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The banking industry in Nigeria has been faced with enormous challenges that affect performance, management, and reliability. There are 24 banks in Nigeria today. These banks are referred to as consolidated banks. They emerged after the recapitalisation initiative of the central bank of Nigeria in 2005. Specifically, the central bank of Nigeria (CBN) raised the minimum capital requirement for each bank in Nigeria to N 25billion. This study is mindful of the recent efforts by the federal government of Nigeria to recapitalise and reconsolidate banking operations, which may reduce the number of licensed banks in Nigeria by ten. Banks constitute an important vehicle for economic growth and sustainable development in Nigeria.

Ekanem (2003) takes a look at the banking industry in Nigeria provides estimates of total productivity of the banking industry in Nigeria for 1986-2000. He concludes that the banking industry in Nigeria has expanded rapidly in recent years with productivity rising sharply since 1996. Nnanna (2001) observe that bank credit is important for the startup and efficient performance of any enterprise, which requires provision of funds for capitalization, working capital, and rehabilitation, as well as for the creation of new investments. Funds are required to bring together the other factors of production – land, labour, and capital - before production can take place. This is why credit is very important in any economy.

Nzotta (1999) stresses that bank credits influence positively the level of economic activities in any country. They influence what is to be produced, who produces it, and how much is to be produced. This, he further argues, is derived from the intermediate role of banks, i.e., as a link between surplus and deficit units in the economic system. Dauda (2007) assesses the role, size, and contribution of the community banking system in Nigeria’s development process from 1992 to the present she looks into extent to which community banks have been efficient in performing their development roles at the grassroots level using the following criteria:

  • Inculcation of good banking habits,
  • Deposit generation and savings mobilization
  • Granting of loans and advances
  • Development of real sector
  • Development of non productive activities.

She concludes that the Nigerian community banking system is growing in size, but is still unable to be productive enough to help poor households escape from poverty.

Aiyegbusi and Soetan (2003) examine the impact of community banks such as Microfinance Banks (MFB) on the credit habits of women, and seeks to amplify the importance of the banks for improved quality of life of marginalised groups like women. Their findings show an upsurge in the credit habits of all respondents since these banks have been introduced. This was attributed to community banks’ flexible requirements for loan procurement.



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