12 types of banks/financial institutions in Nigeria

According to the Central Bank of Nigeria, there are 12 types of banks or financial institutions in Nigeria. The core banking type remains commercial banks. The rest are seen as other financial institutions. They can also be classified as money deposit banks and non-money deposit banks. 

Below we explained the 12 types of banks in Nigeria. Out of them, commercial, non-interest, and microfinance banks are known to accept deposits from their customers.

1. Commercial banks

Commercial banking is the core banking type and it is highly regulated by the Central Bank of Nigeria. It is also referred to as a deposit money bank along with microfinance bank and Islamic banking. Commercial banks accept deposits and other valuables, give out loans to clients, and perform other businesses as they deem fit and within their regulatory limits.

2. Microfinance banks

A Microfinance bank is a money deposit bank similar to a commercial bank but is limited to serving the poorest of the poor. The extent of their service includes accepting micro deposits, giving out micro-loans, and micro insurance. Most MFBs focus on the first two aspects.

3. Non-Interest banks

Non-interest banking is a recent development in Nigeria. They carry out the function of a commercial bank but they give out loans without charging interest. It is an Islamic banking model and instead of interest, they involve a share of profit from the loan provided.

4. Development Finance Institutions (DFIs)

DFIs are established to finance businesses at a single-digit interest rate. Most of them are established by the federal government through the Central Bank of Nigeria. The main DFIs in Nigeria are the Bank of Industry (BOI) and the Bank of Agriculture (BOA).

5. Merchant Banks

They are a special kind of commercial bank but are restricted from accepting deposits. They are types of banks involved in wholesale banking services such as private equity, large loans, and financial advisory to large companies in the country where they are regulated.

6. Finance Companies (FCs)

Finance companies provide funding for short-term projects including hire purchases, local purchase orders, and leases. They are prohibited from accepting deposits. Therefore, they borrow funds from other sources for their clients. The difference between the amount they incurred as interest to their lender and that earned from their clients is their profit.

7. Bureaux-de-Change (BDCs)

BDCs operate in the Nigerian foreign exchange market. They provide all foreign currencies required by Nigerians. This includes dollars and pounds. The foreign currency are exchanged for the Nigeria Naira and vice versa. They make their money through fees charged and the volatility of the market.

8. Discount Houses

A discount house is a type of bank that provides discounting and rediscounting services to their clients. This includes discounting debts and treasury bills on behalf of their clients. 

9. Holding Company (HCs)

The holding company is a household name for financial companies with subsidiaries. Many banks with subsidiaries in other types of banks including merchants, mortgage, discount houses, insurance companies, and fintechs are required by the central bank of Nigeria to be a holding company. Guarantee Trust Holding Company (GTCO) is an example.

10. Primary Mortgage Banks (PMBs)

Mortgage banks are types of banks and financial institutions that provide loan services to those who want to own a house.

11. Payment Service Banks (PSBs)

These banks provide payment services to unbanked individuals. They provide both internet and agent banking services. They are not allowed to give out loans to clients. The platform is mostly owned by telecoms like MTN and 9 Mobile. To receive a license from the CBN you need a minimum of 5 billion capital requirement. MOMO agent owned by MTN is an example.

12. Mobile Money Operators (MMOs)

MMOs are financial service providers licensed by the Central Bank of Nigeria to provide financial services via mobile phones. Individuals can open an account with their phone number which is connected to a virtual card or wallet. OPay is an example of a mobile money operator in Nigeria. They provide deposit and payment services at little charge compared to traditional commercial banks.