Retail Payment Systems
In the OIC Member Countries
70
The foreign banks came principally to render services in connection with international trade,
so their relations at that time were chiefly with the expatriate companies and with the
government. They largely ignored the development of local African entrepreneurship. These
three banks controlled almost about 90% of the aggregate bank deposits. From 1914 to the
early part of 1930s, several abortive attempts were made to establish locally owned and
managed banks to break the foreign monopoly. Failing to establish indigenously owned banks
was as a result of the lack of capitalisation and management ability combined with the absence
of regulation by any government agency. The indigenous banks could not survive the hostile
and unfair competition posed by the foreign banks. It was therefore not surprising that by
1954, a total of 21 out of 25 indigenous banks had failed and went into self-liquidation.
The Nigerian banking industry evolved in four stages, the first of which can be best described
as the unguided laissez-faire phase (1930-59), during which several poorly capitalised and
unsupervised indigenous banks failed before their tenth anniversary. The second stage was the
controlled regime (1960-1985), during which the Central Bank of Nigeria (CBN) ensured that
only ‘fit and proper’ persons were granted a banking license, subject to a minimum paid-up
capital. The third stage was the post-Structural Adjustment Programme (SAP) or decontrolled
regime (1986-2004), during which the neo-liberal philosophy of ‘free entry’ was over-
stretched and political authorities dispensed banking licenses on the bases of patronage. The
emerging fourth stage is the era of consolidation (2004-to a foreseeable future), with major
emphasis on recapitalisation and proactive regulation based on prudential principles.
In the area of Central Banking, the West African Currency Board (WACB) carried out banking
operations in the former British colonies in West Africa before independence. Administrative
problems of the WACB led to the establishment of Central Banks in these colonies. In Ghana, it
came into being in 1957, in Nigeria 1959, Sierra Leone in 1964, and in the Gambia 1964. The
Central Bank of Nigeria (CBN) was established by the Central Bank Act of 1958. It was to
replace the West African Currency Board (WACB) of the colonial government as part of the
preparation for independent Nigeria.
According to CBN (2012), there are 21 commercial banks operating in Nigeria, along with 5
development finance institutions, 658 bureaus de change, 81 finance companies, 101 primary
mortgage institutions, 5 discount houses, as well as 904 license granted for microfinance
institutions.