8 Types of Banks In Nigeria [Explained!]

Types of banks in Nigeria

Have you ever wondered what are the different types of banks in Nigeria today?

In every country, there are numerous different types of banks, each of which serves a particular set of customers and performs a different set of functions.

Commercial banks appear to be the most common sort of financial institution, and as you are aware, many people would choose to bank with the best. As a result, we’ve compiled a ranking of the top 10 best banks in Nigeria right now.

Knowing the many types of banks that are available to you is essential for making financial decisions, whether you want to create a savings account or take out a loan of any kind. But, more specifically, what are the distinctions?

Take into consideration some of the following questions while picking a financial institution:

Are there any fees associated with the account, such as for maintenance, overdrafts, or maintaining a minimum balance?
Do they provide you with the financial products you require, whether it’s a checking account, a loan, a credit card, or the services of a financial advisor?

  • What amount of money do you require to open an account?
  • Does your bank have any branches in your neighborhood, or can you readily access your account online?
  • Does the bank provide customer care in the event that you require assistance or have a question?

Now, let’s have a look at the various sorts of banks that exist in Nigeria in further detail.

Types of Banks In Nigeria & Their Functions Explained

The following are the types of banks in Nigeria namely;

  • Central bank
  • Commercial banks
  • Merchant banks
  • Development banks
  • Savings bank
  • Mortgage bank

Want to know more about each of these types of banks right?

1. Savings Bank

Types of Banks - Savings Bank

Savings bank is among the types of bank in Nigeria which is meant to encourage saving culture among citizens of the country.

The majority of people own savings accounts. Money saved by customers of a savings bank is often invested in businesses to generate more money. The majority of types of banks in Nigeria have the right to operate as savings account.

Functions of savings bank

  • They assemble the capital of the community, conserve the idle wealth, and having aggregated it into sizable funds, loan it to business enterprises.
  • They add to the peace and comfort and available consumption of society by providing a safe outlet for the funds of those who have the will and capacity to save but do not have the ability either to use the funds industrially themselves or to invest them with safety and profit.
  • They promote thrift more than any other Financial Institution.
  • The prudent investment of interest and accumulated principal, which together constitute savings, lessens profligacy, provides against the adversities of old age and sickness.

2. Central Bank

The Central Bank is the sole authority of all types of banks in Nigeria banking industry.

A central bank is a financial institution given privileged control over the production and distribution of money and credit for a nation or a group of nations.

In a modern economy, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks. The primary goal of many central banks is price stability.

In some countries, central banks are also required by law to act in support of full employment. Most central banks do not engage in retailing banking and an individual cannot open an account or ask for credit facilities/loans.

It acts as a bank for the deposit money banks and this is how it influences the flow of money and credit in the economy to achieve stable prices.

Commercial banks can turn to the central bank to borrow money, usually to cover very short-term needs.

Periodically, the central bank of Nigeria determines target growth rates of money supply, which are compatible with overall policy goals.

Functions of Central Bank

  • Issue money
  • Lender of Last Resort to Commercial banks
  • Lender of Last Resort to Government
  • Target low inflation
  • Target growth and unemployment
  • Operate monetary policy/interest rates
  • Unconventional monetary policy
  • Ensure stability of the financial system
  • Read more functions of central bank of Nigeria

3. Commercial Bank

Types of Banks In Nigeria - Commercial Banks

Commercial bank is the popular among the types of bank in Nigeria.

A commercial bank is a kind of financial institution that carries all the operations related to deposit and withdrawal of money for the general public, providing loans for investment, and granting of business loans, mortgage lending, and basic investment products like savings accounts and time deposits.

These banks are profit-making institutions and do business only to make a profit. The two primary characteristics of a commercial bank are lending and borrowing.

The bank receives the deposits and gives money to various projects to earn interest (profit). The rate of interest that a bank offers to the depositors is known as the borrowing rate, while the rate at which a bank lends money is known as the lending rate.

The financial system of Nigeria is dominated by the banking sector, especially the deposit money bank which provides the foundation for the development of the financial system.

Their credit component constitutes a major link between the monetary sector and the real sector of the Nigerian economy.

The list of Banks in Nigeria under this category includes Access Bank PLC, Citibank Nigeria Limited, Diamond Bank Plc, Ecobank Nigeria Plc, etc.

As one of the major types of banks in Nigeria, the commercial bank performs the following functions:

  • Accepting deposits: The most significant and traditional function of a commercial bank is accepting deposits from the public
  • Providing loans
  • Credit Creation
  • Transfer of funds


4. Merchant Banks

Merchant bank is another types of bank in Nigeria, which is similar to an investment bank in that they both provide their own capital for debt or equity financings in mid-market companies.

Merchant banks are private, so they are not regulated and can be very flexible on the type and level of investments made.

In addition to investing, merchant banks provide advisory services on corporate finance issues such as the purchase or sale of a business, with these services usually added on to the companies in which they invest.

Functions of Merchant Bank

  • Corporate Counselling
  • Project Counselling
  • Capital Restructuring Services
  • Portfolio Management
  • Issue Management
  • Loan/Credit Syndication
  • Arranging Working Capital Finance
  • Bill Discounting and Acceptance Credit
  • Lease Finance
  • Venture Capital

Related: Full list of Merchant banks in Nigeria

5. Microfinance Bank

Kinds of banks - Microfinance

Microfinance, also called microcredit, is one of the types of banks in Nigeria provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services.

The goal of microfinance is to ultimately give impoverished people an opportunity to become self-sufficient.

Microfinance services are provided to unemployed or low-income individuals because most of those trapped in poverty, or who have limited financial resources, and do not have enough income to do business with traditional financial institutions.

Microfinance allows people to take on reasonable small business loans safely, and in a manner that is consistent with ethical lending practices.

Like conventional lenders, micro financiers must charge interest on loans, and they institute specific repayment plans with payments due at regular intervals.

Some lenders require loan recipients to set aside a part of their income in a savings account, which can be used as insurance if the customer defaults.

If the borrower repays the loan successfully, then they have just accrued extra savings. Examples of banks in this category include: Achina Microfinance Bank Limited, Acme Microfinance Bank Limited, Acorn Microfinance Bank Limited e t c

What Are the Benefits of Microfinance?

  • It allows people to provide for their families
  • It gives people access to credit
  • It serves those who are often overlooked in society
  • It creates the possibility of future investments.
  • It is sustainable
  • It can create jobs
  • It encourages people to save.

6. Mortgage Bank

A mortgage bank is a bank specializing in mortgage loans. It can be involved in originating or servicing mortgage loans, or both.

The banks loan their own capital to borrowers and either collect payments in installments along with a certain rate of interest or sell their loans in the secondary market.

The scale of a mortgage bank’s operations varies. Some mortgage banking companies operate nationwide whereas some may originate a larger loan volume as opposed to operating nationwide.

Some of the banks in Nigeria operating in this category are Abbey Mortgage Bank Plc, AG Homes Savings & Loan’s Limited, AKWA Savings & Loans Limited, ASO mortgage bank, etc.

Functions of Mortgage Bank

  • Perform Financial Analysis
  • Perform Financial Counselling
  • Loan Origination

7. Cooperative or Mutual Banks

Cooperative banking

Cooperative or mutual banks can offer the financial products that both retail and commercial banks provide.

The only difference is that they operate on a cooperative basis, meaning that the bank’s customers own a portion of the bank.

A sharp increase in primary co-operative banks has led to the rapid development of businesses of cooperative banks in the urban areas in recent years.

The three types of cooperative banks operating in our country are primary credit societies, central cooperative banks, and state cooperative banks.

These banks are organized at three levels, village or town level, district level and state level.

Functions of a Cooperative Bank

  • Providing loans to small borrowers and small businesses.
  • Extending credit facilities like term loans and working capital loans.
  • Giving advances against shares and debentures.

Related: The top 10 best loan apps in Nigerian right now

8. Non Interest Banks

Lastly on my list of types of banks in Nigeria is Non-Interest banks. It operates on defining principles such as interest prohibition in debt and exchange contracts; the prohibition of uncertainty or speculative behavior in business transactions; the prohibition of any form of gambling.

Non-Interest banks engage in partnership contracts, trading contracts, leasing contracts, and other financial services that conform to Islamic commercial jurisprudence.

It also prohibits funding of unethical concerns such as, alcohol, tobacco, ammunition manufacturing, and adult entertainment institutions; just to mention a few. Banks in this category are Jaiz Bank Plc and TAJ Bank Limited.

Types of Banks In Nigeria (Summary)

That’s it on the types of banks in Nigeria. A bank is a bank no matter where you go.  On the surface, they may all look the same, but there are some important differences you should know about before opening a bank account.

Once you know the difference between the various banks, you will be able to see why they are an important part of our economic system.

Your bank account is the core of your financial well-being. That’s why it is so important to choose a bank that’s right for your needs.

Did you find this post helpful? Please like, share and drop your comments.

Even More Topics:

1 Comment

Leave A Reply

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.