These financial institutions also offer financial consultation services to consumers who seek advice on the pros and cons of making a particular investment. These institutions are strictly regulated by national authority (Central Bank of Nigeria) to keep the financial structure and market active and efficient.
There are various types of financial institutions in Nigeria to carryout different financial activities. These institutions look into masses financial needs, be it an individual or a company, and offer relevant services.
Financial Institutions in Nigeria and their Functions
The following categories are the financial institutions in Nigeria and their functions:
- Central Bank of Nigeria
- Commercial Banks
- Micro-finance Banks
- Deposit Money Bank
- Discount Houses
- Community Bank
- Finance Companies
- Development Finance Institutions
- Holding Company
- Merchant Banks
- Non-Interest Banks
- Primary Mortgage Banks
- Payment Service Banks
- Insurance Company
1. Central Bank of Nigeria
Central Bank of Nigeria is an apex financial institution in the banking system. It is considered as an integral part of the economic and financial system of a nation. The Central Bank of Nigeria functions as an independent authority and is responsible for controlling, regulating and stabilizing the monetary and banking structure of the country.
2. Commercial Banks
As a financial institutions in Nigeria, the main function of commercial banks is to provide financial services to the general public and also provide loan facilities to the business which helps in ensuring economic stability and growth of the economy.
3. Micro Finance Banks
The function of microfinance is to provide financial services to people “generally excluded from traditional banking channels because of their low, irregular and unpredictable income.”
Microfinance products are services offered by MFIs to satisfy the needs of their customers such as credit, savings, leasing, standing order, bills payment, fund transfer, management and vocational skills training, consultancy and advisory services, marketing assistance, information, technological development and so on.
Microfinance Bank is licensed to providing microfinance services, such as savings, loans, domestic funds transfer, and other financial services that are needed by the economically active poor, micro, small and medium enterprises to conduct or expand their businesses.
4. Bureau D Chang
According to the Central Bank of Nigeria (CBN) Bureau De Change is one of the financial institutions in Nigeria functions to carry out small scale foreign exchange service in Nigeria and whose sole object is the carrying on of such business on a stand alone basis. The small scale foreign exchange service is limited includes dealing in bank notes, coins, buying and selling of Traveller’s cheques and other businesses as the CBN may approve from time to time.
5. Deposit Money Bank
A financial institution licensed by the regulatory authority to mobilize deposits from the surplus unit and channel the funds through loans to the deficit unit and performs other financial services activities.
6. Discount House
Discount house is a financial institutions in Nigeria with the function acts as an intermediary between the Central Bank and the licensed banks in open market operation transactions and other eligible securities.
7. Community Bank
The function of community bank is to accept deposits and provide business loans, mortgages and credit lines. Despite their emphasis on local customers, some have created online banking functionality that allows them to serve a wider audience.
Community banks offers a direct benefit to your account, but it also benefits all other account holders in your community, keeping more money in their bank account instead of losing expendable cash to enrich a massive financial institution.
8. Finance Company
The function of a finance company is to finance the activities of other businesses and individuals. This means that the company is in charge with the responsibility of lending money to those interested in pursuing such funding. Finance companies focus solely on this lending aspect and do not accept deposits the way commercial banks do.
Finance company are licensed to providing financial services for consumers and to industrial, commercial, or agricultural enterprises. Such services include: Funds management; Equipment leasing; Hire-purchase; Debts factoring and securitization; Project financing or consultancy; Debt administration; LPO financing; Project financing; Export financing; Financial consultancy; and Issuing of vouchers, coupons, credit cards and token stamps and such other businesses as the CBN may, from time to time, designate.
9. Development Finance Institutions
The function of DFIs as development finance institutions is to make impact investments for sustainable development and generating profits.
The development finance institutions are governmental institutions established to perform specified developmental functions. The functions are to make impact in infrastructural developments in agriculture, industry, commerce and other undertakings, which are geared towards the attainment of the developmental objectives of the government.
10. Holding Company
As a financial institutions in Nigeria, the holding company is a parent business entity usually a corporation or LLC that doesn’t manufacture anything, sell any products or services, or conduct any other business operations. The function holding company is to hold the controlling stock or membership interests in other companies.
11. Merchant Banks
A merchant bank in Nigeria is a firm or the financial institution providing capital to the companies in the form of share ownership instead of loan.
Merchant bank also work as a consultancy and provide advisory on corporate matters to firm in which they invest, these banks are experts in international trade, which makes them pundit in dealing with multinational corporation.
The function of merchant bankers is to helps firms or companies in raising finance by way of issue of a share, bank loans, debenture etc.
12. Non-Interest Banks
Non-Interest Banks are financial institutions in Nigeria where a customer, whether an individual or business is not just a customer but is a partner with the Bank or owner of goods and assets. This means they share the risks as well as the profits of such a partnership and ownership.
13. Primary Mortgage Banks
The primary mortgage bank is a direct lender of the money that the potential homeowner uses to purchase a house or other property, paying the mortgage back in monthly payments to the issuing institution.
The function of the mortgage bank is lending money against the mortgage for specific securities. They structure various loan products at a cheap rate or with better funding arrangements and involve various activities like loan origination, mortgage sale, and loan/mortgage servicing.
14. Payment Service Banks
The functions of the Payment Service Banks as a financial institutions in Nigeria is the responsibility to accept deposits and withdrawals from individuals and small businesses. Issue debits and prepaid cards in its name. Operate electronic wallet. Issue financial advice.
15. Insurance Company
The most important function of insurance company is to spread the risk over a number of persons who are insured against the risk, share the loss of each member of the society on the basis of the probability of loss to their risk and provide security against losses to the insured.
The government requires you to have certain types of insurance to protect the public, and lenders require insurance to protect their investment. Other policies might be a prudent investment, depending on the type of business you run.
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