NAME: STEPHEN CHIMAROKE CHUKWUANI

REG NO. FPOCSNA22046

SYSTEM ANALYSIS
ASSIGNMENT
(1) Choose any existing system
(2) How it works
(3) What you find out that is not good
(4) What to do in order to solve the problem
(5) The benefits of solving that problem
(6) Specify if the benefit is short term or long term
and give reasons.
TOPIC
Analysis on Banking systems in Nigeria and how
they work:
 The banking system in Nigeria operates similarly to banking systems in many other countries,
but I think here we have our characteristics and regulatory framework with my own point of
view.
 Central Bank of Nigeria (CBN)

The Central Bank of Nigeria is the apex regulatory authority for the banking sector. It is
responsible for formulating and implementing monetary policies, issuing and regulating the Nigerian
currency (the Naira), and ensuring the stability of the financial system.

The CBN also supervises and licenses banks, sets reserve requirements, and regulates foreign
exchange transaction

In Nigeria we have different types of banks which includes:

 Commercial bank
 Microfinance bank
 Development bank

Commercial bank Are the most common and offer a wide range of banking services to
individuals, businesses, and the government.

Commercial banks in Nigeria provide services such as savings and current accounts, loans,
mortgages, foreign exchange services, and payment services.
Some of the major commercial banks in Nigeria include Access Bank, Zenith Bank, First Bank of
Nigeria, and Guaranty Trust Bank.
 Banking Products and Services:
Nigerian banks offer a variety of products and services, including electronic banking, mobile
banking, and internet banking to facilitate transactions.
The use of ATMs, online banking, and mobile banking has become increasingly popular, making
banking more accessible to a wider population.
Regulations and Supervision:
Nigerian banks are subject to strict regulations and supervision by the Central Bank of Nigeria.
This includes regular audits, capital adequacy requirements, and compliance with anti-money
laundering and anti-terrorism financing regulations.
The Nigeria Deposit Insurance Corporation (NDIC) provides insurance coverage on deposits in
case of bank failures, reassuring customers about the safety of their funds.

Credit Facilities:
Banks in Nigeria provide loans and credit facilities to individuals, businesses, and the
government. These loans may include personal loans, mortgages, working capital loans, and
project financing.

Foreign Exchange Market:

Nigeria has a foreign exchange market where banks play a significant role in facilitating foreign
currency transactions. The CBN regulates and manages the exchange rate policies.

Financial Inclusion:
Efforts have been made to enhance financial inclusion in Nigeria, with initiatives to bring more
individuals and businesses into the formal banking sector. This includes the deployment of
mobile banking services and the establishment of microfinance banks.
Challenges:

The Nigerian banking sector faces challenges such as non-performing loans, cybersecurity
threats, and the need for continuous technological advancements to meet the demands of a
growing population.
Government and Banking Sector Development:

The Nigerian government plays a crucial role in the development of the banking sector through
policies, regulations, and initiatives aimed at fostering economic growth and stability.
 In summary, the banking system in Nigeria is regulated by the Central Bank of Nigeria and
comprises various types of banks offering a wide range of financial services. It plays a critical role
in the Nigerian economy by facilitating economic growth, financial inclusion, and the efficient
allocation of capital. However, it also faces challenges that require ongoing attention from
regulatory authorities and the banking industry itself to ensure stability and growth.

 What you find out that is not good

The Nigerian banking system, like any other banking system, has its share of challenges
and issues that are often considered. Some of these challenges include:

Non-Performing Loans (NPLs): Non-performing loans are loans that are in default or are not being
serviced as agreed. The Nigerian banking system has faced issues with NPLs, which can strain the
financial health of banks and reduce their ability to lend to businesses and individuals.
Weak Corporate Governance: Some Nigerian banks have faced issues related to weak corporate
governance, including cases of insider abuse and unethical behavior by bank officials. This can erode
trust in the banking system.

Financial Inclusion Gaps: While efforts have been made to improve financial inclusion in Nigeria,
there are still significant gaps, with a substantial portion of the population, particularly in rural areas,
lacking access to basic banking services.

Cybersecurity Risks: As with banks worldwide, Nigerian banks face cybersecurity risks, including the
threat of cyberattacks and data breaches. These can compromise customer data and disrupt banking
operations.

Currency Depreciation and Exchange Rate Fluctuations: Nigeria has faced challenges related to
currency depreciation and exchange rate fluctuations, which can impact the stability of the financial
system and foreign exchange transactions.

Regulatory Compliance: Ensuring that all banks adhere to regulatory requirements can be
challenging. Regulatory compliance issues can lead to penalties, fines, and reputational damage for
banks.

Infrastructure Challenges: In some cases, infrastructure challenges, such as unreliable power supply
and limited internet connectivity, can affect the efficiency and effectiveness of banking operations,
particularly in rural areas.

Financial Fraud: Financial fraud, including cases of identity theft, card fraud, and Ponzi schemes, can
affect both banks and their customers, leading to financial losses and damaged trust.

Limited Access to Credit: Despite efforts to improve access to credit, many small and medium-sized
enterprises (SMEs) in Nigeria still face challenges in obtaining loans and financing for their
businesses.

Low Financial Literacy: A portion of the Nigerian population lacks adequate financial literacy, which
can lead to poor financial decision-making and vulnerability to financial scams and fraud.

Lack of Transparency: Ensuring transparency in banking operations, including fee structures and
loan terms, can be a challenge in some cases, potentially leading to customer dissatisfaction and
distrust.

It's important to note that the Nigerian government and regulatory authorities are actively working
to address many of these challenges through various policies, regulations, and initiatives.

 What to do in order to solve the problem

Addressing challenges in the Nigerian banking system requires a multifaceted approach involving
various stakeholders, including government authorities, regulatory bodies, banking institutions, and
the broader financial community. Here are some steps that can be taken to help solve the problems
in the Nigerian banking system:

Strengthen Regulatory Oversight:

Enhance the regulatory framework to ensure strict compliance with banking regulations and
improve supervision to detect early signs of financial distress and misconduct.

Promote Transparency and Accountability:

Enforce transparency in banking operations, including fee structures and loan terms, to build trust
between banks and their customers. Encourage accountability by holding banks and their executives
responsible for unethical practices.

Manage Non-Performing Loans (NPLs):

Implement effective measures to address non-performing loans, such as stricter lending standards,
improved credit risk assessment, and efficient debt recovery mechanisms.

Enhance Cybersecurity Measures:

Invest in robust cybersecurity infrastructure and training to protect against cyber threats and data
breaches.

Financial Inclusion:

Expand efforts to improve financial inclusion, especially in rural areas, by increasing the availability
of banking services, promoting mobile banking, and enhancing financial education.

Corporate Governance: Strengthen corporate governance practices within banks, including board
oversight, risk management, and ethical standards.

Currency Stability:

Implement policies to stabilize the currency and reduce exchange rate fluctuations, which can affect
the stability of the financial system.

Infrastructure Development:

Address infrastructure challenges such as power supply and internet connectivity to ensure the
efficiency of banking operations, especially in underserved areas.

Financial Literacy Programs:

Promote financial literacy programs to empower individuals and businesses with the knowledge and
skills needed for sound financial decision-making.

Access to Credit:

Facilitate access to credit for small and medium-sized enterprises (SMEs) through initiatives like
credit guarantee schemes and reduced collateral requirements.

Collaboration with International Institutions:

Collaborate with international financial institutions and organizations to access technical expertise
and resources for improving the banking sector.

Anti-Corruption Measures:

Implement and enforce anti-corruption measures to root out corrupt practices within the banking
sector and regulatory bodies.

Education and Training:

Invest in training and capacity-building programs for bank employees to ensure they have the
necessary skills and knowledge to operate effectively and ethically.

Customer Protection:

Strengthen customer protection measures, including the establishment of ombudsman services and
mechanisms for addressing customer complaints.
Government Support:

The Nigerian government should continue to support policies that promote economic stability,
including fiscal policies that encourage responsible lending and borrowing.

Research and Analysis:

Solving the problems in the Nigerian banking system is an ongoing process that requires
commitment, collaboration, and vigilance from all stakeholders. A well-regulated and stable banking
system is essential for economic growth and development in Nigeria.

 The benefits of solving the problem in the Nigeria

banking system:
Solving the problems in the Nigerian banking system would yield several significant benefits, not
only for the banking sector itself but also for the overall economy and society. Here are some of the
key benefits:

Financial Stability:

A well-regulated banking system helps maintain financial stability, reducing the risk of bank failures
and financial crises. This stability is essential for economic growth and investor confidence.

Enhanced Trust and Confidence: Improved transparency, ethical behavior, and accountability in the
banking sector would lead to increased trust and confidence among customers, investors, and the
general public.

Economic Growth and Development:

A stable and efficient banking sector facilitates economic growth by channeling funds to productive
investments, supporting entrepreneurship, and fostering job creation.

Foreign Investment:

A well-functioning banking system attracts foreign investment and foreign banks, which can
contribute to economic development and provide access to international capital markets.

Reduction in Corruption:

Stricter regulatory oversight and improved corporate governance can help reduce corruption within
the banking sector and regulatory bodies, improving overall integrity and trust.

Infrastructure Development:

Addressing infrastructure challenges in banking operations can enhance efficiency, reduce costs, and
expand banking services to underserved areas.

Better Risk Management:

Improved risk management practices within banks reduce the likelihood of financial crises, ensuring
the resilience of the banking sector in the face of economic challenges.

Financial Education and Informed Decision-Making:

Financial literacy programs empower individuals and businesses to make informed financial
decisions, reducing the risk of falling victim to financial scams and fraud.

Job Creation:
A stable and growing banking sector creates employment opportunities in various areas, including
banking, financial services, and Fintech.

Global Competitiveness:

A well-functioning banking sector enhances Nigeria's global competitiveness, making it an attractive

destination for investment and business.

Government Revenue:

A healthy banking system can contribute to government revenue through taxes and regulatory fees,
which can be reinvested in public services and infrastructure.

In summary, resolving the challenges in the Nigerian banking system would have far-reaching
positive effects on the economy, society, and the well-being of individuals and businesses

 Specify if the benefit is short term or long term and give

reasons.
Long-Term Benefits
Financial Stability: Achieving and maintaining financial stability is a long-term goal. Strengthening
the banking system's resilience to financial shocks and crises requires ongoing efforts and vigilant
regulation over the years.

Economic Growth and Development: While improvements in the banking sector can have
immediate positive effects on economic growth, sustainable long-term development relies on
consistent, responsible lending practices and investments.

Financial Inclusion: Achieving widespread financial inclusion is a long-term endeavor, as it involves

reaching underserved populations and ensuring their sustained participation in the formal banking
system.

Infrastructure Development: Addressing infrastructure challenges is often a long-term effort

requiring substantial investments in power supply, internet connectivity, and other critical
infrastructure.

Sustainable Development: Integrating sustainability into banking practices is a long-term

commitment, as it involves aligning financial activities with environmental and social goals over an
extended period.

Job Creation: Job creation in the banking sector can have both short-term and long-term effects,
with ongoing employment opportunities resulting from a growing and stable banking industry.

Global Competitiveness: Building and maintaining global competitiveness is a long-term endeavor

that involves consistently improving banking practices, regulations, and the business environment.

Government Revenue: Government revenue from the banking sector can be a consistent source of
income over the long term, but it may fluctuate based on economic conditions and regulatory
changes.

In summary, while some benefits of solving problems in the Nigerian banking system can be realized
relatively quickly, others require sustained efforts and a long-term commitment to regulatory
improvements, ethical practices, and infrastructure development. The timeline for realizing these
benefits depends on the specific nature of the issue and the effectiveness of the measures taken.