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07030248044Nigeria Banking Sector has experienced a boom-and burst cycle in the past 20-25 years. After the implementation of the structural adjustment programme (SAP) in 1986 and de-regulation of the financial sector, new banks proliferated mainly driven by attractive arbitrage opportunities in the foreign exchange market (Heiko 2007) but prior to the regulation period, financial intermediation never took off and even declined in the 1980’s and 1990’s (Capiro and Kligbiel).
According to Adam (2005), bank consolidation could be achieved by way of mergers and, or acquisition, recapitalization and proactive regulations. Banks consolidation is more than mere sprinkle of the number of banks in any banking industry, the primary objective of reforms is to guarantee an efficient and sound designed system. The banking system develop to required resilience to support the economic development of the nation by efficiently fulcrum of financial intermediation (Lemo 2005).
The sector was highly Oligopolistic with remarkable features of the market concentration and leadership (Lemo 2005) noted that there are ten banks that control more than 50% of the aggregate deposit liabilities and more than 45% of the aggregate credit.
The sector was characterized by small scale banks with high overheads, low capital base average less than $10 million, heavy reliance on the government patronage and loss making. Nigeria’s banking sector was still characterized by a high degree of fragmentation and low level of financial intermediation up to 2004.
This research work is motivated by the need to look into the central bank (CBN)’s recent consolidation that employed certain measures to strengthen the minimum capital requirement from N2 billion to N25 billion through official report and economic information on the banking sector, it became evident that the consolidation of banks led to remarkable reduction in the number of banks from 89 to 25 by merger acquisition, initial public offer and other means.
The research concludes that bank consolidation has resulted in making banks more efficient, effective, and reliable profitable and also their intermediary potential have also been revised with the period of 2005-2011.
Business organizations are recently seeing consolidation through merger and acquisition as an alternative means of re-capitalization. The last reform that makes it mandatory for all deposit money banks to raise their capital base from N2 billion to N25 billion on or before 31st December 2005 sent some of the banks on their heels.
i. High level of bank weakness
ii. Ten top banks were in charge of the bank sector.
iii. The need to consolidate was to create a robust capital base that will enhance effective functioning of the banks. In this study the research is intending to examine if the consolidation has improve upon the effectives of the banking industry.
Bank consolidation will go a long way enhancing economic growth in Nigeria and also in the banking and financial sector will be stable.
Hence, the objectives of this study includes:
i. To access the implication of consolidation on the banking industry.
ii. To examine the impact of consolidation on Nigeria banks.
iii. To access the state of Nigeria banks before consolidation.
iv. Identify the benefits of bank consolidation.
v. To identify the effect of bank consolidation on Nigeria economy at large.
To achieve the research objective the following questions are asked:
i. How do you view the quality of the banking industry before consolidation?
ii. Do you think the industry actually needs a reformation or reform such as consolidation?
iii. How do you view the increase of capital base in the banking industry?
iv. Has the state of the banks improve after consolidation?
v. Are the Nigerian banks strong and trusted enough to invest in?
vi. Do you think the Nigerian banks are well able to make an impact in the global banking scene?
vii. How will you rate the impact of consolidation of banks on the manufacturing sector of Nigerian economy?
This is a statement of expected relationship between a dependent and independent variables. It is a specified expectation about empirical reality derived from proposition. (Anyanwu, 2000:23). They are unproved assertions concerning some of the variables. (Alugbuo, 2005:7).
It is a statement giving an insight of what the researcher expect to be the outcome of the study, with regards to the variable contained and investigated in the statement of the problem. (Ohakwe, 2008:158).
Looking at the main purpose of this research, it will be reasonable to propose that:
Ho: There is no significant relationship between bank consolidation and the performance of deposit money banks.
Hi: There is a significant relationship between bankconsolidation and the performance deposit money banks.
This study is an attempt to extrude the implication of the consolidation exercise on the performance of deposit money bank in Nigeria. Prior the reform of the banking sectors in Nigeria, banks in the minimize capital base was 2 million naira. The consolidation exercise mandate to raise his capital base to 25 million naira. This specification actually shrink banks from about 89-24 banks post consolidation. It is in the high of the above that this study is seeking to investigate how well or other while this fildrate banks have perform. This study will enable us to draw conclusion on banks performance appraise and post consolidation era. By so doing we will enable to explain the effectiveness of theSoludo 2005 consolidation agenda. It is a study to aspire the implication or impact on consolidation reform. Therefore this study will as a contribution and reference point to operators in the banking industry. Users of financial information as well as a reference material to researcher in the banking and finance subject area.
This study covers the generate operation and consolidation of commercial banks exercise which has produced 22 commercial banks out of the 89 banks. It’s main coverage is FCMB and other banking sector reforms like the takeover of Banks (Spring Bank, Bank PHB and Afribank now Enterprise Bank,
Keystone bank and Mainstreet Bank respectively) by government and recent development among few banks.
In course of the study, the researcher was constrained by in accessibility to data because some of the institutions where the data are obtainable, workers find it difficult to understand certain information to researchers to escalating the secret of the institution.
Moreover, the problem of time and finance cannot be over exaggerated.
This constraints to some extent, it is hoped that despite the constraint the results of this study will be relevant and serve the purpose of which it is originally intended to fulfill.
Chapter one of this research work is the introduction, it emphasizes on the reason why the research was carried out, the study, importance of the study and to whom the study will benefit.
The chapter two went ahead to enumerate, give details and also expand on the preview literally work of other researchers on the area.
The chapter three deals with the source of data, research design, population of the study, sampling and sampling technique and also variable in model, model of specification and model of analysis.
The chapter four expands on presentation analysis and interpretation of result. That is how data are presented, data analysis, hypothesis testing.
The chapter five explains the recommendation, summary and final conclusion of the research work done.
Banks: Can be defined as a place of business that receives, bends, issues, exchange and takes care of money, extend credit and private ways of spending money and credit quickly from place to place.
Consolidation: Can be defined as the obligation by law for which two or more companies combine to form one new company to meet a specific requirement or agreement.
Economy: Can be defined as the structure of economic life of a country’s area or system.
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