See 5 Flaws In The Nigerian Banking System

See 5 Flaws In The Nigerian Banking System

The Nigerian banking system has been in full operation since the 19th century. It came into full operation as a result of a surge in theft but has been criticized to be riddled with many flaws. Truth is, I’m not going to sugarcoat it, the Nigerian banking system has a lot of flaws. These flaws could be either operational, regulatory, or both.

If you want to know some of the flaws in the Nigerian system, then do well to read through this article.


The establishment of banks in Nigeria dates back to 1959, July 1st. This was when the Central Bank of Nigeria (otherwise known as CBN) presented the draft to the House of Representatives. Although the draft was presented in March 1958, it was fully implemented the following year. The CBN took further responsibility for nurturing finance and capital marketing subsequently.

That being said, as much as the entire operation was drafted and planned accordingly, it wasn’t perfect. The next section highlights the various flaws in the Nigerian banking system.

Flaws in the Nigerian banking system

As I mentioned earlier, the Nigerian banking system is riddled with so many flaws, both operational and regulatory. Some of these flaws include the following;

1. High debts

A report by Al-Jazeera states that the number of loans or should I say debt owed by Nigeria as a whole make it difficult to trust the system. The report stated that many Nigerians are now afraid to deposit their money into their bank account to save.

Even I will think twice about saving my money with banks knowing this fact. This is one flaw that the banking system considers to be normal but it doesn’t actually seat well in the hearts of most Nigerians.

2. Customer service

This is one of the worst flaws of them all, it is one that is eating the system yet is still being ignored. The report from Al-Jazeera states that millions of Nigerians complain about the customer service system.

I believe even you reading this article must be tired of getting into a long queue just to deposit or withdraw money. It is actually unheard of to go into a bank in the US and wait in line for hours even just to be attended to.

Not to mention that at a point in most banks, they notice they are unable to handle the crown. Afterwards, they derive unorthodox means to reduce the crown in the bank.

You see cases where banks put boxes and direct customers depositing to use the box so they can reduce crowd. These are unethical and actually, build a form of discomfort with customers.

3. Competitions from fintech companies

Any company that utilizes technology to enhance financial service is known as a fintech company. Some examples are; Kuda bank, Pay Stack, PiggyVest, FlutterWave, Opay, etc.

With the implementation of fintech companies around the world, the banking system is now more competitive. And the issue is that people are more reliant on fintech instead on normal banks.

With the invention of fintech companies, people don’t see the need for regular banks anymore. Fintech companies like Kuda and PiggyVest are now sort of like the new kind of bank. Many people feel safer saving their funds with these apps than the traditional banks. This happens to be one of the reasons sighted in the first flaw of this article.

Another reason worth sighting is that it is easier for people to get loans from these fintech companies than banks. The banking system is set up to make attaining loans harder for regular citizens, whereas it is easier to get loans from apps.


4. Unstructured supplementary service data code

USSD code or unstructured supplementary service date code is said to be another flaw in the Nigerian banking system. While USSD code has its benefits, it has stirred up a considerable amount of questions.

Many question its safety in particular as it involves a third party, which is the network provider. When initiating a transaction, the bank platform uses the network provider as the gateway.

This has been an issue to question as many feel that safety is being compromised by a third party. This even applies to tokens that are sent through a third party as well when verification is done.

5. Safety of information

Another critical problem that is yet to be addressed is the safety of information. Many people question if our information or should I say data is safe in the hand of most banks. Considering the fact that not much effort is put into encrypting files which are stored. It is obvious to see where the worries stem from.

Additionally, others question the security in banks, though there are stationary soldiers, it’s still a cause for worry. A few years ago, reports came in of a robbery in Ile Oluji, and a while back, Edo State.

Now considering the fact that a majority of forms filled are left to seat in the bank. It can cause a little bit of worry as a majority of people who fill out forms key in a lot of personal details into those forms.

There are various reports about scammers using BVN to hack people’s accounts. It’s no surprise why people are afraid when getting reports like this, yet most banks in Nigeria are still lackadaisical about security.


Why are banks failing in Nigeria?

This stems from a number of reasons, mostly; capital inadequacy, non-transparency, and bad operating systems.

How many banks have failed in Nigeria?

According to the Nigeria deposit insurance corporation (NDIC), 45 banks have failed in Nigeria.

Which bank is the best in Nigeria?

Some of the best banks are; Zenith bank, First bank, and Access bank.

Conclusion: Flaws in the Nigerian banking system

So there you have it, 5 flaws that are plaguing the banking system in Nigeria. However, as much as these flaws are present, it doesn’t necessarily mean that banks aren’t effective.

Study shows that the Nigerian banking system has proven to be resilient and relatively good. So, there’s no harm in using the service of any of the banks present in Nigeria. However, it is best to diversify your finance, just like the old adage says, “do not put all your eggs in one basket”.

I hope you enjoyed reading this article, if you did, you should also see the TOP 10 BEST BANKS IN NIGERIA.

Thanks for reading.

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