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Challenges Facing Financial Institutions in Nigeria

Challenges Facing Financial Institutions in Nigeria

  1. Bad Loans: These occur when borrowers are not able to pay back loans at the appointed time. This problem affects the smooth running of financial institutions because it tends to tie up capital that would have been used for further development and investment.
  2. Illiteracy: Due to the high level of illiteracy in Nigeria, some of the customers of financial institutions are illiterates and their inability to effectively communicate sadly affects the smooth running and completion of financial transactions.
  3. Government Policies: Government regulations or policies also affect financial institutions in the sense that government might make a policy to correct a certain abnormality in the economy, but, this policy might, in turn, hinder the profit-making potentials of financial transactions e.g. the abolition of Commissions on Turnover (COT). COT alone contributes over 60% of the fees and commissions of banks. Thus, Nigerian banks are potentially losing in annual revenues as a result of the implementation of zero COT policy.
  4. Low Profits: Even with all the profitability headlines, many Nigerian financial institutions still battle with low profits and are yet to make enough returns on investment and equity. This has led to a massive retrenchment of workers in many financial institutions as they hope to cut down costs so as to maximize profits. It has also led to the inability of financial institutions to keep up with the continuous servicing of their recurrent expenditure.
  5. Poor Customer Services: Most Nigerian financial institutions are not up to date with standard modern customer service delivery. These poor service deliveries (both digital and manual) have constituted a major setback in the customer base of such institutions, as most customers require top quality services, especially as it concerns money.

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