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A commercial bank is a financial institution that grants loans, accepts deposits, and offers basic financial products such as savings accounts and certificates of deposit to businesses.

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A commercial bank makes money primarily by providing different types of loans to customers and charging interest afterward.

Commercial banks in Nigeria came into existence because of the need for Nigerians to participate in commercial banking. Commercial banking started in Nigeria before independence.

The beginning

Commercial banking started in Nigeria through the establishment of the African Banking Corporation endowed with the responsibility of distributing Bank of England notes for the British Treasury during that period.

Later, in 1894, the Bank of British West Africa, now called The First Bank of Nigeria came into existence in Nigeria after which the Union Bank of Nigeria (UBA) formerly called the Barclays Bank was also established.

Between 1945 and date, the indigenous commercial banking system has undergone a period of turbulence, especially in the last 1950s and 1960s with most of them moving out of business because of insufficient funds, lack of proper management and patronage, and many more. Some of these banks include Merchant Bank Limited, Nigerian Farmers, Commercial bank, etc.

As time goes on and the collapse of more banks continued, the early Federal Government saw the need to intervene in the commercial banking sector by infusing capital into the National Bank, Agbonmagbe Bank, and African Continental Bank.

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During that period, news had it that the intervention was a result of the effort of business persons with strong political influence to ensure that the banking sector stayed afloat.

The federal government then intervened in the activities of commercial banks for two main reasons:

To discourage the monopoly of monetary transactions by the two established expatriate banks

To liberalize credit facilities for Nigerian entrepreneurs

At the tail end, the evolution and development of commercial banks experienced occasional setbacks that had to be opposed by the infusion of more funds, restructuring of the Boards, and streamlining of management.

Change and Preferences

Presently, as banks head into a new decade, financial analysts forecast that profitability will remain a challenge.

This challenging situation will spur commercial banks to make critical decisions that might change their system of the mode of operations.

Banks might be left with the option of either changing and evolving again or committing to driving transformation.

Nevertheless, high-performing banks know that both options are needed to lift profitability and that a focus on the customers and their preferences is a smart place to start.

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In the present world, advancing technology and reforms, such as open banking, have expanded the services and activities of the commercial bank and customers are turning to a broader range of providers to address their needs.

It is no news that commercial banks that consistently outperform the market take a strategic approach to meet customer expectations and preferences. They do this by identifying a target customer segment, working systematically to understand this segment to develop market-relevant products, allocate investments in capital, ensure management focus, and guide virtually every other significant decision.

Sadly, changing customer preferences and increased competition make it even more challenging for banks to remain relevant to customers.

However, some commercial banks know that creating a customer-focused culture is critical to lifting profitability in tough conditions and allowing investment in digital transformation programs that will drive long-term value.

However, this doesn’t happen overnight, therefore commercial banks in Nigeria can begin now by building on the latent trust of existing customers, improving their experience, and taking a strategic approach to meeting customer preferences and expectations.

Conclusively, the role of the commercial bank in the development of developing countries like Nigeria can never be over-estimated as they help in ensuring the proper circulation of money for the citizens.

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This article was first published on 17th May 2022


Grace Christos Is a content creator with a proven track record of success in content marketing, online reputation management, sales strategy, and so much more.

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