations of the country.

       Nigeria Banks are required to play a crucial or vital role in the mobilization of financial resources for achieving economic development through;

1.    Provision of facilities for collection of savings

2.    Provision of facilities for transfer of fund

3.    Advisory services to business and investors

4.    Providing business status reports and references

5.    Providing facilities for the financing of international trade

       In this a fore mentioned services carried out by the Banks in Nigeria help to bring growth of economic activities in the country, by their creation of money or credit. The mobilizing of savings has enable funds to deficit sectors.

       Commercial Banking institution in Nigeria can be classified into two. They are the purely indigenous Banks owned 100% by Nigeria (Individuals and Governments), and mixed Banks with a majority indigenous shareholder (at least 60%) and minority foreign interest.