Nigeria, a former colony of Britain gained its independence on October l, 1960. Since the country's independence, it has experienced a prolonged military rule punctuated by short democratic regimes, but since 1999 it has managed to sustain a stable democratically elected government. Nigeria is a nation blessed with vast oil and other resources but the World Bank estimates that almost 70% of the Nigerian people live below the poverty level. A great potential for growth exits in this country of about 140 million people but there seems to be a missing wire needed to spark the fires of economic development. The Nigerian economic environment has not been very conducive to foreign direct investment due to problems with corruption and other obstacles to foreign investment. It is imperative that the financial sector be developed in Nigeria to provide a catalyst for a sustainable economic development in the country. While the banking sector should not be the only focus of a country's financial system, the banking sector has always been dominant in the Nigerian financial scene and evidence suggest that this will remain so at least until a capable capital-market can be developed to support it. This thesis seeks to analyze the critical role of banking in the economic development of Nigeria.