The Effect Of Bank Consolidation On The Performance Of Banks In Nigeria
to merge may run into difficulties, because most Nigeria banks are not quoted on the stock exchange and the assets of some are really bad. The effect of the merger is that merging banks in the country, under the current dispensation may lose their licenses and be issued new ones to reflect the new consolidated outfit. As we go on in the subsequent chapters, further critical look shall be taken on the effect that this development is likely to or will have on the Nigeria banking industry and the economy at large.
1.1 STATEMENT OF PROBLEM
Business organisations are recently seeing Consolidation (Mergers and Acquisition) as an alternative means of recapitalizing. The current trend of compelling all commercial banks to raise their capital base from 2billion to 25 billion naira by CBN on or before 31st December 2005 has sent some of these banks on their heels to consider Merger and Acquisition as a survival strategy.
The expected problems regarding consolidation are
There exit a high degree of calculated risk taking to tap opportunities that come the way of business, but there is risk avoidance in Nigeria business and where risk is low, development is also low and industrial advancement becomes near static.
Consolidation could be a very expensive venture in terms of funds required to prosecute it successfully.
Corrupt practices at public and private sector levels are another impediment. This need to be discouraged and incidence of corrupt practices should be severely punished because consolidation deals require confidence and trust to promote consummation.
Nigeria suffers anaemically from lack of information which may unfortunately hinder significant leaps in business combinations
1.2 OBJECTIVE OF THE STUDY
The fundamental objectives of this study are
To assess the implication of consolidation on the banking industry
To examine the impact of consolidation on the Nigeria banks.
To highlight possible challenges posed by the policy of bank consolidation
Assess Nigeria banks before consolidation
Identify the benefits of bank consolidation
Evaluate the prospect of banks after consolidation
Assess the implication of consolidation on banks in Nigeria
1.3 SIGNIFICANCT OF THE STUDY
The significance of this study is to add to the general body of knowledge, enlighten the general public on the effect of bank consolidation on the performance of banks in Nigeria. And also explain the challenges of bank consolidation. This research work would also establish the fact that consolidation (merger and acquisition) is a veritable means for fostering banking growth.
1.4 SCOPES AND LIMITATION OF STUDY
The scope of this study is to know the challenges of bank consolidation.
Due to the financial constraint coupled with available, the research will make use of available materials in the Securities and Exchange Commission’s library. Central Bank of Nigeria(CBN) and Association of Issuing Houses of Nigeria’s library where books relevant to the research topic will be consulted and the internet.
1.5 RESEARCH QUESTION
The question on this research work is
Is there significant relationship between capitalisation and liquidity ratio of banks in Nigeria?
Is there significant relationship between capitalisation and loan to deposit ratio?
1.6 RESEARCH HYPOTHESES
Baridam (2001) defined hypotheses as a tentative answer to the problem. The following hypotheses will be formulated from the objectives and will be verified in the course of this research work and noted as null from guide us in finding the solution to the problem that is induced in this research work.
HO: There is no significant relationship between capitalisation and liquidity ratio of banks in Nigeria
HO: There is no significant relationship between capitalisation and loan to deposit ratio?
1.7 DEFINATION OF TERMS
Bank Re-capitalization: It is the act of supplying long-term funds of the owners of the bank to meet the requirement of monetary authority. Osiegbu (2005).
Consolidation: It is the reduction in the number of banks and other deposit taking institution with a simultaneous increase in the size and concentration of the consolidation entities in the sector (BIS, 2001:2)
Merger: It is the combination of two or more separate firms into a single firm
Acquisition: It is where a company takes over the controlling shareholding interest of another company
1.8 ORGANIZATION OF THE STUDY
The research work will be made up of five chapters as follows:
CHAPTER ONE: This consists of the introduction, statement of the problem, purpose of the study, research questions, research hypothesis, significance of the study, limitations of the